Sodexo: Short term cautious stance but positive in the medium term
NEUTRAL, Fair Value EUR72 (+15%)
Major disappointment mainly from Continental Europe with the top line impacted by a significant decrease in volume and margins under pressure due to the difficulty of passing on higher costs. The current economic environment still weighs on the group’s P&L and forces management to take additional measures to reinforce the group’s competitiveness which imply higher exceptional costs. For the year ahead, management lowered its guidance, i.e. lfl revenue growth between 1% and 2% with stable operating profit (vs. “modest growth” for these two metrics previously). Nevertheless, Sodexo’s confirmed its medium term objective of a 6.3% EBIT margin by the end of 2015 with 7% annual consolidated revenue growth. Such goals could be reached but short-term economic expectations will keep the group’s valuation under pressure. After adjustment, we maintain our Fair Value and confirm our Neutral opinion.
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