Caterer Sodexo to reorganise main unit as serves up sales beat

By Federica Mileo and Diana Mandia

(Reuters) -French catering and food services group Sodexo announced on Friday a reorganisation of its main on-site services business to improve effectiveness and said it expects revenue and margin to return to pre-pandemic levels in 2023.

Reporting better-than-expected third-quarter revenue helped by price hikes and post-Omicron volume recovery, the group said activities returned to 97% of pre-COVID levels, as events and retail sites restarted and more people returned to offices.

"In 2023 we will get back to pre-pandemic revenue and margin", Chairwoman and CEO Sophie Bellon said on a call with journalists.

Sodexo shares rose more than 4% before paring gains with Bernstein analysts describing the reorganisation as the "bigger news".

"The long-suggested reorganisation of the business back to geographic segments (North America, Europe, Rest of the World) matches [rival] Compass and should simplify the business," they said in a note.

They added that they saw this quarter as the beginning of management winning back investor trust and starting to show acceleration in growth.

After being hit by COVID-19 lockdowns, caterers are now renegotiating tariffs and supplier agreements as the sector faces soaring energy and food prices triggered by Russia's invasion of Ukraine, both major wheat exporters.

CFO Marc Rolland said Sodexo's tariffs over the third quarter rose more than 5% year-on-year, as it managed to pass more inflation to its clients. He added the group expects tariffs to increase 4 to 5% by the end of the year.

"We cannot avoid to pass inflation on to clients, it is part of our 'savoir-faire'", said Bellon.

Sodexo, which in May dropped the option of opening up the capital of its voucher business to an external investor, said it would present its strategy for the division and the on-site services unit together with its mid-term objectives on Nov. 2 during its Capital Markets Day.

By 0848 GMT, its shares were up 2.8%, having risen as much as 4.2% earlier, while rival Elior was 5.3% higher.

The group's revenue rose 18.3% to 5.52 billion euros ($5.77 billion) in the quarter ended May 31, against a 5.33 billion euro average estimate from analysts polled by the company, and confirmed the full-year outlook it had lowered in April.

($1 = 0.9573 euros)

(Reporting by Federica Mileo and Diana Mandiá; Editing by Milla Nissi and Emelia Sithole-Matarise)