Sodexo reports revenue return to pre-Covid level in Q4 as part of annual results

At its Board of Directors meeting on Oct. 25, Sodexo closed the books for Fiscal 2022, ended Aug. 31, reporting revenue growth of 21.2%, organic growth of 16.9% and a return to its pre-Covid revenue level in the fourth quarter. In her comments, Board Chair Sophie Bellon remarked that “North America generated strong growth, improved profitability and its retention and development improved significantly” as part of her report on the progress made on the priorities that she had set out at the beginning of the year, which included boosting growth in the U.S.

“All our activities delivered a strong recovery in Fiscal 2022,” she noted. “Growth in Benefits & Rewards Services accelerated and On-site Services margins improved, despite the inflationary backdrop. Net new business was strong, and retention was at an all-time high. Our balance sheet has also been strengthened significantly.”

North American operations were also noted for helping boost organic growth in the Education sector by 22% through its strong post-Covid recovery in universities and schools, and its strong improvement in client retention to over 96% through strong cross-selling and increasing first-time outsourcing contracts to 44% of signatures in the fiscal year.

In addition to the overall revenue increase, highlights of Fiscal 2022 included organic revenue growth of 17% in the company’s On-site Services unit—by far its largest and the one that encompasses North American foodservice operations—with the recovery continuing sequentially throughout the year, leading to a return to 99% of Fiscal 2019 level in the fourth quarter, with Business & Administrations back to over 100%.

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In Business & Administrations, organic growth was 22.7%, driven by ongoing growth in Energy & Resources and Government & Agencies, the recovery of Sports & Leisure in the second half as events and conventions picked up strongly and Corporate Services benefiting from a solid return to the office. The trend in the last two months of the year was in line with the company’s Work from Home estimates made in 2020 and it anticipates further improvement.

In Healthcare & Seniors, organic growth was 4% with performance driven by pricing, cross-selling and the progressive recovery of hospital retail sales and Seniors’ occupancy.

In Education, organic growth was 22%, following the strong post-Covid recovery in activity in Universities and Schools in North America, China and India.

“We expect that our financial performance will return to Fiscal 2019 levels this year,” Bellon stated. “I am confident that for Fiscal 2023, we can achieve 8 to 10% organic growth and a margin close to 5.5%.”

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Those expectations are driven in part by a further recovery in Corporate Services and Sports & Leisure, and positive net new business momentum, including expected further improvement in retention, while the company pegs inflationary pricing at 4-5%.