Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Sodexo. We currently have 7 research reports from 1 professional analysts.
Q4 17 revenues grew 3.9%, in line with consensus estimates; the organic growth for the year was +1.9%. The H2 operating profit before exceptional items was €603m (+10.6%), a 6.0% margin (+40bp). H2 net income came in at €375m (reported +34.9%; before non-recurring items +10.9%). Guidance 2018: - Organic growth at +2-4% (ex. 53rd week impact); external growth at least +2.5%; - Flat underlying operating margin at 6.5%. The medium-term targets are confirmed: - Average annual revenue growth (ex. currency effect) at +4-7%; - Operating profit growth at +8-10%.
Sodexo has agreed to buy Centerplate Inc. from Olympus Partners for $675m (all cash). The deal should be closed by end 2017.
The guidance on revenue organic growth in 2017 has been reduced to +1.5-2.0% (vs. +2.5% previously). Sodexo confirmed guidance on the operating profit as growing by 8-9% for the year (ex. currency effect and exceptional expenses), but the consensus pointed to +11%. Q3 revenue didn’t grow as expected in Q3, at +0.5% (organic; +1.3% excluding the Rugby World Cup). The medium-term outlook is confirmed: - average annual revenue growth (ex. currency effect) at +4-7%; - operating profit growth at +8-10%.
Sodexo has published its 9M 16 sales, up by 3.7% including 3.3% organic growth helped by the Rugby World Cup contract in the UK and Ireland (+2.5% growth excluding this impact).
Sodexo posted upbeat FY15 results, pointing to an improvement in the operating leverage. The exit from unprofitable contracts, cost-cutting measures and the supportive momentum in North America have contributed to the rise in the EBIT margin (by 40bp to 5.8%). Organic sales came in 2.5% higher yoy, showing a sequential improvement throughout the year (+2.3% in Q1, +2.4% in H1, +2.2% in 9m), while reported sales jumped by +10%, fuelled by FX (+7.3% impact on FY15 sales). On-Site Services grew by 2.2%, on the back of popular integrated services, with a high facilities management component which made up for the slowdown in foodservices volumes. The Corporate Services division was the best performer (+3.9% lfl), boosted by the ramp-up of contracts in the UK which stood out, recording a +12.8% in sales lfl followed by North America (+1.5%, +17.9% reported). The poor trends in Foodservices reflects the pressure from clients which have been seeking to slash costs (headcount reductions, cost-cutting strategy), particularly in Europe (Continental Europe: +0.6% in sales lfl, -0.3% excl. FX). The Benefits & Rewards business performed well (+7.5% lfl in issue volume, +9.5% in sales), in spite of the poor momentum in LatAm. EBIT jumped by 18.3% reportedly (+11.9% excl. FX), backed by North America (+39.4% reported, +18.7% at CER) in particular which benefited from the deployment of standardised one-site contact management methods which helped to mitigate the impact of inflation. The UK & Ireland showed a 42.4% rise in EBIT reported (+28.8% excl. FX), fuelled by several major integrated services contracts which were in the start-up phase in FY14. The several cost-cutting measures announced as part of FY15 figures are expected to generate €200m of cost savings between 2015 and FY18, which should partially offset price pressures from clients. The group announced a €300m share buy-back programme in 2016 (c.2.4% of the share capital).
New York’s minimum wage for fast-food workers is set to almost double from $8.75 to $15 an hour (implying potentially 180,000 workers statewide) by the end of 2018 for the city and by mid-2021 for the rest of the state. This is what is claimed by a committee formed in May by the governor Andrew Cuomo and which does not need legislative approval but must be ratified by the state labour commissioner, which is highly expected. Several big US cities including Seattle, San Francisco and Los Angeles (and a month ago) have approved a minimum wage increase to $15 an hour (expected to be effective by 2021 in Los Angeles after growing progressively). Chicago is also considering raising its minimum wage to $15 an hour. This came after protests by low-wage employees of companies like Walmart (the largest private employer in the US) and McDonald’s swelled into several big US cities. The two groups have since pledged to increase their workers’ pay by $1-2 an hour, although contested by the $15 movement activists who see it as too small.
Sodexo released its 9m consolidated revenues which highlighted a deceleration in the organic trend compared to H1's figure due to the challenging economic environment in Latin America and certain countries in Europe. The group's consolidated revenues delivered 2.2% LFL growth in 9m against +2.4% in H1. On-site Services (OSS, 96% of sales) experienced 1.9% organic growth in sales largely backed by the UK & Ireland (8.6% of On-site Services revenues), which showed acceleration throughout the year (+10% LFL vs +6.1% in Q1 and +8.4% in H1) where facilities management experienced strong demand, followed by the Rest of the World (+3.1%) as well as by the Corporate segment (+3.7% organic growth vs +0.4% and -0.3% for Healthcare & Seniors and Education, respectively). The North American region (39% of On-site Services sales) showed a flattish trend since the beginning of the fiscal 2015 year (+1.4% LFL vs +1.4% in Q1 and +1.5% in H1) despite solid dynamic growth in the corporate segment (+6% LFL), notably in Facilities Management which showed increased volumes. The region has also largely benefited from the strength of the dollar against the euro (+16.5% reported including a +15.4% impact from FX). In Continental Europe (33% of On-site Services sales), trends worsened and the region switched to negative territory although only moderately (-0.2% vs 0% in Q1 and -0.3% in H1 15). However, Latin America has been qualified as experiencing a particularly challenging environment, notably in Brazil and Chile. Benefits and Rewards Services (4.2% of sales but c.28% of group EBIT) delivered +9.1% growth LFL in sales and +14.5% reported, boosted by acquisitions (+3.7% impact on sales). The FY guidance has been maintained with an expected EBIT growth of +10% (excl. FX impact).
Research Tree provides access to ongoing research coverage, media content and regulatory news on Sodexo. We currently have 7 research reports from 1 professional analysts.
|18Sep17 06:30||GNW||Sodexo Completes Sale of Vivabox|
|07Sep17 14:10||GNW||The Most Anxious Generation Yet? Sodexo Decodes Gen Z with Global Survey of University Students|
|07Sep17 10:18||GNW||Sodexo : sustainably at the top of the DJSI|
|30May17 17:03||GNW||Sodexo : Michel Landel announces his intention to retire as CEO of Sodexo in January 2018; Sodexo's Board of Directors appoints Denis Machuel as his successor|
|13Apr17 06:00||GNW||Sodexo: First Half Fiscal 2017 in line with expectations, strong growth in operating profit|
|10Apr17 10:38||GNW||Sodexo expands in private-pay home care market in the UK|
|22Mar17 12:41||GNW||Sodexo announces changes to the Board committees|
A shake up of UK retail betting shops or LBO’s is pending final outcome of a consultation on 23 January 2018. Limits on B2 (FOBT) machines proposed at £50, £30, £20 or £2 a spin. We estimate at £2 limits earnings for WMH and LCL would fall by c. 49% and c. 57% respectively (assuming no self-help or mitigating factors). We estimate the market is pricing in a £20 limit outcome.
Companies: GVC WMH PTEC
Interim results to 31 October are impressive. They echo comments made at the AGM in September. Net cash at end September was £64.4m (August: £65m). UK – continues to grow fast & profitably - Revenues rose 118%: “more than double the same period last year”; - Average revenue per instruction rose 14% to £1,138; - Gross profit margin rose to 56.5% (1H17: 55.6%; 2H17: 56.4%); - Administration overhead rises to £9.3m (1H17: £3.8m; 2H17: £5.3m); - Media spend of £10.1m as guided; 2H spend to rise to £13m; - UK Adj EBITDA was £4.7m (1H17: £0.3m; 2H17: £1.1m); Australia – developing faster than UK (at similar period of development) - Revenues of £6.8m (1H17: £0.4m) are “many times ahead” of last year; US – launch in September 2017 is “ahead of schedule” - Launch in January of San Diego, Sacramento & Fresno with 18 LREEs. The CEO’s commentary updates revenue guidance for the UK from £80m to £84m and refers to Purplebricks “overseas expansion progressing well.”
Companies: Purplebricks Group
Since April, our growth style screen has performed very strongly, outperforming the main small-cap index by 20pp and 24pp on an unweighted and weighted basis respectively, also comfortably outpacing microcap. In this note we provide more detail on the constituent and basket performance in the period and present the new screen constituents. As usual we focus on 10 of the current constituents, providing brief summaries and financials for clients to consider. We will refresh again in 5-6 months time and report back on performance.
Companies: SUN DOTD ERGO TEF AVG SOG COR FEN LOOP YU/
We use this note to address some concerns weighing on investor sentiment post the AGM update. We conclude these are overplayed and detract from the excellent work done by management to position CVS for sustained value accretion. The 15% de-rating is overdone on fundamental analysis and relative to major sector deals. Overall, we see the current share price weakness as a rare buying opportunity.
Companies: CVS Group
Topic of the quarter: It’s alive! Infrastructure and assets in general have traditionally been built to provide a fixed service and are maintained and renovated to a fixed schedule – dead and dumb. Technology will completely change this. Sensors and wireless networks have the potential to allow assets to ‘talk’ to us. These living, smart assets will be able to tell us when they need maintenance, how efficient they are being and provide the data that will directly influence their construction, availability and use. The implications for construction costs through to operating costs and the ability to service changing user needs are very significant. The Support Services, Construction and Technology sectors need to work together to maximise this potential, recognise and harness the power of data, and invest in and embrace change. These are daunting challenges in highly competitive markets where politics play a role, different skill sets (that are currently in short supply) are needed and shareholders are looking over management's shoulders. However, the prize for those companies who get it right is significant, and the risk from not changing much greater. There are positive early signs with Crossrail providing tangible examples of Smart Infrastructure using innovative sensors.
Companies: FOUR ACL BOOT CLL CNCT FCRM LOK PPH RNWH STAF UTW WATR VANL WYG
BOTB has announced a change to its tax regime, such that the company now expects to pay Remote Gaming Duty (RGD). As such, we update our forecasts accordingly – EBITDA reduces by £0.3m to £1.5m in FY18E and by £0.6m to £1.3m in FY19E. Despite this unfortunate news, we stress that trading should continue as normal (existing underlying forecasts are essentially unchanged) and BOTB should remain a profitable and cash-generative business. Indeed, the short-term position could improve thanks to an unconcluded VAT claim for £4.5m (gross of expenses).
Companies: Best Of The Best
H1 revenue came in at £27.5m (+41% YoY), gross profit +32% to £11.8m (margin -270bps to 42.8%), headline EBITDA at £4.5m (+18% YoY, margin -320bps to 16.3%), PBT of £1.1m (+17.5% YoY) and headline diluted EPS of 0.4p (flat YoY). Trading reflected a softer Summer across suburban London driven by adverse weather and lower inbound tourism as well as a more benign operating environment in the PY vis a vis ingredients inflation, rates and levies, NLW and real wage growth supporting H1’17 revenue, headline EBITDA and headline PBT growth north of 40%. We retain our existing forecasts and 19p PT for now.
Companies: Fulham Shore
In an unscheduled trading update today, SFE indicates slightly weaker sales than hoped since the last formal update in September, and leads coming at a slightly higher cost of acquisition and lower margin. This has been exacerbated in Dec by delays to their installation programme due to the snow, which will delay some business into Q1 next year. The net effect is a shortfall of c£1.5m versus previously downgraded expectations, and guidance towards c£15m PBT. This equates to a 10% downgrade and a YoY decline of 27%. The net cash position remains strong though and at £12m varies only slightly to our £12.8m forecast. This underpins the Board’s commentary about retaining the progressive dividend policy. Initiatives to drive cost savings and conversion enhancements are advancing and this will support some recovery next year. However, given the lower base and tough end market conditions, management is guiding towards only modest growth, suggesting the downgrade ripples through to next year.
Companies: Safestyle UK
In the October edition of the Hardman Monthly newsletter, Chief Executive, Keith Hiscock analyses the much misunderstood – but highly important – issue of stock liquidity. In particular, he focuses on the lower echelons of the Main Market and of AIM.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GTLY MCL MUR NSF OBT ODX OXB NIPT PHP PURP RE/ RGD SCLP SPH SCE TRX VAL
We update our forecasts to reflect the disposal of Marshall Leasing (MLL) and the closure of six loss making sites (5 franchised dealerships and 1 used car centre). We downgrade our adj. PBT forecasts for 2018E and 2019E by 15.1% and 15.4% respectively. We see the disposal and the portfolio update as positive for Marshall Motor Holdings (MMH), allowing the group to strengthen the balance sheet by reducing financial leverage and focus the business model at a time of uncertainty across the sector.
Companies: Marshall Motor
This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2.
Companies: 7DIG ALT AMO ARTA BOTB BLTG CTP CFHL CYAN ISL DTC DOTD ELCO ESV FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET ONEV PHD QTX QXT RCN 932 SSY SEE SIM SPE SRT STR TAP TAX TEP TPOP TRAK UNG VIP ZOO
For investors wondering where all the shoppers have been, they have probably been shopping online at Boohoo... and will be logging in again this weekend after the UKs fashion press, bloggers, vloggers and influencers give what will inevitably be a lot of positive commentary to spring/summer lines showcased at its fashion event yesterday. Boohoo, Nasty Gal and Boohoo Man were represented and of particular interest according to feedback at the event were Premium, Curve, Menswear and athleisure lines across brands. The mood of the team was very upbeat and their continuing focus on capacity solutions means risk there is being managed. After the recent 30% correction there is scope for shares to rebound. We move back to buy.
Vague intentions re mobile model re-positioning, containable profit guidance reduction 5% as current trade holds up – the Elephant is Still in the Room
Companies: Dixons Carphone
Whilst the drag in the UK was in line with expectations, relating mainly from the Beds re-ranging programme which was accelerated and completed in Q2, the European business dropped back to a small loss, and accounted for the £2m miss versus our H1 forecast. The cause was a change of discounting approach, which can and will be reversed. Despite encouraging share gains in the UK from the strategic transformation, and an expectation that Bed performance will strengthen in H2, domestic conditions are tough and the shortfall left by Europe is unlikely to be offset. FY guidance is therefore towards the lower end of the range, implying downgrades of c5-6%.
We examine wet-led and food-led capacity across the regions and conclude that excess capacity remains in the food-led segment (although Central, Welsh and Yorkshire regions lag the national average). Despite recent profit warnings, an increasing divergence in reported performance between pubs and restaurants, and a recent reduction in eating out frequency and spend, existing food-led operators remain too focused, in our view, on trimming estate tails and slowing rollout rather than substantial capacity reduction – and combined with smaller PE-backed concepts scaling up and landlord pragmatism, net new capacity continues to enter the market. Given the severe cost and competitive pressures, as well as downside macro risks, we foresee more pain across the sector – in the near term expect aggressive menu price discounting to continue, leading subsequently to margin pressure and forecasting risk for listed operators and financing risk for smaller, highly leveraged private operators. While rightsizing will happen (it did with pubs), the process may be protracted. We run the finnCap Slide Rule over the casual dining space, with our preferred pick (BUY, 19p PT) scoring highest on QVGM metrics. While not immune to sector woes, lacks an estate tail, should be a beneficiary of trading down, and has a number of self-help levers, as well as a management team that has seen the movie (many times) before.
Companies: BOTB FUL HOTC IDP JOUL CAKE PHTM RGD RBG SCS SHOE