Sodexo (SW FP) France
Industrials
An Iron Blue score of 28/60 is top quartile (fertile ground for shorting). Red flags include 1) Regular (and higher y/y) use of stripped out restructuring and other one-off costs. 2) Elevated use of provisions accounting, including €39m releases during FY23. 3) Increased client investment capitalisations. 4) Gap between €2.9bn headline net debt (2.4x net debt/EBITDA) and Iron Blue’s preferred calculation (€4.0bn, 2.9x). 5) Extended KPMG auditor tenure (20 years) and above average non-audit fees. 6) Management structure out of line with best practice (combined CEO/chair, non-independent board, shares/votes mismatch, Bellon cross-holding). 7) 41% y/y rise in whistleblower cases.
Edition: 174
- 24 November, 2023
Sodexo (SW FP) France
Industrials
An Iron Blue score of 28/60 is top quartile - fertile ground for shorting. Accounting red flags include: margin recovery supported by falling D&A (partly following stripped out asset impairments), above avg. use of provisions accounting, contract cost capitalisations at a decade high, widening gap between headline net debt and Iron Blue’s measure, and €99m Y/Y increase in reverse factoring. Governance red flags: combined chair/CEO/controlling shareholding, disparity between shares and votes, Bellon cross holding, above avg. non-audit payments and auditor tenures of 19 and 28 years. FY23 brings a change in auditor.
Edition: 149
- 25 November, 2022