Account 'anomalis' batter Sodexho

PARIS, France (Reuters) -- French catering company Sodexho Alliance said on Thursday that management and accounting problems at its British unit meant it could undershoot its year profit forecast by as much as 14 percent.

Sodexho shares opened 18 percent lower on the news and were subsequently suspended limit-down in Paris.

Sodexho said it had detected errors of management and accounting anomalies in its British operations whose impact was more serious and sudden due to difficult economic conditions. It said the problems would set back its long-term group targets by one year.

The company also said that its auditors in Britain "have not been sufficiently vigilant.'' Company executives told reporters the auditors were PricewaterhouseCoopers.

"Fiscal year 2001/2002 in the United Kingdom will be seen as an accident in Sodexho's development,'' Chairman Pierre Bellon said in a statement. "It has set our long-term objectives back by one year.''

The company said it would not meet its goal of 2001/02 net profit after goodwill writedowns of 210 million euros. Its revised target is between 9.5 and 14.2 percent lower.

"Despite savings in interest expense and the booking of net exceptional income, the objective for group net income after goodwill amortisation will not be met. Based on what we know today, group net income should total between 180-190 million euros,'' the company said in a statement.

Its EBITA profit margin in Britain will sink to zero in 2001/02 compared to its target of 2.5 percent.

The warning is Sodexho's second this year. In May it cut its full-year operating margin forecast to 4.7 percent from 4.9 percent previously, knocking nine percent off its shares, but it maintained its target for full-year profit of 210 million euros at that time.

Problems in Britain came to light at the time of its first-half earnings in May, when its operating margins in Britain halved.

The company said on Thursday it had finalised an action plan for Britain and recovery was under way.

Deputy chairman Albert George said restoring that margin was its top priority, and forecast 2.5 percent organic sales growth and an EBITA margin of 2.5 percent in Britain in 2002/03.

It forecast sales in the current 2001/02 year growing five percent though organic growth would be less than two percent.

As for its 2002/03 year, Sodexho forecast organic sales growth of 5-6 percent, an operating margin of 4.7 percent and net pre-exceptional profit at constant exchange rates of 210 million euros.