Sodexo sees demand for catering and vouchers lifting margins

By Diana Mandia

(Reuters) -Sodexo expects its operating profit margin to rise to over 6% in 2025 as more companies outsource their catering needs and the French food services group expands its vouchers business.

The company delivered a 5% margin in its last fiscal year and last week forecast an increase to 5.5% for 2022-2023.

Sodexo, presenting its 2025 strategy, said on Wednesday it would particularly look to expand its Benefits and Rewards (B&R) business as companies seek more ways to retain staff in tight labour markets and greater flexibility as a growing number of employees work remotely.

French voucher group Edenred said last month it expected profit growth to accelerate over the next three years as staff shortages and rising inflation pushed employers to spend more on worker benefits and to respond to new work trends.

B&R will target capital spending close to 10% of revenue per year between 2022 and 2025, Sodexo said. Earlier this year, the company decided not to open the division to external capital.

Sodexo, whose businesses also include workplace design, sterilization of medical devices, reception and cleaning services, said it would step up its focus on food services as rising inflation leads more companies to outsource catering.

CEO Sophie Bellon said the group would provide more options with seasonal fresh foods and locally sourced products to meet growing customer demand in these areas.

However, Sodexo forecast organic sales growth of between 6% and 8% for fiscal 2024-2025, lower than its forecast of 8% to 10% for 2022-2023.

Its shares were down 2.1% to 86.94 euros at 1115 GMT.

“The commitment to get operating margins above 6%, a level they’ve never been before, is a relatively big commitment,” Morningstar analyst Michael Field said.

Sodexo, which serves 100 million consumers each day across 64 countries, said it also aimed to boost its growth in the United States, helped by a retention rate of over 96% and first-time outsourcing contracts, which are increasing and accounted for 44% of signings last year.

(Reporting by Diana Mandiá in Gdansk; editing by Milla Nissi and Mark Potter)