Sodexo: First half Fiscal 2022 Results up strongly
· *Revenue growth +19.4%, despite Omicron, **organic growth +16.7%*
· *Underlying operating profit doubled, **H1 margin at 5.2%, up +210 bps*
· *Fiscal 2022 guidance *
· Organic revenue growth around the bottom of the range of +15% to +18%
· Underlying operating profit margin close to 5%^1, at constant rates
*Issy-les-Moulineaux, April 1, 2022 - *Sodexo (NYSE Euronext Paris FR 0000121220-OTC: SDXAY). At the Board of Directors meeting held on March 31, 2022, and chaired by Sophie Bellon, the Board closed the Consolidated accounts for the First half Fiscal 2022 ended February 28, 2022.
*Financial performance for First half Fiscal 2022 *
(in millions of euro) *H1 FISCAL 2022* *H1 FISCAL 2021* *DIFFERENCE* *DIFFERENCE CONSTANT RATES *
Revenue *10,262* *8,595* *+19.4%* *+15.9%*
*UNDERLYING OPERATING PROFIT* *538* *265* *+103.0%* *+96.2%*
*UNDERLYING OPERATING PROFIT MARGIN* *5.2%* *3.1%* *+210 bps* *+210 bps*
Other operating expenses (1) (128) *-99.2%* *-100.9%*
*OPERATING PROFIT * *537* *136* *+294.9%* *+279.5%*
Net financial expense (53) (50)
Tax charge (136) (53)
Effective tax rate 28.3% 63.0%
*GROUP NET PROFIT* *337* *33* *x10* *x10*
*EPS* (in euro) *2.30* *0.23* *x10*
*UNDERLYING NET PROFIT* *339* *128* *+164.8%* *+156.0%*
UNDERLYING EPS (in euro) ² 2.32 0.87 +165.3%
*Sodexo Chairwoman and CEO Sophie Bellon said: *
“Revenue growth and margins improvement have been strong in this First half, reflecting the solid recovery in Education, Corporate Services and Sports & Leisure segments. Omicron did have an impact on the recovery in the second quarter, but we are seeing a pick-up since the end of February.
We have closed the GET efficiency program, with better results than anticipated. The teams mobilized actively to implement measures to mitigate rising cost inflation: indexation, client negotiations, productivity, product substitution. These actions resulted in a +210 bps improvement of our Underlying operating profit margin to 5.2%.
Since October 2021, we have made significant progress on our strategic priorities. Operational execution and sales development are improving in the United States. More new food model offers are being deployed in our major geographies. Our disposals and acquisitions are fully aligned with our portfolio strategy. The transfer of the management of Schools and Government & Agencies to the regions is a first step in the simplification of our organization.
In the second half of the year, we are confident that the return to the workplace and Sports & Leisure events will continue to recover. However, the environment remains uncertain with intermittent local outbreaks of Covid-19, and the war in Ukraine. We are confident that we can manage the year end inflationary pressure on margins. Currencies should give us a nice tailwind, but we expect organic revenue growth to be around the bottom of the range we had given in October 2021.
Our teams are mobilized to meet the challenges and I warmly thank them for their impressive engagement in the field with our clients and our suppliers. We remain confident in our capacity to continue to grow our business.”
*Highlights of the period*
· First half Fiscal 2022 Group revenue was 10,262 million euro, up *+19.4%*, with strong recovery coming through in all segments that were severely impacted by Covid. The currency effect was strong at +3.5%, resulting from the strength of all our major currencies against the euro. The net M&A contribution was -0.8% due to the exit of businesses, sold as part of the portfolio management program. As a result, Group organic revenue growth was +16.7%, back up to 95% of pre-Covid levels.
· *On-site Services* organic revenue growth was *+17.0%*, with a particularly strong first quarter up +17.9% and a second quarter at +16.1%, impacted by Omicron. The recovery was solid with the first quarter ending at 95 % of pre-Covid levels but falling back slightly to 94% in the second quarter due to Omicron. The key elements of the half-year were:
· In *Business & Administrations*, organic growth was *+19.5%*. It reflects a strong recovery in Corporate Services, back up to 89% of pre-Covid levels in Q2, due to a gradual but regular return to the workplace. Sports & Leisure is back up to 61%, as the number of events has picked up significantly. Energy & Resources and Government & Agencies remained solid.
· In *Healthcare & Seniors*, organic growth was *+5.0%*, with the first quarter up +7.4% and the second quarter up +2.5% reflecting a much tougher comparative base in Europe, including a high level of activities at the Testing Centers contract in the United Kingdom last year.
· In *Education*, organic growth was *+29.5%*. While the recovery in activity in Universities in North America was very strong during the period, Omicron did have an impact on the growth in the second quarter in Schools in North America and Europe. Relative to pre-Covid levels, Education was at 88% in the second quarter, back down from 92% in the first quarter, impacted also by the full effect of the Chicago Public Schools contract termination.
· *Key Performance Indicators for the First half Fiscal 2022:*
· Client retention was up +60 bps to 98.1%, improving in all regions and segments.
· New sales development was up +90 bps at 3.7%, with improvements in many regions, including North America. The higher levels of signings were combined with continued signing discipline, particularly regarding the average projected gross margin which is up +80 bps.
· Same site sales growth recovered strongly at +19.8%, as volume recovery came through, helped by some solid cross-selling in many segments and regions.
· *Benefits & Rewards Services* organic growth was *+9.3%*, with Employee benefits up a strong +14.5%. There was an acceleration in the second quarter in both the Europe, USA and Asia region and Latin America, where Brazil is also back to double digit growth.
· *Underlying operating margin* was 5.2%, up +210 bps versus First half Fiscal 2021. This significant improvement in performance is the result of the strong recovery in volumes, the successful completion of the GET efficiency program, and strong actions to mitigate inflation through indexation, contract renegotiations and productivity.
· *Other operating expenses (net)* amounted to only 1 million euros in First half Fiscal 2022, with restructuring costs falling to 3 million euros and gains on the sale of assets more or less off-setting losses. This compares to 128 million euros in the previous year.
· The *Effective tax rate* at 28.3% fell below 30%, back to a more regular rate.
· *Group net profit* recovered significantly at 337 million euros against 33 million euros in the previous year. Basic EPS was thus multiplied by 10 at €2.30 against €0.23 in the previous year. *Underlying Net profit* increased +164.8% to 339 million euros against 128 million euros in the previous year.
· First half Fiscal 2022 *Free cash outflow* was 75 million euros against the cash inflow of 237 million euros in the previous period. The previous year was boosted by delayed restructuring costs and government payment delays. This year performance was marred by the unwinding of these same government payment delays and restructuring costs combined with the reimbursement of Tokyo Olympics ticketing and an exceptional contribution to the United Kingdom pension funds. Recurring free cash flow was 182 million euros, after a significant increase in capex to 159 million euros, or 1.5% of revenues, relative to the exceptionally low level of 86 million euros, or 0.9% of revenues in the previous year.
· *Net debt* has risen year on year to 2.0 billion euros from 1.7 billion euros. However, gearing^2 is stable at 56% and as a result of the significant improvement in EBITDA, the net debt ratio^2 has fallen back down to 1.8x compared to 3.8x at the end of First half Fiscal 2021.
· Once again, our *Corporate Responsibility* *achievements *have been externally recognized:
· Sodexo earns its 15^th consecutive 100 on the Human Rights Campaign Foundation’s annual assessment of LGBTQ+ workplace equality.
· Sodexo is ranked #1 of the food service sector in World Benchmarking Alliance’s (WBA) first Food and Agriculture Benchmark, which measures how the world's 350 most influential companies in the industry are transforming the food system for a more sustainable future.
· In February 2022, Sodexo was awarded Supplier Engagement Leader by CDP, placing us in the 8% top companies taking action to measure and reduce environmental risks within its supply chain.
· *Strategic priorities*
· Boost US growth: · Sales momentum is developing with robust new development, an increase in the active pipeline, which should support stronger sales in the second half and solid retention. First time outsourcing contract signings are increasing and currently represent circa 40% of signatures in the First half.
· Investment in the Marketing & Sales resources is continuing with additions of new sales executives and managers and the recent launching of a new digital training program.
· A specific long-term incentive scheme for the North America leadership team has been launched to strengthen collective and individual accountability.
· Accelerate the food model transformation: · The deployment of On-site brands & offers is accelerating with the scale-up of The Good Eating Company in the United States and new contracts signatures in the tech and finance sectors for Nourish, Fooditude and The Good Eating Company.
· We are developing partnerships with high-end brands such as an exclusive 10-year partnership with ForFive Coffee, a premium coffee and food company based in New York.
· The digitalization of the consumer experience is also progressing. In China, we are leveraging the Meican digital online ordering, mobile apps, smart waiter… to enhance the food offer and develop new smaller clients. We have signed an agreement to expand the Kiwibot fleet in 50 US universities by the end of the year.
· We are progressively transforming production & logistics: with our new branded offsite kitchens such as Fooditude, Nourish, Frontline Food Services but also with our new central production units in Boston or in Beijing.
· Manage more actively our portfolio: · A number of strategic acquisitions & investments have been completed during the period:
· To expand the New Food Model offerings, we have acquired Frontline Food Services in North America and increased our participation in Meican in China.
· To strengthen our European GPO (Group purchasing organization), two investments have been made in Europe.
· To enhance our value-added offers in Healthcare, a Technical Equipment management service company has been acquired in China.
· Divestment of non-core activities and geographies have also accelerated in the First half. In On-site Services, subsidiaries in Morocco, non-strategic account portfolios in Australia and Czech Republic and The Lido in France have all been sold. Benefits & Rewards Services disposed of its Russian activity and also the sports-cards in Romania and Spain. The Global Childcare activities and On-site Services in the Congo were closed in March. As a result, the Group has now reduced its presence down to 55 countries at the end of February 2022.
· Enhance the effectiveness of our organization: · The GET efficiency program closed ahead of plan with 382 million euros of savings against the target of 350 million euros and a savings/cost ratio of 117% versus 100%.
· The reorganization of Government & Agencies and Education to be managed regionally has simplified the organization, and as a result two Global CEO positions have been removed from the Executive Committee.
· In the Executive Committee, Annick de Vanssay, interim Chief People Officer since September 2021, is now appointed as Group Chief Human Resources Officer and Alexandra Serizay, previously Chief of Staff of Sophie Bellon, is appointed Group Chief Strategy Officer.
· *Ukraine war*
· Sodexo does not have activities in Ukraine.
· Sodexo has a small On-site presence in Russia: less than 1% of Group revenues. The situation is being monitored closely and we are reviewing different options at the moment.
· From the beginning of the war, Sodexo has been strongly mobilized to ensure business continuity for its clients, guarantee the safety of its employees, and provide support to the refugees in countries bordering Ukraine. Sodexo Group and Stop Hunger have set up a Sodexo Employee Donations Global Initiative with the support of their long-term partner, the United Nations World Food Programme (WFP). Employee donations are matched by Sodexo and the money raised will be used to support refugees in the region and people affected by the war in Ukraine.
*Outlook*
The First half Fiscal 2022 benefited from a strong recovery, post-Covid, in the Corporate Services, Sports & Leisure and Education segments but it was also impacted by Delta and Omicron in the second quarter. Since the end of February, momentum is picking back up. However, the current environment remains full of uncertainties. There is a resurgence of localized Covid outbreaks, several mobilizations in Russia will not happen, and the Testing Centers in the United Kingdom are closing earlier than expected.
As a result, we expect
· *Fiscal 2022 organic growth to be around the bottom of the range of +15% to +18% given in October 2021. *
The currencies provided a strong tailwind in the First half and, at today’s rates, should continue to do so.
Our teams have successfully managed the margins in the First half and are highly mobilized to mitigate all these uncertainties and in particular the additional inflation resulting from the disruption to the supply chain due to the Ukraine war.
As a result, we maintain our expectations for
· *Fiscal 2022 Underlying Operating Profit margin close to 5%*^*3**, at constant rates.*
*Conference call*
*Sodexo will hold a conference call in (English) today at 9:00 a.m. (Paris time), 8:00 a.m. (London time) to comment on its H1 Fiscal 2022 results. *
*Those who wish to connect: *
· From the United Kingdom: +44 2071 928 338, or
· From France: +33 1 70 70 07 81, or
· From the US: +1 646-741-3167,
Following by the access code *92 69 446*
*A live audio webcast is also available on **www.sodexo.com**.*
The press release, presentation and webcast will be available on the Group website www.sodexo.com in both the « Latest News » section and the « Finance – Financial Results » section.
*Fiscal 2022 financial calendar*
Fiscal 2022 Third quarter Revenues July 1, 2022
Fiscal 2022 Annual Results October 26, 2022
Fiscal 2022 Annual Shareholders Meeting December 19, 2022
*Please note that the date of the Annual Shareholders Meeting has changed.*
These dates are indicative and may be subject to change without notice.
Regular updates are available in the calendar on our website www.sodexo.com
*About Sodexo*
Founded in Marseille in 1966 by Pierre Bellon, Sodexo is the global leader in Quality of Life Services, an essential factor in individual and organizational performance. Operating in 55 countries, our 412,000 employees serve 100 million consumers each day. Sodexo Group stands out for its independence and its founding family shareholding, its sustainable business model and its portfolio of activities including Food Services, Facilities Management Services and Employee Benefit Solutions. We provide quality, multichannel and flexible food experiences, but also design attractive and inclusive workplaces and shared spaces, manage and maintain infrastructure in a safe and environmentally friendly way, offer personalized support for patients or students, or even create programs fostering employee engagement. From Day 1, Sodexo has been focusing on tangible everyday gestures and actions through its services in order to have a positive economic, social and environmental impact over time. For us, growth and social commitment go hand in hand. Creating a better everyday for everyone to build a better life for all is our purpose.
Sodexo is included in the CAC Next 20, CAC 40 ESG, FTSE 4 Good and DJSI indices.
*Key Figures*
· 17.4 billion euro in Fiscal 2021 consolidated revenues
· 412,000 employees as at August 31, 2021
· #1 France-based private employer worldwide
· 55 countries (as at Feb. 28, 2022)
· 100 million consumers served daily
· 10.9 billion euro in market capitalization (as at March 31, 2022)
*Contacts*
*Analysts and Investors* *Media*
Virginia Jeanson
+33 1 57 75 80 56
virginia.jeanson@sodexo.com Mathieu Scaravetti
+33 6 28 62 21 91
mathieu.scaravetti@sodexo.com
*SODEXO*
*H1 2022 Financial Report*
*H1 Fiscal 2022 Activity Report*
*1** **First half Fiscal 2022 results up strongly*
*1.1** **H1 Fiscal 2022 operating performance*
Group revenues reached 10.3 billion euros, up +19.4%.
The recovery in revenues continued to be solid in the first quarter of the year as activity in Sports & Leisure, Corporate Services and Education picked up strongly. In the second quarter, recovery stalled due to Omicron in these segments. However, profitability continued to improve in all segments and regions.
As a result, First half Fiscal 2022 organic revenue growth reached +16.7%, with an Underlying Operating Profit margin at 5.2%, up +210 bps. Net profit was 337 million euros, up 10 times compared to 33 million euros in First half Fiscal 2021 and 378 million euros in First half Fiscal 2020, pre-Covid.
*1.2** **New leadership for Sodexo*
On February 16, 2022, the Group announced that the Board had decided to appoint Sophie Bellon as Chief Executive Officer of Sodexo, a position she has held on to an interim basis since October 1, 2021. After a successful transition phase, the Board considered she was the best placed to lead the Group through this new phase in its history and to maintain the very strong momentum around the four key priorities:
1. Boost US growth
2. Accelerate the food model transformation
3. Manage more actively our portfolio
4. Enhance the effectiveness of our organization
*Organizational changes*
· Since October 2021, a series of organizational changes have been undertaken. The Schools and Government & Agencies segments are now managed regionally by the Region/Country chair. As a result, the departing CEOs of these segments have not been replaced in the Executive Committee.
· In addition, changes within the Global Leadership team have been implemented:
· As of March 1, 2022, Alexandra Serizay, previously Chief of Staff of Sophie Bellon, is appointed Group Chief Strategy Officer, member of the Executive Committee, to replace Sylvia Metayer who is retiring. Alexandra joined Sodexo in 2017 as Global Head of Strategy for the Corporate Services segment. In that role, she worked with the teams across the world to define the Segment’s strategic roadmap. She has previously developed solid expertise in M&A at Deutsche Bank, in strategy at Bain & Company, and in operations at HSBC, as COO and then as Deputy Head of retail banking for France, where, among others, she led the transformation to a multichannel model.
· Annick de Vanssay, interim Chief People Officer since September 2021, has now been appointed as Group Chief Human Resources Officer. Annick has developed a solid and proven expertise in Human Resources throughout her career. Among others, she held several senior positions in Human Resources in Groups such as Orange. During her career, she has contributed to major transformation projects.
*1.3** **Working towards a Better Tomorrow*
Once again, our *Corporate Responsibility achievements* have been externally recognized:
· Sodexo earns its 15^th consecutive 100 on the Human Rights Campaign Foundation’s annual assessment of LGBTQ+ workplace equality.
· Sodexo is ranked #1 of the food service sector in World Benchmarking Alliance’s (WBA) first Food and Agriculture Benchmark, which measures how the world's 350 most influential companies in the industry are transforming the food system for a more sustainable future.
· In February 2022, Sodexo was awarded Supplier Engagement Leader by CDP, placing us in the 8% top companies taking action to measure and reduce environmental risks within its supply chain.
*1.4** **Evolution of the Board of Directors*
To ensure balanced governance on the Board following the combining of the Chairwoman and CEO roles, the Board of Directors appointed Luc Messier, a Sodexo director since January 2020, as Lead Independent Director. His main mission is to ensure the proper governance of the company.
According to the internal rules of the Board (published on sodexo.com) the Lead Independent Director has the power to:
· amend the agenda of the Board meetings;
· bring any situations of conflict of interest to the Board;
· in coordination with the Chairwoman, is the Board's spokesperson for investors and shareholders on governance issues.
In line with the recommendations of the AFEP-Medef code, Sophie Bellon has resigned from the Nominating committee.
As of March 1, 2022, the Board Committees are made up as follows:
*Audit Committee*
· Sophie Stabile, Chairwoman, Independent director
· Jean-Baptiste Chasseloup de Chatillon, Independent director
· François-Xavier Bellon, Director
· Véronique Laury, Independent director
· Cathy Martin, Director representing employees
*Nominating Committee*
· Cécile Tandeau de Marsac, Chairwoman, Independent director
· Luc Messier, Lead Independent director
· François-Xavier Bellon, Director
· Nathalie Bellon-Szabo, Director
· Françoise Brougher, Independent director
*Compensation Committee*
· Cécile Tandeau de Marsac, Chairwoman, Independent director
· Philippe Besson, Director representing employees
· Françoise Brougher, Independent director
· Sophie Stabile, Independent director
*1.5** **Ukraine war impact*
· Sodexo does not have activities in Ukraine.
· Sodexo has a small On-site presence in Russia: less than 1% of our revenues. The situation is being monitored closely and we are reviewing different options at the moment.
· From the beginning of the war, Sodexo has been strongly mobilized to ensure business continuity for its clients, guarantee the safety of its employees, and provide support to the refugees in countries bordering Ukraine. Sodexo Group and Stop Hunger have set up a Sodexo Employee Donations Global Initiative with the support of their long-term partner, the United Nations World Food Program (WFP). Employee donations are matched by Sodexo and the money raised will be used to support refugees in the region and people affected by the war in Ukraine.
*2** **H1 Fiscal 2022 performance*
*2.1** **Consolidated income statement*
(in millions of euros) *H1 FISCAL 2022* *H1 FISCAL 2021* *DIFFERENCE* *DIFFERENCE CONSTANT RATES*
Revenue *10,262* *8,595* *+19.4**% * *+15.9**% *
*UNDERLYING OPERATING PROFIT* *538* *265 * *+103.0**% * *+96.2**% *
*UNDERLYING OPERATING PROFIT MARGIN* *5.2**% * *3.1%* *+210 bps * *+210 bps *
Other operating expenses (1) (128)
*OPERATING PROFIT* *537* *136* *+294.9**% * *+279.5**% *
Net financial expense (53) (50)
PRE-TAX PROFIT excluding share of profit from Equity method companies 484 86
Tax charge (136) (53)
Effective tax rate 28.3% 63.0%
*GROUP NET PROFIT* *337* *33* *x10 * *x10 *
*EPS *(in euros) *2.30* *0.23* *x10 *
*UNDERLYING NET PROFIT* *339* *128* *+164.8**% * *+156.0**% *
Underlying EPS (in euros) 2.32 0.87 +165.3%
*2.2** **Currency effect*
Exchange rate fluctuations do not generate operational risks, because each subsidiary bills its revenues and incurs its expenses in the same currency. However, given the weight of the Benefit & Rewards activity in Brazil, and the high level of its margins relative to the Group, when the Brazilian real declines against the euro, it has a negative effect on the Underlying Operating Profit margin due to a change in the mix of margins. Conversely, when the Brazilian real strengthens Group margins increase.
*1€=* *AVERAGE RATE *
*H1 FY 2022* *AVERAGE RATE *
*H1 FY 2021* *AVERAGE RATE *
*H1 FY 2022 **VS**. H1 FY 2021* *CLOSING RATE *
*AT 28/02/2022* *CLOSING RATE *
*AT 31/08/21* *CLOSING RATE*
*28/02/2022 **VS**. 31/08/2021*
U.S. dollar 1.143 1.197 +4.7% 1.120 1.183 +5.7%
Pound Sterling 0.846 0.897 +6.1% 0.836 0.859 +2.8%
Brazilian real 6.258 6.554 +4.7% 5.783 6.139 +6.2%
The positive contribution of currencies in First half Fiscal 2022 is the result of the recent weakness of the euro against all our main currencies with an increase in the U.S. dollar and the Brazilian real of +4.7% and sterling of +6.1% cumulating in a +3.5% positive impact on revenues and no impact on the Underlying Operating Profit margin.
Sodexo operates in 55 countries. The percentage of total revenues and Underlying Operating Profit denominated in the main currencies are as follows:
*FISCAL 2022* *% OF REVENUES* *% OF UNDERLYING OPERATING PROFIT*
U.S. dollar 39 % 51 %
Euro 24 % -2 %
UK pound Sterling 10 % 10 %
Brazilian real 4 % 14 %
The currency effect is determined by applying the previous year’s average exchange rates to the current year figures.
*2.3** **Revenues*
*REVENUES BY ACTIVITY*
*REVENUES*
(in millions of euros) *H1 FY 2022* *H1 FY 2021* *RESTATED ORGANIC GROWTH* *ORGANIC GROWTH* *EXTERNAL GROWTH* *CURRENCY EFFECT* *TOTAL GROWTH*
Business & Administrations 5,160 4,280 +19.5 % +19.6 % -2.0 % +3.0 % +20.6 %
Healthcare & Seniors 2,675 2,338 +5.0 % +9.8 % +0.7 % +4.0 % +14.5 %
Education 2,030 1,620 +29.5 % +20.7 % -0.2 % +4.8 % +25.3 %
*ON-SITE SERVICES* *9,865* *8,238* *+17.0* *%* *+17.0* *%* *-0.9* *%* *+3.6* *%* *+19.8* *%*
*BENEFITS & REWARDS SERVICES* *398* *359* *+9.3* *%* *+9.3* *%* *+0.5* *%* *+1.0* *%* *+10.8* *%*
Elimination (1) (2)
*TOTAL GROUP* *10,262* *8,595* *+16.7* *%* *+16.7* *%* *-0.8* *%* *+3.5* *%* *+19.4* *%*
First half Fiscal 2022 consolidated revenues were at 10.3 billion euros, up +19.4% year-on-year including a negative net contribution from acquisitions and disposals of -0.8% and a strong currency impact of +3.5%. Excluding these elements, organic revenue growth was +16.7%.
*ON-SITE SERVICES*
On-site Services organic revenue growth was +17.0% for the period, with a solid recovery up to the end of December, an Omicron impact in Q2 in Corporate Services, Sports & Leisure and Education, and a visible improvement by the end of February. As a result, the second quarter, at 94% of pre-Covid Fiscal 2019 revenues at constant rates, was slightly below the first quarter at 95%, but still well above the levels of Fiscal 2021.
The performance of the main segments relative to Fiscal 2019 revenues is as follows:
*AT CONSTANT RATES*
*in % of Fiscal 2019 revenues*
*Q3 FY 2020* *Q4 FY 2020* *Q1 FY 2021* *Q2 FY 2021* *Q3 **FY **2021* *Q4 FY 2021* *Q1 FY 2022* *Q2 FY 2022*
*Business & Administrations* *71* *%* *70* *%* *78* *%* *78* *%* *78* *%* *82* *%* *91* *%* *91* *%*
Of which Corporate Services 73 % 74 % 79 % 78 % 75 % 79 % 87 % 89 %
Of which Sports & Leisure 16 % 9 % 14 % 17 % 22 % 43 % 64 % 61 %
*Education* *46* *%* *64* *%* *72* *%* *68* *%* *79* *%* *85* *%* *92* *%* *88* *%*
Of which Schools 52 % 78 % 87 % 84 % 88 % 99 % 104 % 92 %
Of which Universities 41 % 52 % 61 % 54 % 72 % 71 % 84 % 84 %
*Healthcare & Seniors* *88* *%* *92* *%* *97* *%* *100* *%* *96* *%* *100* *%* *105* *%* *104* *%*
*On-site Services* *70* *%* *75* *%* *81* *%* *81* *%* *83* *%* *87* *%* *95* *%* *94* *%*
*Benefits & Rewards Services* *77* *%* *95* *%* *100* *%* *94* *%* *96* *%* *97* *%* *107* *%* *106* *%*
*Group* *70* *%* *75* *%* *81* *%* *82* *%* *83* *%* *87* *%* *95* *%* *94* *%*
During the first half of Fiscal 2022, the Food services activity recovered strongly, up +27% in line with the recovery in Education and Sports & Leisure segments. Facilities Management services continued to grow, up +5% year on year despite the impact of the termination of the Chicago Public Schools contract and lower activity in the Testing Centers in the second quarter.
By the end of the second quarter, Food services were back up to 82% of pre-Covid levels. The lower level in FM services at 112% at the end of the second quarter was due to the full effect of the Chicago Public Schools contract termination, significant volatility in the Testing Centers activity between the first and second quarters and a base effect linked to acquisitions consolidated from the second quarter Fiscal 2019.
Key performance indicators have improved across the board during the First half Fiscal 2022:
· client retention was 98.1%, up +60 bps compared to First half Fiscal 2021 with improvements in all segments and regions.
· new sales development was up +90 bps at 3.7%, with a solid contribution from Business & Administrations and Healthcare & Seniors. Education is also up but is less significant due to the seasonality of the new business decisions which tend to be taken at the end of the academic year. This increase in development is accompanied by an +80bps improvement in expected gross margins.
· same site sales were up +4,250 bps at +19.8%, thanks to the strong volume recovery in Corporate Services, Sports & Leisure and Education and solid cross-selling particularly in Healthcare & Seniors.
*ON-SITE SERVICES REVENUES BY REGION*
*REVENUES BY REGION*
(in millions of euros) *H1 FY 2022* *H1 FY 2021* *ORGANIC GROWTH*
North America 4,232 3,174 +27.1 %
Europe 3,917 3,528 +10.6 %
Asia-Pacific, Latam, Middle East and Africa 1,716 1,535 +11.0 %
*ON-SITE SERVICES TOTAL* *9,865* *8,238* *+17.0* *%*
· The +27.1% organic growth in North America in the First half reflects the reopening of all schools and universities and Sports & Leisure sites, and a slow return to work. The region is still only at 85% of pre-Covid levels due to the significant weight of Sports & Leisure and Corporate Services in the mix of business.
· Europe was up +10.6% reflecting continued recovery in the region, which in the First half Fiscal 2022 was back up over 95% of pre-Covid levels.
· Asia-Pacific, Latin America, Middle East and Africa grew organically by +11.0% and now running at 21% above pre-Covid levels.
*FOR THE SECOND QUARTER ONLY*
*REVENUES BY REGION*
(in millions of euros) *Q2 FY 2022* *Q2 FY 2021* *ORGANIC GROWTH*
North America 2,026 1,486 +25.8 %
Europe 1,895 1,721 +10.0 %
Asia-Pacific, Latam, Middle East and Africa 862 767 +10.5 %
*ON-SITE SERVICES TOTAL* *4,783* *3,974* *+16.1* *%*
Growth in the second quarter Fiscal 2022 slowed slightly in all regions relative to the first quarter, due to an ever-improving comparable base. While the recovery in Europe was impacted by Omicron, from 98% of pre-Covid levels in the first quarter to 93% in the second quarter, the recovery continued in North America up +1% to 86% of pre-Covid levels in the second quarter.
*Business & Administrations*
*REVENUES BY REGION*
(in millions of euros) *H1 FY 2022* *H1 FY 2021* *RESTATED ORGANIC GROWTH*
North America 1,263 828 +45.2 %
Europe 2,354 2,084 +15.1 %
Asia-Pacific, Latam, Middle East and Africa 1,542 1,369 +10.8 %
*BUSINESS & ADMINISTRATIONS TOTAL* *5,160* *4,280* *+19.5* *%*
First half Fiscal 2022 *Business & Administrations* revenues totaled *5.2 billion euros*, up +19.5% organically.
*FOR THE SECOND QUARTER ONLY*
*REVENUES BY REGION*
(in millions of euros) *Q2 FY 2022* *Q2 FY 2021* *RESTATED ORGANIC GROWTH*
North America 620 405 +41.8 %
Europe 1,146 1,004 +16.8 %
Asia-Pacific, Latam, Middle East and Africa 776 687 +10.3 %
*BUSINESS & ADMINISTRATIONS TOTAL* *2,543* *2,095* *+19.5* *%*
Second quarter organic growth in *North America* was *+41.8%* due to a solid recovery in activity in Corporate services and Sports & Leisure. While the first benefited from a continued although very slow return to work, the rebound in the Sports & Leisure activity stalled in the second quarter due to the impact of Omicron. On the other hand, Energy & Resources segment growth accelerated during the period due to new contract startups and return of support workers onsite.
In *Europe*, second quarter revenues were up *+16.8%* organically, boosted by a solid recovery in Corporate Services and Sports & Leisure, although the recovery stalled due to the protective measures put in place for Omicron. On the other hand, the contribution from new contracts in the Government & Agencies and Energy & Resources segments was not enough to compensate the loss of the Transforming Rehabilitation contract in the UK.
In *Asia-Pacific, Latam, Middle East and Africa,* organic revenue growth was *+10.3%*. The Corporate Services segment continued to grow double digit as activity picked up strongly in India and remained strong in all other regions. Energy & Resources continued to achieve very solid growth. New business ramp-ups and strong underlying growth in the energy sector compensated some contract losses.
*Healthcare & Seniors*
*REVENUES BY REGION*
(in millions of euros) *H1 FY 2022* *H1 FY 2021* *RESTATED ORGANIC GROWTH*
North America 1,424 1,297 +4.7 %
Europe 1,114 910 +4.8 %
Asia-Pacific, Latam, Middle East and Africa 137 131 +9.6 %
*HEALTHCARE & SENIORS TOTAL* *2,675* *2,338* *+5.0* *%*
*Healthcare & Seniors* First half revenues amounted to *2.7 billion euros*, up +5.0% organically.
*FOR THE SECOND QUARTER ONLY*
*REVENUES BY REGION*
(in millions of euros) *Q2 FY 2022* *Q2 FY 2021* *RESTATED ORGANIC GROWTH*
North America 730 643 +5.2 %
Europe 537 467 -1.5 %
Asia-Pacific, Latam, Middle East and Africa 70 66 +9.2 %
*HEALTHCARE & SENIORS TOTAL* *1,337* *1,177* *+2.5* *%*
In *North America*, organic growth was *+5.2%*, helped by some inflation and ongoing recovery in Seniors occupancy. Hospital activity has been growing in volume, but retail activity is still at only 70% of pre-Covid levels.
In *Europe*, organic growth was *-1.5%*, impacted by a significant volatility in activity in the Testing centers from quarter to quarter and year to year. Seniors occupancy continues to pick up progressively.
In *Asia-Pacific, Latam, Middle East and Africa*, organic revenue growth was *+9.2%*, due to strong volume growth related to new contracts in Asia and same-site growth in Brazil.
*Education*
*REVENUES BY REGION*
(in millions of euros) *H1 FY 2022* *H1 FY 2021* *RESTATED ORGANIC GROWTH*
North America 1,545 1,050 +40.4 %
Europe 449 535 +3.1 %
Asia-Pacific, Latam, Middle East and Africa 36 35 +27.7 %
*EDUCATION TOTAL* *2,030* *1,620* *+29.5* *%*
First half Fiscal 2022 revenues in *Education* were *2.0 billion euros*, up +29.5% organically.
*FOR THE SECOND QUARTER ONLY*
*REVENUES BY REGION*
(in millions of euros) *Q2 FY 2022* *Q2 FY 2021* *RESTATED ORGANIC GROWTH*
North America 676 438 +41.2 %
Europe 212 250 +6.6 %
Asia-Pacific, Latam, Middle East and Africa 16 14 +26.5 %
*EDUCATION TOTAL* *904* *703* *+30.6* *%*
In the second quarter, *North America* was up *+41.2%* with all schools and colleges open during the quarter. The recovery did stall in the second quarter compared to the first quarter due to Omicron and the full impact of the Chicago Public Schools contract termination. In Universities, Board plans are nearly back up to Fiscal 2019 levels. However, the retail and events activities were impacted by staff shortages, lower footfall, and sanitary protocols.
In *Europe*, revenue was up *+6.6%* organically. Schools were fully open, against a previous year which had been impacted by confinement in the UK. However, student attendance rates were still below normal levels due to the number of cases of Omicron during the quarter.
In *Asia-Pacific, Latam, Middle East and Africa*, organic growth was *+26.5%* reflecting very rapid ramp-up in student attendance in India, particularly in universities.
*BENEFITS & REWARDS SERVICES*
First half Fiscal 2022 *Benefits & Rewards Services* revenue amounted to 398 million euros, up +9.3% organically.
Employee Benefits organic growth was back up to double digit at +14.5% compared to an issue volume up +13.3%. Services Diversification was down -7.6% organically.
*REVENUES BY ACTIVITY*
(in millions of euros) *H1 FY 2022* *H1 FY 2021* *ORGANIC GROWTH*
Employee Benefits 324 275 +14.5 %
Services Diversification* 73 84 -7.6 %
*BENEFITS & REWARDS SERVICES* *398* *359* *+9.3* *%*
* Including Incentive & Recognition, Mobility & Expenses and Public Benefits.
*FOR THE SECOND QUARTER ONLY*
*REVENUES BY ACTIVITY*
(in millions of euros) *Q2 FY 2022* *Q2 FY 2021* *ORGANIC GROWTH*
Employee Benefits 177 145 +18.9 %
Services Diversification* 39 45 -12.8 %
*BENEFITS & REWARDS SERVICES* *215* *190* *+11.4* *%*
* Including Incentive & Recognition, Mobility & Expenses and Public Benefits.
In the second quarter, the organic growth in *Employee Benefits* revenues was very strong at +18.9%, compared to an organic growth in issue volume of +17.4% boosted by particularly strong gift activity.
*Services Diversification* was down -12.8% organically. While fuel and mobility cards activity grew double digit, this was more than offset by a substantial reduction in Covid-related public benefits.
*REVENUES BY REGION*
(in millions of euros) *H1 FY 2022* *H1 FY 2021* *ORGANIC GROWTH*
Europe, USA and Asia 267 242 +9.9 %
Latin America 131 116 +8.2 %
*BENEFITS & REWARDS SERVICES* *398* *359* *+9.3* *%*
*FOR THE SECOND QUARTER ONLY*
*REVENUES BY REGION*
(in millions of euros) *Q2 FY 2022* *Q2 FY 2021* *ORGANIC GROWTH*
Europe, USA and Asia 147 130 +12.5 %
Latin America 68 60 +9.1 %
*BENEFITS & REWARDS SERVICES* *215* *190* *+11.4* *%*
In the second quarter, Europe, USA and Asia, organic revenue growth was +12.5% boosted by very strong growth in issue volume in Israel and Turkey.
In Latin America, organic growth was +9.1%, boosted by a return to high single digit growth in Brazil, on double digit growth in Issue volumes. Growth remained solid in the rest of the region.
*REVENUES BY NATURE*
(in millions of euros) *H1 FY 2022* *H1 FY 2021* *ORGANIC GROWTH*
Operating Revenues 375 339 +8.9 %
Financial Revenues 23 20 +16.6 %
*BENEFITS & REWARDS SERVICES* *398* *359* *+9.3* *%*
First half Fiscal 2022 Operating revenues were up +8.9% and Financial revenues were up +16.6%.
*FOR THE SECOND QUARTER ONLY*
*REVENUES BY NATURE*
(in millions of euros) *Q2 FY 2022* *Q2 FY 2021* *ORGANIC GROWTH*
Operating Revenues 203 180 +10.6 %
Financial Revenues 12 11 +25.5 %
*BENEFITS & REWARDS SERVICES* *215* *190* *+11.4* *%*
In the second quarter, Operating revenues were back up to double digit growth at +10.6%, boosted in particular by much better momentum in Brazil and a very strong year end season for gift cards. Financial revenues were up very strongly at +25.5% due to the significant increase in the Selic (official Brazilian interest rate) which is now back up over 11%, having been below 3% 12 months ago.
*2.4** **Underlying Operating Profit*
First half Fiscal 2022 Underlying Operating Profit was 538 million euros, more than double the previous year. The Underlying operating margin was up +210 bps to 5.2%, reflecting the solid recovery in activity.
The significant step-up in the Underlying operating margin semester after semester, since the low in Second half Fiscal 2020 of -1.5%, reflects the improvement in activity levels, very tight cost control, numerous contract renegotiations in the On-site activities, more active portfolio management, and the contribution from the GET efficiency program.
The GET efficiency program was aimed at protecting the gross profit margin as government aid receded and structurally reducing SG&A for the long-term by simplifying the structures in the Group, to free up capacity to invest in growth and to enhance margins. The program has now been closed.
*GET PROGRAM* *FISCAL 2020* *FISCAL 2021* * FISCAL 2022* *TARGET*
(in millions of euros) *CUMULATED NUMBERS*
*Total exceptional costs* *158* *312* *327* *350*
*Cash impact* *(75)* *(217)* *(305)* *(315)* SG&A savings — 91 157 175 Gross profit cost avoidance — 127 225 175
*Total savings* *—* *218* *382* *350*
*Savings/Costs* *117%* *100%*
Cumulated up to the end of First half Fiscal 2022, the GET program has cost 327 million euros, generated 382 million euros of annual savings, with a cash impact of 305 million euros, of which of 37 million euros in First half Fiscal 2022. As a result, the program exceeded the target cost savings by 32 million euros with a ratio of savings to costs of 117%, also above the target of 100%.
(in millions of euros) *UNDERLYING OPERATING PROFIT*
*H1 FISCAL 2022* *DIFFERENCE* *DIFFERENCE (EXCLUDING *
*CURRENCY EFFECT)* *UNDERLYING OPERATING PROFIT MARGIN *
*H1 FISCAL 2022* *DIFFERENCE *
*IN MARGIN* *DIFFERENCE IN MARGIN *
*(EXCLUDING CURRENCY MIX EFFECT)*
Business & Administrations 138 +753.5% +705.9% 2.7% +230 bps +230 bps
Healthcare & Seniors 171 +14.9% +10.6% 6.4% 0 bps 0 bps
Education 172 +146.5% +135.8% 8.5% +420 bps +410 bps
*On-site Services* *481* *+104.8%* *+96.8%* *4.9%* *+200 bps* *+190 bps*
*Benefits & Rewards Services* *106* *+25.3%* *+25.2%* *26.7%* *+310 bps* *+330 bps*
Corporate expenses & Intragroup eliminations (50) +8.9% +9.3%
*UNDERLYING OPERATING PROFIT* *538* *+103.0%* *+96.2%* *5.2%* *+210 bps* *+210 bps*
At current rates, First half Fiscal 2022 On-site Services Underlying Operating Profit doubled year on year and the margin rose by +200 bps, or +190 bps at constant currency mix effect, to 4.9%. The currency impact during the First half was limited.
The performance by segment at *constant rates* is as follows:
· *Business & Administrations* Underlying Operating profit increased seven-fold from a very low level in Fiscal 2021. As a result, the Underlying operating margin was up +230 bps to 2.7%. Progress is solid, linked to the recovery in revenues, even though the margin is still some way off the Fiscal 2020 first half margin of 4%. It also represents a significant improvement in margins since the beginning of the pandemic, from -3.3% in Second half Fiscal 2020, to 0.4% in First half 2021 and 1.9% in the Second half. While the margin has recovered significantly in Corporate Services and is back to breakeven in Sports & Leisure, the margin in Energy & Resources has been temporarily impacted by high levels of Omicron-linked absenteeism, particularly in the mining sector, and some major contract ramp-ups.
· in *Healthcare & Seniors*, the Underlying Operating Profit margin is flat year on year at 6.4% but higher than in the First half Fiscal 2020, pre-Covid, at 6.3%. Net new business is positive for margins and inflation is being passed on either through indexation clauses, contract negotiations or productivity measures.
· in *Education*, Underlying Operating Profit more than doubled and the margin was up by +410 bps at 8.5%, compared to a margin of 8.4% in First half Fiscal 2020. This performance reflects strong volume recovery in North America and Asia, productivity in Europe and strict cost management throughout. Inflation has been passed on to clients or compensated by productivity.
In *Benefits & Rewards Services*, excluding negligible currency impacts, Underlying Operating Profit was up +25.2% and the margin was 26.7%, up +330 bps. This represents a progressive pick-up in the margin over the last few semesters, as the business has recovered from the negative effects of the Covid confinements. While cost reduction has continued, spending on enhanced digitalization and new offerings has also continued. The recovery in financial revenues is also feeding through into enhanced margins.
*2.5** **Group net profit*
*Other net operating expenses* amounted to 1 million euros compared to 128 million euros in the previous year.
With the closing of the GET program, in First half Fiscal 2022, restructuring costs fell to only 3 million euros. Gains related to the sale of assets were more or less offset by the losses.
As a result, the Operating Profit was up strongly at 537 million euros compared to 136 million euros in the previous year.
(in millions of euros) *H1 FISCAL 2022* *H1 FISCAL 2021*
*UNDERLYING OPERATING PROFIT* *538* *265*
*OTHER OPERATING INCOME* *67* *8*
Gains related to consolidation scope changes 33 3
Gain on disposals of non-current assets — —
Gains on changes of post-employment benefits — 4
Other 34 —
*OTHER OPERATING EXPENSES* *(68)* *(136)*
Restructuring and rationalization costs (3) (107)
Losses related to consolidation scope changes (34) (1)
Amortization of purchased intangible assets (20) (21)
Impairment of goodwill and non-current assets — —
Acquisition-related costs (2) (2)
Losses on changes of post-employment benefits (1) (1)
Losses related to the disposal of non-current assets — —
Other (8) (3)
*OTHER OPERATING INCOME AND EXPENSES (NET)* *(1)* *(128)*
*OPERATING PROFIT* *537* *136*
First half Fiscal 2022 Net financial expense was up at 53 million euros against 50 million euros in the previous year. The increase is attributable to the increased gross debt resulting from the US Dollar bond issue in April 2021 somewhat offset by the 600 million euros reimbursement of a euro bond in October 2021. The blended cost of gross debt was 1.5% as at February 28, 2022, which is slightly lower than the rate at the end of February and August 2021 of 1.6%.
The tax charge was up strongly at 136 million euros due to the very significant increase in the pre-tax profit. However, the effective tax rate fell below 30%, back to a more regular rate at 28.3%, compared to 63% in the previous year.
The share of profit of other companies accounted for using the equity method was 2 million euros in First half Fiscal 2022, compared to 2 million euros in the preceding year. Profit attributed to non-controlling interests was 11 million euros compared to the previous year amount of 2 million euros.
As a result, First half Fiscal 2022 Group Net Profit was multiplied by 10 to 337 million euros, compared to 33 million euros in the previous year. Underlying Net Profit adjusted for Other Operating income and expenses net of tax amounted to 339 million euros, compared to 128 million euros in the previous year, up +164.8%.
*2.6** **Earnings per share*
Published First half Fiscal 2022 EPS was 2.30 euros against 0.23 euro in the previous year. The weighted average number of shares for Fiscal 2022 was more or less stable at 146,292,627 compared to 146,001,603 shares for First half Fiscal 2021.
Underlying EPS amounted to 2.32 euros, up +165.3% compared to the previous year.
*3** **Consolidated financial position*
*3.1** **Cash flows*
Cash flows for the period were as follows:
(in millions of euros) *H1 Fiscal 2022* *H2 Fiscal 2021*
Operating cash flow 674 405
Change in working capital excluding change in BRS financial assets^ (1) (481) 41
IFRS 16 outflow (109) (123)
Net capital expenditure (159) (86)
*Free cash flow*^* (2)* *(75)* *237*
Net acquisitions (26) (10)
Share buy-backs (13) (11)
Dividends paid to shareholders (294) —
Other changes (including scope and exchange rates) (156) (28)
*(Increase)/decrease in net debt* *(564)* *187*
(1) Excluding change in financial assets related to the Benefits & Rewards Services activity of 67 million euros in Fiscal 2022 versus -42 million euros in Fiscal 2021. Total change in working capital as reported in consolidated accounts: in Fiscal 2022: -414 million euros = -481 million euros + 67million euros and in Fiscal 2021: -1 million euros = 41 million euros - 42 million euros.
(2) The Group does not believe the accounting treatment introduced by IFRS 16 modifies the operating nature of its lease transactions. Accordingly, to ensure the Group’s performance measures continue to best reflect its operating performance, the Group considers repayments of lease liabilities as operating items impacting the Free cash flow, which integrates all lease payments (fixed or variable). To be consistent, the lease liabilities are not included in Net debt (treated as operating items).
First half Fiscal 2022 Free cash outflow was 75 million euros against an inflow of 237 million euros in the previous period.
First half Fiscal 2022 Operating cash flow improved to 674 million euros against 405 million euros in the previous period as a result of the significant improvement in the operating profit of the Group. On the other hand, working capital deteriorated significantly with an outflow of cash of 481 million euros during the First half Fiscal 2022. This was exceptionally high due to the 37 million euros cash effect of the restructuring costs, the unwinding of the government Covid-linked payment delays for 100 million euros, reimbursement of the Tokyo Olympics hospitality packages for 55 million euros, an exceptional cash contribution to the UK pension fund for 71 million euros and a 7 million euros net cash inflow for Benefits & Rewards Services resulting from the Hungarian indemnity related to closing the business, which is offset by the fine related to the dispute with the French competition authorities which is being paid monthly.
Net capital expenditure, including client investments, at 159 million euro, or 1.5% of revenues, increased year on year from the exceptionally low level of 86 million euros in the previous year.
While contract-linked capital expenditure in some segments has continued to be delayed due to the effect of the pandemic, IT investment is maintained, and the digitization of Benefits & Rewards Services continues. Given the Group's mix of segments and geographies, and in a normal environment, this rate should be running at around 2.5% of annual revenues.
Given the number of completed disposals since the beginning of the year, the cash impact of acquisitions net of disposals amounted to 26 million euros.
The resumption of the payment of a dividend on Fiscal 2021 earnings resulted in an outflow of 294 million euros.
After taking into account Other changes, consolidated net debt increased by 564 million euros during the First half to 2,042 million euros at February 28, 2022.
*3.2** **Acquisitions and disposals for the period*
First half Fiscal 2022 has been an active period for closing numerous disposals of non-core activities and geographies:
· The On-site Services activities in Morocco
· The Lido in France
· Non-strategic account portfolios in Australia, Czech Republic
· Benefits & Rewards Services in Russia
· Benefits & Rewards Services sports cards in Romania and Spain
· The Global Childcare activities and the Onsite Services business in the Congo were completed mid-March.
On the other hand, further strategic acquisitions & investments have also been made:
· In the New Food Model, we have acquired Frontline Food Services, North America, and increased our participation in the digital food services company, Meican, China
· In the GPO space, we have made two investments to strengthen the position of Entegra in E