Sodexo presents its income statement by function.
Operating profit comprises the following components:
In order to better focus the Group’s financial communication on recurring operating profit and to simplify benchmarking with competitors, the consolidated income statement has changed as from Fiscal 2018 to include a new indicator, “Underlying operating profit”, which corresponds to operating profit before “Other operating income” and “Other operating expenses”.
Other operating income and expenses include the following:
Underlying operating profit also comprises the Group’s share of profit of companies consolidated by the equity method that directly contribute to the Group’s business.
Underlying operating profit has replaced operating profit in the segment information, as it is now the main indicator reviewed regularly by the Executive Committee, which is the Group’s main operating decision-maker.
Revenues reported by Sodexo relate to the sale of services in connection with the ordinary activities of fully consolidated companies as follows:
Food services revenues are recognized when the consumer pays at the check-out (the date on which control of the goods is transferred to the consumer, since the sales do not represent any other unsatisfied performance obligation at that date). Facilities Management services mainly represent routine or recurring services, whose benefits are simultaneously received and consumed by clients as they are performed by the Group, and therefore correspond to performance obligations satisfied over time. Consequently, the Group applies the practical expedient provided for in IFRS 15 and recognizes the revenue for its right to bill (invoicing based on contractual prices, which represent the transaction prices of the different promised services).
As a result, revenue recognition matches with billing for most of the On-site Services.
Principal versus Agent considerations:
When a third party is involved in providing goods or services to the customers (for example, a subcontractor), the Group evaluates whether or not it obtains control of goods or services before transferring control to the customer. When the Group controls the good or service before it is transferred to the customer, the revenue is recognized on a gross basis. Otherwise, the revenue is recognized on a net basis. It should be noted that the changes in revenue recognition principles introduced by IFRS 15 led the Group to reassess the accounting treatment of some contracts (revenue now recognized on a gross basis for instances where we subcontract part of our Facilities Management services, and on a net basis in some specific cases).
Consideration payable to customers:
In certain cases, and mainly upon client requirements, the Group pays fees or rent for the use of space or equipment made available to us on sites that enable us to deliver our services. In accordance with IFRS 15 principles applicable to consideration payable to customers, the Group considered that such expenses should be recognized as a deduction from the corresponding revenues (previously recognized as operating expenses).
