March 18, 2020 / 6:23 AM / 21 days ago

Coronavirus could impact Sodexo's annual revenue by $2.2 billion

PARIS (Reuters) - French catering and food services group Sodexo (EXHO.PA) on Wednesday suspended its annual forecast and said the coronavirus pandemic could impact its annual sales by 2 billion euros ($2.2 billion) (1.82 billion pounds).

FILE PHOTO - The logo of French food services and facilities management group Sodexo is seen at the company headquarters in Issy-les-Moulineaux near Paris, France, November 30, 2018. REUTERS/Gonzalo Fuentes

The warning came even as the company’s first-half performance was currently in line with forecasts, despite including a drop in revenue in China and Italy due to the virus outbreak.

“We are currently running a full bottom-up forecast exercise based on closures and revised traffic estimates and will provide an update on April 9th along with our H1 results. Currently, early estimates, given the many moving parts, could be for an impact of around 2 billion euro on annual revenues,” Sodexo said.

Sodexo, alongside British company Compass (CPG.L), ranks among the world’s largest catering groups. Its clients range from the Royal Ascot Racecourse to the U.S. Marine Corps.

Based on the last few weeks’ observations in China, Italy, France and the United States, Sodexo said that for each 100 million euros of lost revenue, the impact on underlying operating profit was for a decline of around 30%, depending on the country and the segment of the business affected.

The group said its education services sector - which caters for schools and colleges - was hurt by the closures of establishments, notably in the United States.

Its business dealing with sports and leisure, stadiums, cultural destinations, airline lounges and conference centres was also experiencing a severe scaling down or full closure.

Many clients are also shutting down their plants or offices or are asking their employees to work from home, the company said.

Although its mid-term perspectives were positive, Sodexo said it had no other choice but to suspend its previous guidance given in January until the situation stabilized.

In January, Sodexo had stuck to a 2020 forecast for organic revenue growth of around 4% and a stable underlying operating margin, excluding the impact of currencies and IFRS 16 accounting standards.

Reporting by Sudip Kar-Gupta; Editing by Dominique Vidalon, Aditya Soni

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