Sodexo announces solid H1 Fiscal 2023 results and plan to spin-off Benefits & Rewards Services
Issy-les-Moulineaux, April 5, 2023Sodexo (NYSE Euronext Paris FR 0000121220-OTC: SDXAY).
*First half Fiscal 2023 results up strongly*· Revenue growth +17.8%, organic growth +13.4%
· Underlying operating profit +30.9%, H1 margin at 5.8%, up +60 bps
· Underlying Earnings per share amounted to 3.25 euros, up +40%
*Group Fiscal 2023 organic growth guidance upgraded*
· Organic growth now expected to be close to +11%
· Underlying operating profit margin confirmed to be close to 5.5% at constant rates
*Plan to spin-off and list Benefits & Rewards Services during 2024*
· Resulting in two leading pure players Sodexo On-site Services (OSS) and Benefits & Rewards Services (BRS) with highly cash generative business models
· Placing both businesses in a stronger position to execute their respective strategies and realize their full potential in fast growing markets
At the Board of Directors meeting held on April 4, 2023, chaired by Sophie Bellon, the Board closed the Consolidated accounts for the First half Fiscal 2023 ended February 28, 2023.
(in millions of euros) *H1 FISCAL 2023* *H1 FISCAL 2022* *DIFFERENCE* *DIFFERENCE CONSTANT RATES*
Revenue *12,085* *10,262* *+17.8%* *+12.0%*
Organic revenue growth +13.4% +16.7%
*UNDERLYING OPERATING PROFIT* *704* *538* *+30.9%* *+22.4%*
*UNDERLYING OPERATING PROFIT MARGIN* *5.8% * *5.2%* *+60 bps* *+50 bps*
Other operating expenses (42) (1)
*OPERATING PROFIT* *662* *537* *+23.3%* *+16.7%*
Net financial expense (48) (53)
PRE-TAX PROFIT excluding share of profit
from Equity method companies 614 484
Tax charge (166) (136)
*GROUP NET PROFIT* *440* *337* *+30.6%* *+23.3%*
EPS (in euros) *3.01* *2.30* *+30.9%*
*UNDERLYING NET PROFIT* *475* *339* *+40.1%* *+44.8%*
Underlying EPS (in euros) 3.25 2.32 +40.0%
*Sodexo Chairwoman and CEO Sophie Bellon said: *
“The performance in the first half is solid. In On-site Services, despite inflation, the post-Covid ramp-up in volumes, mitigation actions and pricing have helped us to improve our margins. Food inflation has remained high and is likely to remain so in the second half. In Benefits & Rewards Services, growth and profitability have been better than expected.
To reflect the positive business momentum in the first half, we upgraded the Group organic growth guidance for Fiscal 2023 close to +11% while confirming our UOP guidance, expected to be close to 5.5% at constant rates.
With the completion of the On-site Services reorganization into geographies, the Sodexo Leadership Team is totally focused on the execution of our strategic plan.
The next major step for the Group is the proposed separation of OSS and BRS, that is driven by a strong strategic rationale. More focused, supported by a dedicated and empowered governance as well as an adequate capital structure, each entity would be in an even stronger position to pursue its own strategy, achieve its goals and realize its full potential.
We confirm our mid-term financial objectives and are more than ever determined to meet them. I am confident in the capacity of the leadership teams of both entities to deliver the expected results.
Finally, I would like to take a moment to warmly thank our teams for the strong progress that we have made this first half.”
*First half Fiscal 2023 Results up strongly *
· First half Fiscal 2023 consolidated revenues were at 12.1 billion euros, up +17.8% year-on-year including a net contribution from acquisitions and disposals of -1.3% and a positive currency impact of +5.7%. Excluding these elements, organic revenue growth was +13.4%.
· *On-site Services *organic revenue growth was +12.9% for the period, benefiting from the ongoing post-Covid ramp-up particularly in Corporate Services, Sports & Leisure and Universities, as well as above 5% pricing effect. Net new development started to come through in the second quarter, contributing +0.5% to the growth in the First half. Food services recovered strongly up +20% organically. FM services were up +6% excluding the impact of the end of the Testing Centers contract in the UK. Food services represented 65% of total On-site Services revenues during the period, increasing from 59% in Fiscal 2022.
· First half Fiscal 2023 *net new development* was positive:
· Client retention was 97.8% with no unanticipated contract losses.
· New sales development was 3.6%, reaching a record more than 0.8 billion euros including cross-selling.
· First half Fiscal 2023* Benefits & Rewards Services* revenue organic growth was +24.2%. Operating revenues were up +16.1% organically due to portfolio growth, positive net new development and an increase in face values. Financial revenues more than doubled due to the increase in interest rates in all geographies.
· *Underlying operating profit* was 704 million euros, up +30.9%, and +22.5% excluding currency effects. The Underlying operating margin was up +60 bps at 5.8%.
· *Other operating expenses (net)* amounted to 42 million euros against 1 million euros in First half 2022 last year benefited from significant positive one-offs.
· *Operating profit* was up strongly at 662 million euros compared to 537 million euros in the previous year.
· *Net financial expense *was 48 million euros against 53 million euros in the previous year. The reduction is principally due to higher interest rates on cash deposits.
· *Effective tax rate* was 27.1% against 28.3% in the previous year.
· *Group net income* was up +30.6% to 440 million euros. Underlying net profit adjusted for Other Operating income and expenses net of tax amounted to 475 million euros, compared to 339 million euros in the previous year, up +40.1%.
· *Free cash outflow* was 46 million euros against the cash outflow of 75 million euros in First half Fiscal 2022. Net capex was 234 million euros, compared to 159 million euros in the previous year. Gross capex was 317 million euros, or 2.6% of revenues.
· *Net debt* has reduced to 1.9 billion euros from 2.0 billion euros at the end of First half Fiscal 2022. As a result, gearing^1 is reduced to 46% from 56% and the net debt ratio^1 remains at the bottom end of the range at 1.3x compared to 1.8x at the end of First half Fiscal 2022.
· Once again, our *Corporate Responsibility achievements* have been recognized:
· Sodexo ranked 12^th in the annual ranking published by *Equileap*, world leader in data and information on gender equality. Sodexo is equal 1^st on the French podium.
· Sodexo received a special mention for “Workforce action” category at the *WDI Workforce Transparency Awards*.
· For the second consecutive year, Sodexo is on the *CDP Supplier Engagement Leaderboard*. The Group is among the top 8% companies taking action to measure and reduce environmental risks within its supply chain.
· Sodexo ranks in the top 10% companies in the "Restaurants & Leisure Facilities" sector for the excellence of its performance in terms of sustainable development in the *S&P Global Sustainability Yearbook.*
^1 See Alternative Performance Measures definitions
*Plan to create two leading pure players in growth markets by splitting Sodexo On-site Services and Benefits & Rewards Services*
The Sodexo Board of Directors has unanimously approved the project to separate the two business units of Sodexo by spinning-off and listing BRS through the distribution of BRS shares to Sodexo shareholders.
Bellon SA supports the plan and intends to continue playing a long-term controlling shareholder role in both businesses.
The contemplated transaction is expected to take place during 2024 following the completion of several customary steps, including consultation of the employee representative bodies, and remains subject to market conditions.
The Group confirms, and is more committed than ever to deliver, its mid-term guidance via the two separate entities.
Detailed transaction terms will be presented at a later stage and submitted to the approval of Sodexo’s shareholders at an extraordinary shareholders’ meeting. Sodexo’s bondholders and other lenders will be consulted on the proposed transaction in due course.
*Strong strategic Rationale*
By separating the two businesses, Sodexo intends to accelerate value creation for all its stakeholders:
· As two pure players dedicated to their respective markets and clients, one in Food and Facilities Management services and the other in employee benefits and engagement, each would be strategically more focused;
· Empowered and dedicated governance would drive enhanced business and financial performance;
· Conducting each business independently would help create a focused workforce and optimize employer attractiveness and people retention through dedicated compensation mechanisms;
· Both companies would be established with the adequate capital structures providing them with the full financial flexibility to execute their growth strategies, including specific M&A.
At separation, OSS and BRS would have capital structures consistent with a strong Investment Grade rating;
· Already operating vastly as an independent company, the spin-off and listing of BRS is not expected to generate any material adverse effects and would result in one-off costs customary for a transaction of this nature;
· The two differentiated investment profiles, with their respective business drivers, KPIs and stock market benchmarks would ensure that they attract the best suited investors.
*Outlook*
First half Fiscal 2023 was better than expected. As a result, Fiscal 2023 guidance for the Group and Benefits & Rewards Services has been revised up slightly.
*Group* *Fiscal 2023 guidance* upgraded on organic growth:
· Fiscal 2023 Organic revenue growth now expected close to +11%, driven by higher-than-expected growth in H1 and price increases to remain above 5% in H2
· Fiscal 2023 Underlying operating profit margin confirmed to be close to 5.5%, at constant rates
*Benefits & Rewards Services Fiscal 2023 guidance upgraded on both organic growth and Underlying operating profit margin:*
· Fiscal 2023 Organic revenue growth expected close to +20%
· Fiscal 2023 Underlying operating profit margin expected close to 32%, at constant rates
*Group and Benefits & Rewards Services* *Fiscal 2024 and 2025 guidance reiterated: *
· *Group*: +6 to +8% organic revenue growth and an Underlying operating profit margin above 6% at constant rates in FY2025
· *Benefits & Rewards Services: *low double-digit organic revenue growth and an Underlying operating profit well above 30% at constant rates in FY2025
*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 First half Fiscal 2023 results. *
*Those who wish to connect: *
· from the UK / International, please dial: +44 (0) 121 281 8004
· from France, please dial: +33 (0) 1 70 91 87 04
· from the USA, please dial: +1 718 705 8796
*Access Code: 07 26 14*
*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 “Newsroom” section and the “Investors – Financial Results” section.
*Fiscal 2023 financial calendar*
Fiscal 2023 Third quarter Revenues June 30, 2023
Fiscal 2023 Annual Results October 26, 2023
Fiscal 2023 Annual Shareholders Meeting December 15, 2023
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 sustainable food and valued experiences at every moment in life: learn, work, heal and play. Operating in 53 countries, our 422,000 employees serve 100 million consumers each day. The Sodexo Group stands out for its independence and its founding family shareholding, its responsible business model and its portfolio of activities including Food Services, Facilities Management Services and Employee Benefit Solutions. This diversified offer meets all the challenges of everyday life with a dual goal: to improve the quality of life of our employees and those we serve, and contribute to the economic, social and environmental progress in the communities where we operate. For Sodexo, growth and social commitment go hand in hand. Our purpose is to create a better everyday for everyone to build a better life for all.
Sodexo is included in the CAC Next 20, CAC 40 ESG, CAC SBT 1.5, FTSE 4 Good and DJSI indices.
*Key figures*
· 21.1 billion euros in Fiscal 2022
consolidated revenues
· 422,000 employees as at August 31, 2022
· #2 France-based private employer worldwide
· 53 countries
· 100 million consumers served daily
· 13.3 billion euros in market capitalization
(as at April 4, 2023)
*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
*Disclaimer*
This press release contains forward-looking statements, including on the proposed spin-off and listing of Benefits & Rewards Services. Forward-looking statements give the current expectations and projections of Sodexo relating to its financial condition, results of operations, plans, objectives, future performance and business. These statements may include, without limitation, any statements preceded by, followed by or including words such as “target,” “believe,” “expect,” “aim,” “intend,” “may,” “estimate,” “plan,” “project,” “will,” “should,” “would,” “could” and other words and terms of similar meaning. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Sodexo’ control that could cause the Sodexo’ actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include those discussed or identified under section 6.4.3 of the Universal Registration Document of Sodexo, filed with the French Autorité des marchés financiers (AMF) on 9 November 2022 and available on the Company’s website (www.sodexo.com) and the AMF’s website (www.amf-france.org). Such forward-looking statements are based on numerous assumptions regarding Sodexo’ present and future business strategies and the environment in which it will operate in the future. Accordingly, readers of this press release are cautioned against relying on these forward-looking statements. These forward-looking statements are made as of the date of this press release. This press release does not contain or constitute an offer of securities for sale or an invitation or inducement to invest in securities in France, the United States or any other jurisdiction.
1
*SODEXO - **First half Fiscal 2023 **Financial Report*
*1** **Strong First half Fiscal 2023**1.1** **H1 Fiscal 2023 operating performance*
First Half Fiscal 2023 results have exceeded both First half Fiscal 2019 and 2020 numbers, with revenues and net profit reaching a record level of 12.1 billion euros and 440 million euros respectively. Organic growth was +13.4% and the Underlying operating profit margin was 5.8%.
On-Site Services organic revenue growth was +12.9%, helped by the ongoing post-Covid ramp-up, strong pricing above 5% and the contribution of net new business. The Underlying operating margin increased +20bps to 5.1%.
Benefits & Rewards Services organic revenue growth remained higher than expected at +24.2% boosted by higher interest rates in all regions, a strong increase in face values as well as portfolio growth. As a result, the Underlying operating profit margin was 31.9%, up +530bps.
After a seasonal Free cash outflow of 46 million euros, net debt at the end of the period was 1.9 billion euros. As a result, gearing fell to 46% and the net debt ratio to 1.3x, both well within the Group's targets.
*1.2** **Group strategy presented at the Capital Markets Day **on November 2, 2022*
The 2025 strategic plan to generate sustainable, profitable growth and create value for shareholders and all stakeholders was presented in November 2022.
Sodexo’s strategic plan is based on 3 pillars:
· *Refocus on Food Services and be more selective in Facilities Management by:* · Upgrading and upscaling existing food offers and accelerating the development of advanced food models to address fast-changing consumer needs and behaviors: multichannel, anytime, anywhere, hybrid.
· Targeting selected Facilities Management services that augment the food experience and bring value to our clients and consumers.
· *Accelerate Benefits & Rewards Services profitable growth:*Guided by its vision to bring to life a personalized and sustainable employee experience at work and beyond, the plan is to:
· Accelerate in Meal and Food markets, by enhancing the digital experience for clients, consumers and affiliated merchants and penetration of the SME segment.
· Augment its core business, by enriching offers with a wider range of integrated and flexible employee benefits, while strengthening employee rewards & recognition and engagement platforms.
· Diversify its activities as a longer-term ambition.
Benefits & Rewards Services Capex is expected to run at close to 10% of revenues per year in the 2022 to 2025 period.
· *Strengthen Sodexo’s impact as market-maker in sustainability:*In line with our mission and purpose, having a positive impact on the planet and people is at the core of Sodexo’s business.
· Sodexo has launched a process with SBTi to formalize its ‘science-based’ 2040 Net Zero commitment, which will be a first in the sector.
· Sodexo is continuing its journey to reduce its environmental impact by committing to achieve -34% carbon emissions reduction by 2025, by extending the deployment of its WasteWatch program to 85% of its food service sites by 2025 vs 46% at the end of Fiscal 2022.
· Recognized as a leader in Diversity, Inclusion and Equity, Sodexo is about to achieve its gender balance objectives at top management level and is targeting gender balance in 100% of its management at country level teams by 2025.
This strategic plan is supported by three key enablers:
· *Tech & Data investments* are critical to improving operational efficiency while enhancing consumers' experience. · On-Site annual IS&T, Digital and Data operating expenses are currently running at around 500 million euros per year.
· Specifically, to increase consumer centricity, Sodexo aims to reach 10 million active consumers in its On-Site digital ecosystems by 2025.
· *Commercial excellence*: supported by strong consumer-oriented brands, innovative offers, and a robust CRM system and digital sales and marketing tools. · Sodexo is aiming to take client retention above 95% by 2025.
· A best-in-class CRM system and new digital sales and marketing tools (MSDC) have been deployed in North America with digital marketing leads now accounting for 60% of the pipeline. MSDC’s tool is currently being deployed in Europe.
· Consumer-oriented branded offers will be scaled and expanded, such as The Good Eating Company, Modern Recipe or Aspretto.
· *Supply chain power*: Sodexo will better leverage its powerful global supply chain. · Increase Sodexo’s purchasing from SMEs, targeting 2 billion euros per year by 2025 for On-site Services, to enhance local, responsible, and inclusive sourcing.
· Continue to develop Entegra, Sodexo’s GPO, in the United States and in Europe, in Food & Hospitality, as both a profit center and a means of delivering superior purchasing power.
To support this strategy, Sodexo will continue to have a disciplined approach to investment with gross Capex rising from 2.3% of revenues in 2022 to 2.8% in Fiscal 2025 and acquisitions, which will be focused, strategic and accretive.
*1.3** **Evolution on the Board *
As of December 19, 2022, the Board Committees are made up as follows:
*Audit Committee*
· Jean-Baptiste Chasseloup de Chatillon, Chairman, Independent Director
· François-Xavier Bellon, Director
· Véronique Laury, Independent Director
· Cathy Martin, Director representing employees
· Luc Messier, Independent Lead Director
*Nominating Committee*
· Cécile Tandeau de Marsac, Chairwoman, Independent Director
· François-Xavier Bellon, Director
· Nathalie Bellon-Szabo, Director
· Françoise Brougher, Independent Director
· Luc Messier, Independent Lead Director*Compensation Committee*
· Cécile Tandeau de Marsac, Chairwoman, Independent Director
· Philippe Besson, Director representing employees
· Françoise Brougher, Independent Director
· Federico J. González Tejera, Independent Director
*1.4** **Corporate Responsibility achievements*
Once again, our Corporate Responsibility achievements have been recognized:
1. Sodexo ranked 12th in the annual ranking published by Equileap, the world's leader in data and information on gender equality. Sodexo is equal 1st on the French podium.
2. Sodexo received a special mention for “Workforce action” category at the WDI Workforce Transparency Awards.
3. For the second consecutive year, Sodexo is on the CDP Supplier Engagement Leaderboard. The Group is among the top 8% companies taking action to measure and reduce environmental risks within its supply chain.
4. Sodexo ranks in the top 10% companies in the "Restaurants & Leisure Facilities" sector for the excellence of its performance in terms of sustainable development in the S&P Global Sustainability Yearbook.
*2** **H1 Fiscal 2023 performance*
*2.1** **Consolidated income statement*
(in million euros) *H1 FISCAL 2023* *H1 FISCAL 2022* *DIFFERENCE* *DIFFERENCE CONSTANT RATES*
Revenue *12,085* *10,262* *+17.8%* *+12.0%*
*UNDERLYING OPERATING PROFIT* *704* *538* *+30.9%* *+22.4%*
*UNDERLYING OPERATING PROFIT MARGIN* *5.8%* *5.2%* *+60 bps* *+50 bps*
Other operating expenses (42) (1)
*OPERATING PROFIT* *662* *537* *+23.3%* *+16.7%*
Net financial expense (48) (53)
PRE-TAX PROFIT excluding share of profit
from Equity method companies 614 484
Tax charge (166) (136)
*GROUP NET PROFIT* *440* *337* *+30.6%* *+23.3%*
*EPS *(in euros) *3.01* *2.30* *+30.9%*
*UNDERLYING NET PROFIT* *475* *339* *+40.1%* *+44.8%*
Underlying EPS (in euros) 3.25 2.32 +40.0%
*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 2023* *AVERAGE RATE*
*H1 FY 2022* *AVERAGE RATE*
*H1 FY 2023 **VS**. H1 FY 2022* *CLOSING RATE AT 28/2/2023* *CLOSING RATE *
* AT 08/31/22* *CLOSING RATE*
*02/28/2022 **VS**. 08/31/2022*
U.S. dollar 1.031 1.143 +10.9% 1.062 1.000 -5.8%
Pound Sterling 0.874 0.846 -3.2% 0.877 0.860 -1.9%
Brazilian real 5.417 6.258 +15.5% 5.528 5.148 -6.9%
The positive contribution of currencies in First half Fiscal 2023 is the result of the strength of the US dollar, up +10.9% and the Brazilian real, up +15.5%, during the 1^st quarter. However, during the second quarter, both rates came down, closing 5.8% and 6.9% below the levels at the beginning of the period.
Sodexo operates in 53 countries. The percentage of total revenues and underlying operating profit denominated in the main currencies during the First half Fiscal 2023 are as follows:
*H1 FISCAL **2023* *% OF REVENUES* *% OF UNDERLYING OPERATING PROFIT*
U.S. dollar 44% 52%
Euro 23% 4%
UK pound Sterling 7% 7%
Brazilian real 5% 15%
The currency effect is determined by applying the previous year’s average exchange rates to the current year figures.
*2.3** **Revenues*
*REVENUES BY REGION*
*REVENUES*
(in million euros) *H1 FY 2023* *H1 FY 2022* *ORGANIC GROWTH* *EXTERNAL GROWTH* *CURRENCY EFFECT* *TOTAL GROWTH*
North America 5,499 4,232 +16.4% +1.2% +12.4% +29.9%
Europe 4,027 3,917 +8.3% -3.8% -1.6% +2.8%
Rest of the World 2,055 1,716 +14.7% -2.0% +7.1% +19.8%
*ON-SITE-SERVICES* *11,581* *9,865* *+12.9%* *-1.3%* *+5.8%* *+17.4%*
*BENEFITS & REWARDS SERVICES* *508* *398* *+24.2%* *-1.0%* *+4.3%* *+27.5%*
Elimination (4) (1)
*TOTAL GROUP* *12,085* *10,262* *+13.4%* *-1.3%* *+5.7%* *+17.8%*
First half Fiscal 2023 consolidated revenues were at 12.1 billion euros, up +17.8% year-on-year including a net contribution from acquisitions and disposals of -1.3% and a positive currency impact of +5.7%. Excluding these elements, organic revenue growth was +13.4%.
*ON-SITE SERVICES*
On-site Services organic revenue growth was +12.9% for the period, benefiting from the ongoing post-Covid ramp-up particularly in Corporate Services, Sports & Leisure and Universities, as well as a pricing effect above 5%. Net new development started to come through in the second quarter, contributing +0.5% to the growth in the first half. The end of the Testing Centers contract accounted for -1.7%.
Organic growth was boosted by a strong recovery in Food services up +20% organically. FM services were up +2%, or +6% excluding the impact of the end of the Testing Centers contract in the UK. Food services represented 65% of total On-Site revenues during the period, increasing from 59% in Fiscal 2022.
First half Fiscal 2023 net new development was positive:
· client retention was 97.8%, with no unanticipated contract losses and we are on track to achieve our objective of 95% for the full year.
· new sales development was 3.6%, reaching a record more than 0.8 billion euros including cross-selling.
*ON-SITE SERVICES REVENUES BY SEGMENT*
*REVENUES BY SEGMENT*
(in million euros) *H1 FY 2023* *H1 FY 2022* *ORGANIC GROWTH*
Business & Administrations 6,355 5,160 +19.8%
Healthcare & Seniors 2,899 2,675 +2.2%
Education 2,327 2,030 +9.9%
*ON-SITE SERVICES TOTAL* *11,581* *9,865* *+12.9%*
· The +19.8% organic growth in *Business & Administrations* in the First half reflects the ongoing return to the workplace and an increase in activity in stadiums and convention centers, compared to a period last year that had been impacted by the delta and omicron variants. Pricing also helped.
· The +2.2% organic growth in *Healthcare & Seniors* reflects strong activity in hospitals, with the opening of the Ardent account in North America, strong cross-selling and ongoing recovery in retail sales in hospitals, offset by the end of the Testing Centers contract in the UK. Excluding the testing centers, organic growth was +9.1%.
· *Education* organic growth was up +9.9% compared to the previous year, with strong attendance levels and a much higher number of events on campus compared to a period which had also been impacted by the delta and omicron variants.
*North America*
*REVENUES*
*REVENUES BY SEGMENT *
(in million euros) *H1 FY 2023* *H1 FY 2022* *ORGANIC GROWTH*
Business & Administrations 1,884 1,263 +31.3%
Healthcare & Seniors 1,722 1,424 +9.4%
Education 1,893 1,545 +10.7%
*NORTH AMERICA TOTAL* *5,499* *4,232* *+16.4%*
First half Fiscal 2023 *North America* revenues totaled *5.5 billion euros*, up +16.4% organically, helped by strong pricing in all segments.
First half organic growth in *Business & Administrations* was +31.3%, boosted by strong volume increases in Corporate Services, as the return to the workplace continued, and in convention centers and air lounges. The Energy & Resources and Government & Agencies segments were also up. Although small, convenience solutions and new contracts at Entegra also supported growth.
In *Healthcare & Seniors*, organic revenue growth was +9.4% driven by price increases, cross-selling, a recovery in retail volumes and some increase in attendance in Seniors. The net new development contribution remained neutral, as the losses impacted faster than the wins. The balance is expected to improve in the second half, with the full impact of the Ardent mobilization.
In *Education,* organic revenue growth was +10.7%. In Schools, the impact on volumes of the reduction in government waiver eligibility for students and the last effects of the loss of the Chicago Public Schools contract was compensated by higher pricing. Growth in Universities was much stronger, with a higher number of board plans as well as one extra day, stronger retail sales and more on-Campus event catering.
*Europe*
*REVENUES BY SEGMENT*
(in million euros) *H1 FY 2023* *H1 FY 2022* * ORGANIC GROWTH*
Business & Administrations 2,632 2,354 +16.7%
Healthcare & Seniors 1,009 1,114 -8.3%
Education 386 449 +5.3%
*EUROPE TOTAL* *4,027* *3,917* *+8.3%*
*In Europe,* first half revenues amounted to* 4.0 billion euros,* up +8.3% organically, or +13.3% excluding the impact of the Testing Centers, helped by price increases.
In *Business & Administrations*, organic growth was +16.7%, boosted by very strong demand for sporting and corporate events as well as the ongoing return to the office. This was somewhat offset by contract losses in Energy & Resources and Government & Agencies.
In* Healthcare & Seniors*, organic growth of -8.3% was impacted by the end of the Testing Centers. The rest of the business was +8.6%, with the contribution of new openings, recovery in retail sales and solid occupancy in Seniors.
*Education* organic revenue growth was +5.3%, reflecting some volume growth compared to the Delta and Omicron variants impact on prior year attendance. Pricing contribution was lower than in most segments, particularly in France where passing on inflation remains slow.
*Rest of the World*
*REVENUES BY SEGMENT*
(in million euros) *H1 FY 2023* *H1 FY 2022* *ORGANIC GROWTH*
Business & Administrations 1,839 1,543 +14.9%
Healthcare & Seniors 168 137 +8.6%
Education 48 36 +30.7%
*REST OF THE WORLD TOTAL* *2,055* *1,716* *+14.7%*
*Rest of the World* First half Fiscal 2023 revenues were *2.1 billion euros*, up +14.7% organically. Relatively weak volume and new business growth in China was more than compensated by the contribution from net new wins in the other geographies.
*Business & Administrations* was up +14.9%. Growth in Corporate Services and Energy & Resources has continued to be very strong due to a combination of strong volume increases in most regions except in Australia, due to previous year contract losses, and China, impacted by Covid-related site closures. Net new business in particular in the tech sector in India and in mining in Latin America has also contributed positively. Price increases reflecting the different levels of inflation in each country are coming through progressively.
*Healthcare & Senior*s revenue was +8.6% organically, with a strong performance particularly in India, and more modestly in Brazil.
*Education* organic growth was +30.7% reflecting the full ramping up of school and university attendance in India post-Covid.
*BENEFITS & REWARDS SERVICES*
First half Fiscal 2023* Benefits & Rewards Services* revenue amounted to 508 million euros, up +27.5%, with strong organic growth of +24.2% and a currency impact of +4.3%, partially offset by net disposals of -1%.
First half Fiscal 2023 Operating revenues were up +16.1% organically, accelerating quarter by quarter since the beginning of Fiscal 2022, boosted by portfolio growth, positive net new development and a progressive increase in face values. Financial revenues more than doubled due to the increase in interest rates in all regions.
*REVENUES BY NATURE*
(in million euros) *H1 FY 2023* *H1 FY 2022* *ORGANIC GROWTH*
Operating Revenues 448 375 +16.1%
Financial Revenues 60 23 +158.6%
*BENEFITS & REWARDS SERVICES* *508* *398* *+24.2%*
In the First half, the strong momentum in organic growth in* Employee Benefits* revenues was maintained, at +24.2%, compared to an organic growth in issue volume of +12.6% to 8.3 billion euros, reflecting much higher interest rates, face value increases and significant volume increases in Brazil, Turkey, Romania and Mexico and a positive contribution from net new business, particularly in France and Mexico.
*Services Diversification* organic growth was also strong, at +24.1%, due to the combination of strong fuel and mobility cards activity and two major public benefits contracts in Austria and Romania in the first quarter.
*REVENUES BY ACTIVITY*
(in million euros) *H1 FY 2023* *H1 FY 2022* *ORGANIC GROWTH*
Employee benefits 418 324 +24.2%
Services Diversification* 90 74 +24.1%
*BENEFITS & REWARDS SERVICES* *508* *398* *+24.2%*
* Including Incentive & Recognition, Mobility & Expenses and Public Benefits.
*Europe, Asia and USA*, organic revenue growth was +22.8% due to higher SME penetration, strong face value increases and generally strong demand in all markets.
In *Latin America*, organic growth was even stronger at +26.9%, and across the region, due to face value increases, strong portfolio growth and volume growth in fuel & fleet across the region.
*REVENUES BY REGION*
(in million euros) *H1 FY 2023* *H1 FY 2022* *ORGANIC GROWTH*
Europe, Asia and USA 318 267 +22.8%
Latin America 190 131 +26.9%
*BENEFITS & REWARDS SERVICES* *508* *398* *+24.2%*
*2.4** **Underlying operating profit*
First half Fiscal 2023 Underlying operating profit was 704 million euros, up +30.9%, and +22.5% excluding currency effects. The Underlying operating margin was up +60 bps at 5.8%, reflecting on the one hand, strong improvement in Benefits & Rewards Services, and a more modest increase in On-site Services.
(in million euros) *UNDERLYING OPERATING PROFIT *
*H1 FISCAL 2023* *DIFFERENCE* *DIFFERENCE (EXCLUDING CURRENCY EFFECT)* *UNDERLYING OPERATING PROFIT MARGIN H1 FISCAL 2023* *DIFFERENCE *
*IN MARGIN* *DIFFERENCE *
*IN MARGIN (EXCLUDING CURRENCY *
*MIX EFFECT)*
North America 365 +39.8% +26.2% 6.6% +40 bps +40 bps
Europe 157 +4.0% +6.7% 3.9% 0 bps +10 bps
Rest of the World 71 +2.9% -6.8% 3.5% -50 bps -70 bps
*ON-SITE-SERVICES* *593* *+23.3%* *+15.4%* *5.1%* *+20 bps* *+20 bps*
*BENEFITS & REWARDS SERVICES* *162* *+52.8%* *+46.4%* *31.9%* *+530 bps* *+510 bps*
Corporate expenses
& Intragroup eliminations (51) +4.1% +4.1%
*UNDERLYING OPERATING PROFIT* *704* *+30.9%* *+22.5%* *5.8%* *+60 bps* *+50 bps*
*On-Site Services* Underling operating profit was up +23.3%, or +15.4% excluding currencies and the margin was 5.1%, up +20 bps. Generally, pricing and mitigation are covering cost inflation. Leverage on higher volumes is slightly impacted by mobilization costs.
The performance by zone at constant rates is as follows:
· *North America* underlying operating profit increased +26.2% and the underlying operating margin was up +40 bps at 6.6%. Pricing and mitigation actions to offset cost inflation, leverage on the volume recovery, particularly in Corporate Services and Sports & Leisure, strict control of central costs, ongoing improvements in SKU management, attendance forecasting and labor scheduling, all contributed to the strong improvement, somewhat offset by mobilization costs in Healthcare.
· In* Europe*, the Underlying operating profit was up +6.7%, and the margin was stable at 3.9%. Cost inflation was offset by pricing and mitigation policies, except in some very specific sectors, such as Schools in certain countries, where pricing is still lagging cost inflation. Leverage on the post-Covid recovery in volumes as well as an increase in average spend per consumer, provided upside, somewhat offset by the impact of strikes in France and the loss of the Testing centers contract in the UK.
· *Rest of the World* Underlying operating profit was down -6.8% and the margin was down -50 bps at 3.5%. This temporary decline is due to a combination of delays in price increases and some significant mobilization costs after very strong development signed in the previous year. Profitability in China was also affected by zero-Covid measures.*Benefits & Rewards Services* Underlying operating profit was up +52.8%, and +46.4% excluding currency impacts. As a result, the margin was also up +530 bps at 31.9%. The margin improvement was due to the significant increase in interest rates on the float as well as strong operating leverage, despite sustained investments in IT, data and digital. Margins improved excluding financial revenues.
*2.5** **Group net profit*
*Other operating expenses (net)* amounted to 42 million euros compared to 1 million euros in the previous year which benefited from significant positive one-offs. First half 2023 other operating expenses included 10 million euros of restructuring costs linked to the change in the organization of the Group.
As a result, the *Operating Profit* was 662 million euros compared to 537 million euros in the previous year.
(in million euros) *H1 FISCAL 2023* *H1 FISCAL 2022*
*UNDERLYING OPERATING PROFIT* *704* *538*
Net impact related to consolidation scope changes 1 (1)
Restructuring and rationalization costs (10) (3)
Amortization of purchased intangible assets (22) (20)
Other (11) 23
*OTHER OPERATING EXPENSES (NET)* *(42)* *(1)*
*OPERATING PROFIT* *662* *537*
First half Fiscal 2023 Net financial expense was 48 million euros against 53 million euros in the previous year. The reduction is principally due to higher interest rates on cash deposits.
The effective tax rate was 27.1%, below the 28.3% in the previous year.
First half Fiscal 2023 Group net income was up +30.6% to 440 million euros, compared to 337 million euros in the previous year. Underlying net profit adjusted for Other Operating income and expenses net of tax amounted to 475 million euros, compared to 339 million euros in the previous year, up +40.1%.
*2.6** **Earnings per share*
Published First half Fiscal 2023 EPS was 3.01 euros against 2.30 euros in the previous year. The weighted average number of shares for Fiscal 2023 was more or less stable at 146,147,666 compared to 146,292,627 shares for First half Fiscal 2022.
Underlying EPS amounted to 3.25 euros, up +40.0% compared to the previous year.
*3** **Consolidated financial position*
*3.1** **Cash flows*
Cash flows for the period were as follows:
(in million euros) *H1 FISCAL 2023* *H1 FISCAL 2022*
Operating cash flow 808 674
Change in working capital excluding change in BRS financial assets ^(1) (517) (481)
IFRS 16 outflow (103) (109)
Net capital expenditure (234) (159)
*Free cash flow *^*(2)* *(46)* *(75)*
Net acquisitions (7) (26)
Share buy-backs (57) (13)
Dividends paid to shareholders (352) (294)
Other changes (including scope and exchange rates) (139) (156)
*(Increase)/decrease in net debt* *(601)* *(564)*
(1) Excluding change in financial assets related to the Benefits & Rewards Services activity of 7 million euros in First half Fiscal 2023 versus 67 million euros in First half Fiscal 2022.
Total change in working capital as reported in consolidated accounts:
in First half Fiscal 2023: -510 million euros = -517 million euros + 7 million euros
and in First half Fiscal 2022: -414 million euros = - 481 million euros + 67 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 2023 Free cash outflow was 46 million euros against an outflow of 75 million euros in the previous period.
First half Fiscal 2023 Operating cash flow improved to 808 million euros against 674 million euros in the previous period as a result of the significant improvement in the operating profit of the Group. The working capital outflow was similar to the previous year, at 517 million euros compared to an outflow of 481 million euros during First half Fiscal 2022.
Net capital expenditure increased +47% to 234 million euros, representing 1.9% of revenues against 1.5% in the previous year. Gross capex was 317 million euros, up +43%, representing 2.6% of revenues. On-Site Services gross capex amounted to 264 million euros, or 2.3% of revenues, of which more than 85% was client facing. More than 85% of Benefits & Rewards gross capex was focused on IT & Data to reinforce its IT architecture and consumer and client platforms, amounting to 53 million euros, or 10.4% of revenues.
M&A activity was limited in the First half Fiscal 2023. Acquisitions net of disposals amounted to 7 million euros.
The Fiscal 2022 dividend payment resulted in an outflow of 352 million euros compared to 294 million euros in the previous year, reflecting the 20% increase in the dividend per share.
After taking into account Other changes, consolidated net debt increased by 601 million euros during the First half to reach 1,868 million euros at February 28, 2023.
*3.2** **Acquisitions and disposals for the period*
First half Fiscal 2023 has been a quiet period for both acquisitions and disposals of non-core activities and geographies.
Overall acquisitions net of disposals amounted to 7 million euros.
*3.3** **Condensed consolidated statement of financial position *
*at February 28, 2023*
(in million euros) *FEBRUARY 28, 2023* *FEBRUARY 28, 2022* *(in million euros)* *FEBRUARY 28, 2023* *FEBRUARY 28, 2022*
Non-current assets 10,416 10,063 Shareholders’ equity 4,096 3,615
Current assets excluding cash 6,312 5,980 Non-controlling interests 4 10
Restricted cash
Benefits & Rewards 843 782 Non-current liabilities 6,637 7,129
Financial assets
Benefits & Rewards 375 221 Current liabilities 9,834 8,899
Cash 2,625 2,607
*TOTAL ASSETS* *20,571* *19,653* *TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY* *20,571* *19,653* Borrowings 5,699 5,647
Net debt 1,868 2,042
Gearing 46% 56%
Net debt ratio 1.3 1.8
The increase in shareholders’ equity was due to several factors: the currency translation adjustment of some currencies such as the US dollar and the Brazilian real and the remeasurement of defined benefit plan obligations, as well as the revaluation of financial assets under IFRS 9.
As of February 28, 2023, net debt was 1,868 million euros, representing a gearing of 46%, and a net debt ratio of 1.3x, firmly within the target range of between 1x and 2x, and down from the same period last year.
Gross borrowings were more or less stable during First half Fiscal 2023 and compared to the end of First half Fiscal 2022 at 5.7 billion euros, of which 95% is at fixed rates and 21% is dollar-denominated, with an average maturity of 4.2 years and 100% covenant-free. The blended cost of debt at the end of the period is 1.7% against 1.6% a year ago.
Operating cash reached a total of 3,831 million euros, including 843 million euros of restricted cash and 375 million euros of financial assets of Benefits & Rewards Services.
The Benefits & Rewards Services activity asset to liability coverage is at 123% compared to 121% as at February 28, 2022, with operating cash of 2,871 million euros and client receivables of 1,702 million euros, compared to voucher liabilities payable of 3,707 million euros.
The rest of the Group also had a significant operating cash position of 960 million euros.
At the end of the First half, the Group had unused credit lines totaled 1.8 billion euros.
*3.4** **Subsequent events*
The Sodexo Board of Directors has unanimously approved the project to separate the two business units of Sodexo by spinning-off and listing BRS through the distribution of BRS shares to Sodexo shareholders.
The contemplated transaction is expected to take place during 2024 following the completion of several customary steps, including consultation of the employee representative bodies, and remains subject to market conditions.
Detailed transaction terms will be presented at a later stage and submitted to the approval of Sodexo’s shareholders at an extraordinary shareholders’ meeting. Sodexo’s bondholders and other lenders will be consulted on the proposed transaction in due course.
*3.5** **Outlook*
First half Fiscal 2023 was better than expected. As a result, Fiscal 2023 guidance for the Group and Benefits & Rewards Services has been revised up slightly.
*Group* *Fiscal 2023 guidance* upgraded on organic growth:
· Fiscal 2023 Organic revenue growth now expected close to +11%, driven by higher-than-expected growth in H1 and price increases to remain above 5% in H2
· Fiscal 2023 Underlying operating profit margin confirmed to be close to 5.5%, at constant rates
*Benefits & Rewards Services* *Fiscal 2023 guidance *upgraded on both organic growth and Underlying operating profit margin:
· Fiscal 2023 Organic revenue growth expected close to +20%
· Fiscal 2023 Underlying operating profit margin expected close to 32%, at constant rates
*Group and Benefits & Rewards Services* *Fiscal 2024 and 2025 *guidance reiterated:
· Group: +6 to +8% organic revenue growth and an Underlying operating profit margin above 6% at constant rates in FY2025
· Benefits & Rewards Services: low double-digit organic revenue growth and an Underlying operating profit well above 30% at constant rates in FY2025
*3.6** **Alternative Performance Measure definitions*
*Blended cost of debt*
The blended cost of debt is calculated at period end and is the weighted blended financing rate on borrowings (including derivative financial instruments and commercial papers) and cash pooling balances at period end.
*Financial ratios definition*
*FIRST HALF FISCAL 2023* *FIRST HALF FISCAL 2022*
Gearing ratio
Borrowings (1) – operating cash (2) 45.6%
56.3%Shareholders’ equity and non-controlling interests
Net debt ratio
Borrowings (1) – operating cash (2) 1.3
1.8Rolling 12-month Underlying EBITDA
(underlying operating profit before Interest, Taxes, Depreciation and Amortization) (3)
*Financial ratios reconciliation*
*FIRST HALF FISCAL 2023* *FIRST HALF FISCAL 2022*
(1) Borrowings Long-term borrowings 5,132 5,601
+ Short-term borrowings 569 55
- Derivative financial instruments recognized as assets (2) (9)
*BORROWINGS* *5,699* *5,647*
(2) Operating cash Cash and cash equivalents 2,625 2,607
+ Restricted cash and financial assets
related to the Benefits & Rewards Services activity 1,218 1,003
- Bank overdrafts (12) (5)
*OPERATING CASH* *3,831* *3,605*
(3) Underlying EBITDA Underlying operating profit 1,226 851
+ Depreciation and amortization 479 514- Lease payments (216) (244)
*ROLLING 12-MONTH UNDERLYING EBITDA *
*(UNDERLYING OPERATING PROFIT *
*BEFORE DEPRECIATION AND AMORTIZATION)* *1,489* *1,121*
*Free cash flow*
Please refer to the section entitled Consolidated financial position.
*Growth excluding currency effect*
The currency effect is determined by applying the previous year’s average exchange rates to the current year figures except in hyper-inflationary economies where all figures are converted at the latest closing rate for both periods when the impact is significant.
*Issue volume*
Issue volume corresponds to the total face value of service vouchers, cards and digitally delivered services issued by Benefits & Rewards Services for beneficiaries on behalf of clients.
*Net debt*
Net debt is defined as Group borrowing at the balance sheet date, less operating cash.
*Organic growth*
Organic growth corresponds to the increase in revenue for a given period (the “current period”) compared to the revenue reported for the same period of the prior fiscal year, calculated using the exchange rate for the prior fiscal year; and excluding the impact of business acquisitions (or gain of control) and divestments, as follows:
· for businesses acquired (or gain of control) during the current period, revenue generated since the acquisition date is excluded from the organic growth calculation;
· for businesses acquired (or gain of control) during the prior fiscal year, revenue generated during the current period up until the first anniversary date of the acquisition is excluded;
· for businesses divested (or loss of control) during the prior fiscal year, revenue generated in the comparative period of the prior fiscal year until the divestment date is excluded;
· for businesses divested (or loss of control) during the current fiscal year, revenue generated in the period commencing 12 months before the divestment date up to the end of the comparative period of the prior fiscal year is excluded.
*Underlying Net profit*
Underlying Net profit presents a net income excluding significant unusual and/or infrequent elements. Therefore, it corresponds to the Net Income Group share excluding Other Income and Expense and significant non-recurring elements in both Net Financial Expense and Income Tax Expense where relevant.
*Underlying Net profit per share*
Underlying Net profit per share presents the Underlying net profit divided by the average number of shares.
*Underlying operating profit margin*
The underlying operating profit margin corresponds to Underlying operating profit divided by revenues.
*Underlying operating profit margin at constant rates*
The underlying operating profit margin at constant rates corresponds to Underlying operating profit divided by revenues, calculated by converting 2023 figures at Fiscal 2022 rates, except for countries with hyperinflationary economies.
2
*First half Fiscal 2023 - **Condensed consolidated financial statements*
*1** **Consolidated financial statements*
*1.1** **Consolidated income statement*
(in million euros) *FIRST HALF FISCAL 2023* *FIRST HALF FISCAL 2022*
*Revenues* *12,085* *10,262*
*Cost of sales* *(10,326)* *(8,792)*
*Gross profit* *1,759* *1,470*
Selling, General and Administrative costs (1,056) (934)
Share of profit of companies accounted for using the equity method that directly contribute to the Group’s business 1 2
*Underlying operating profit* *704* *538*
Other operating income 1 67
Other operating expenses (43) (68)
*Operating profit* *662* *537*
Financial income 39 10
Financial expenses (87) (63)
Share of profit of other companies accounted for using the equity method — —
*Profit for the period before tax* *614* *484*
Income tax expense (166) (136)
*Net profit for the period* *448* *348*
Of which:
Attributable to non-controlling interests 8 11
*ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT* *440* *337*
*Basic earnings per share *(in euro) *3.01* *2.30*
*Diluted earnings per share* (in euro) *2.98* *2.27*
*1.2** **Consolidated statement of comprehensive income*
(in million euros) *FIRST HALF FISCAL 2023* *FIRST HALF FISCAL 2022*
*NET PROFIT FOR THE PERIOD* *448* *348*
*Components of other comprehensive income that may be reclassified subsequently *
*to profit or loss* *(384)* *235*
Change in fair value of cash flow hedge instruments — —
Change in fair value of cash flow hedge instruments reclassified to profit or loss — —
Currency translation adjustment (385) 232
Currency translation adjustment reclassified to profit or loss — 1
Tax on components of other comprehensive income that may be reclassified subsequently to profit or loss — —
Share of other components of comprehensive income (loss) of companies accounted for using the equity method, net of tax 1 2
*Components of other comprehensive income that will not be reclassified subsequently to profit or loss* *20* *147*
Remeasurement of defined benefit plan obligation (101) 104
Change in fair value of financial assets revalued through other comprehensive income 98 73
Tax on components of other comprehensive income that will not be reclassified subsequently to profit or loss 23 (30)
*TOTAL OTHER COMPREHENSIVE INCOME (LOSS), AFTER TAX FOR THE PERIOD* *(365)* *381*
*Comprehensive income for the period* *82* *729*
Of which:
Attributable to equity holders of the parent 75 717
Attributable to non-controlling interests 7 12
*1.3** **Consolidated statement of financial position*
*Assets*
(in million euros) *FEBRUARY 28, 2023* *AUGUST 31, 2022*
Goodwill 6,286 6,611
Other intangible assets 661 678
Property, plant and equipment 510 510
Right-of-use assets relating to leases 843 895
Client investments 676 667
Investments in companies accounted for using the equity method 72 73
Non-current financial assets 1,144 1,025
Other non-current assets 64 172
Deferred tax assets 160 154
*NON CURRENT ASSETS* *10,416* *10,785*
Current financial assets 62 57
Inventories 350 352
Income tax receivable 183 171
Trade and other receivables 5,641 5,068
Restricted cash and financial assets related to the Benefits & Rewards Services activity 1,218 1,257
Cash and cash equivalents 2,625 3,225
Assets held for sale^(^1) 76 5
*CURRENT ASSETS* *10,155* *10,135*
*TOTAL ASSETS* *20,571* *20,920*
(1) As of February 28, 2023, assets held for sale correspond to current and non-current assets of a non-strategic activity located in several countries, excluding the associated goodwill as the amount depends on the selling price, which is still being discussed, and its allocation by country. The goodwill estimation is within the range of 60 to 100 million euros.
*Shareholders’ equity and liabilities*
(in million euros) *FEBRUARY 28, 2023* *AUGUST 31, 2022*
Share capital 590 590
Additional paid-in capital 248 248
Reserves and retained earnings 3,258 3,577
*EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT* *4,096* *4,415*
*NON-CONTROLLING INTERESTS* *4* *10*
*SHAREHOLDER’S EQUITY* *4,100* *4,425*
Long-term borrowings 5,132 5,709
Long-term lease liabilities 715 759
Employee benefits 266 282
Other non-current liabilities 180 197
Non-current provisions 113 115
Deferred tax liabilities 231 161
*NON CURRENT LIABILITIES* *6,637* *7,223*
Bank overdrafts 12 8
Short-term borrowings 569 35
Short-term lease liabilities 167 184
Income tax payable 204 207
Current provisions 75 99
Trade and other payables 5,037 5,230
Voucher liabilities 3,707 3,509
Liabilities directly associated with assets held for sale 63 —
*CURRENT LIABILITIES* *9,834* *9,272*
*TOTAL SHAREHOLDER’S EQUITY AND LIABILITIES* *20,571* *20,920*
*1.4** **Consolidated cash flow statement*
(in million euros) *FIRST HALF FISCAL 2023* *FIRST HALF FISCAL 2022*
*Operating profit* *662* *536*
Depreciation, amortization and impairment of intangible assets and property, plant and equipment ^(1) 263 259
Provisions (23) (35)
(Gains) losses on disposals (2) 1
Other non-cash items 22 19
Dividends received from companies accounted for using the equity method 2 1
Net interest expense paid (10) (16)
Interests paid on lease liabilities (9) (9)
Income tax paid (97) (82)
*Operating cash flow* *808* *674*
Change in inventories (11) (26)
Change in trade and other receivables (812) (783)
Change in trade and other payables 29 19
Change in vouchers payable 277 309
Change in financial assets related to the Benefits & Rewards Services activity 7 67
*Change in working capital from operating activities* *(510)* *(414)*
*NET CASH PROVIDED BY OPERATING ACTIVITIES* *298* *260*
Acquisitions of property, plant and equipment and intangible assets (215) (158)
Disposals of property, plant and equipment and intangible assets 17 7
Change in client investments (37) (8)
Change in financial assets and share of companies accounted for using the equity method (37) (70)
Business combinations (12) (41)
Disposals of activities 5 19
*NET CASH USED IN INVESTING ACTIVITIES* *(279)* *(251)*
Dividends paid to Sodexo S.A. shareholders (352) (294)
Dividends paid to non-controlling shareholders of consolidated companies (5) (4)
Purchases of treasury shares (57) (13)
Disposal of treasury shares — 6
Change in non-controlling interests — —
Proceeds from borrowings 267 43
Repayment of borrowings (272) (623)
Repayments of lease liabilities (104) (108)
*NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES* *(523)* *(993)*
*NET EFFECT OF EXCHANGE RATES AND OTHER EFFECTS ON CASH* *(100)* *54*
*CHANGE IN NET CASH AND CASH EQUIVALENTS* *(604)* *(930)*
*NET CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD* *3,217* *3,532*
*NET CASH AND CASH EQUIVALENTS, END OF PERIOD* *2,613* *2,602*
(1) Including 99 million euros corresponding to the right-of-use assets depreciation recognized in First Half Fiscal 2023 pursuant to IFRS 16 (106 million euros recognized for First Half Fiscal 2022).
*1.5** **Consolidated statement of changes in shareholders’ equity*
(in million euros)
*NUMBER OF SHARES OUTSTANDING*
*SHARE CAPITAL*
*ADDITIONAL PAID-IN CAPITAL*
*RESERVES AND COMPREHENSIVE INCOME*
*CURRENCY TRANSLATION ADJUSTMENT*
*TOTAL SHAREHOLDERS’ EQUITY*
*ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT* *NON-CONTROLLING INTERESTS* *TOTAL*
*Shareholders’ equity as of August 31, 2022* *147,454,887* *590* *248* *3,992* *(415)* *4,415* *10* *4,425*
Net profit for the period 440 440 8 448
Other comprehensive income (loss), net of tax 19 (384) (365) (1) (366)
*Comprehensive income* *459* *(384)* *75* *7* *82*
Dividends paid (352) (352) (3) (355)
Treasury share transactions (57) (57) (57)
Share-based payment (net of income tax) 24 24 24
Change in ownership interest without any change of control (10) (10) (10) (20)
Other 1 1 — 1
*SHAREHOLDERS’ EQUITY AS OF FEBRUARY 28, 2023* *147,454,887* *590* *248* *4,056* *(799)* *4,096* *4* *4,100*
(in million euros)
*NUMBER OF SHARES OUTSTANDING*
*SHARE CAPITAL*
*ADDITIONAL PAID-IN CAPITAL*
*RESERVES AND COMPREHENSIVE INCOME*
*CURRENCY TRANSLATION ADJUSTMENT*
*TOTAL SHAREHOLDERS’ EQUITY*
*ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT* *NON-CONTROLLING INTERESTS* *TOTAL*
*Shareholders’ equity as of August 31, 2021* *147,454,887* *590* *248* *3,455* *(1,125)* *3,168* *7* *3,175*
Restatement due to IFRS IC decision on IAS 19 application * — — 10 — 10 — 10
*Shareholders’ equity as of September 01, 2021* *147,454,887* *590* *248* *3,465* *(1,125)* *3,178* *7* *3,185*
Net profit for the period 337 337 11 348
Other comprehensive income (loss), net of tax 148 232 380 1 381
*Comprehensive income* *485* *232* *717* *12* *729*
Dividends paid (294) (294) (10) (304)
Treasury share transactions (7) (7) (7)
Share-based payment (net of income tax) 21 21 21
Change in ownership interest without any change of control — — —
Other — — —
*SHAREHOLDERS’ EQUITY AS OF FEBRUARY 28, 2022* *147,454,887* *590* *248* *3,670* *(893)* *3,615* *10* *3,625*
* Corresponding to the application of the IFRS Interpretation Committee decision issued in April 2021 clarifying the calculation methods, in application of IAS 19 "Employee benefits", for certain commitments relating to defined benefit plans.
*2** **Notes to the consolidated financial statements*
· Sodexo is a société anonyme (a form of limited liability company) registered in France, with its headquarters located in Issy-les-Moulineaux.Sodexo’s condensed interim consolidated financial statements for the six-month period from September 1, 2022, to February 28, 2023, were approved by the Board of Directors on April 4, 2023.
The numbers shown in the tables were prepared in thousands of euros and are presented in million euros (unless otherwise indicated).
*Note 1.*
*Significant events*
*1** **New On-site Services organization*
As announced in July 2022, the Group has reorganized its On-site Services activity with regions and countries consolidated into geographic zones led by three Zone Presidents, with the full responsibility of the Profit and Loss. The three geographic zones are North America, Europe and Rest of the World (including Asia-Pacific, Middle East, Africa, Latin America)
In order to reflect the implementation of the new organization of On-site Services by geographic zone, fully effective from October 1, 2022, the Group has redefined its operating segments as defined by IFRS 8 (corresponding until then to the global client segments and now represented by regions) and has updated its segment information accordingly. Thus, within On-site Services activity, the new operating segments after aggregation correspond to the following geographic zones:
· North America,
· Europe (including the Continental Europe, France and United Kingdom & Ireland regions),
· Rest of the World (including Asia-Pacific/ Middle East/ Africa, Latin America (without Brazil) and Brazil).Benefits & Rewards Services, not impacted by the reorganization, is an operating segment on its own.
For comparability purposes, the segment information of the previous period has been restated (see note 3.1).
Furthermore, in accordance with IAS 36 "Impairment of assets", the reorganization of On-site Services activity has led the Group to reassess the level at which goodwill impairment tests are carried out. On-site Services goodwill have therefore been reallocated to each region (group of Cash Generating Units), which corresponds to the lowest level at which goodwill is monitored for internal management purposes (see note 4), based on estimated relative value in use as of August 31, 2022.
*Note 2.*
*Basis of preparation of the financial statements*
*1** **Accounting policies*
*1.1** **General principles*
The condensed interim consolidated financial statements for the six months ended February 28, 2023, have been prepared in accordance with IAS 34 "Interim Financial Reporting", as published by the IASB and endorsed by the European Union. They do not inclu