Elior, Sodexo: isn’t it a good time to invest in collective catering? – 22.06.2022 at 15:30

Elior, Sodexo: isn't it a good time to invest in collective catering?  Photo: Adobe Stock

Elior, Sodexo: isn’t it a good time to invest in collective catering? Photo: Adobe Stock

This week, Café de la Bourse became interested in shares of Sodexo and Elior, two of the largest companies in the catering sector. What is the news for each of these companies? What is their stock market history from the beginning of 2022? What are our expectations from the two titles? We will tell in more detail in this article.

News from Elior and Sodexo

Both Elior and Sodexo are confused by the lack of visibility for the current fiscal year for three main reasons: Covid, the war in Ukraine and, of course, inflation.

However, the sector has benefited from the resumption of full-time training and the return of staff to the office. Sodexo also achieved current operating income of 538 million euros in the first half of 2022, which exceeded analysts’ expectations (530 million euros). Elior’s revenue recovered in the first half of 2022 after several difficult quarters (+ 18% compared to the first half of 2021).

But the lack of visibility in the coming months has prompted Elior to revise its financial targets for the current fiscal year downward: in mid-May, the group said that in mid-May, publishing semi-annual results, its organic growth will be above 16% against 18%. EBITA (earnings before interest and depreciation) for the first half of the year was negative at -11 million euros and should be close to the balance sheet at the end of the year, while the margin was initially projected at 2-2.5%.

Sodexo, for its part, has revised its growth forecasts downwards, from 15% to 18% for the fiscal year ending next August.

The Elior and Sodexo markets have been affected for the first time by stricter sanitary protocols introduced since early December, and disruptions related to various sanitary protocols make it difficult to forecast daily volumes, both in terms of quantity and team organization.

First of all, both groups also suffer from the effects of accelerating inflation in all countries where they work: some foods are highly volatile and call for vigilance (especially grains coming from or transported through Ukraine). This galloping global inflation has a strong impact on Elior and Sodexo on their profits.

In addition, on March 2, Elior announced the resignation of Philippe Guillaume, CEO, for personal reasons. Bernard Golt has been appointed interim CEO until a new CEO is appointed. At the same time, Derichebourg took advantage of the loss of share value to increase its stake in Elior to more than 20%. The group will again increase its share depending on market conditions and opportunities, but not reaching 30% of the company’s capital or voting rights.

For its part, Sodexo surprised investors by abandoning its plan to sell its subsidiary Services and Rewards, the news was rather poorly received by the market (-5.8% on the day of the announcement), which hoped to crystallize the value of this asset.

Stock market indicators of Elior and Sodexo shares

Elior, Sodexo: isn't it a good time to invest in collective catering?  Photo: Freepik

Elior, Sodexo: isn’t it a good time to invest in collective catering? Photo: Freepik

As a natural consequence of the lack of visibility for the respective financial years, shares of Elior and Sodexo have suffered on the stock market since the beginning of the year.

The Elior stock (highlighted in dark blue on the chart) has had very complex stock market performance since January 2022. Elior shares fell 60% and are currently trading at the lowest level for this period – 2.44 euros (closing price on June 16). Technical rebound is possible in the short term with stochastic RSI in the neutral zone

Shares of Sodexo, for their part, performed slightly better and followed the CAC 40 (sky blue on the chart). Shares of Sodexo have lost 14% since the beginning of the year and closed at 66.5 euros on June 16. Technical rebound is also possible in the short term with stochastic RSI also in the neutral zone.

What opportunities are divided into Elior?

Elior’s presentation

Elior is one of the world leaders in catering. The group manages restaurants located in a wide range of institutions: on the one hand, enterprises and administrations (36.4% of turnover), nursing homes and nursing homes (32.9% of turnover) and, finally, schools and educational institutions (30.7%). turnover). . Elior also offers additional services such as cleaning or security services.

53.5% of turnover is generated internationally and 45% in France.

The turnover is 3.69 million euros in 2020-2021 (fiscal year runs from September to September) against 3.97 million euros a year ago. Elior is trying to recover. The company recorded operating losses for the second year in a row with a loss of -87 million euros for the financial year 2021-2021 and a net loss of -100 million euros.

We share our opinion about Elior

It is possible that Elior’s recovery rate will remain moderate compared to its counterparts: its economic model is less diversified than, for example, Sodexo, and the group is more likely to have its profits eroded by inflation, according to Bernard Golt’s comments in the second quarter of 2022 year. In the short run, the visibility of this inflation and the choice of central bank monetary policy, especially in the euro area, remains too weak. In addition, the absence of the CEO further complicates optimism in the Elior stock market.

What features does Sodexo share?

Sodexo presentation

Sodexo is another world leader in catering and facility management. 96% of turnover is related to “on-site services”, ie restaurant management and cooking, as well as ancillary services such as reception, security, cleaning, transport or mail.

Market turnover is divided between companies and administrations (53%), medical institutions and residences (29%) and, finally, schools and educational institutions (18%). The remaining 4.3% of revenue is related to Sodexo Benefits and Rewards, which provide gift vouchers, food vouchers, fuel cards and more.

Turnover is distributed between France (13.1%), USA (35.4%), Great Britain (10.8%) and other geographical areas (40.7%).

Sodexo’s revenue in 2021 was 17.5 million euros, and forecasts for the financial year 2022 are 20.6 million euros. Operating profit for 2021 is 578 million euros (3.3% of sales) and net profit is 139 million euros (0.8% of sales).

Our opinion of Sodexo is shared

Sodexo has performed very poorly in the stock market in recent weeks, despite good results for the first half of the year and higher-than-expected returns. The market did not accept them very well, as it was combined with lower growth forecasts. They are no less satisfied. The current level of Sodexo stocks can be a good place to start investing in catering. The name Sodexo seems to give a significant discount compared to other players in the sector, such as Compass or Aramark.

This article can be found at Café de la Bourse