Sodexo: Fiscal 2023 Results above guidance, Pluxee full spin-off expected early 2024

Sodexo Chairwoman and CEO Sophie Bellon said:

“In Fiscal 2023, we have made good progress in the execution of our strategy which confirms the momentum of the last 2 years. We are on track to recover agility and profitable growth. Everyday, the transfer of operational accountability in the regions enables faster decision-making and increased mutualization.

The North American recovery is coming through, with solid growth in volumes, good commercial momentum and enhanced operational execution.

The transformation of our food offers is progressing in all geographies along with our approach to grow more selectively our FM business, which is now visible in contract signings.

Our perseverance on client retention is consistently paying off with another record year at 95.2%, and I am confident that in time, we will further raise the bar to 96%.

The Pluxee full spin-off is expected to be completed early 2024.

And we have continued to actively manage our portfolio with for example the recently announced sale of the Homecare activities.

I would like to warmly thank our teams for this strong year. Thanks to their hard work and unprecedented engagement, we exceeded our guidance while executing at pace on our strategy. We are set up to continue to achieve solid and profitable growth and to deliver on our ambition to be the leader in sustainable food and valued experiences at every moment in life: learn, work, heal and play.”

 

Sodexo Fiscal 2023 key figures and highlights
(with Pluxee as discontinued operation)

(in million euros)	FISCAL 2023	FISCAL 2022 restated	DIFFERENCE	DIFFERENCE CONSTANT RATES
Revenue	22,637	20,263	+11.7%	+10.2%
Organic growth	+11.0%	+17.0%
UNDERLYING OPERATING PROFIT	976	815	+19.8%	+17.2%
UNDERLYING OPERATING PROFIT MARGIN	4.3%	4.0%	+30 bps	+30 bps
Other operating income and expenses	(129)	(3)
OPERATING PROFIT	847	812	+4.3%	+2.5%
NET PROFIT FROM CONTINUING OPERATIONS	560	514	+8.9%	+8.7%
PLUXEE NET PROFIT	234	181	+29.3%	+25.6%
GROUP NET PROFIT	794	695	+14.2%	+12.9%
EPS (in euro)	5.44	4.75	+14.5%
UNDERLYING NET PROFIT FROM CONTINUING OPERATIONS	659	525	+25.5%	+24.1%
PLUXEE UNDERLYING NET PROFIT	249	174	+43.1%	+38.9%
GROUP UNDERLYING NET PROFIT	908	699	+29.9%	+27.8%
UNDERLYING EPS (in euro)	6.21	4.78	+29.9%

Given the proximity of the Pluxee spin-off and the support from Bellon SA for the operation, Pluxee is accounted for as a discontinued operation and therefore is consolidated in the P&L at the net profit level. As a result, the commentary down to net profit includes only the Sodexo continued operations.

• Sodexo continued operations Fiscal 2023 consolidated revenues reached 22.6 billion euros, up +11.7% year-on-year driven by organic growth of +11%, a positive currency impact of +1.5% and a net contribution from acquisitions and disposals of -0.8%.
• The First half benefited from the ongoing post-Covid recovery and more than 5% pricing, to pass inflation. Growth remained very solid in the second half, at +9.9% in Q3 and +8.1% in Q4, due to ongoing volume growth in most segments and geographies and continued pricing contribution of more than 5%. Excluding an accounting change related to the revenue recognition in a large contract which impacted the fourth quarter by -2.3%, Underlying organic growth exit rate was in fact +10.4% in the fourth quarter, a positive trend for beginning of Fiscal 2024.

By geography, for the full year:

• In North America, organic growth was +13.9% with strong growth in all segments, and in particular in Business & Administrations due to the continued return to office and strong attendance and average spend in Sodexo Live!
• In Europe, organic growth was +7.5%, or +10.6% excluding the end of the testing centers contract in the UK. All segments contributed even though Education was impacted by strikes in Q3 and delayed price increases, particularly in France.
• In Rest of the World, organic growth was +11.5%, or +14.6% excluding the accounting adjustment. Growth was very strong in all regions in Corporate Services and Energy & Resources, except in China where the post-Covid macro economic environment is impacting Business & Administrations. Education growth was very strong in India and China.

• Solid net new signings:
  • Client retention rate was a record 95.2%, +70 bps higher than the previous year which was already a record level.
  • New development was 7%, in the 7-8% range. New wins including cross-selling reached 1.7 billion euros up against 1.5 billion euros the previous year, and with enhanced profitability.
  • As a result, the net new business signed during the year was positive at 2.2% compared to 2% in the previous year and this will contribute to Fiscal 2024 growth.

• Sodexo continued operations Underlying operating profit was 976 million euros, up +19.8% and the Underlying operating margin was 4.3%, up +30 bps. This significant increase in margin was due to an improvement in North America of +30 bps and Rest of the World of +40 bps offsetting a -20 bps reduction in Europe. This zone was temporarily impacted by delays in passing through price increases in the public sector in France, Italy and Belgium, and the end of the testing centers contract which had a high flow-through. HQ costs were also down significantly.
• Sodexo continued operations Other operating expenses (net) amounted to 129 million euros against 3 million euros in Fiscal 2022. This year, the costs were linked to restructuring due to the change in organization, M&A costs and one-off Pluxee spin-off costs.
• Sodexo continued operations Net Income was 560 million euros, up +8.9% and Underlying net profit was 659 million euros up +25.5%.
• Pluxee contributed 234 million euros to Net profit in Fiscal 2023, up +29.3% year-on-year, and 249 million euros to Underlying net profit, up +43.1%. The significant increase in this contribution reflects the combination of +26.9% organic revenue growth, boosted by higher interest rates, higher face values, strong new business in most regions and, regulation changes in Brazil. The Underlying operating margin increase was also substantial, up +450bps improvement to 33.1%.
• As a result, Sodexo Net profit reached 794 million euros and Underlying net profit 908 million euros, resulting respectively in an EPS of 5.44 euros and 6.21 euros.
• The Board proposes a dividend of 3.10 euros, up +29%, representing a pay-out ratio of 50%, in line with Sodexo's dividend policy. This will be proposed at the Shareholders meeting on December 15, 2023.
• Sodexo continued operations Free cash flow was 374 million euros up from 326 million euros the previous year and despite a 33% increase in Capex, linked to some particularly large client investments. Gross capex was 520 million euros, or 2.3% of revenues against 2% in Fiscal 2022. Pluxee free cash flow was also very strong at 438 million euros, up from 305 million euros in Fiscal 2022. As a result, Group total Free cash flow was 812 million euros
• Sodexo continued operations Net debt (adjusted to reflect the post-spin-off situation) was 2.9 billion euros at the end of the year. Both Sodexo continuing operations and the Group⁽¹⁾ showed strong deleveraging during Fiscal 2023. Sodexo will continue to target a mid-term range of 1-2x for the net debt ratio.

		Sodexo continuing operation		Group(1)
	(in million euros)	Fiscal 2023	Fiscal 2022 (restated)	Fiscal 2023	Fiscal 2022
	Net debt (adjusted)	2,918	3,508	1,075	1,268
	Net debt/EBITDA (adjusted)	2.4x	3.4x	0.7x	1.0x

• In anticipation of the full spin-off of Pluxee, Sodexo has elected to redeem, on November 10, 2023 all of its 300 million euros 1.125 per cent Bonds series due May 22, 2025 pursuant to the terms and conditions of these Bonds.

CSR results mirror the good financial performance

In Fiscal 2023, Sodexo’s solid financial performance was accompanied by continued progress on its sustainability commitments:

• Record performance on safety of our People. At the end of Fiscal 2023, Sodexo reached a record 0.55 Lost Time Injury Rate (LTIR), representing a -15.4% reduction compared to Fiscal 2022. The severity of Lost time injuries also reached a record level reduction of -52% compared to the previous year.
• 82.5% Employee engagement confirming renewed confidence in Sodexo and its trajectory. The engagement rate was up +4.2 points compared to 2021, exceeding the 2025 objective of 80%. For this 10^th engagement survey, the participation rate reached an all time high of 70.3%, up +10.3 points compared to the 2021 survey, with 243,000 participants across the Group.
• Increased share in renewable electricity in our direct operations. Further progress has been achieved in the share of the Group’s direct electricity consumption that is renewable at 55%, well above the 40% target for the year and therefore facilitating the achievement of our target of 100% by 2025.
• The year-on-year Scope 1, 2 and 3 reduction in GHG emissions was -5.4% in Fiscal 2023 while the reduction compared to 2017 was at -20.7%. Sodexo emissions targets have been validated by the SBTi in 2019. Because our journey started early on and following the SBTi guidelines, Sodexo has rebased its emissions since 2017. The effect of this rebaselining implies a significant reduction of the 2017 baseline numbers. As a result, at the end of Fiscal 2023, Scope 1&2 GHG emissions are down -32.9% relative to the new 2017 base line, on track to reach our reduction target of -34% in 2025. The Scope 3, -34% reduction target should be reached in Fiscal 2026. The current reduction trajectory is aligned with the SBTi recommended pathway for the 1.5° trajectory.

Sodexo Governance

At the Shareholders meeting on December 15, 2023, the following renewals and appointments will be proposed:

• Sophie Bellon, who should she be reelected will then be reappointed Chairwoman and CEO.
• Nathalie Bellon-Szabo, who will then be confirmed as member of the Nominating Committee.
• Federico J. González Tejera, who will then be confirmed as member of the Compensation Committee.
• Francoise Brougher's term expires after the 2023 Shareholders meeting. No longer considered as an independent Director, she will not be seeking renewal. Sophie Bellon and the other members of the Board thank her for her very dedicated support of and strong contribution to the Company and the Board over these last 12 years.
• The appointment of a new independent Director, Gilles Pélisson will be presented for election at the Shareholders meeting. Since 2016 and until recently, Gilles Pélisson was Chairman of the Board and Chief Executive Officer of the commercial television network and production group, TF1. Before joining TF1, Gilles Pélisson was Chairman and CEO in several international, listed companies such as Accor, Euro Disney and Bouygues Telecom. Gilles Pélisson was also board member for Bic, Lucien Barrière Group, NH Hoteles and Sun Resort International. He is currently the Lead independant director of Accenture PLC (United States) and Chairman of the Lyfe Institute (formely Paul Bocuse Institute), a management school in hospitality and culinary arts. Gilles Pélisson will bring 40 years of extensive operational experience in international environments in the services industry, as well as a thorough understanding of corporate governance. Should his appointment be approved at the Shareholders meeting, he will become Chairman of the Nominating Committee.
• As part of the review of the committees, the Board of Directors endorsed the appointment of François-Xavier Bellon and Jean-Baptiste Chasseloup de Chatillon as members of the Compensation Committee.

Sodexo* Outlook

*excluding Pluxee

Given the strategic progress made in Fiscal 2022 and 2023, Sodexo is on track to pursue its recovery in North America, enhance efficiency and agility, continue to transform the food offers and operations and grow selectively in Facilities Management. Commercial excellence, data and digital investments and supply management support, will all contribute to better commercial momentum and better margins.

The Underlying revenue organic growth exit rate in the fourth quarter of Fiscal 2023 was over +10%.
With continued inflation being passed through, pricing is expected to average out at 3-4% for Fiscal 2024. The contribution from net new business should be above 2%, amplified by cross-selling.

As a result, Sodexo (excluding Pluxee) Fiscal 2024 and 2025 guidance:

• Organic revenue growth should be between +6 and +8% per annum;
• Underlying operating profit margin should continue to grow by +30-40 bps per annum, at constant rates.

Pluxee full Spin-off
The project to spin-off Pluxee has advanced significantly.

The listing is expected early 2024 on Euronext Paris, subject to approval of the listing prospectus by the Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) and its passporting to the French Autorité des marchés financiers, the Euronext admission decision and market conditions.

Existing double voting rights of Sodexo shareholders will be maintained at Pluxee, which will be legally registered in the Netherlands allowing Bellon SA to continue playing a long-term controlling shareholder role in Pluxee. Tax residency will remain in France.

The proposed full spin-off will be put to a shareholder vote during a dedicated General Meeting to be held early 2024.

Pluxee plans to hold a Capital Markets Day shortly before the dedicated General Meeting to present its strategic plan and the next phase of value creation. The Fiscal 2024 and mid-term guidance will be provided on this occasion.

The spin-off will have no significant tax impact for Sodexo and its shareholders, at least in France and in the USA.

Pluxee will be allocated a portion of Sodexo's current indebtedness for a total amount of 0.6 billion of euros and Pluxee proforma capital structure will be consistent with a strong Investment Grade credit rating.

The Board of Pluxee will be comprised of:

• an Executive Chairman: Didier Michaud-Daniel;
• 4 Bellon family Board members;
• 5 Independent Board members.

The Animation (services) contract between Bellon SA and Pluxee will be similar to that of Sodexo.

BNP Paribas, Citigroup, J.P. Morgan and Société Générale are acting as Lead Equity Capital Market Advisors to Sodexo and Pluxee, and Goldman Sachs and Natixis are acting as Other Equity Capital Market Advisors, in the contemplated listing of Pluxee.

The Group has signed 2 new banking facilities for Pluxee to ensure it has a solid and flexible financing structure in place post the listing. These comprise a €650m 5-year Revolving Credit Facility and a €1.5bn 12-month Bridge Facility. The RCF facility will provide liquidity headroom for Pluxee. The bridge facility will be used to repay existing intercompany debt, and is intended to be refinanced by a bond market issuance in due course and subject to market conditions. BNP Paribas and Société Générale are acting as Coordinators, Mandated Lead Arrangers and Bookrunners, and each of Banco Santander, S.A., Citibank, N.A., London Branch, J.P. Morgan SE, Crédit Industriel et Commercial and ING Bank N.V., French Branch are acting as Mandated Lead Arrangers.

******************

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 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 13

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.

Sodexo Fiscal 2024 financial calendar

Fiscal 2023 Annual Shareholders Meeting	December 15, 2023
Fiscal 2024 First quarter Revenues	January 5, 2024
Fiscal 2024 First half Results	April 5, 2024
Fiscal 2024 Third quarter Revenues	July 2, 2024
Fiscal 2024 Full year Results	October 24, 2024
Fiscal 2024 Annual Shareholders Meeting	December 17, 2024

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. The Group stands out for its independence, its founding family shareholding and its responsible business model. Its portfolio of activities includes Sodexo Food and Facilities Management Services and Pluxee Employee Benefit Solutions, activity for which the Group announced a spin-off and listing project in early 2024. 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.

Sodexo Key figures

22.6 billion euros Fiscal 2023 consolidated revenues 430,000 employees as at August 31, 2023 #1 France-based private employer worldwide

45 countries 80 million consumers served daily 14.3 billion euros in market capitalization (as at October 25, 2023)

 

	Sodexo 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
	Pluxee Contacts
	Analysts and Investors		Media
	Pauline Bireaud +33 6 22 58 83 51 pauline.bireaud@sodexo.com		Cecilia de Pierrebourg +33 6 03 30 46 98 cecilia.depierrebourg@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.

In advance of the spin-off, Pluxee will publish a prospectus that has been approved by the Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) and passported to the French Autorité des marchés financiers. The prospectus will include special purpose financial statements for Pluxee on a stand-alone basis for the fiscal years 2021, 2022 and 2023 under International Financial Reporting Standards as adopted by the European Union. As Pluxee did not operate on a stand-alone basis in the past, the historical financial information to be included in the prospectus may deviate from the Pluxee results presented as part of the Sodexo group results.

 

 

Fiscal 2023 Activity Report

1 Fiscal 2023 Performance of Sodexo (with Pluxee as discontinued operations)

 

1.1 Consolidated income statement

(in million euros)	FISCAL 2023	FISCAL 2022  restated	DIFFERENCE	DIFFERENCE CONSTANT RATES
Revenue	22,637	20,263	+11.7%	+10.2%
Organic growth	+11.0%	+17.0%
UNDERLYING OPERATING PROFIT	976	815	+19.7%	+17.1%
UNDERLYING OPERATING PROFIT MARGIN	4.3%	4.0%	+30 bps	+30 bps
Other operating income and expenses	(129)	(3)
OPERATING PROFIT	847	812	+4.3%	+2.5%
Net financial expense	(101)	(87)
Net income before tax & shares accounted for equity method	737	718
Tax charge	(181)	(206)
CONTINUING OPERATIONS NET PROFIT (GROUP SHARE)	560	514	+8.9%	+8.7%
PLUXEE NET PROFIT (GROUP SHARE)	234	181	+29.3%	+25.6%
GROUP NET PROFIT (GROUP SHARE)	794	695	+14.2%	+12.9%
EPS (in euro)	5.44	4.75
CONTINUING OPERATIONS UNDERLYING NET PROFIT	659	525	+25.5%	+24.1%
PLUXEE UNDERLYING NET PROFIT	249	174	+43.1%	+38.9%
GROUP UNDERLYING NET PROFIT	908	699	+29.9%	+27.8%
Underlying EPS (in euro)	6.21	4.78

 

1.2 Revenues

Continuing activity revenues by zone
REVENUES (in million euros)	FISCAL 2023	FISCAL 2022		ORGANIC GROWTH	EXTERNAL GROWTH	CURRENCY EFFECT	TOTAL  GROWTH
North America	10,479	8,828		+13.9%	+0.6%	+4.2%	+18.7%
Europe	8,071	7,774		+7.5%	-2.0%	-1.7%	+3.8%
Rest of the World	4,087	3,661		+11.5%	-1.5%	+1.6%	+11.7%
SODEXO Continuing operations	22,637	20,263		+11.0%	-0.8%	+1.5%	+11.7%

Fiscal 2023 Sodexo continuing activities consolidated revenues reached 22.6 billion euros, up +11.7% year-on-year, driven by organic growth of +11.0%, positive currency impact of +1.5% and net contribution from acquisitions and disposals of -0.8%.

Fiscal 2023 organic revenue growth was up +11.0%, benefiting from higher attendance and average spend related to post-Covid ramp-up in Corporate Services, Sports & Leisure and Universities, as well as a consistent pricing effect of more than 5% throughout the year. Net new business contribution accelerated quarter on quarter to reach 2% in the second half. The end of the Testing Centers contract in the UK impacted the first three quarters and accounted for -1.2% in the full year organic growth. Finally, an accounting change related to the revenue recognition in a large Energy & Resources contract affected the organic growth of the year by -0.5%, and by -2.3% for the fourth quarter alone where the change was implemented retroactively for the full year.

Organic growth was boosted by a strong recovery in Food services up +16%. FM services were up +3%, or +6% excluding the impact of the end of the Testing Centers contract in the UK. Food services represented 64% of total On-Site revenues during the period, increasing from 60% in Fiscal 2022, and almost back up to pre-Covid levels.

Key performance indicators improved significantly in Fiscal 2023:

• client retention rate reached a record at 95.2%, up +70 bps compared to the previous year, which was already the highest rate ever. This performance was the result of the strong focus and discipline of the teams, and improvement in processes that have been implemented over the last years.
• new sales development was 7.0%, down -50 bps versus last year in percentage of prior year revenue, but up in value and in the target range of 7-8%. Total new signings during the year, including cross-selling, amounted to 1.7 billion euros compared to 1.5 billion euros in Fiscal 2022.
• as a result, the net new business signed during the year was more than 2% for the second year in a row, demonstrating the ability of the business to generate consistent net new development to sustain future growth.

North America

REVENUES BY SEGMENT (in million euros)	FISCAL 2023	FISCAL 2022	ORGANIC GROWTH
Business & Administrations	3,866	2,983	+23.4%
Healthcare & Seniors	3,440	3,047	+8.8%
Education	3,173	2,798	+9.1%
NORTH AMERICA TOTAL	10,479	8,828	+13.9%

Fiscal 2023 North America revenues totaled 10.5 billion euros, up +13.9% organically. This strong growth resulted from the post-Covid recovery in the first half, and the acceleration of revenue contribution from net development and cross-selling in the second half. The growth was also driven by consistent 5% of price revisions throughout the fiscal year, although with a slight decrease in the fourth quarter as the cost inflation drivers on cost plus accounts declined.

Organic growth in Business & Administrations was +23.4%, boosted by the return to the office and new contracts in Corporate Services, increased activity in Sports events, convention centers and airport lounges, with increased passenger counts and higher spend per capita, as well as inflation pass-through. Although coming from a smaller base, Convenience solutions and Entegra also contributed to the momentum with strong organic growth.

In Healthcare & Seniors, revenues were up +8.8% organically, driven by price increases, cross-selling and retail volume improvement. The net new development contribution has accelerated through-out the year with the full impact of the Ardent mobilization, now visible in the second half.

In Education, organic growth was up +9.1% compared to the previous year, driven by Universities up +13.4%, benefiting from strong attendance levels, price increases, and a higher level of board plans, retail sales and event catering. In Schools, growth was slightly negative, the impact of price adjustments being offset by decreases in meal volumes related to the reduction of government waiver eligibility for students.

Europe

REVENUES BY SEGMENT (in million euros)	FISCAL 2023	FISCAL 2022	ORGANIC GROWTH
Business & Administrations	5,337	4,898	+12.2%
Healthcare & Seniors	2,026	2,106	-2.4%
Education	708	769	+4.4%
EUROPE TOTAL	8,071	7,774	+7.5%

Fiscal 2023 Europe revenues totaled 8.1 billion euros, up +7.5% organically, or +10.6% excluding the impact of the end of the Testing Centers. The growth was driven by strong price revisions, continued improvement in return to the office and very strong Sports & Leisure activity. Thanks to a strong fourth quarter in Sports & Leisure in France and new business in Government in the United Kingdom, combined with high level of growth in Corporate services, organic growth in the fourth quarter in Europe was +9.0%, trending favorably compared to the third quarter which was at +6.9% excluding the impact of Testing Centers affected by strikes and bank holidays.

In Business & Administration, organic growth was +12.2%, boosted by strong price revisions, continued improvement in the return to the office, significant IFM project works and retail picking up, particularly in Continental Europe. Sports & Leisure growth was very strong, boosted by record sales in tourism in France, sports events (Roland Garros and Tour de France), and an increase in number and size of corporate events.

This was somewhat offset by contract losses in Energy & Resources in Northern Europe.

In Healthcare & Seniors, organic growth of -2.4% was impacted by the end of the Testing Centers. The rest of the business was +9.1%, with the contribution of new openings and solid occupancy in Seniors particularly in France.

Organic revenue growth in Education was +4.4%, reflecting in the first half some volume recovery following the impact of Covid lock downs in the previous year. The third quarter was affected by strikes in France and an overall increase in bank holidays, offset in the fourth quarter by positive impact of working days. Pricing contribution was lower than in most segments, particularly in France where passing on inflation was hampered by the use of inadequate indices. Revenues decreased by 61 million euros compared to prior year due to the disposal of the Childcare business during Fiscal 2022.

Rest of the World

REVENUES BY SEGMENT (in million euros)	FISCAL 2023	FISCAL 2022	ORGANIC GROWTH
Business & Administrations	3,659	3,285	+11.5%
Healthcare & Seniors	337	305	+6.2%
Education	91	70	+35.1%
REST OF THE WORLD TOTAL	4,087	3,661	+11.5%

Fiscal 2023 Rest of the World revenues were 4.1 billion euros. Organic Growth was up +11.5%. Excluding a change in revenue recognition on project works of one of our large Energy & Resources contracts, from a gross to net basis reflecting the changes in the way we operate this contract, the organic growth would have been +14.6%. The change was implemented during the fourth quarter, with retroactive impact for the full year.

Business & Administrations organic growth was up +11.5%, impacted by the accounting change, but +14.9% excluding this effect, driven by an increase in project works and successful negotiations on price adjustments in Energy & Resources, impact of the new openings and strong pricing in Corporate Services and mining in Latin America and Brazil, and strong performance in India and South East Asia, in particular in the tech sector.

Healthcare & Seniors revenue was +6.2% organically, with good development in India and China, partly offset by a decrease in Brazil as a result of the exit of several low performing contracts.

Education organic growth was +35.1%, with all schools reopened in China and strong volume growth in India.

 

1.3 Underlying Operating Profit

Fiscal 2023 Sodexo excluding Pluxee Underlying operating profit was 976 million euros, up +19.7%, or +17.1% excluding the currency effect. The Underlying operating profit margin, including Corporate expenses, was 4.3%, up +30 bps. The currency mix effect was negligible.

(in million euros)	UNDERLYING OPERATING PROFIT FISCAL 2023	DIFFERENCE	DIFFERENCE (EXCLUDING CURRENCY EFFECT)	UNDERLYING OPERATING PROFIT MARGIN FISCAL 2023	DIFFERENCE IN MARGIN	DIFFERENCE IN MARGIN (EXCLUDING CURRENCY MIX EFFECT)
North America	582	+23.6%	+18.7%	5.6%	+30 bps	+20 bps
Europe	299	-0.5%	+2.2%	3.7%	-20 bps	-20 bps
Rest of the World	192	+23.1%	+19.2%	4.7%	+40 bps	+30 bps
UNDERLYING OPERATING PROFIT BEFORE CORPORATE COSTS	1,073	+15.8%	+13.6%	4.7%	+10 bps	+10 bps
Corporate expenses	(97)	-13.4%	-13.4%
UNDERLYING OPERATING PROFIT (continuing activities)	976	+19.7%	+17.1%	4.3%	+30 bps	+30 bps

The increase in profitability in Fiscal 2023 was driven by operating leverage from higher revenue, especially in North America, combined with rigorous inflation management including sustained price increases and mitigation actions, improved supply chain economics, and disciplined corporate cost management.

• North America Underlying operating profit increased by +23.6% and the Underlying operating margin was up +30 bps to 5.6%, despite strong inflationary pressure, mobilization costs in Healthcare and additional investments to support growth. Leverage on the volume recovery, combined with operational efficiencies including supply chain optimization, improved workforce retention and recruitment, labor scheduling and attendance forecasting contributed to the increase in profitability.

• In Europe, the -0.5% decrease in Underlying operating profit (or +2.2% increase excluding the currency effect) resulted in a margin of 3.7%, down -20 bps. In a highly inflationary environment, and despite strong mitigation efforts, margins were temporarily affected in public contracts in France, Italy and Belgium where price adjustments lagged food cost inflation. In addition, the Testing Centers contract had high margin flow through and stopped during the third quarter of last year.
• In Rest of the World, Underlying operating profit was up +23.1% and the margin up +40 bps to 4.7% thanks to operating leverage in most countries, and successful price negotiations in Australia.

 

1.4 Net profit from Continuing activities

(in million euros)	FISCAL 2023	FISCAL 2022 restated	DIFFERENCE	DIFFERENCE CONSTANT RATES
UNDERLYING OPERATING PROFIT	976	815	+19.7%	+17.1%
Net scope change impacts	(7)	52
Restructuring and rationalization costs	(45)	(4)
Amortization of purchased intangible assets	(36)	(36)
M&A costs, Spin-off costs & Other	(41)	(15)
OTHER OPERATING INCOME AND EXPENSES	(129)	(3)
OPERATING PROFIT	847	812	+4.3%	+2.5%
Net financial expense	(101)	(87)
Pre-tax profit excluding share of profit from Equity method companies	737	718
Tax charge *	(181)	(206)
NET INCOME GROUP	560	514
UNDERLYING NET PROFIT	659	525	+25.5%	+24.1%

*Fiscal 2023 effective tax rate is 24.6%, compared to an ETR of 28.8% in Fiscal 2022.

Other operating income and expenses of Sodexo excluding Pluxee amounted to -129 million euros compared to -3 million euros in the previous year. This significant increase is due to M&A costs, one-off spin-off costs of Pluxee this year (12 million euros) and restructuring costs principally related to the change in organization from global segments to geographies. Prior year also benefited from 52 million euros of net gains related to the disposals program, including the Childcare business.

As a result, the Operating Profit is 847 million euros compared to 812 million euros in the previous year.

Fiscal 2023 Net financial expenses increased to 101 million euros against 87 million euros in the previous year. The increase is mainly due to 14 million euros costs linked to the bond consent process related to the spin-off project of Pluxee. The blended cost of debt at Fiscal 2023 year-end was at 1.7%, 10 basis points higher than at Fiscal 2022 year end, mainly due to the increased costs associated with the USD floating rates swaps.

The tax charge was down significantly to 181 million euros, despite a higher pre-tax profit, leading to an Effective Tax Rate of 24.6% against 28.8% in the prior year. This improvement is explained by the decrease in the CVAE rate in France and the better pre-tax results in France where deferred tax assets are not recognized. In addition, improved financial outlook in some geographies (mainly Germany and Netherlands) have led to a recognition of deferred tax assets related to prior years losses, excluding which, the Effective Tax Rate would have been of 25.5%.

The share of profit of other companies accounted for using the equity method was 12 million euros, slightly up compared to 8 million euros last year. Profit attributed to non-controlling interests was 8 million euros compared to the previous year amount of 6 million euros.

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