Sonae : SGPS SA, informs on 1Q19 Consolidated Results

SONAE

FIRST QUARTER

RESULTS'19

Highlights and CEO's message

•Consolidated turnover reached €1,461 M in the 1Q19, +8.9% when compared to 1Q18

•Consolidated underlying EBITDA increased 15.6% y.o.y. to €105 M and EBITDA increased 33.4% y.o.y. to €136.1 M

•Net income group share improved 6.5% reaching €18.3 M

"Sonae has had a good start to the year, despite the adverse calendar effect of a later Easter period. Consolidated turnover in the first quarter increased by 8.9% y.o.y. reaching €1,461 M, with positive contributions from almost all businesses, particularly from Sonae MC and from Sonae Sierra, which is now fully consolidated into Sonae's accounts.

Regarding profitability, underlying EBITDA grew 15.6% y.o.y. to €105 M, driven by a solid performance of Sonae MC, and EBITDA reached €136.1 M, +€34 M when compared to 1Q18, fuelled by both equity method results (namely Sonae Sierra and ISRG), and the capital gain from the sale of Saphety by Sonae IM, which continues to create value by actively managing its portfolio.

In terms of portfolio management, this quarter marked the acquisition by Sonae MC of a 60% stake in Arenal, which we believe will significantly reinforce Sonae MC's position in the Health & Wellness segment, one of our growth avenues.

Despite a significant increase in our total investment level (+64% y.o.y.), mainly driven by the Arenal acquisition, our capital structure remains strong. Our gearing level continued to decrease y.o.y. and is now down to 0.5x, and our main businesses continue to show conservative balance sheets. Our debt now has a longer maturity profile and low funding costs, thus maintaining conditions to both support the growth strategies of our businesses and our shareholder remuneration policy.

In my first CEO message, I would like to thank Paulo and Ângelo for all their support in the transition phase and for having the benefit of their wisdom as Chairman and Non-Executive Board member.

We are today over 53 thousand people at Sonae, committed to the development of a long-living company which creates economic and social value. We will only be able to achieve this goal by taking great care of all our stakeholders to whom we remain committed."

Cláudia Azevedo, Sonae CEO

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Sonae consolidated performance

Sonae corporate structure
	stake	consolidation method
Sonae MC	100%	Full consolidation
Worten	100%	Full consolidation
Sonae Fashion	100%	Full consolidation
ISRG	30%	Equity method
Sonae FS	100%	Full consolidation
Sonae IM	90%	Full consolidation
Sonae Sierra	70%	Full consolidation
NOS	23%	Equity method

(1) MDS

Sonae consolidated results
Million euros	1Q18(1)	1Q19	y.o.y.
Turnover	1,341.1	1,460.7	8.9%
Underlying EBITDA	90.8	105.0	15.6%
margin	6.8%	7.2%	0.4 p.p.
Equity method results (2)	11.8	26.5	-
Non-recurrent items	-0.6	4.6	-
EBITDA	102.0	136.1	33.4%
margin	7.6%	9.3%	1.7 p.p.
Provisions and impairment losses	-0.4	-0.7	-78.6%
D&A	-49.1	-51.9	-5.6%
D&A - RoU	-22.8	-26.3	-15.1%
EBIT	29.7	57.3	92.8%
Net financial results - lease liabilities	-15.4	-18.3	-18.9%
Net financial results - financing	-7.5	-10.5	-39.9%
EBT	6.9	28.5	-
Taxes	2.2	4.3	91.1%
Direct results	9.1	32.8	-
Indirect results	9.3	-1.1	-
Net income	18.4	31.7	72.8%
Non-controlling interests	-1.2	-13.4	-
Net income group share	17.2	18.3	6.5%

(1)Restated figures due to: a) IFRS 16 accounting standard; and b) the discontinued operations namely Berg from Sonae Fashion and the sale of Saphety in Sonae IM.

(2)Equity method results: includes equity method results from Sonae Sierra statutory accounts, direct income related to investments consolidated by the equity method (mainly NOS/Zopt and ISRG) and discountinued operations results

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In 2019, Sonae begins reporting its business segments under a new structure, which now includes a new perimeter for Sonae MC (comprised of the historical Sonae MC segment, Maxmat and Sonae RP's operational assets). The former Sonae Sports & Fashion segment was split into Sonae Fashion and ISRG, given the different nature and independent management teams of both businesses. Finally, 2019 also marks the adoption of the IFRS 16 accounting standard. For comparable reasons, historical figures were restated to include all the abovementioned changes. Additionally, this will be the first full year of line-by-line consolidation of Sonae Sierra's accounts. 1Q18 figures still exclude this effect, as the acquisition of the additional 20% stake only happened in 3Q18.

In the 1Q19, Sonae's statutory turnover increased by 8.9% y.o.y to €1,461 M, mainly reflecting growth at Sonae MC (+€72 M) and the consolidation of Sonae Sierra's statutory revenues (€45 M)1. Underlying EBITDA grew +€14 M to €105 M (+15.6% y.o.y.), also driven by a solid performance of Sonae MC and by the full consolidation of Sonae Sierra.

EBITDA reached €136.1 M, +€34 M when compared to 1Q18, underpinned by the growth in underlying EBITDA and also by: (i) equity method results of €26.5 M, with a particularly positive note to Sonae Sierra and ISRG, and (ii) non-recurrentitems of €4.6 M, mostly related to the capital gain from the sale of Saphety by Sonae IM. This good performance at the EBITDA level drove Direct Result to reach €32.8 M, +€24 M when compared to 2018, and consequently Net income group share increased

6.5% to €18.3 M.

1)Please see additional information on page 10

Sonae capital structure

Sonae net debt evolution (€M)

73

461

-€ 99M

1,2661,167

1Q181Q19

Arenal acquisition impact

Sonae Sierra acquisition impact

Net Debt LfL

Sonae net invested capital
Million euros	1Q18(1)	1Q19	y.o.y.
Net invested capital	4,185	5,944	42.0%
Sonae shareholders funds	1,967	3,124	58.8%
Financial net debt	1,267	1,761	39.1%
Sonae net debt	1,266	1,701	34.4%
Lease liabilities	952	1,118	17.5%

(1) Restated figures according to IFRS16 accounting standard

On a LfL basis, Sonae Net Debt decreased by €99 M to €1,167 M, when compared to 1Q18.

Actual net debt reached €1,701 M following the acquisition of Arenal and the additional 20% stake in Sonae Sierra, impacted by: (i) the acquisition amount (€256 M), and (ii) the consolidation of Sonae Sierra's statutory net debt (€205 M).

Sonae's cost of debt was 1.3% at the end of 1Q19, and the average maturity profile was around 4 years. Excluding Sonae Sierra, i) Sonae was able to keep average cost of debt around 1% and ii) since the end of the 1Q19, has already refinanced €230 M in long term facilities, which enables Sonae to secure a comfortable average maturity profile of circa 4 years and maintain its practice of being fully financed for the coming 18 months.

Gearing evolution

(pre-IFRS 16)

Sonae's average gearing at book value decreased to 0.5x in 1Q19 compared to 0.6x in 1Q18, evidencing a reinforced capital structure. On the other hand, average gearing at market value increased up to 0.8x in 1Q19 vs 0.6x in 1Q18, mainly due to the share price performance in the period.

Sonae Capex			% of Turnover
Million euros	1Q18	1Q19	1Q18	1Q19
Capex	71	116	5.3%	7.9%
Sonae MC	56	101	5.7%	9.7%

Total capex increased to €116 M in the 1Q19, mainly related with the Arenal acquisition by Sonae MC in the beginning of the year.

Worten	4	5	1.7%	2.3%
Sonae Fashion	4	2	4.4%	2.2%
Sonae FS	0	0	5.0%	1.0%
Sonae IM	3	8	10.4%	19.1%
Sonae Sierra	0	4	n.a.	9.9%

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Sonae operational performance by business

Sonae MC

Turnover and

underlying EBITDA margin evolution (€M; %)

Worten

Turnover and

underlying EBITDA margin evolution (€M; %)

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For Sonae MC, 2019 begun with a strong top line growth, despite the negative calendar effect with Easter falling later than it did in the previous year. In the 1Q19, turnover increased by 7.4% y.o.y. to €1,048 M and surpassed the €1 Bn mark. This evolution benefited from: (i) the positive evolution of LfL of 1.1% in 1Q19, which evidenced an increase in volumes as food inflation remained at a low level (+0.9%); (ii) the steady expansion of the store network with 14 new company operated stores, including 3 Continente Bom Dia and 1 Continente Modelo (current freehold of 44%); and (iii) the completion of Arenal's acquisition, reinforcing Sonae MC's position in the Health & Wellness segment, one of its main strategic development pillars.

In terms of profitability, underlying EBITDA grew by 8.1% when compared with the same period of last year, reaching €81 M in 1Q19, corresponding to a stable margin of 7.7%. This solid performance benefited from the positive turnover evolution offsetting the pressure from the challenging competitive environment and the investments in the ongoing expansion program.

(For additional information please see document published with Sonae MC 1Q19 Results at www.sonae.pt)

During these first months of 2019, Worten reached turnover of €237 M, a reduction of 2% y.o.y., with similar trend in the LfL stores (tough comparing with 8.8% LfL in 1Q18). This top line performance was impacted by a later Easter season and atypical weather conditions. In Portugal, Worten was able to once again reinforce its market leadership, and, moreover, online continuing posing accelerated growth when compared with the offline channel, in line with its omnichannel strategy.

This top line performance, coupled with both the store expansion in the last 12 months and continued efforts towards digital transformation, led to an underlying EBITDA of €8.1 M.