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Impact of IFRS on Fiscal 2005 Financial Statements
4/20/2006
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Paris, April 20, 2006 - SODEXHO ALLIANCE (Euronext Paris FR0000121220 - SW / NYSE:SDX), the world's leading Food and Management Services company, is applying IFRS effective September 1, 2005 and today is presenting the effects of these principles on its fiscal 2005 financial statements:
- The Group has elected to present its income statement by function in compliance with the option permitted by IAS 1.
- As the concept of exceptional items does not exist in IFRS, certain transactions have been reclassified to operating profit or net financial expense.
- Charges related to stock option plans are recorded in operating profit, in accordance with IFRS 2.
- Goodwill is no longer amortized.
The principal accounting options relating to the initial application of IFRS and the principal stated impacts conform with the information communicated in the Reference Document for fiscal 2005.
Below is a summary of principal impacts:
Fiscal 2005 (million euro) | French GAAP | IFRS |
Revenues | 11,672 | 11,693 |
EBITA / Operating profit | 530 | 443 |
EBITA / Operating profit before US litigation | 531 | 505 |
Group Net Income | 159 | 215 |
Shareholders' equity | 2,136 | 2,063 |
Revenues
Application of IFRS had a minimal impact on revenues.
Operating profit
Operating profit of 443 million euro in IFRS includes French GAAP EBITA, goodwill impairment charges, and the majority of exceptional income and expense items.
Excluding the impact of the provision recorded in connection with the US litigation, operating profit was 505 million euro as compared to 530 million euro in French GAAP.
Excluding this provision, the IFRS operating margin was 4.3%.
Net income
Net income was 215 million euro compared to 159 million euro in French GAAP. The difference mainly results from the reversal of goodwill amortization (IAS 36).
Cash and cash equivalents
Cash and cash equivalents totaled 928 million euro (net of bank overdrafts) in IFRS as of August 31, 2005 as compared to 1,366 million euro in French GAAP. A more restrictive definition of cash and cash equivalents in IFRS resulted in the following changes:
- The accounts described below, principally pertaining to the Service Vouchers and Cards activity, are presented as current financial assets:
- investments with maturities greater than three months of 120 million euro, and
- restricted cash of 206 million.
- In addition, in accordance with IAS 32, treasury shares of 99 million euro are now presented as a reduction to shareholders' equity
Borrowings
As of August 31, 2005, bank overdrafts are reclassified as cash equivalents and borrowings increased by 19 million euro. This arises principally from the recognition of capital leases related to financing by arrangements guaranteed by French municipalities which were previously accounted for as operating leases.
Shareholders' equity
As of August 31, 2005, shareholders' equity totaled 2,063 million euro as compared to 2,136 million euro in French GAAP.
The Group has elected to apply the provisions of the amended IAS 21, under which goodwill is treated as an asset of the acquired company and consequently is accounted for in the subsidiary's functional currency. This adjustment had a negative impact of 32 million euro as of August 31, 2005 and 99 million euro as of September 1, 2004.
Group shareholders' equity was also reduced as a result of the reclassification of treasury shares as part of the stock options plan.
In addition, as permitted under IFRS 1, the Group has decided to recognize all accumulated actuarial gains and losses arising on retirement and other employee benefit plans as of September 1, 2004. Similar treatment was also adopted in the preparation of the consolidated French GAAP financial statements for fiscal 2005.
A detailed presentation of the impact of the transition to IFRS for fiscal 2005 will be included in the notes to the consolidated financial statements for the first half of fiscal 2006.
Conference call
SODEXHO ALLIANCE will hold a conference call today to comment on the impact of IFRS on its fiscal 2005 financial statements. The call will begin at 6:00 p.m. (Paris time). The call-in access number is + 33 1 72 28 01 56. This press release and a slideshow presentation will be available by clicking on the link www.sodexho.com, under the “latest news” section, beginning at 5:35 p.m. To access the replay of the conference call, please dial + 33 1 72 28 01 49 and enter the code: 179928#.
Financial communication calendar
- First-half fiscal 2006 results
The press release for first-half fiscal 2006 results will be published on May 11. Presentations for analysts and journalists will be held the same day, at Etoile-St-Honoré, 23, rue Balzac, 75008 Paris. - First nine months fiscal 2006 revenues
Wednesday, July 5, 2006, conference call.
The above dates are provided for information only and are subject to change.
Download the presentation in pdf Download the annex in pdf
About Sodexho Alliance
Sodexho Alliance, founded in 1966 by Pierre Bellon, is the leading global provider of Food and Management services, with more than 324,000 employees on 26,700 sites in 76 countries. For fiscal 2005, which closed August 31, 2005, SODEXHO ALLIANCE had sales of 11.7 billion euros. Listed on Euronext Paris and on the New York Stock Exchange, the Group's current market capitalization is 6.2 billion euro.
