Elior, Sodexo: Is Now the Right Time to Invest in Collective Nutrition? – 06.22.2022 at 15:30

Elior, Sodexo: Is Now the Right Time to Invest in Collective Nutrition?  Photo credit: Adobe Stock.

Elior, Sodexo: Is Now the Right Time to Invest in Collective Nutrition? Photo credit: Adobe Stock.

This week, Café de la Bourse acquired shares in Sodexo and Elior, two of the largest food service companies. What’s the news for each of these companies? What is their history of the stock market since the beginning of 2022? What are our expectations for the two titles? We will tell you more in this article.

News from Elior and Sodexo

Elior and Sodexo are in turmoil over the lack of information about the current financial year for three main reasons: Covid, the war in Ukraine and, of course, inflation.

However, the sector has benefited from a resurgence in activity with the resumption of face-to-face training and the return of employees to the office. Sodexo also posted a consistent operating profit of €538 million in the first half of fiscal year 2022, beating analysts’ expectations of €530 million. Elior’s revenue rebounded in the first half of fiscal 2022 after several difficult quarters (+18% compared to the first half of 2021).

But the lack of information about the coming months prompted Elior to revise its financial targets for the current fiscal year downward: in mid-May, the group said in its half-year results that its organic growth would exceed 16% from 18%. % previously predicted. EBITA (earnings before interest, taxes and depreciation) for the first half of the year was negative at -11 million euros and should be close to the balance at the end of the year, while the margin was originally forecast at 2-2.5%.

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

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

First of all, these two groups are also suffering from the consequences of accelerating inflation in all countries where they operate: some food products show high volatility and require vigilance (especially grains coming from or transported through Ukraine). This galloping global inflation is having a strong impact on Elior and Sodexo’s margins.

Additionally, on March 2, Elior announced the resignation of its chief executive, Philippe Guillemot, for personal reasons. Bernard Gault was appointed interim CEO pending the appointment of a new CEO. At the same time, Derichebourg took advantage of the loss in share price to increase its stake in Elior to over 20%. The group will again increase its share depending on market conditions and opportunities, but will not reach 30% of the company’s capital or voting rights.

For its part, Sodexo surprised investors by abandoning its plan to sell its Benefits & Rewards Services subsidiary, news rather poorly received by the market (down 5.8% on the day of the announcement), which had hoped to crystallize the asset’s value.

The dynamics of Elior and Sodexo shares on the stock market

Elior, Sodexo: Is Now the Right Time to Invest in Collective Nutrition?  Photo Credit: Freepik

Elior, Sodexo: Is Now the Right Time to Invest in Collective Nutrition? Photo Credit: Freepik

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

Elior stock (indicated in dark blue on the chart) has had a very heavy performance in the stock market since January 2022. closing price on June 16). In the short term, a technical rebound is possible with a stochastic RSI in the neutral zone.

Sodexo, for its part, performed slightly better and followed the CAC 40 index (sky blue on the chart). Sodexo shares have lost 14% since the beginning of the year and closed at 66.5 euros on June 16. A technical bounce is also possible in the short term when the stochastic RSI is also in the neutral zone.

What opportunities does Elior have?

Elior’s presentation

Elior is one of the world leaders in catering. The Group manages restaurants located in a wide variety of institutions: on the one hand, companies and administrations (36.4% of turnover), care facilities and nursing homes (32.9% of turnover) and finally schools and educational institutions (30.7% of turnover). % turnover). . In addition, Elior offers additional services such as cleaning or security services.

53.5% of turnover comes from the international market and 45% from France.

The turnover is 3.69 million euros in 2020-2021 (financial year runs from September to September) compared to 3.97 million euros a year ago. Elior struggles to bounce back. The company recorded an operating loss for the second year in a row: a loss of -87 million euros for the financial year 2021-2021 and a net loss of -100 million euros.

Our opinion on the Elior promotion

Elior’s recovery is likely to remain modest compared to its peers: its economic model is less diversified than, for example, Sodexo’s, and the group is more likely to have its margins squeezed by inflation, as evidenced by comments by Bernard Gault at announcement of results for the second quarter of 2022. In the short term, there remains too little visibility into the evolution of this inflation and the monetary policy choices of central banks, especially in the euro area. In addition, the absence of a CEO further complicates optimism in the Elior stock market.

What are the opportunities on Sodexo shares?

Sodexo presentation

Sodexo is another global leader in catering services and facility management. 96% of the turnover is related to “on-site services”, i.e. restaurant management and food preparation, 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 residential buildings (29%) and, finally, schools and educational institutions (18%). The remaining 4.3% of income is related to Sodexo Benefits and Rewards services, which provide gift vouchers, meal vouchers, fuel cards, etc.

The turnover is distributed between France (13.1%), USA (35.4%), UK (10.8%) and other geographical regions (40.7%).

Sodexo’s revenue in 2021 was 17.5 million euros, with forecasts for fiscal year 2022 of 20.6 million euros. Operating profit for 2021 is 578 million euros (3.3% of sales), while net income is 139 million euros (0.8% of sales).

Our opinion on Sodexo shares

Sodexo has performed very poorly on the stock market in recent weeks, despite strong half-year results and better-than-expected earnings. They were not well received by the market as they were accompanied by lower growth forecasts. They are no less pleasant. Sodexo’s current stock levels could be a good starting point to start investing in food service. The Sodexo name seems to offer a significant discount compared to other players in the sector such as Compass or Aramark.

This article can be found on the Café de la Bourse website.