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Sodexo Announces 7.4% Increase In Revenues For First Quarter Fiscal 2013

Organic growth in On-site Services was + 1.9%, or + 3.2% excluding the impact of the Rugby World Cup contract, since this first quarter compares with a first quarter of Fiscal 2012 that included 52 million euro of revenues from this hospitality contract.

Organic growth in Corporate of + 4.2% during the first quarter of Fiscal 2013, or + 6.7% excluding the impact of the Rugby World Cup, resulted from two main positive elements:

- Increased demand for integrated services contracts from companies in North America and Europe,

- Sodexo’s solid rate of development in the Rest of the World (especially in Latin America and in Remote Sites) despite some signs of slower economic activity in several countries since last summer.

The 1% decline in revenues in Health Care and Seniors is essentially due to a soft client retention rate in Fiscal 2012. However, since the beginning of this fiscal year, Sodexo teams have been awarded some significant new contracts, particularly in the U.S., which should contribute to the acceleration of growth in this segment over the next 18 months.

Organic growth of + 0.2% in Education mainly reflects increased selectivity when approaching public sector clients.

Benefits and Rewards Services

Organic revenue growth was + 6.7%, a level close to that of Fiscal 2012, again a result of Sodexo’s strong position in Latin America.

Analysis of On-site Services organic growth

North America

Revenues

millions of euro      

1 st Quarter Fiscal 2013

     

1 st Quarter Fiscal2012

      Organic growth
Corporate       415       345       + 5.6%
Health Care and Seniors 628 603 - 2.8%
Education       892       823       + 0.9%
TOTAL       1,935       1,771       + 0.6%
  • Organic growth of + 5.6% in Corporate remained solid. This performance results mainly from success in extending facilities management services for clients that include General Electric, the contribution of new contracts, including the prestigious Circuit of the Americas, home of Formula 1 U.S. Grand Prix, as well as continued favorable Remote Sites development in Canada.

Recent successes include renewal and expansion of Sodexo’s global contract with Procter & Gamble (43 services).

  • In Health Care and Seniors, revenues registered an organic decline of - 2.8%. Virtually all of this decline for the quarter reflects the loss a year ago of the Ascension Health contract.

In contrast, new business awarded to Sodexo since the beginning of Fiscal 2013 clearly confirms the relevance of Sodexo’s offer and prospects for growth over the medium term. New wins include the signing of a major contract with one of the largest U.S. retirement home chains, HCR ManorCare (290 retirement homes in 32 states and nearly 40,000 residents for annual revenues of USD 220 million once the contract is fully operational). Other recently signed contracts include Health Corporation of America (HCA) East Florida (9 hospitals), LA County (2 sites at UCLA Medical Center in California) and Ochsner Medical Center (Louisiana).

  • In Education, organic growth was + 0.9%. This reflects reduced spending by students in schools and universities and lower activity at university stadiums, as well as the temporary closure of more than 250 East Coast schools in the wake of Hurricane Sandy last November.

Continental Europe

Revenues

millions of euro      

1 st Quarter Fiscal 2013

     

1 st Quarter Fiscal2012

      Organic growth
Corporate       896       848       + 3.3%
Health Care and Seniors 353 351 + 0.1%
Education       270       267       + 0.6%
TOTAL       1,519       1,466       + 2.0%
  • Organic growth in Corporate was + 3.3%, a slightly higher rate than that achieved in Fiscal 2012. This performance is largely explained by the roll out of contracts with a significant facilities management component, such as for Deutsche Telekom in Germany, Rusal and Gazprom in Russia and Eli Lilly in several countries. In France, the level of activity reflected the opening of a site in Nantes as well as additional services for the Ministry of Justice. In contrast, foodservices activity was generally weak as a result of lower patronage, a decrease in the average check size and a reduction in catering services. Recent successes included DNB (Norway), the renewal of the KLM contract in the Netherlands and a new contract extension with Deutsche Telekom (T-Mobile) in Germany.
  • In Health Care and Seniors, organic revenue growth was + 0.1%. Satisfactory comparable unit growth, especially in France, was offset by the effects of weak prior year business development as well as a more selective client approach in Southern Europe. Sodexo recently won new contracts such as Nouvelles Cliniques Nantaises (France) and Fruängsgården, Stockholm (Sweden).
  • In Education, organic growth in revenues is + 0.6%. In Spain and Italy particularly, comparable unit growth was modest as a result of pressures on school budgets that reduced service levels as well as selectivity in new business development. Sodexo teams recently won contracts that include the City of Fonte Nuova (Italy), Darussafaka Okul, Istanbul (Turkey), and Ensemble Scolaire des Recollets (Longwy) in France.

Rest of the World

(Latin America, Africa, Middle East, Asia, Australia and Remote Sites)

Revenues

millions of euro      

1 st Quarter Fiscal 2013

     

1 st Quarter Fiscal2012

     

Organic growth

Corporate       875       773       + 9.8%
Health Care and Seniors 42 38 + 7.8%
Education       32       36       - 17%
TOTAL       949       847       + 8.6%
  • Organic growth in Corporate remains high at + 9.8%, driven by Sodexo’s strong performance in the mining sector in Australia and Latin America, despite reductions in scope of certain mining contracts that progressed from the construction to the operations phase in Asia-Pacific. Signs of deceleration of industrial activity were particularly evident in Brazil, India and more recently in China. However, new business development remained solid, with Sodexo winning numerous contracts, including AstraZeneca (China), Australian Submarine Corporation (Australia), Electrolux (Brazil), Pacific Rubiales Energy (Colombia) and Total E&P (Congo).
  • In addition, Sodexo will provide postal support (collection, transportation and delivery of letters and parcels) in partnership with the French Postal services for 19,000 people deployed on French military bases abroad. This innovative project leverages Sodexo’s on-site services expertise in extreme environments.
  • Health Care and Seniors continues to grow in Asia and Latin America with several new contract awards, including Renmin University Hospital Wuhan (China). The decline in Education (representing only 3% of Rest of the World revenues) results from the non-renewal of a large public contract in Chile.

UK and Ireland

Revenues

millions of euro      

1 st Quarter Fiscal 2013

     

1 st Quarter Fiscal2012

      Organic growth      

Organic growth excluding Rugby

Corporate       263       266       - 10.5%       + 11.1%
Health Care and Seniors 68 56 + 5.3%
Education       38       35       - 2.9%        
TOTAL       369       357       - 7.3%       + 8.5%
  • In Corporate, 1 st Quarter Fiscal 2013 revenues increased + 11.1% (excluding rugby) 1, with approximately half contributed from services during the Paralympic Games in London in early September 2012 (around 13 million euro in revenues). The balance of this solid progress results from the ramp up of several integrated services contracts such as Unilever, Astra Zeneca and Eli Lilly.
  • In Health Care and Seniors, organic growth of + 5.3% primarily reflects the provision of new services at a large university hospital (North Staffordshire University Hospital). There also has been a recent recovery in business development, for example with the signing of a contract with Brighton and Sussex University Hospital.
  • In Education, revenues registered an organic decline of - 2.9%, reflecting continued selectivity in approaching public sector contracts. Recent successes include St. Andrews College, Dublin (Ireland).

Benefits and Rewards Services

Issue volume

millions of euro      

1 st Quarter Fiscal 2013

     

1 st Quarter Fiscal2012

      Organic growth
Latin America       1,855       1,643       + 18.4%
Europe and Asia       2,103       2,016       + 2.8%
TOTAL       3,958       3,659       + 9.8%
                 

Revenues

millions of euro      

1 st Quarter Fiscal 2013

     

1 st Quarter Fiscal2012

      Organic growth
Latin America       100       95       + 11.7%
Europe and Asia       83       80       + 0.9%
TOTAL       183       175       + 6.7%
  • Organic revenue growth for the activity was driven by a dynamic performance in Latin America. Face value *increases (especially in Brazil and Venezuela) and the rise in the number of beneficiaries continue to be important growth factors in Latin America. However, pressure on commissions in Brazil resulted in a gap between growth in issue volume and revenues in the first quarter.
  • In Europe, growth was more modest, given the impact of the regulatory change in Hungary (effective as of January 1, 2012), a more challenging economic environment and lower demand in Italy. In contrast, activity in Belgium and France remained solid.
  • Recent successes include the Serviço Federal de Processamento de Dados and Universidade Estadual de Campinas and Pepsico (Brazil), Unidad Nacional de Protección (Colombia), Edere SA (Mexico), Transporte de Valores Viseteca (Venezuela), Roche Farma (Spain) and Ekol Lojistik (Turkey).

Also of note was the success of the new Spirit of Cadeau gift card in France (home and sports-themed products and services) during the end of year holiday season.

Acquisitions

On November 2, 2012, Sodexo expanded its presence in Latin America with the acquisition of Servi-Bonos, a leading player in the food and meal vouchers and cards market in Mexico. With a portfolio of 5,000 clients across the country, Servi-Bonos recorded issue volume of around 300 million euro in 2011.

On December 24, 2012, Sodexo reinforced its presence in India with the acquisition of MacLellan India, an Indian leader in facilities management services with specific expertise in HVAC services, maintenance and energy management. The acquisition of MacLellan India contributes to Sodexo’s technical services expertise.

These acquisitions did not have a material impact on Sodexo’s financial strength compared to its position as of August 31, 2012.

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