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March 29, 2018, 2:19 a.m. EDT

Sodexo cuts guidance on disappointing quarter

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By Anthony Shevlin

Sodexo SA (SW.FR) said Thursday that it has reduced its financial guidance for fiscal 2018 due to a second-quarter performance that was below expectations.

The French company said that, excluding the impact of 2017 being a 53-week year, it now expects to deliver organic revenue growth of between 1% and 1.5% compared with the growth of between 2% and 4% it had previously expected. The company lowered its expectation of its underlying profit margin in fiscal 2018 to around 5.7% from 6.5%.

Sodexo said net profit for the 2018 fiscal first half was 372 million euros ($460.1 million) compared with EUR348 million in the year-earlier period. Revenue for the first half fell 3.2% at current exchange rates to EUR10.29 billion, the company said.

Sodexo Chief Executive Denis Machuel said: "The second-quarter performance was below our expectations and we have reduced our financial guidance for fiscal 2018. We have identified specific areas of underperformance and we are acting quickly to implement a series of corrective measures."

The company said planned measures to increase efficiencies and improve margins in North America that have not yet delivered, and a small number of significant contracts that have not yet ramped up to the expected levels of profitability have hit its underlying operating profit.

Sodexo said it expects declining revenues in North America, combined with a slower-than-anticipated conversion of pipeline opportunities into new contract wins, to weigh on its topline growth and margins in the second half.

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