UPDATE 1-Sodexo keeps goals, H1 profit rises

Thu Apr 17, 2014 1:42am EDT

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PARIS, April 17 (Reuters) - French catering, facilities management and vouchers group Sodexo kept its full-year goals on Thursday after operating profit rose 11.4 in the first half, helped by cost cuts and new contracts in the United States.

The world's second-biggest catering services company after Britain's Compass Group said operating income excluding restructuring costs and currency effects in the six months to Feb. 28 rose to 559 million euros ($772 million).

The group reiterated its forecast for a 2.5 to 3 percent rise in like-for-like full-year 2013/14 sales after revenue grew 2.4 percent like-for-like in the first half to 9.283 billion euros.

It also kept its forecast for 2013/14 operating profit growth of 11 percent at constant exchange rates and for its operating margin to rise because of cost savings to 5.6 percent from 5.2 percent last year. For fiscal year 2014/15, Sodexo also expects an operating profit margin of 6 percent.

Sodexo manages canteens and facilities for office workers, the armed forces, schools, hospitals and prisons, and sells vouchers for meals and gifts. Its clients range from the Royal Ascot Racecourse to the U.S. Marine Corps.

Revenue from on-site services, which make the bulk of business, rose 1.9 percent like-for-like in the first-half, while the vouchers business grew 15.1 percent, driven by strong demand in Latin America and accelerated growth in Europe.

On-site services revenue rose 3.8 percent in North America, driven notably by strong demand from corporate clients and new facilities management contract wins from Unilever and Walt Disney World Resorts.

On-site revenue rose only 0.6 percent in Europe, where clients continued to reduce demand for catering services to cut costs. There was also weak demand for remote-site services in the mining sector in Africa, the Middle East, Australia and Latin America, Sodexo said.

As it faces tough times in Europe, Sodexo has been focusing more on services outside its core catering business and betting on emerging markets to drive growth.

Facilities management services now represent more than a quarter of group revenue.

Sodexo trades at 19.65 times estimated earnings against 17.94 times for Compass, a premium some analysts tie to hopes that a cost-cutting plan it unveiled a year ago will boost operating margins. ($1 = 0.7243 Euros) (Reporting by Dominique Vidalon; Editing by James Regan)

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