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).
Counterparty risk relating to client accounts receivable is immaterial. Given the Group’s geographic and segment spread, there is no concentration of risk on past due individual receivables for which no provision has been recorded. Due to the degradation in the economic environment resulting from the Covid-19 pandemic, the Group has reinforced its credit risk tracking.
Thus, the Group did not record any significant change in the impacts related to the proven financial failures of its customers during the year. The net carrying amount of overdue receivables amounts to 533 million euros, of which 21 million are beyond 12 months (1% of total net accounts receivable as of August 31, 2024, same as of August 31, 2023).
The main counterparty risk is bank-related. The Group has limited its exposure to counterparty risk by diversifying its investments and limiting the concentration of risk held by each of its counterparties. Transactions are conducted with highly creditworthy counterparties taking into consideration country risk. The Group has instituted a regular reporting of the risk spread between counterparties and of their quality.
To reduce this risk further, the Group has an international cash pooling mechanism between its main subsidiaries (with a netting facility), reducing the amount of liquidity held by third parties by concentrating it in the Group’s financial holding companies.
The maximum counterparty represents approximately 34% of the Group’s operating cash (excluding restricted cash and financial assets related to the Benefits & Rewards Services activity) and is with a banking group whose rating is A-1 (compared to around 23% as of August 31, 2023).
The Group has not identified any significant event.
Commitments arising from surety arrangements (pledges, charges secured against plant and equipment, and real estate mortgages) contracted by Sodexo S.A. and its subsidiaries in connection with operating activities during Fiscal 2024 are not material.
The performance bonds given to clients relate to around fifteen sub-contracting contracts, where the Group considers that it may be exposed to indemnity payments if it is unable to fulfill the service obligation. These bonds are subject to regular review by the management of the business unit and a provision is recorded as soon as payment under a bond becomes probable. For all other contracts with a performance bond, Sodexo considers that it can deploy the additional resources needed to avoid paying compensation under the bond.
The Group also has performance obligations to clients but regards these as having the essential features of a performance guarantee rather than an insurance contract designed to compensate the client in the event of non-fulfillment of the service obligation (compensation is generally due only where Sodexo is unable to provide alternative or additional resources to fulfill the obligation to the client).
| not included | AUGUST 31, 2024 | AUGUST 31, 2023 | |||
|---|---|---|---|---|---|
| (in million euros) | LESS THAN 1 | 1 TO 5 YEARS | MORE THAN 5 | TOTAL | TOTAL |
| Financial guarantees to third parties | — | 8 | 73 | 81 | 80 |
| Site management commitments | — | — | — | — | — |
| Performance bonds given to clients | 28 | — | 142 | 170 | 168 |
| Other commitments | 24 | 41 | 48 | 113 | 104 |
| TOTAL OTHER COMMITMENTS GIVEN | 52 | 49 | 263 | 364 | 352 |
Given its size and geographical reach, Sodexo considers itself capable of providing the additional resources required to avoid paying compensation to clients protected by such clauses.
The “Other commitments” line mainly includes the 10-year guarantee given by Sodexo S.A. in December 2021 to the Trustee of the UK pension plan (i.e., until December 2031), for a maximum of 40 million pounds Sterling as of August 31, 2024, in order to cover Sodexo UK’s obligations in connection with the plan.
