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Sodexho Marriott Services

Posted On: 1/25/2001

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Sodexho Marriott Services is a diversified contract foodservice and facilities management company formed by the merger of the former Marriott Management Services and the North American operations of France's Sodexho Alliance, S.A. (see V/T, December 1997). The transaction was completed in March of 1998. The company recently published results for the first quarter of its fiscal year 2001.

Net income was $36 million, or $0.56 per diluted share, for the 13 weeks ended Dec. 1, 2000, up 2 percent compared with net income of $2 million, or $0.44 per share, for last year's first quarter.

Revenue for the first quarter of the fiscal year totaled $1.36 billion, an increase of $71 million, or 6 percent over the same period last year.

The company benefited from the continued favorable outsourcing trends in the North American markets, in addition to continued growth in sales to existing clients and expanding its relationships with its clients through competitive add-on services.

Schools, Healthcare and Education divisions had sales growth of more than 6 percent, with Corporate Services having sales growth in the 3 percent range in the current quarter versus last year's comparable period.

"We had a great quarter to start our new fiscal year," said Michel Landel, president and CEO of Sodexho Marriott Services. "The Education division did an outstanding job in improving the results of several accounts that were under-performing last year, while our other divisions enjoyed solid results for the quarter. We continue to focus on adding value for our existing clients and the new relationships we enter.

"Looking ahead, we reiterate this year's financial goals of five to six percent top line and mid-teens bottom line growth," Landel added.

Operating profit for the first quarter of fiscal year 2001 totaled $11 million, up $15 million, or 14 percent, from last year's first quarter total of $103 million. This increase was the result of significant improvement in several underperforming accounts in the Education and Schools divisions.

Other factors contributing to the growth in operating profits included the continued mitigation of labor costs for the current quarter versus last year's first quarter and efficiencies in procurement-related activities.

Corporate expenses were up $3 million to $26 million, compared with $23 million for the prior year's quarter. Excluding "Y2K" readiness costs in the previous year, corporate expenses were up $5 million or 25 percent versus last year's quarter. This increase was the result of increases in positions filled in the information technology and human resources areas.

Sodexho Marriott's Board of Directors recently approved the initial phase of its information technology strategy, regarding the replacement of the company's centralized accounting system. This phase is an integral part of the company's overall goal of improving its flexibility in providing quality services to its clients.

This project will greatly increase the effectiveness of communication and analysis of data at the client level, Sodexho Marriott reports. The new system will enable the company to better identify opportunities to improve margins and reduce the company's processing cycles, which will reduce its net working capital requirements.

The company projects that it will invest approximately $30 million for this project over the next two years for systems, conversion and implementation expenditures, with no material impact on the fiscal year 2001 income statement.

Headquartered in Gaithersburg, MD, Sodexho Marriott Services, Inc. has $4.7 billion in annual sales. The company offers a variety of innovative outsourcing solutions, including foodservice, housekeeping, groundskeeping, plant operations and maintenance, asset and materials management and laundry services to corporations, healthcare facilities, schools, universities and colleges and remote site markets.

The company has some 111,000 employees at approximately 5,000 locations across the U.S. and Canada.