November 16, 2017 / 8:43 AM / a year ago

UPDATE 1-Services group Sodexo eyes more sales growth, but shares fall on weak margin guidance

* Shares fall on disappointment over outlook

* Revenues 20.698 bln euros vs 20.735 bln forecast

* Op profit 1.326 bln euros vs 1.379 bln forecast (Adds share price reaction and analyst comments)

By Dominique Vidalon

PARIS, Nov 16 (Reuters) - French facilities management and vouchers group Sodexo said its cost reduction plan was on track and expressed confidence it could accelerate sales growth, although its shares fell on disappointment over its margin guidance.

Sodexo, which is buying for $675 million U.S. company Centerplate - which provides food and hospitality at sports, convention and entertainment venues - also said its strong financial structure gave it scope to eye more acquisitions.

Sodexo, the world’s second-biggest catering services company after Compass Group, posted a rise of 1.9 percent in like-for-like revenue to 20.698 billion euros ($24.38 billion) for the fiscal year ended August 31.

Operating profit before exceptional items rose 8.4 percent to 1.326 billion euros, broadly in line with the group’s guidance for a increase that would come in at the bottom of an initial 8-9 percent range.

Sodexo was expected to post revenue of 20.735 billion euros and operating profit of 1.379 billion, according to an Inquiry Financial poll for Reuters.

Shares in Sodexo fell 5 percent - the worst performer on France’s benchmark CAC-40 - as analysts cited disappointment over Sodexo’s margin guidance. The stock is down by nearly 10 percent so far in 2017.

For the current 2017-2018 fiscal year, Sodexo forecast underlying revenue growth of between 2-4 percent and confirmed its broader, medium-term goal, but the company also forecast a flat underlying operating margin at 6.5 percent of sales.

Sodexo warned in July that full-year revenue growth would be less than initially expected after a weaker third quarter.

Sodexo said on Thursday that trends were turning positive again in France and in its division dealing with the energy and resources sectors, although growth remained modest in at its ‘Education and Health Care’ arm in North America.

Analysts at brokerages Kepler Cheuvreux and Jefferies both expressed some disappointment at Sodexo’s outlook. Jefferies kept a “hold” rating on Sodexo while Kepler kept a “buy” rating.

“We do not think this revision translates into better underlying revenue trends, as the net development in Europe (despite a recovery in France) and the Education and Healthcare segments in north America are weaker than expected,” wrote Kepler in a research note.

$1 = 0.8490 euros Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta

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