×

Sodexho's 2007 Profit Disappoints, Shares Fall

French catering and services group Sodexho Alliance disappointed investors with 2007 profits that fell short of expectations, sending its shares down as much as 10 percent.

The company, which employs 340,000 people worldwide to feed office workers, soldiers and school children, said on Thursday net profit in the year to Aug. 31 rose 7.5 percent to 347 million euros ($508.7 million), below the average forecast of 356 million euros from 11 analysts polled by Reuters Estimates.

Underlying operating profit rose 14.5 percent to 640 million euros, at the top end of the company's guidance for an increase of between 12 and 15 percent but below the market consensus for 651 million.

In a statement, Sodexho forecast fiscal 2008 like-for-like sales growth of over 7 percent, compared with 8.4 percent in 2007, and growth in operating profit at constant exchange rates of around 12 percent.

"The figures are a bit disappointing. The outlook is reasonable but from a lower base and it's not clear if the operating profit guidance includes recent acquisitions. The market will react negatively," said one Paris-based analyst.

Sodexho shares -- which had risen sharply in anticipation of the 2007 results -- were 6.5 percent lower at 45 euros, having hit 43.3 euros, the lowest level since mid-August.

Chief Executive Officer Michel Landel told journalists on a conference call the forecasts were "sensible" given an uncertain international environment and fully in line with the group's long-term goal to grow sales around 7 percent a year.

"We are able to pass on part of the rise (in food prices) to our customers through indexation clauses in most of our contracts and we are working hard to raise productivity throughout our supply chain," Landel said.

"I think more than 7 percent for this year is completely respectable given the environment we're in," he added.

Landel said the group hadn't lost any U.S. financial sector clients due to the country's sub-prime mortgage crisis and growth remained good in the United States and elsewhere.

"We should see sustained growth all over the world," he said.

The company said it would propose a 21 percent rise in its dividend to 1.15 euros per share.