Sodexho hit by "accounting anomalies" in UK

French-owned contract caterer Sodexho has issued its second profits warning this year following a "rapid deterioration of profitability in the UK" and "accounting anomalies".

The company said in a statement: "After becoming aware of the problems at Sodexho Land Technology, our grounds maintenance subsidiary, we changed the Sodexho management team in the UK in April 2002.

"In addition, we have continued to examine the UK's accounts and have called in an independent expert to strengthen our analysis and internal audit process."

It continued: "We have found serious errors of management as well as accounting anomalies. The impact of these management errors has been more serious and sudden because they have occurred in a difficult economic environment.

"In addition, our statutory auditors in the UK have not been sufficiently vigilant."

The company's UK auditor, PricewaterhouseCoopers, declined to comment.

Profit projections for the year ended 31 August 2002 have been revised downward to €180-€190m, from €210m.

The company will report its year-end financial results in November.

Sodexho deputy chairman Albert George said that, together with new UK chief executive Mark Shipman and his team, he had finalised a detailed action plan for the UK and recovery was underway.

Improving profit margins would be the focus for the next two or three financial years. "This will involve in-depth programmes to make our contracts more profitable, to train and motivate our teams, to tighten on-site management of food and personnel costs, and to reduce support functions overheads," George said.

As a result, Sodexho is forecasting 2.5% organic sales growth in the UK for the financial year 2002-03.

It concluded: "Fiscal year 2001-02 in the UK will be seen as an accident in Sodexho's development. It has set our long-term objectives back by one year."

Sodexho's shares fell by almost 30% on today's news.