Shares plunge as Sodexo slashes outlook

(Sharecast News) - Shares in Sodexo tumbled on Friday, after the French catering giant posted below-forecast interim earnings and slashed its full-year outlook.

The 60-year-old company confirmed it now expects organic revenue growth of between 0.5% and 1% in the current year, down from previous guidance for growth of between 1.5% and 2.5%. The underlying operating profit margin, which had been forecast to come in "slightly lower" than last year's 4.7%, is now anticipated to be between 3.2% and 3.4%.

Sodexo said the revised targets reflected weaker first-half commercial momentum, expected lower volumes in an "uncertain" external environment, execution challenges and management actions, including a review of all contracts and assets.

Consolidated revenues in the six months to 28 February fell 3.7% to �12bn, weighed down by currency headwinds and contract losses in North America. Organic revenue growth was 1.7%.

Underlying operating profits tumbled 32.1%, or 26.5% on a constant currency basis, to �442m, well below analyst forecasts, while net profits slumped 56.7% at �188m.

As at 1100 BST, the Paris-listed stock had shed 12%.

New chief executive Thierry Delaporte, who replaced Sophie Bellon in November, said he had taken a "clear and objective view of where we stand and how we move forward.

"We have undeniably underperformed the market and our main competitors. The root causes have been building over time and relate primarily to under-investment and execution: intensity, decision-making and prioritisation, and consistency in delivery."

He concluded: "While we know this will not be an overnight fix, we are moving with a strong sense of urgency on our action plan to restore growth."