Pargesa : Consolidated results 3Q 2018 (unaudited)

C

PRESS RELEASE

Geneva, 31 October 2018

• ● Financial results at 30 September 2018:

•  Preliminary remark: It is reminded that accounting standard IFRS 9, which became effective on 1 January 2018, significantly changes the accounting treatment of non-consolidated1 portfolio investments2. Pursuant to this new standard:

  •  unrealized gains (or losses) recorded until 31 December 2017 in shareholders' equity will never be recorded in the income statement;

  •  according to the accounting option retained by the Group (please refer to Section 2.2, Remark 1 further in this report), changes in fair values from 1 January 2018 onwards are recorded directly in shareholder's equity and will never be recorded in the income statement, except for changes in the fair value of those of the private equity and other investment funds that are not consolidated, which are recorded through income statement.

  Therefore, the comparison of the economic operating income and net income in the nine-month period in 2018 and the corresponding period in 2017 must be analyzed in light of these accounting changes (for more details, please see Section 2.2 below).

•  At 30 September 2018, the average EUR/CHF exchange rate was 1.161, compared with 1.095 at 30 September 2017, an increase of +6.0%.

•  Economic operating income3: CHF 259.8 million compared with CHF 348.1 million at 30 September 2017. Economic operating income at 30 September 2018 includes:

  •  a contribution from the portfolio amounting to CHF 304.8 million, compared with CHF 385.7 million at 30 September 2017, reflecting:

    • ○ the increase in the operating contribution from Imerys (CHF 100.0 million compared with CHF 90.3 million at 30 September 2017);

    • ○ the contribution from Parques Reunidos, which is accounted for using the equity method since the end of 2017, for CHF -3.2 million;

    • ○ the increase in the dividends from non-consolidated shareholdings (CHF 187.6 million compared with CHF 171.7 million at 30 September 2017), primarily due to the increase in the dividends per share paid by most of the portfolio companies, additional investments made by GBL in Umicore and GEA, as well as to the increase in the average EUR/CHF exchange rate;

• 1 In this press release, the term "consolidated" means full consolidation or equity accounting.

• 2 The term "portfolio" includes the shareholdings and Sienna Capital.

• 3 See definition on page 6.

Pargesa Holding SA	11, Grand-Rue	Tel : [phone]	[e-mail]
CH-1204 Geneva	Fax : [phone]	www.pargesa.ch

• ○ a contribution of CHF 20.4 million from private equity and other funds activities, compared with CHF 123.7 million at 30 September 2017. It is reminded that in Q1 2018, Sagard II and Sagard 3 (non-consolidated funds) completed the sale of their investment in Kiloutou and Alvest, respectively. The revaluation reserve in Pargesa' shareholders' equity included at the end of 2017 an aggregate unrealized gain of CHF 57 million (Pargesa's share), as a result of the revaluation of these two investments. Pursuant to new accounting standard IFRS 9, this amount has not been recorded in the income statement at the time Kiloutou and Alvest were sold in Q1 2018, and remains recorded in shareholders' equity. At 30 September 2017, the contribution from this activity included in particular Pargesa's share of the gains recorded by Ergon Capital Partners III from the sale of its investments in Golden Goose, for CHF 63.4 million and ELITech, for CHF 59.3 million4.

•  the non-cash impact related to the derivative financial instruments embedded in the convertible and exchangeable bonds5 issued by GBL, for a net amount CHF +7.1 million (CHF -10.3 million at 30 September 2017).

•  Non-operating income: CHF -8.5 million at 30 September 2018, compared with CHF +0.4 million at 30 September 2017. It is worth noting that GBL sold in Q2 2018 its participation in Burberry, generating a gain of EUR 67 million (Pargesa's share: CHF 40 million). As per IFRS 9, this gain is recorded directly in shareholders' equity, and did not flow through income statement.

•  As a result of the above, Pargesa's net income stands at CHF 251.3 million at 30 September 2018, compared with CHF 348.5 million at 30 September 2017.

The organisation chart below reflects the Group structure at 30 September 2018 a.:

50.0% b.

Sienna Capital c.

EUR 1'344 e.

53.8%

7.5%

16.6%

7.5%

9.4%

16.9%

0.6%

7.3%

20.0%

21.2%

EUR 17'990 d.

a.	Shareholdings are expressed as a percentage of the capital held. The chart shows the main shareholdings of the portfolio.
b.
	50.7% of voting rights, taking into account the suspended voting rights related to GBL treasury shares.
c.
	Comprising significant investments in private equity, debt or specific thematic funds.
d.
	Market value in EUR million of the main investments held by GBL at 30 September 2018.
e.
	Estimated value in EUR million at 30 September 2018.

4 Note: had these transactions been achieved in 2018, the capital gain would have been recorded in the income statement, since the fund Ergon Capital Partners III is consolidated, as were the investments in Golden Goose and ELITech.

5

In 2017 only, with respect to exchangeable bonds.

Pargesa Holding SA	11, Grand-Rue	Tel : [phone]	[e-mail]
CH-1204 Geneva	Fax : [phone]	www.pargesa.ch

1. 2018 highlights

• ● As already reported, on 8 February 2018, Umicore raised EUR 892 million through a capital increase subscribed by institutional investors and other investors. The new shares, which represent 10% of the number of outstanding shares prior to the transaction, were issued at a price of EUR 39.80 per share. GBL participated in the capital increase by investing EUR 144 million, which had the effect of slightly diluting its shareholding to 16.9% of Umicore's capital, compared with 17.0% prior to the transaction. As at 30 September 2018, the value of GBL's investment in Umicore was EUR 2'010 million.

• ● It is reminded that on 3 April 2018, GEA Group ("GEA") announced that GBL had crossed on 23 March 2018 the 5.0% threshold of the voting rights of the company. As at 30 September 2018, GBL held 7.3% of GEA's share capital, worth EUR 404 million.

• ● Also already reported was the sale by GBL in May 2018 of 6.6% of the capital of Burberry Group Plc ("Burberry").

  Proceeds from the disposal amounted to EUR 566 million and allowed GBL to realize a capital gain of EUR 67 million (with Pargesa's share being CHF 40 million), which however has not been recorded in the income statement as a consequence of IFRS 9, which became effective on 1 January 20186.

• ● As a reminder, on 12 June 2018, GBL announced the completion of a 7-year bond issue for EUR 500 million, with a coupon of 1.875%. The proceeds from this issuance are used by GBL for general corporate purposes. The transaction allows GBL to lengthen its debt maturity profile, and to further diversify its financing sources.

• ● On 9 October 2018, GBL's convertible bond, issued on 27 September 2013, expired. Since April of this year, certain holders of bonds requested an early conversion of their bonds representing 81% of all bonds issued, the balance being reimbursed on 9 October 2018. The bonds have been redeemed, partly by the delivery of GBL treasury shares, and for the balance in cash. Following the redemption of the bonds and based on the number of bonds converted in GBL shares, Pargesa's economic interest in GBL stands at 50.7% compared to 51.8% at 31 December 2017.

• ● The board of directors of GBL has authorised the company to purchase up to EUR 250 million of its own shares, if appropriate and depending on market conditions. This authorisation is valid until 26 April 2021.

• ● At the level of Imerys the following highlights can be disclosed :

  • o Imerys announced on 17 May 2018 that it had entered into an exclusivity agreement for the purpose of the sale of its roofing division Imerys Toiture for an enterprise value of EUR 1 billion. Imerys Toiture, which mainly serves the French construction market, generated revenue of EUR 300 million in 2017 with around 1'000 employees and 14 plants located in France. This agreement follows the strategic review conducted by Imerys' board of directors on the prospects of the Roofing division. This transaction improves Imerys growth profile through higher exposure to dynamic markets and geographies and strengthens its balance sheet. The transaction has been completed on 11 October 2018 and permits Imerys, on this occasion, to realise a net capital gain of more than EUR 700 million which will be recorded in the income statement in the 4th quarter.

  • o Following an in-depth market analysis, Imerys decided to withdraw from the ceramic proppants market.

    Imerys group is currently studying several divestiture scenarios for this business, which has a balance sheet value of approximately EUR 150 million. Since the third quarter of 2018, costs associated with this business are recognized as restructuring costs. As a result, the annual negative contribution of the Oilfield Services division to the current operating income should be around EUR 5 million in 2018.

  • o Imerys has decided to implement a care and maintenance program for its Namibian graphite assets to preserve their long-term value for a future point when market pricing allows a proper value to be achieved for this high-quality graphite product. The implementation of a proper care and maintenance program enables Imerys to preserve its mining rights and resume production once general market conditions become more favourable. These assets are accounted for on Imerys' balance sheet for a value of approximately EUR 50 million

6 The shareholding in Burberry was not consolidated.

Pargesa Holding SA	11, Grand-Rue	Tel : [phone]	[e-mail]
CH-1204 Geneva	Fax : [phone]	www.pargesa.ch

• o Certain subsidiaries of the Imerys group, which operate its American Talc business, are among the defendants in the actions brought before several US federal and state courts by multiple plaintiffs. In these matters, the plaintiffs assert claims based on the alleged hazards related to the use of talc in certain products. Most of this litigation relates to sales made prior to Imerys' 2011 acquisition of its Talc business.There has been no material adverse development in this litigation affecting the relevant US subsidiaries in this quarter. However, while these litigations continue to develop/expand, these subsidiaries are assessing and reviewing their strategic options for best protecting their respective long term financial interests.

• ● At the level of Sienna Capital it is reminded that:

  • o In November 2017, Ergon Capital Partners III ("ECP III") announced the signature of an agreement for the acquisition of svt Holding GmbH ("svt"). This German company is one of the leaders in preventive passive fire protection. The acquisition was finalized in January 2018. In February 2018, svt signed an agreement to acquire Rolf Kuhn GmbH. Through this transaction, which was completed in April, svt becomes a major European actor in fire protection.

  • o In September 2017, a group of investors announced that they had entered into exclusive negotiations with Sagard 3 and Alvest's management team, to acquire a significant stake in this company, the global leader in the production and distribution of airport ground support equipment. As at 31 December 2017, the unrealized gain on this investment then recorded in the revaluation reserve in shareholders' equity, amounted to CHF 34 million (Pargesa's share). The transaction was finalized in January 2018, and Sagard 3 reinvested in the capital of the company. Sagard 3 is a non-consolidated fund, thus as per new accounting standard IFRS 9, the CHF 34 million gain was not recorded in the income statement, and remains recorded in shareholders' equity.

    In November 2017, the shareholders (including Sagard II) of Kiloutou, one of the European leaders of rental construction equipment, entered into exclusive negotiations for the sale of a majority shareholding position in the company. As at 31 December 2017, the unrealized gain on this investment then recorded in shareholders' equity (in the revaluation reserve), amounted to CHF 23 million (Pargesa's share). The transaction was finalized in February 2018. Sagard II is a non-consolidated fund, thus for the same reasons as the ones regarding the sale of Alvest (see above), the CHF 23 million gain was not recorded in the income statement, and remains recorded in shareholders' equity.

    In January 2018, Sagard 3 completed the acquisition of a majority stake in Climater, one of the French leading firms in climatic engineering (installation and maintenance of air conditioning, heating and ventilation systems in buildings).

  • o In July 2018, GBL, through its subsidiary Sienna Capital, realized its first co-investment transaction by investing EUR 250 million, alongside funds affiliated with the investment company KKR, in Upfield (previously named Flora Food Group), the carve-out of Unilever's Spreads division. Upfield is the world leader in plant-based margarine spreads and cooking products. It is currently established in 69 countries and generated pro forma sales of around EUR 3 billion in 2017.

  • o During Q3 2018, ECP III finalized the acquisition of Beltaste-Vanreusel, a Belgian manufacturer of frozen food products and supplier of fast food restaurants, and Indo, the Spanish leader in the manufacture and distribution of ophthalmic lenses and ophthalmic diagnostic equipment.

  At 30 September 2018, GBL's commitments with respect to Sienna Capital amounted to EUR 553 million (EUR 733 million at 31 December 2017).

2. Consolidated financial results at 30 September 2018 (unaudited)

The Board of directors of Pargesa Holding SA met today and reviewed the unaudited consolidated financial results for the nine-month period ended 30 September 2018.

Pargesa Holding SA	11, Grand-Rue	Tel : [phone]	[e-mail]
CH-1204 Geneva	Fax : [phone]	www.pargesa.ch

2.1. Presentation of results in accordance with IFRS

The simplified income statement in accordance with IFRS is as follows:

30 September	30 September
CHF million	2018	2017
Operating income	4'685.2	3'791.7
Operating expenses	(4'255.8)	(3'416.9)
Other income and expenses	4.2	267.6
Operating profit (loss)	433.6	642.4
Dividends and interest from long-term investments	363.9	337.0
Other financial income and expenses	(84.1)	(100.2)
Taxes	(126.0)	(106.6)
Income from associates and joint ventures	26.0	25.5
Net profit from continuing operations	613.4	798.1
Net profit from discontinued operations	56.2	53.3
Consolidated net profit (before non-controlling interests)	669.6	851.4
Attributable to non-controlling interests	(418.3)	(502.9)
Attributable to Pargesa shareholders (Group share)	251.3	348.5
Basic earnings per share attributable to Pargesa shareholders (CHF)	2.97	4.12
Average number of shares (thousands)	84'680	84'660
Average EUR/CHF exchange rate	1.161	1.095

Operating income and expenses are primarily the revenues and operating expenses of Imerys, whose accounts are fully consolidated.

Other income and expenses include net capital gains and losses as well as impairments and reversals of previous impairments on certain Group shareholdings7 and operations. As mentioned in previous press releases this year, pursuant to new accounting standard IFRS 9 the gains resulting from the sale in Q1 2018 of the investments in Kiloutou and Alvest held by the non-consolidated funds Sagard II and Sagard 3, respectively, which amounted to CHF 102 million in aggregate (including the portion attributable to non-controlling interests), as well as from the sale by GBL in Q2 2018 of its investment in Burberry (CHF 79 million, including the portion attributable to non-controlling interests), have not been recorded in the income statement and remain recorded in shareholders' equity. At 30 September 2017, this item included the gain realized by ECP III from the sale of its investments in Golden Goose and ELITech (CHF 263 million).

The dividends and interest from long-term investments item comprises the net dividends recorded by the Group from its non-consolidated investments.

The other financial income and expenses and taxes items include Pargesa's, GBL's and Imerys' figures. Other financial income and expenses includes the non-cash impact of GBL's derivative financial instruments being marked to market.

Income from associates and joint ventures represents the share of the consolidated net profit contributed by shareholdings accounted for in the Pargesa financial statements using the equity method. These shareholdings are primarily held by GBL (Parques Reunidos, starting in 2018), Sienna Capital or Imerys.

The net profit from discontinued operations represents the contribution from Imerys' Roofing division.

The item non-controlling interests mainly relates to the share of income attributable to the minority shareholders of GBL and Imerys, these two companies being fully consolidated into Pargesa's financial statements.

7 With respect to non-consolidated portfolio investments and the application of IFRS 9, please refer to the comments in Section 2.2,

Remark 1 below.

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Pargesa Holding SA	11, Grand-Rue	Tel : [phone]	[e-mail]
CH-1204 Geneva	Fax : [phone]	www.pargesa.ch