Earnings Release • Nov 13, 2014
Earnings Release
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Issy-les-Moulineaux, November 13, 2014 - Sodexo (NYSE Euronext Paris FR 0000121220-OTC: SDXAY): At the November 10, 2014 Board of Directors Meeting chaired by Pierre Bellon, Michel Landel, Chief Executive Officer, presented the performance for the year ended August 31, 2014.
| Year ended August 31 | Change at | Change at | ||
|---|---|---|---|---|
| Millions of euro | Fiscal 2014 | Fiscal 2013 | current exchange rates |
constant exchange rates |
| Revenues | 18,016 | 18,397 | -2.1% | +2.6% |
| Organic growth | 2.3% | 1.1% | ||
| Operating profit before exceptional costs1 | 966 | 964 | +0.2% | +10.7% |
| Operating margin before exceptional costs1 excluding currency exchange rates |
5.7% | 5.2% | ||
| Exceptional costs1 | (27) | (139) | ||
| Reported operating profit | 939 | 825 | +13.8% | +25.9% |
| Financial result | (173) | (136) | ||
| Effective tax rate | 34.8% | 34.3% | ||
| REPORTED GROUP NET INCOME | 490 | 439 | +11.6% | +20.3% |
| Net debt ratio (as of August 31, 2014)2 | 12% | 16% | ||
| Dividend per share (in euro) | 1.803 | 1.62 | +11.1% |
1 Operating profit and margin before costs recognized in connection with the program to improve operational efficiency and reduce costs in Fiscal 2013 and Fiscal 2014, and after share of profit of companies consolidated by the equity method that directly contribute to the Group's business.
2 Ratio of net financial debt to shareholders' equity and non-controlling interests.
3 Dividend subject to approval at the January 19, 2015 shareholders' meeting.
« Sodexo has met its objectives for 2014 and improved its profitability, in particular in On-site Services. We can also note strong momentum in Benefits and Rewards Services. Lastly, the share of facilities management services continues to increase, now representing 28% of our revenues, reflecting the increasing demand by our clients for integrated services. I would like to thank all of our teams for the ever stronger commitment demonstrated this year. This involvement and the progress we have made allow us to remain confident that we will yet again increase profitability in Fiscal 2015. »
Sodexo's consolidated revenues for Fiscal 2014 were 18 billion euro. Organic growth was 2.3%.
Organic growth for the On-site Services activity was +1.8%. In a sluggish global economy, this increase reflects stronger demand for Sodexo's integrated Quality of Life Services offers in most regions. These well-configured offers, which include a significant facilities management component, helped to offset the decline in foodservices volumes, particularly in Europe, that resulted from client downsizing plans.
By client segment and on the same basis of comparison, organic revenue growth was as follows:
Excluding Remote Sites, Corporate segment organic growth was around +4%.
Organic growth in Benefits and Rewards Services revenues was +13%. The significant acceleration compared with Fiscal 2013 reflected the sustained growth dynamic in Latin America and healthy expansion in Asia, led by India and China.
The Group's key growth indicators were as follows:
In addition, in human resources, Sodexo conducted a new international employee engagement survey among 130,000 employees in 60 countries. The engagement rate, which measures employees' satisfaction and commitment, is a key performance indicator for the Group.
The results of this engagement survey show that significant advances have been made:
Group operating profit before exceptional items1 was 966 million euro, an increase of +10.7% excluding currency effects and +0.2% at current currency exchange rates over the prior year.
This overall performance included some notable growth in operating profit:
At the same time, however, operating profit in On-site Services in North America and in the United Kingdom and Ireland remained at levels broadly similar to the prior year, as a result of significant costs related to the ramp-up of large contracts.
Consolidated operating margin (excluding currency effects) therefore improved by 0.5%, rising from 5.2% in Fiscal 2013 to 5.7% in Fiscal 2014. Including currency effects, consolidated operating margin was 5.4% at current rates.
At the beginning of Fiscal 2013, Group senior management launched a program to improve operational efficiency and reduce costs. The objective of the program was to reduce On-site operating costs and achieve sustained administrative cost savings, with annual savings increasingly affecting operating profit in Fiscal 2014 and Fiscal 2015.
Exceptional expenses related to the program to improve operational efficiency and reduce costs amounted to 27 million euro in Fiscal 2014. They included:
The total costs incurred under the program to improve operational efficiency and reduce costs during the 18-month period from September 2012 to February 2014 amounted to 166 million euro. Sodexo benefited from the initial favorable impact of this program in Fiscal 2014, when 100 million euro of cost savings were achieved. The program is expected to generate annual savings of 160 million euro in Fiscal 2015, representing a 100% payback.
As part of the plan, Sodexo decided to terminate under-performing contracts and activities representing annual revenues of around 450 million euro.
Reported operating profit amounted to 939 million euro, an increase of +13.8% at current currency exchange rates and +25.9% excluding currency effects.
1 Costs recognized in Fiscal 2013 and Fiscal 2014 in connection with the program to improve operational efficiency and reduce costs.
2 Rest of the World includes Sodexo's activities in Latin America, Asia, Africa and the Middle East as well as Remote Sites management worldwide.
Group net income was 490 million euro compared to 439 million euro in Fiscal 2013, an increase of +11.6% or +20.1% excluding currency effects. During Fiscal 2014, the Brazilian real declined (-12.4%) against the euro. The U.S. dollar lost 3.9% and the UK pound sterling gained +1.6%. In addition, continuing the method used since 2010 to translate amounts in Venezuelan bolivars into euro and present performance for the year, the consolidated financial statements were prepared using an average exchange rate of 51.06 bolivars = 1 U.S. dollar (equivalent to 67.34 bolivars = 1 euro). This new rate used to translate income statement items represented an 80% decline in the bolivar against the euro in Fiscal 2014.
It should nonetheless be noted that these exchange rate fluctuations do not create operational risk, because each subsidiary bills its revenues and incurs its expenses in the same currency.
Earnings per share was 3.23 euro compared to 2.91 euro for the prior year, an increase of +11% or +19.6% excluding currency effects.
The costs incurred in connection with the program to improve operational efficiency and reduce costs had an after-tax negative impact on Group net income of 18 million euro in Fiscal 2014 compared to 91 million euro in Fiscal 2013.
At the Annual Shareholders' Meeting to be held on January 19, 2015, the Board of Directors will recommend paying a dividend of 1.8 euro per share for Fiscal 2014, an increase of nearly +11.1% over the prior year. This proposal is in line with Sodexo's policy of allowing shareholders to benefit from the growth in Group net income; it also reflects the Board's great confidence in the Group's future and takes into consideration Sodexo's solid cash-generating financial model.
The proposed dividend represents a payout ratio of 56% of Group net income (54% of Group net income before exceptional expenses related to the program to improve operational efficiency and reduce costs).
Shares held in registered form for more than four years as of August 31, 2014 and still held when the dividend becomes payable, will qualify for a 10% dividend premium (rounded down to the nearest cent), provided that they do not represent over 0.5% of the capital per shareholder.
Net cash provided by operating activities amounted to 825 million euro, representing 200 million euro more than in Fiscal 2013. Two factors explain the increase:
During the year, Sodexo carried out two major debt refinancing transactions:
These two transactions will enable Sodexo to refinance borrowings maturing in 2014 and 2015 at more favorable conditions, significantly extend the average maturity of its debt and gradually reduce its average annual borrowing cost.
Net debt at August 31, 2014 was 371 million euro, representing 12% of consolidated equity compared to 16% at August 31, 2013. Gross debt repayment capacity as of the same date represented 5.4 years of operating cash flow compared to 3.4 years as of the prior year-end.
On September 12, 2014, Sodexo's Benefits and Rewards Services subsidiary in the United Kingdom announced that it had signed an agreement for the acquisition of Motivcom plc. The acquisition should be completed before the end of the calendar year.
In Fiscal 2014, Sodexo won several major awards recognizing its commitment to economic, social and environmental responsibility:
At the November 10, 2014 Board of Directors meeting, Chief Executive Officer Michel Landel highlighted the effectiveness of the Group's long-term strategy, based on a unique range of integrated Quality of Life Services, an unparalleled global network in its activities, and undisputed leadership in emerging countries.
Michel Landel summarized three priorities for the Group going forward in the coming years:
In the context of a global economy shaped currently by low inflation and an uncertain macroeconomic and political environment in certain emerging countries in the short-term, Fiscal 2015 commences with three favorable trends for Sodexo:
Nevertheless, ramp-up of some of the more comprehensive integrated service contracts is proving to take longer than in the past.
However, Michel Landel also reaffirmed his confidence in the Group's ability to achieve further operating leverage and profitability improvement during Fiscal 2015, thanks to the structured action plans implemented at all levels of the organization; a program to improve operational efficiency that is already delivering results; and, finally, the full engagement of all Sodexo teams around initiatives to improve competitiveness.
i.e. representing an overall improvement in operating margin of +0.8% over the two year period from Fiscal 2013 to Fiscal 2015 excluding currency effects, in line with the objectives fixed in November 2013.
In the medium-term (i.e. over the next 3 to 5 years), Sodexo is convinced that it can capture an even greater share of its markets' considerable potential that is almost 50 times greater than the Group's current revenues, and also achieve lasting improvement in profitability.
Further, Michel Landel noted that his Group Executive Committee has been given the task of defining, over the coming fiscal year, the necessary steps to progressively move from an organization by country to an organization by global client segment. This organizational transformation will make it easier for Sodexo to give its international and local clients the benefit of its expertise and consumer insights in each of its markets.
He explained that by accelerating investment in intangible assets, in particular, by developing the Group's Human Resources and strengthening technical and innovation capabilities throughout the world, Sodexo is continuing to focus its teams on the sustained drive to improve competitiveness.
Hence, the Group's medium-term ambition (i.e. over the next 3 to 5 years) is to achieve:
In conclusion to this meeting, the Board of Directors reaffirmed its strong confidence in Sodexo's future and reiterated its core strengths:
The Board of Directors thanks Sodexo's clients for their loyalty, the Group's shareholders for their confidence and Sodexo's 419,000 employees for their efforts in Fiscal 2014 and for their daily commitment to improving the quality of life of our clients and consumers.
Sodexo will hold a briefing today at 9:00 a.m. at the Capital 8 Conference Center (32, rue Monceau, 75008 Paris) to discuss the Fiscal 2014 results.
The briefing may also be viewed via webcast on www.sodexo.com or via conference call at + 44 (0) 20 3427 1905 followed by the code 98 58 177 (in French) or 68 12 163 (in English).
The press release, presentation and webcast will be available on the Group's website www.sodexo.com, under the tab "Latest news" as well as in the section "Finance – Financial results." A recording of the conference call will be available at + 44 (0) 20 3427 1905 followed by the code 68 12 163, until November 27, 2014.
| First quarter revenues - Fiscal 2015 | January 9, 2015 |
|---|---|
| Annual Shareholders' Meeting | January 19, 2015 |
| Dividend ex-date | January 29, 2015 |
| Dividend record date | January 30, 2015 |
| Payment of the Fiscal 2014 dividend | February 2, 2015 |
| Half-year interim results - Fiscal 2015 | April 16, 2015 |
| Nine months revenues - Fiscal 2015 | July 8, 2015 |
| Annual results, Fiscal 2015 | November 12, 2015 |
Founded in 1966 by Pierre Bellon, Sodexo is the global leader in services that improve Quality of Life, an essential factor in individual and organizational performance. Operating in 80 countries, Sodexo serves 75 million consumers each day through its unique combination of On-site Services, Benefits and Rewards Services and Personal and Home Services. Through its more than 100 services, Sodexo provides clients an integrated offering developed over more than 45 years of experience: from reception, safety, maintenance and cleaning, to foodservices and facilities and equipment management; from Meal Pass, Gift Pass and Mobility Pass benefits for employees to in-home assistance and concierge services. Sodexo's success and performance are founded on its independence, its sustainable business model and its ability to continuously develop and engage its 419,000 employees throughout the world.
Key figures (as of August 31, 2014) 18 billion euro consolidated revenues
This press release contains statements that may be considered as forward-looking statements and as such may not relate strictly to historical or current facts. These statements represent management's views as of the date they are made and Sodexo assumes no obligation to update them. The reader is cautioned not to place undue reliance on these forward-looking statements.
| Analysts and Investors | Press |
|---|---|
| Pierre BENAICH | Laura SCHALK |
| Tel. & Fax : +33 1 57 75 80 56 | Tel. & Fax : +33 1 57 75 85 69 |
| E-mail: [email protected] | E-mail: [email protected] |
| (in millions of euro) | Fiscal 2014 | Fiscal 2013 | Internal Growth |
Change (at current exchange rates) |
Change (at constant exchange rates) |
|---|---|---|---|---|---|
| On-site Services | |||||
| North America | 6,759 | 6,821 | +3.7% | -0.9% | +3.6% |
| Continental Europe | 5,702 | 5,716 | -0.2% | -0.2% | +0.7% |
| Rest of the World | 3,327 | 3,683 | +0.2% | -9.7% | +0.4% |
| United Kingdom and Ireland | 1,483 | 1,397 | +4.7% | +6.2% | +4.6% |
| Total On-site Services | 17,271 | 17,617 | +1.8% | -2.0% | +2.1% |
| Benefits and Rewards Services | 751 | 790 | +13.0% | -4.9% | +13.7% |
| Intragroup eliminations | (6) | (10) | |||
| TOTAL GROUP | 18,016 | 18,397 | +2.3% | -2.1% | +2.6% |
| Change (at current |
Change (at constant |
|||
|---|---|---|---|---|
| (in millions of euro) | Fiscal 2014 | Fiscal 2013 | exchange rates) | exchange rates) |
| On-site Services | ||||
| North America | 358 | 372 | -3.8% | +0.5% |
| Continental Europe | 231 | 198 | +16.7% | +17.7% |
| Rest of the World | 140 | 127 | +10.2% | +20.5% |
| United Kingdom and Ireland | 66 | 67 | -1.5% | -3.0% |
| Total On-site Services | 795 | 764 | +4.1% | +8.0% |
| Benefits and Rewards Services | 268 | 304 | -11.8% | +11.8% |
| Corporate expenses | (91) | (94) | ||
| Intragroup eliminations | (6) | (10) | ||
| TOTAL GROUP | 966 | 964 | +0.2% | +10.7% |
1 Excluding exceptional costs recorded in Fiscal 2013 and Fiscal 2014 in connection with the program to improve operational efficiency and reduce costs. All of the information related to operating profit in the remainder of this document is presented excluding exceptional items.
| (in millions of euro) | Fiscal 2014 | Fiscal 2013 | Organic | growth Acquisitions | Currency effect |
Total growth |
|---|---|---|---|---|---|---|
| Corporate | 1,704 | 1,647 | +8.9% | |||
| Health Care and Seniors | 2,439 | 2,521 | +1.1% | |||
| Education | 2,616 | 2,653 | +2.8% | |||
| TOTAL | 6,759 | 6,821 | +3.7% | +0.0% | -4.6% | -0.9% |
On-site Services revenues in North America were 6.8 billion euro. Organic growth for the year of +3.7% significantly exceeded the 0.6% recorded in Fiscal 2013.
At +8.9%, organic growth in the Corporate segment was at its highest level since 2007, reflecting the success of facilities management services offers for such clients as Unilever, OneMain Financial/Citi Financial and The Boeing Company, as well as the development of several major Remote Sites in Canada, such as Suncor Fort Hills and La Romaine 3.
Sodexo won many new contracts during the fiscal year, notably with Bloomberg and Dow Jones & Company.
In Health Care and Seniors, the +1.1% revenue growth was modest due to the slower-thanexpected ramp-up of major contracts won in Fiscal 2013 and the sale of certain under-performing laundry activities. In addition, following a change in the client's strategy, in the last quarter of Fiscal 2014 Sodexo decided not to pursue the ramp-up of the expanded contract for the ManorCare national retirement home network and to revert to the original contract scope consisting of services provided for many years in the Northeastern United States.
Contract wins during the year included Covenant Care (Alberta) in Canada, and USC Kenneth Norris Jr Cancer Hospital (California) and Wheaton Franciscan Hospital (Wisconsin) in the United States.
Organic growth in Education was +2.8%. The growth dynamic was maintained thanks to a high client retention rate and improved growth in On-site existing site revenues in the Schools and Universities segments linked to increases in student spending and in the number of meals served.
New contracts signed during the year included Chicago Public Schools, Jackson State University (Mississippi) and William Rainer Harper College (Illinois).
On-site Services operating profit in North America totaled 358 million euro, an increase of 0.5% over the prior year excluding currency effects.
Many productivity improvement initiatives were launched as part of a structured program, leading in particular to further advances in menu standardization and improved management of overheads. However, these gains were partially masked by the significant start-up costs incurred notably for the ManorCare contract, and by a one-off increase in provisions for impairment of certain trade receivables.
Operating margin was 5.3% compared to 5.5% in Fiscal 2013.
| (in millions of euro) | Fiscal 2014 | Fiscal 2013 | Organic growth |
Acquisitions | Currency effect |
Total growth |
|---|---|---|---|---|---|---|
| Corporate | 3,404 | 3,407 | +1.1% | |||
| Health Care and Seniors | 1,380 | 1,404 | -1.2% | |||
| Education | 918 | 905 | -3.6% | |||
| TOTAL | 5,702 | 5,716 | -0.2% | +0.9% | -0.9% | -0.2% |
In Continental Europe, revenues totaled 5.7 billion euro, with organic growth representing a negative (-0.2%).
Performances were mixed, depending on the country. Sodexo continued to expand in Central Europe and improved its growth in Germany and Belgium, but experienced a further decline in foodservices volumes, particularly in France and the Netherlands. In addition, growth in Russia slowed considerably in the second half of the fiscal year, as a result of the geopolitical situation.
In Corporate, organic growth was +1.1%, reflecting the continued success of integrated service offers with a significant facilities management component, which were sold to many clients throughout Europe. These services enabled Sodexo to maintain its growth momentum and to offset the decline in foodservices volumes that was due, in particular, to client downsizing plans. Recent contract wins included Carlsberg (for 35 sites in 10 countries, with a wide range of services including cleaning, reception, grounds keeping, foodservices, and technical maintenance of buildings and fire protection systems), and Johnson & Johnson in Germany.
In Health Care and Seniors, organic revenue growth in Continental Europe was -1.2%, reflecting both weak growth in On-site existing site revenues due in particular to shorter patient stays and also erosion of the client retention rate in Northern Europe over the twelve months of Fiscal 2014. Recent contract wins included the Regional Hospital in Saint Omer and the Clinique Générale in Annecy, in France, and the Istituto Fisioterapici Ospitalieri (IFO) in Italy.
In Education, the -3.6% decline in revenues was due to Sodexo's decision to terminate or not renew certain under-performing contracts, notably in Southern Europe, and to reductions in school budgets in several countries. Sodexo's teams nevertheless signed several major contracts, for example with the public schools in Asnières-sur-Seine in France and Taideyliopiston Sibelius Akatemia in Finland.
Operating profit rose by 33 million euro (or nearly 18% excluding currency effects) to 231 million euro, and operating margin improved significantly to 4.1% from 3.5% in Fiscal 2013. This performance was above all attributable to effective management of overheads. It also reflected the positive effects of several initiatives conducted as part of the program to improve operational efficiency in several European countries. In France, the Crédit d'Impôt pour la Compétitivité et l'Emploi (CICE) recognized in operating profit helped to offset the increase in payroll taxes observed in recent years.
| (in millions of euro) | Fiscal 2014 |
Fiscal 2013 | Organic growth |
Acquisitions | Currency effect |
Total growth |
|---|---|---|---|---|---|---|
| Corporate | 3,030 | 3,398 | -1.3% | |||
| Health Care and Seniors | 172 | 171 | +17.1% | |||
| Education | 125 | 114 | +17.4% | |||
| TOTAL | 3,327 | 3,683 | +0.2% | +0.2% | -10.1% | -9.7% |
In the Rest of the World (Latin America, Africa, Middle East, Asia, Australia and Remote Sites), Sodexo reaffirmed its leadership in high potential emerging markets. Revenues for the fiscal year amounted to 3.3 billion euro. Unfavorable exchange rates reduced reported revenues by 369 million euro.
Excluding currency effects, revenues in the Rest of the World region were stable, edging up +0.4%.
Organic growth in the Corporate segment declined by -1.3% excluding currency effects. Services to companies in the manufacturing and services sectors (excluding Remote Sites) continued to grow at a satisfactory rate, with revenues up +5.6% in emerging countries with strong medium-term potential.
Sodexo's strong sales dynamic led to major contract wins, such as BHP Billiton Cerro Matoso and Unysis in Colombia, Heineken in Brazil, Enel in Chile, Groote Eylandt Gemco (BHP Billiton) and Woodside Energy in Australia, Goodyear Tyres and Tetra Pak India in India, the Knesset in Israel, Mondelez International in Peru and Shanghai Mitsubishi Electric Ltd in China.
In Health Care and Seniors, organic revenue growth of +17.1% reflected solid business development performance, particularly in Brazil and Asia, with new contracts such as Mater Dei Hospital (Belo Horizonte) in Brazil, Clinica Universitaria Boliviariana in Colombia, American Sino Medical Shanghai and the Beijing Jishuitan Hospital in China. The sustained, steady pace of business growth is the result of Sodexo's globally-recognized expertise in the health care and seniors market.
In Education, Sodexo also continued to expand in emerging countries, contributing its expertise and deep familiarity with the various market segments to many clients, especially in Southeast Asia and India. Organic growth was +17.4%. Contract wins by Sodexo's teams included Panyapiwat Institute of Management in Thailand, Fundação Getulio Vargas in Brazil and Universidad Santo Tomas in Chile.
Operating profit in the Rest of the World region increased by +20.5% excluding currency effects to 140 million euro. During the year, the integration of Puras in Brazil continued according to plan, allowing for the implementation of additional operational synergies. Further, efficient cost management and improved on-site productivity in all regions led to an increase in operating margin to 4.2% from 3.4% in Fiscal 2013.
| (in millions of euro) | Fiscal 2014 |
Fiscal 2013 | Organic growth |
Acquisitions | Currency effect |
Total growth |
|---|---|---|---|---|---|---|
| Corporate | 1,070 | 993 | +6.3% | |||
| Health Care and Seniors | 289 | 274 | +3.8% | |||
| Education | 124 | 130 | -6.1% | |||
| TOTAL | 1,483 | 1,397 | +4.7% | -0.1% | +1.6% | +6.2% |
On-site Services revenues in the United Kingdom and Ireland totaled 1.5 billion euro, reflecting organic growth of +4.7%.
In Corporate, revenues grew by a strong +6.3%, reflecting increased demand for integrated services and the supply of additional services to clients such as GSK, Unilever, Agusta Westland and AstraZeneca. Fiscal 2014 revenues also include the start-up of a major service contract for the correctional facility located in Northumberland in the Justice segment.
Organic growth in Health Care and Seniors remained strong, at +3.8%, reflecting ongoing service extensions for several hospitals, including North Staffordshire University Hospital and Romford Hospital.
In Education, Sodexo won a prestigious contract with University College London. Other recent contract wins included The Lady Eleanor Holles School.
Operating profit amounted to 66 million euro, down -3% excluding currency effects.
Despite progress made in On-site productivity programs during Fiscal 2014, operating margin declined from 4.8% to 4.5% as Sodexo teams began preparing for the 2015 Rugby World Cup, incurring marketing costs in connection with the Group's contract to supply hospitality services. The bulk of revenues generated by this event will be recognized in Fiscal 2016. In addition, start-up costs for the new Justice contract weighed on growth in the operating margin in Fiscal 2014.
| (in millions of euro) | Fiscal 2014 |
Fiscal 2013 | Organic growth |
Acquisitions | Currency effect |
Total growth |
|---|---|---|---|---|---|---|
| Latin America | 7,323 | 8,128 | +17.2% | |||
| Europe and Asia | 8,171 | 7,908 | +1.0% | |||
| TOTAL | 15,494 | 16,036 | +10.7% | +0.8% | -14.9% | -3.4% |
| (in millions of euro) | Fiscal 2014 |
Fiscal 2013 | Organic growth |
Acquisitions | Currency effect |
Total growth |
|---|---|---|---|---|---|---|
| Latin America | 410 | 452 | +20.8% | |||
| Europe and Asia | 341 | 338 | +2.5% | |||
| TOTAL | 751 | 790 | +13.0% | +0.7% | -18.6% | -4.9% |
Benefits and Rewards Services issue volume (face value multiplied by the number of vouchers and cards issued) totaled approximately 15.5 billion euro in Fiscal 2014 and revenues from the activity amounted to 751 million euro.
Very strong underlying performances by the operating teams, in terms of both growth and margins, were masked by significant unfavorable currency effects; particularly for Latin American currencies (see explanation at the beginning of this section).
In Latin America, organic growth was very strong in Fiscal 2014, with issue volume increasing by over 17% and revenues by more than 20%, in both cases excluding currency effects. These impressive gains reflected the sustained sales dynamic in Brazil, Chile and Venezuela, supported by innovations closely aligned with client needs. Around two-thirds of growth was due to market penetration and cross-selling, while the other third resulted from inflation in these countries.
In Europe and Asia, organic growth in issue volume and revenues was +4.1% and +2.5% respectively, reflecting contract wins for Quality of Life services, particularly in the United Kingdom with Money Boost, in Turkey with the offer for Ferrero, and in Central Europe. Organic growth was also led by faster development in Asia, particularly in India and China.
Recent contract wins included Santander in Brazil with 22,000 beneficiaries of the Vale Cultura, Johnson Controls in Romania, the Konak District, part of the Izmir municipality in Turkey, the General Directorate of Customs in the Czech Republic, Alcatel Lucent in Mexico, Fundación Escolar Del Estado Lara in Venezuela, Abbott Laboratories in Mexico and Petrobras in Brazil.
Benefits and Rewards Services operating profit increased by nearly +12% (excluding currency effects) to 268 million euro in Fiscal 2014, representing 25% of the Group's consolidated operating profit.
The solid growth reflected the leverage provided by issue volume growth and the cost efficiencies generated by tight management of operating expenses. Sodexo's Benefits and Rewards Services solutions are now 63% digital, following a gradual shift that has taken place over the past ten years in the various countries. Sodexo is constantly adapting to changes in payment media, while continuing to invest to improve its performance for its clients and better anticipate their future needs.
Benefits and Rewards Services Fiscal 2014 operating margin was 35.7% at current currency exchange rates and 37.9% excluding currency effects, compared to 38.5% in the prior year. Margins were negatively affected in Fiscal 2014 by the sharp decline in Latin American currencies (Venezuelan bolivar and Brazilian real).
| In millions of euro | Fiscal 2014 | Fiscal 2013 | Change at current exchange rates |
Change at constant exchange rates |
|---|---|---|---|---|
| Revenues | 18,016 | 18,397 | -2.1% | +2.6% |
| Operating profit before exceptional items |
966 | 964 | +0.2% | +10.7% |
| Exceptional items1 | (27) | (139) | ||
| Operating profit | 939 | 825 | 13.8% | 25.9% |
| Financial income | 20 | 53 | ||
| Financial expenses | (193) | (189) | ||
| Share of profit of associates | 8 | 6 | ||
| Profit before tax | 774 | 695 | 11.4% | 21.0% |
| Income tax expense | (265) | (233) | ||
| Profit for the period | 509 | 462 | 10.2% | 19.0% |
| Non-controlling interests | 19 | 23 | ||
| GROUP PROFIT FOR THE PERIOD | 490 | 439 | 11.6% | 20.3% |
| Earnings per share (in euro) | 3.23 | 2.91 | +11% | +19.6% |
| Dividend per share (in euro) | 1.802 | 1.62 |
1 Costs recorded in connection with the program to improve operational efficiency and reduce costs in Fiscal 2014 and Fiscal 2013. 2 Dividend subject to approval at the Annual Shareholders' meeting on January 19, 2015.
| ASSETS | EQUITY AND LIABILITIES | ||||
|---|---|---|---|---|---|
| (in millions of euro) | August 31, 2014 |
August 31, 2013 |
(in millions of euro) | August 31, 2014 |
August 31, 2013 |
| SHAREHOLDERS' EQUITY | |||||
| Capital | 628 | 628 | |||
| Share premium | 1,109 | 1,109 | |||
| Consolidated reserves and retained earnings |
1,452 | 1,213 | |||
| Total Group shareholders' equity |
3,189 | 2,950 | |||
| Non-controlling interests | 32 | 37 | |||
| NON-CURRENT ASSETS | Total shareholders' equity | 3,221 | 2,987 | ||
| Property, plant and equipment | 555 | 540 | |||
| Goodwill | 4,971 | 4,803 | NON-CURRENT LIABILITIES | ||
| Other intangible assets | 524 | 528 | Borrowings | 2,895 | 1,895 |
| Client investments | 361 | 288 | Derivative financial instruments | 1 | 1 |
| Associates | 60 | 78 | Employee benefits | 449 | 376 |
| Financial assets | 122 | 118 | Other liabilities | 233 | 214 |
| Derivative financial instruments | 17 | 69 | |||
| Other non-current assets | 16 | 14 | Provisions | 104 | 99 |
| Deferred tax assets | 226 | 188 | Deferred tax liabilities | 148 | 153 |
| Total non-current assets | 6,852 | 6,626 | Total non-current liabilities | 3,830 | 2,738 |
| CURRENT ASSETS | CURRENT LIABILITIES | ||||
| Financial assets | 8 | 7 | Bank overdrafts | 61 | 40 |
| Derivative financial instruments | 35 | 39 | Borrowings | 957 | 712 |
| Inventories | 265 | 271 | Derivative financial instruments | 15 | 19 |
| Income taxes receivable | 185 | 119 | Income tax payable | 132 | 109 |
| Trade and other receivables | 3,627 | 3,466 | Provisions | 88 | 116 |
| Restricted cash and financial assets related to the Benefits and Rewards Services activity |
758 | 734 | Trade and other payables | 3,592 | 3,347 |
| Cash and cash equivalents | 2,748 | 1,347 | Vouchers payables | 2,582 | 2,541 |
| Total current assets | 7,626 | 5,983 | Total current liabilities | 7,427 | 6,884 |
| TOTAL ASSETS | 14,478 | 12,609 | TOTAL LIABILITIES AND EQUITY |
14,478 | 12,609 |
| (in millions of euro) | Fiscal 2014 | Fiscal 2013 |
|---|---|---|
| Operating activities | ||
| Operating profit before financing costs | 933 | 814 |
| Non-cash items | ||
| Depreciation | 250 | 271 |
| Provisions | (21) | 93 |
| Losses (gains) on disposals and other, net of tax | (30) | (4) |
| Dividends received from associates | 12 | 16 |
| Change in working capital from operating activities | 117 | (129) |
| Change in inventories | 5 | 6 |
| Change in client and other accounts receivable | (138) | (197) |
| Change in suppliers and other liabilities | 218 | 67 |
| Change in Service Vouchers and Cards to be reimbursed | 103 | 151 |
| Change in financial assets related to the Benefits and Rewards activity | (71) | (156) |
| Interest paid | (159) | (171) |
| Interest received | 24 | 10 |
| Income tax paid | (301) | (282) |
| Net cash provided by operating activities | 825 | 618 |
| Investing activities | ||
| Acquisition of tangible and intangible fixed assets investments | (245) | (241) |
| Fixed asset disposals | 26 | 12 |
| Change in client investments | (68) | (7) |
| Change in financial assets | - | 19 |
| Acquisition of consolidated subsidiaries | (50) | (99) |
| Disposals of consolidated subsidiaries | - | 1 |
| Net cash used in investing activities | (337) | (315) |
| Financing activities | ||
| Dividends paid to parent company shareholders | (248) | (240) |
| Dividends paid to minority shareholders of consolidated companies | (18) | (23) |
| Purchases of treasury shares | (74) | (47) |
| Disposition of treasury shares | 57 | 71 |
| Acquisition of non-controlling interests | - | (12) |
| Proceeds from borrowings | 1,903 | 44 |
| Repayment of borrowings | (700) | (66) |
| Net cash used in financing activities | 920 | (273) |
| CHANGE IN NET CASH AND CASH EQUIVALENTS | 1,408 | 30 |
| Net effect of exchange rates and other effects on cash | (28) | (159) |
| Cash and cash equivalents, as of beginning of period | 1,307 | 1,436 |
| NET CASH AND CASH EQUIVALENTS, AS OF END OF PERIOD |
2,687 | 1,307 |
Carlsberg, 35 sites in 10 countries in Europe Airbus, Toulouse, France BASF, 2 sites in Germany Boeing Company, Virginia, United States Bridgestone, Jiangmen, China Deloitte, 18 sites in France Dow Jones & Company Inc., New Jersey, United States Goodyear Tyres, Aurangabad, India GSK, 3 sites in Belgium Heineken, multi-site, Brazil Huawei Technology, India Knesset, Jerusalem, Israel Mondelez International, Lima, Peru Nestlé, Graneros, Chile OneMain Financial/Citi Financial, multi-site, United States Sanofi Pasteur MSD, Lyon, France Shanghai Mitsubishi Electric Ltd, Shanghai, China Telefónica, 381 sites in Chile Tetra Pak India Private Limited, Pune, India YPÊ, São Paulo, Brazil
American Sino Medical Shanghai, China Beijing Jishuitan Hospital, Beijing, China Christ Hospital, Ohio, United States Clínica Universitaria Bolivariana, Medellín, Colombia Clinique générale d'Annecy, France Cooper Hospital – University Medical Center, New Jersey, United States HCA Capital – LewisGale, Virginia (4 sites), United States Hôpital Foch, Suresnes, France Hospital Monte Klinikum, Fortaleza, Brazil Lima Memorial Hospital, Ohio, United States Mater Dei Hospital, Belo Horizonte, Brazil Mayo Clinic Health System, 2 sites, United States Praram 9 Hospital, Bangkok, Thailand QRG Medicare, Faridabad, India Renci Healthcare, Singapore Résidence les Eaux Vives, Brussels, Belgium The Medical City, Manila, Philippines Wheaton Franciscan Services, Wisconsin (8 sites), United States
Woodside, Australia Cairn India Limited, Barmer, India Cerro Matoso, Montelibano, Colombia ENSCO 122, Netherlands Enel, Taltal, Chile GemCo, Groote Eylandt, Australia Halliburton, Saudi Arabia Keewatinoow S2, Manitoba, Canada Noble Drilling, 2 sites Offshore, United States Rowan Drilling, Offshore, Norway Shelf Drilling, 2 sites, Indonesia Shell, Offshore, Norway Weatherford, Rajasthan, India
Chicago Public Schools, Illinois, United States Ashoka University, Sonipat, India Australian International School, Singapore City University, London, United Kingdom Colegio Academia de Humanidades, Santiago de Chile, Chile College of William & Mary, Virginia, United States Commune di Abbiategrasso, Italia Epsom College, Kuala Lumpur, Malaysia Flint Community School District, Michigan, United States Fundação Getulio Vargas, Rio de Janeiro, Brazil George Mason University, Virginia, United States Indian School of Business, Hyderabad, India KIPP Houston Public Schools, Texas, United States Jackson State University, Mississippi, United States Michigan Area School District, Michigan, United States Mount Vernon City School District, New York, United States Panyapiwat Institute of Management, Bangkok, Thailand Université des Sciences de Santé et Université des Sciences et Techniques de Masuku, Libreville and Franceville, Gabon University College of London, London, United Kingdom Ville d'Asnières, France The Lady Eleanor Holles School, Hampton, United Kingdom
Brighton & Hove Albion Football Club's training complex, Brighton, United Kingdom CAFAM Club – Club de la Caja de Compensación Familiar, Bogotá, Colombia Centre Pompidou, Metz, France Jardin d'acclimatation "La Grande Verrière", Paris, France
Buckley Air Force Base, Colorado, United States
Centre pénitentiaire d'Orléans, Orléans, France
Comité d'entreprise Lignes Air France, France Colruyt France, France District de Konak, Municipalité d'Izmir, Turkey General Directorate of Customs, Czech Republic Johnson Controls, Romania UCZ Magazacilik Ticaret A.S., Turkey
Banco Santander SA., Brazil Alcatel Lucent, Mexico Consorcio Constructor Parque Rio, Brazil Fundación Escolar Del Estado Lara, Venezuela Laboratoires Abbott, Mexico Petrobras, Brazil Servicios de salud del Estado De Puebla, Mexico Talento Comercial Cooperativa De Trabajo Asociado, Colombia Venprecar CA., Venezuela
Bharat Petroleum Corporation Limited, India Lucas TVS Limited, India Shanghai LuJiaZui Finance & Trade Zone Development Co. Ltd., China
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