Sodexo expects its operating profit margin to rise to over 6% in 2025 as more companies outsource their catering and benefits needs and the French food services group boosts its voucher business to meet more demanding employees' expectations.
The company delivered a 5% margin in its last fiscal year and last week forecast an increase to 5.5% for 2022-2023.
Sodexo, presenting its 2025 strategy, said on Wednesday 2 November it would particularly look to expand its Benefits and Rewards (B&R) business as companies seek more ways to retain staff in tight labour markets and greater flexibility as a growing number of employees work remotely.
Get a FREE Digital Subscription!Enjoy full access to Hospitality Ireland, our weekly email news digest, all website and app content, and every digital issue.
French voucher group Edenred said last month it expected profit growth to accelerate over the next three years as staff shortages and rising inflation pushed employers to spend more on worker benefits.
B&R will target capital spending close to 10% of revenue per year between 2022 and 2025 and an underlying operating profit margin exceeding 30% in 2025, Sodexo said.
The caterer, whose businesses also include workplace design, reception and cleaning services, also said it would step up its focus on food offers as rising inflation leads more companies to outsource services.
It will provide more options with seasonal fresh foods and locally sourced products, as well as enhancing digital options, CEO Sophie Bellon said.
Sodexo, which serves 100 million consumers each day across 64 countries, also aims to boost its growth in the United States, where first-time outsourcing contracts are increasing and accounted for 44% of signings last year.
However, the company's organic sales growth target of between 6% and 8% for fiscal 2024-2025 is lower than its forecast last week of 8% to 10% for 2022-2023.
Its shares were down 3.2% to €85.92 at 1406 GMT on Wednesday 2 November.
"Prudent" Margin Target
AlphaValue analyst Yi Zhong described B&R's 2025 margin target of more than 30% as "prudent".
"They have many plans and at the end the margin targets remain the same (over 30%) for 2023 and 2025, versus 31% in 2019, ie it will need at least 3 more years to return to its pre-pandemic margin level", she said.