As of August 31, 2023, the fair value of the investment is assessed at 722 million euros, and its change since the opening of the year has been recorded in other non-recyclable items of comprehensive income. Its fair value was assessed to 541 million euros as of August 31, 2022.
MEASUREMENT OF OTHER INVESTMENTS IN NON- CONSOLIDATED COMPANIES AND CONVERTIBLE BOND INTO SHARES
The fair value of the capital investment held in the form of ordinary shares which are not listed on an active market (financial assets measured at fair value (level 3) through other comprehensive income) was estimated either based on the enterprise value assessed by applying a discounted cash flow method using available financial forecasts, either based on previous transaction prices or using the
peer multiple method. The fair value of the convertible bonds into shares was determined by updating the financial flows with the market rate determined on August 31, 2023, and by adding the optional component estimated using a financial option valuation method based on Black-Scholes-Merton formula.
The Group has carried out sensitivity analysis of the fair value of significant investments and of the convertible bonds to main financial and operational assumptions used:
The Group policies and procedures adopted by the Board of Directors, the Group Chairwoman and Chief Executive Officer, and the Group Chief Financial Officer are designed to prevent speculative positions. Furthermore, under them:
As of August 31, 2023, an increase or a decrease in interest rates would have had no material impact on profit before tax or on shareholders’ equity as 95% of all liabilities at those dates were at a fixed rate of interest.
Because Sodexo has operations in 52 countries, all components of the financial statements are influenced by foreign currency translation effects, and in particular by fluctuations in the U.S. dollar. However, exchange rate fluctuations do not generate any operational risk, because each of the Group’s subsidiaries invoices its revenues and incurs its expenses in the same currency. Sodexo S.A. uses derivative instruments to manage the Group’s risk exposure resulting from the volatility of exchange rates.
| AUGUST 31, 2023 | AUGUST 31, 2022 IFRS 5 restated | |||||||
|---|---|---|---|---|---|---|---|---|
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IMPACT OF A 10% APPRECIATION OF THE EXCHANGE RATE OF THE FOLLOWING CURRENCIES AGAINST THE EURO (in million euros) |
IMPACT ON REVENUES | IMPACT ON OPERATING PROFIT | IMPACT ON PROFIT BEFORE TAX | IMPACT ON SHAREHOLDERS 'EQUITY | IMPACT ON REVENUES | IMPACT ON OPERATING PROFIT | IMPACT ON PROFIT BEFORE TAX | IMPACT ON SHAREHOLDERS 'EQUITY |
| U.S. dollar | 997 | 58 | 38 | 219 | 836 | 46 | 32 | 316 |
| Brazilian real | 101 | 7 | 5 | 79 | 83 | 5 | 5 | 78 |
| Pound Sterling | 185 | 13 | 16 | 66 | 198 | 13 | 15 | 81 |
The nature of the Group’s bank borrowings and bond issues as of August 31, 2023, is described in detail in note 12.4. As of August 31, 2023, 100% of the Group’s consolidated borrowings were raised on capital markets (98% as of August 31, 2022). The maturity dates of the main borrowings range between Fiscal 2024 and Fiscal 2031 (see note 12.4.5). The maturity date of the lease liabilities is detailed in note 7.1.
Exposure to counterparty risk is limited to the carrying amount of financial assets. Group policies and procedures are to manage and spread counterparty risk. For derivative financial instruments, each transaction with a bank is required to be based on a master contract modelled on the standard contract issued by the French Bankers’ Association (AFB) or the International Swaps and Derivatives Association (ISDA).
