Sodexo bets on new services and emerging markets

Thu Feb 28, 2013 12:08pm EST
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By Dominique Vidalon

PARIS (Reuters) - Sodexo (EXHO.PA: Quote) is boosting its focus on services outside of its core catering business and betting on emerging markets to drive growth as it braces for more difficult times in Europe.

Sodexo, which manages canteens and facilities for office workers, armed forces, schools, hospitals and prisons, also sells vouchers for meals and gifts. Its clients range from the Royal Ascot Racecourse to the U.S. Marine Corps.

The world's No.2 catering services company behind British group Compass (CPG.L: Quote) plans to expand mostly without acquisitions, but could target small to mid-sized deals in facilities management and vouchers, its chief executive said on Thursday.

"These two big levers (diversification and emerging markets) allow us to be relatively, even very confident for the future," Michel Landel told Reuters in an interview.

Sodexo, which operates in 80 countries and has a market value of 11 billion euros ($14.42 billion), has forecast "modest" revenue and profit growth in the year ending August 31, due to a slow growing European market.

"Short-term we have said growth would be limited but we are well positioned for the medium and long-term. We will continue to invest despite a difficult economic climate," Landel said.

With cash of over one billion euros and a debt to equity ratio of 21 percent, Sodexo has "the means to fund its expansion", Landel said.

Catering contributes 70 percent of Sodexo's turnover, but companies and governments seeking to cut costs by outsourcing services like equipment maintenance and prisoner training have helped fuel growth at its facilities management busness, which contributes 26 percent of sales and is now Sodexo's fastest growing business.   Continued...

Michel Landel, Chief Executive of Sodexo, the world's second-biggest catering services company, speaks during an interview with Reuters in Issy-les-Moulineaux near Paris November 22, 2010. REUTERS/Philippe Wojazer