Sodexho Marriott Services Inc., the nation's largest food and facilities manager for hospitals, schools and businesses, said third-quarter earnings jumped 22 percent, driven by double-digit growth in operating profits in its health care and corporate divisions.
The profit growth would have been greater were it not for declines in profits in the schools and university divisions, the company said.
For the three months that ended June 2, net income rose to $20.6 million, or 32 cents per share, meeting expectations. That compared with net income of $16.9 million, or 27 cents a share, in the third quarter a year earlier, the Gaithersburg-based company reported yesterday.
After adjusting for a one-time, after-tax charge of $1.9 million, related to the former chief executive's resignation in May 1999, earnings per share rose 7 percent.
Revenue in the quarter grew 5 percent to $1.22 billion. The company attributed the sales growth to new business added in fiscal year 1999, growth of existing business and sales to new clients in the current fiscal year.
Divisions serving schools, health facilities and a combination of divisions operating in Canada led the quarter's sales, with increases ranging from 8 percent to 10 percent.
"We feel good about our quarter," John Bush, chief financial officer, said yesterday. "It was the second quarter in a row that we met expectations. We look forward to establishing a trend to meet or exceed expectations."
The declining profits in the school and university divisions had to do with a shift in academic calendars that meant fewer meal plan days in the quarter than during the corresponding period last year, said Michel Landel, president and chief executive. New accounts also underperformed, he said, because of costs associated with opening and staffing new facilities.
"We have had some issues in new sales, where operational efficiencies haven't taken effect as quickly as we expected them to," Bush said. "Those are all correctable issues."
The company also said its profit growth in the first three quarters has been limited by higher labor costs. "The labor market is getting very competitive, and that is driving up some of our labor," Bush said. "We're using internal tools to drive operating efficiencies, to overcome that upward bias in labor costs."