1st half Fiscal 2020 organic growth was a solid +3.2%. On- site sales were up +3.2%, with stable retention and new sales development, and strong same site sales growth, helped by the Rugby World Cup. Benefits & Rewards organic growth was up +4%, with a strong European performance being off set by weakness in Brazil. The Underlying operating margin was stable at 5.9% and the balance sheet remained solid despite an increase in capex and the traditional 1st half cash outflow. The first half performance was in line with the Group’s full year objectives of +4% organic growth, to include the Olympic Games in the summer, and stable Underlying operating profit margin at 5.5%.
The Focus on Growth strategic agenda was being deployed in all its dimensions, with strong focus on enhancing operational efficiency, thus providing the capacity to continue to invest in growth. Client and consumer centric became a reality, with a new CRM system in place, reinvigorated sales teams, and the first MSDC (Marketing & Sales Distribution Centre) launched in North America. Aspire was deployed with strong uptake by the 50,000 managers involved as part of the Nurturing talent program. The Group-wide WasteWatch program was deployed across 291 sites, the WWF partnership, providing technical support to our corporate responsibility programs, was renewed, and the Group’s leadership continued to be recognized , such as our presence in the Bloomberg Gender- Equality index, Industry leader in the DJ Sustainability Index for the 15th consecutive year and joining The Valuable 500 initiative to place disability on the business agenda.
Then came Covid-19, firstly in China, where Sodexo was immediately mobilized. The experience acquired with this first-hand exposure in the region was rapidly transferred to Europe, and then North America as the pandemic spread across the world.
As the pandemic moved across the world, the priority was to ensure the security of all our people, and then to put in place a set of rigorous actions to protect the results focusing on:
1. proactively managing the workforce, by using all available furlough dispositions and adapting numbers of employees where there were none;
2. strictly controlling the cash positions by maintaining ongoing dialogue with clients, postponing capex, projects and M&A, monitoring cash positions daily and ensuring strict compliance with cash-pooling policies;
3. monitoring our supply chain in order to secure critical supplies of Personal Protective Equipment and rapidly reduce inventories where necessary. 2nd half Fiscal 2020 Revenues were down -27.5% organically, with a 3rd quarter at -36%, adjusted for the first two weeks of the third quarter before lockdown, and a 4th quarter at -24.9%, showing a significantly improving trend going into September 2020. Underlying operating profit flow-through at 21.2%, at constant rates, was in the 20 to 23% hypotheses range provided by the Group in July 2020.
Free cashflow was solid at 465 million euro, excluding the USPP make-whole, during the 2nd half, well above the hypotheses range of -200 million euro to +200 million euro.
Having put in place the necessary actions to protect our people, our consumers and our cash, and drawing on the lessons learned from the experience in restarting business in Asia, Sodexo teams and experts quickly identified the key elements to help clients provide a safe and welcoming environment for their employees as they came out of lockdown. This “rise with Sodexo” program is based on the seamless integration of services across On-site Services, Benefits & Rewards Services and Personal & Home Services, integrating over 40 essential service offerings, customized specifically to the needs of each client. These services include deep cleaning, disinfection, air control, diversified restaurant services, space management to ensure social distancing for those coming back onsite, and meal cards, digital concierge services and food delivery for those who remain working at home.