Allianz +10.1%

There is a lot to like about the Allianz story at present — the company is set to deliver strong earnings growth in the business and get back to being viewed as one of the most dependable companies in the sector. It is aiming to achieve 7-9% earnings growth per annum over the 2025-27 period which, at the midpoint, puts the company at a stronger earnings growth target than the previous plan of 5-7%. The company is expected to produce a 92.6% combined ratio by 2027 and there seems little reason that it will not be able to achieve the top line growth target of 6-7% in property & casual insurance (P/C).

Allianz has formalised a capital management plan and aims to return 60% of earnings via an ordinary dividend and 15% in share buybacks, which equates to a ~6% 2025 total capital return. The focus on reasonable targets in P/C, harnessing the scale advantage and expanding margins in Retail appear sensible and achievable.

Allianz has a strong track record of recent delivery on its earnings targets and an attractive capital management policy. In the last two plans, the company has been able to deliver on its promises to the market, with the company achieving above the midpoint of its target operating profit range in nine out of the last ten years, with the only exception being during COVID-19 in 2020.

Sodexo -17.8%

Sodexo released a profit warning, implying low- to mid-single-digit cuts to revenue and operating profit in the current financial year. This was primarily driven by a softer-than-expected performance in North America. More specifically, the company is indicating that it is seeing softer volumes within Education in North America as well as softer net new ramp-up in its Healthcare end market in the region – this is coming mostly from “delays” in the opening of new contracts. Finally, it also pointed to continued softer growth in Facilities Management in Europe.

Profitability-wise, margins will be impacted by a relatively weak top line coupled with softer improvement in Europe (Corporate Services) and some “operational challenges in a couple of contracts in Latin America”.

Sodexo’s new guidance is for organic revenue growth to be in the range of 3-4% versus previous guidance of +5.5-6.5%; and underlying operating profit margin to grow 10-20 basis points (bps) versus prior 30-40bps. Looking ahead into the second half of the year, focus remains on the momentum in North America — “The challenges are concentrated in a few identified areas, and we are strengthening our action plan. Our immediate focus is on execution, restoring performance in these key areas and tightening predictability”.