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 includes the 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 accounted for using the equity method that directly contribute to the Group’s business.
Underlying operating profit is disclosed in segment information, as it is the main indicator reviewed regularly by the Sodexo Leadership Team, which is the Group’s chief operating decision maker.
Revenues reported by Sodexo relate to the sale of services in connection with the ordinary activities of fully consolidated companies (On-site Services).
Revenues include all revenues stipulated in contracts with clients, whether Sodexo acts as principal (the vast majority of cases) or agent.
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 “Revenue from Contracts with Customers” and recognizes the revenue in the amount to which it has a right to invoice (invoicing based on contractual prices, which represent the transaction prices of the different promised services).
As a result, revenue recognition matches with invoicing for most services provided.
Principal versus Agent considerations
When a third party (for example, a subcontractor) is involved in providing goods or services to a client, the Group evaluates whether or not it controls the goods or services before transferring control to the client. When the Group controls the good or service before it is transferred to the client, it recognizes revenues in the gross amount of consideration to which it expects to be entitled in exchange, Otherwise, when the Group does not control the good or service, it is not considered to be acting as principal in the transaction and revenues are recognized on a net basis.
Revenues are measured at the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to the clients, net of discounts, rebates or credits as well as Value Added Tax (VAT) and other taxes. The financial component of each commercial transaction is considered as negligible and therefore is not recognized separately in accordance with IFRS 15 provisions.
