Sodexo quaterly sales top estimates as people return to offices

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(Reuters) -French caterer Sodexo (EPA:EXHO) reported on Friday forecast-beating first-quarter sales as its On-site business surpassed pre-pandemic levels on a return to the workplace and other venues, while price hikes for corporate clients also helped.

The group confirmed its forecast of organic revenue growth of 8% to 10% and an underlying profit margin close to 5.5% for 2023.

Group sales totalled 6.33 billion euros ($6.65 billion), topping a company-provided analysts' consensus estimate of 6.17 billion euros, while its On-site business exceeded 2019 levels and grew 11.9% organically.

"On-Site Services continued to benefit from ... a higher level of attendance, in all geographies, in the workplace, in stadiums, in convention centers and in Universities," Chief Executive Sophie Bellon said in a statement.

Catering companies are trying to renegotiate tariffs and supplier agreements as the sector faces rising costs. Sodexo had previously flagged difficulties in contractual negotiations in France, particularly in the public sector and schools.

"It's improving... but discussions are still tense," said finance chief Marc Rolland on a call with reporters.

"We intervened with the government... but certain municipalities find it hard to accept renegotiations or discussions," he added.

Sodexo shares fell 2.8% at 0920 GMT. Prior to the market opening, Morningstar analyst Michael Field pointed to the stock's strong rally over the last few months, adding later that "perhaps investors had been looking for an upgrade in guidance that didn't come through".

Analysts nevertheless see the results as a solid start to the year, with J.P.Morgan pointing to "further evidence of Sodexo's improving topline momentum and roadmap to recovery".

Sodexo's Benefits & Rewards division, which delivers vouchers to businesses for their employees, grew as much as 23.4% in the quarter.

Sodexo, which had previously considered opening the unit's capital to an external investor but dropped the option due to insufficient value creation, said in November it would look to expand the vouchers business as companies seek more ways to retain staff in tight labour markets and greater flexibility as more employees work remotely.