Full-year Results, 2019
Matosinhos, 18th March 2020
Proforma unaudited figures reported according to IFRS 16
SAFE HARBOUR
This document may contain forward-looking information and statements based on management's current expectations or beliefs. Forward-looking statements are statements that should not be regarded as historical facts.
These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, including, but not limited to, changes in the regulation, industry and economic conditions; and the effects of competition. Forward-looking statements may be identified by words such as "believes," "expects," "anticipates," "projects," "intends," "should," "seeks," "estimates," "future" or similar expressions.
Although these statements reflect our current expectations, which we believe are reasonable, investors and analysts, and generally all recipients of this document, are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. You are cautioned not to put undue reliance on any forward-looking information or statements. We do not undertake any obligation to update any forward-looking information or statements.
FULL-YEAR RESULTS 2019
2019:
Standout growth, best-in-class profitability and sound financial profile
01.
HIGHLIGHTS
- Turnover for the full-year increased by a record-breaking +9.2% to €4,702m, benefiting from a +3.0% like-for-like growth, positive across all formats
- Annual underlying EBITDA reached €480m, with a stable benchmark margin of 10.2% over turnover
-
Year-endfinancial net debt decreased, reinforcing the capital structure; additionally,
Sonae MC continued to invest for profitable growth (gross capex above €300m), and maintained the payment of an attractive dividend stream (€75m) - In 2019, the Company stood committed to reduce its carbon footprint, reinforce its role as a socially responsible actor, and create a workplace that fosters talent
MESSAGE FROM THE CEO | Luís Moutinho
"I am very satisfied to report our exceptional performance in 2019, whereby we increased market share and returns once again, also enhancing brand power and customer engagement.
Buoyed by a clear strategy and a focused execution, we reinforced our portfolio value proposition, leveraged key operational processes, improved our in-store experience, rolled-out new omnichannel and digital capabilities and accelerated the expansion of our rapid growth formats.
We face 2020 well prepared, with a robust capital structure and a finely-tuned operating model, enabling us to be more agile and capitalise on new opportunities, while driving sustainable change."
Continente own brand nutrition reformulation
FULL-YEAR RESULTS 2019
02.
OPERATIONAL AND FINANCIAL PERFORMANCE
TURNOVER | Full-year | 4th Quarter | ||||||||||||
(€m) | 2018 | 2019 | ∆ y.o.y. | ∆ LFL | 2018 | 2019 | ∆ y.o.y. | ∆ LFL | ||||||
Total Sonae MC | 4,308 | 4,702 | 9.2% | 3.0% | 1,180 | 1,275 | 8.1% | 2.2% | ||||||
Hypermarkets | 1,622 | 1,653 | 1.9% | 1.9% | 459 | 466 | 1.5% | 1.1% | ||||||
Supermarkets | 2,076 | 2,239 | 7.9% | 3.1% | 558 | 600 | 7.4% | 2.1% | ||||||
New Growth Businesses & Others | 609 | 810 | 32.9% | 8.2% | 162 | 209 | 29.3% | 7.8% | ||||||
KEY RESULTS | Full-year | 4th Quarter | ||||||||||||
(€m) | 2018 | 2019 | ∆ y.o.y. | 2018 | 2019 | ∆ y.o.y. | ||||||||
Underlying EBITDA (unEBITDA) | 423 | 480 | 13.4% | 125 | 140 | 12.0% | ||||||||
as % of turnover | 9.8% | 10.2%1 | 0.4pp | 10.6% | 10.9%1 | 0.4pp | ||||||||
Net profit (from continuing operations) | 143 | 1322 | -7.9% | 74 | 482 | -35.2% |
- Sonae MC's turnover reached €4,702m in 2019, up by +9.2%, with all segments, formats and key categories delivering a solid like-for-like performance, amid a backdrop of low inflation and increasing competition.
- Market share across the Company's banners increased compared to last year, yet again, reinforcing Sonae MC's leadership position. Sonae MC also delivered record-breaking top of mind brand awareness in the period, embodying strong customer acknowledgment.
- Throughout the full-year the Company continued to explore value accretive opportunities, stepping up the expansion of its proximity and rapid growth formats, while adding +36k sqm. to its company-operated store network. Furthermore, it pursued selective refurbishments, with 13 food retail units remodelled in the period, which in turn boosted customer in-store experience. The year was also marked by the internationalization of the Health, Wellness & Beauty business through the Arenal acquisition, in the northwest region of Spain.
- Strategic execution remained on track with demonstrable results, as the Company continued to deliver definite value and excellent quality through: i) a refined fresh product range backed by a revamped operating model, ii) reinforced price competitiveness coupled with more relevant and effective promotions, iii) an enhanced and competitive own brand assortment and iv) a healthier and more sustainable range.
- Sonae MC also developed its digital capabilities, accelerating investments in omnichannel, with double-digit growth on e-commerce, and ramping up the mobile apps' ecosystem through the development of new solutions to improve customer experience and address expectations regarding assortment, speed and convenience. In addition, it also enhanced decision-making through new advanced modelling and data- analysis expertise.
- From 2019 onwards, Sonae MC adopted the IFRS 16 and IFRS 15 accounting standards. Underlying EBITDA margin 2019 figures include a one-off positive impact from IFRS 16 adoption on transportation lease agreements. If this impact was excluded, underlying EBITDA margin would stay broadly in line with the previous period.
- Adoption of the IFRS 15 standard forced the postponement of most of the capital gains resulting from a sale & leaseback transaction of two real estate assets concluded on September 2019. Before adoption of this standard, capital gains were computed through the difference between cash proceeds from the sale and net book value of the asset. Under the new standard, a part of the capital gains is deferred over the length of the lease contract.
FULL-YEAR RESULTS 2019
- Underlying EBITDA amounted to €480m, corresponding to a 10.2% margin in line with previous years1, driven by a solid turnover performance, effective margin mix management, and continued progress in the Company's cost-to-serve programme.
- Over the period, Sonae MC achieved further efficiencies and savings across its store operations, supply chain, and head office, offsetting pressure on costs, which facilitated targeted commercial investments aimed at delivering sharper value to customers, as well as the development of organic and inorganic growth opportunities.
- In the bottom line, net profit from continuing operations totalled €132m, enabling the Company to continue to deliver best-in-class returns.
- As at December 2019, Sonae MC's freehold real estate ownership stood at 43%, reflecting the impact of the Arenal acquisition and a sales and leaseback transaction of two food retail assets completed in the 3rd quarter.
FREE CASH-FLOW AND DEBT | Full-year | |||
(€m) | 2018 | 2019 | ∆ y.o.y. | |
Free cash-flow | 39 | 91 | €52m | |
Net financial debt | 607 | 591 | -2.6% | |
Lease liabilities | 859 | 1,006 | 17.1% | |
Total net debt3 to unEBITDA | 3.5x | 3.3x | - |
- For the full-year Sonae MC delivered a sound free cash-flow of €91m, up by +€52m versus last year, a standout result leading to a cash conversion ratio of 65.0%. This free cash flow figure benefited from a very positive working capital performance, reflecting a broadly stable working capital to turnover ratio, while being also strongly influenced by the significant investments carried on in the period.
- The cash-flow for the year from investing activities was mainly attributable to the modernization of the store network (€120m), the steady expansion of the Company store portfolio (€107m), and the strategic capital expenditures (€82m), mostly related to the Arenal integration. Other relevant projects included acquisitions of future store locations, as well as investments in e-commerce, IT, and in improving the logistics backbone.
- In 2019, the Company continued to strengthen its balance sheet, reducing its year-end net financial debt by -€16m to €591m, mainly due to robust free cash-flow generation. As at 31 December 2019, total net debt3 in relation to underlying EBITDA was 3.3x, well in line with Sonae MC's long-term target of <3.5x and compatible with an investment-grade profile.
- The Company also completed several refinancing operations throughout the year, including a financing from the European Investment Bank to support environmental sustainability investments, which allow the improvement of liquidity over the mid-term and the extension of average debt maturity while maintaining a low average cost of debt.
3 Total net debt equals net financial debt plus lease liabilities.
FULL-YEAR RESULTS 2019
SUSTAINABLE DEVELOPMENT | Full-year | |||
(selected ratios) | 2018 | 2019 | ∆ y.o.y. | |
Specific electricity consumption | (kWh/ sqm.) | 517.5 | 497.3 | -3.9% |
GHG emissions (scope 1 &2) | (kg CO2e/ sqm.) | 252.2 | 202.0 | -19.9% |
Recycled plastic | (%) | 22.8 | 29.3 | 6.5pp |
Fresh products purchased from national suppliers | (%) | 83.5 | 85.3 | 1.8pp |
Seafood sourced from sustainable fisheries or farmed | (%) | 59.0 | 62.2 | 3.2pp |
Direct community support | (€m) | 9.1 | 9.3 | 2.2% |
Number of direct employees change | (%) | 2.3 | 6.5 | 4.2pp |
Absenteeism rate | (%) | 5.1 | 5.1 | 0.opp |
Workplace accident frequency rate | (#) | 11.7 | 9.8 | -1.9 |
- Sustainability remained a key priority in Sonae MC's strategy and business model, mainly centred around three core areas: Environment, Community and People. Throughout 2019, the Company became a signatory to relevant international commitments - including the "New Plastics Economy Global Commitment" led by the Ellen MacArthur Foundation - and implemented major initiatives aiming at: i) reducing carbon emissions and general waste and increasing energy efficiency by implementing technologies with a lower ecological footprint, ii) reducing, reusing and recycling plastic through a circular economy model (4,431 tonnes of recycled plastic incorporated instead of virgin plastic by the end of 2019), iii) delivering sugar (-450 tonnes), salt (-60 tonnes) and saturated fat (-300 tonnes) reduction targets, through own brand nutrition reformulation, iv) improving supply chain transparency, namely through higher standards regarding responsible seafood sourcing, v) balancing gender equality on the back of a multi-level intervention plan with short and mid-term measures or vi) promoting work-life integration.
03.
OUTLOOK AND DIVIDEND PROPOSAL
- Sonae MC foresees a cautious macroeconomic scenario for 2020. Despite a forecast at the beginning of the year of positive economic growth, albeit at a slower pace than in 2019, and progress in key downside risks (including Brexit and the US-China trade dispute), the Company anticipates relevant pockets of uncertainty will remain, with the impacts of the COVID-19 pandemic at the top of concerns.
- Furthermore, the competitive scenario should remain challenging, requiring a very assertive strategic architecture and a disciplined operational execution. With this in mind, Sonae MC will continue to be guided by its priorities, placing the customer at the centre of the business, ensuring a solid capital structure, remaining focused on value-added growth, and staying highly committed with sustainable development.
- Considering the net profit from continuing operations for FY 2019 and Sonae MC's dividend practice, the
Board of Directors will propose at the Shareholders' Annual General Meeting the payment of a maximum gross dividend of €75m, corresponding to €0.075 per share. This dividend implies a pay-out ratio of c.50% of the net profit from continuing operations attributable to Sonae MC's shareholders.
FULL-YEAR RESULTS 2019
A.
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED RESULTS | Full-year | 4th Quarter | ||||
(€m) | 2018 | 2019 | ∆ y.o.y. | 2018 | 2019 | ∆ y.o.y. |
Turnover | 4,308 | 4,702 | 9.2% | 1,180 | 1,275 | 8.1% |
Underlying EBITDA (unEBITDA) | 423 | 480 | 13.4% | 125 | 140 | 12.0% |
as % of turnover | 9.8% | 10.2% | 0.4pp | 10.6% | 10.9% | 0.4pp |
D&A | -226 | -250 | 10.4% | -64 | -67 | 5.0% |
Underlying EBIT (unEBIT) | 197 | 230 | 16.8% | 61 | 73 | 19.2% |
as % of turnover | 4.6% | 4.9% | 0.3pp | 5.2% | 5.7% | 0.5pp |
Net financial activity | -65 | -74 | - | -13 | -18 | - |
Other investment income | 0 | 0 | - | - | - | - |
Non-recurring items | 35 | 3 | - | 37 | - | - |
Equity method | 0 | 1 | - | 0 | 0 | - |
EBT | 167 | 160 | -4.2% | 85 | 55 | -35.8% |
Income tax | -214 | -22 | - | -114 | -5 | - |
Minorities | -3 | -6 | - | -1 | -2 | - |
Net profit (from continuing operations) | 143 | 132 | -7.9% | 74 | 48 | -35.2% |
4 Restated figures following the recalculation of deferred tax required by the adoption of IFRS 16.
FULL-YEAR RESULTS 2019 | ||||
CONSOLIDATED BALANCE SHEET | Full-year | |||
(€m) | 2018 | 2019 | ∆ y.o.y. | |
Net fixed assets | 1,504 | 1,635 | 8.7% | |
Leased assets right-of-use | 780 | 898 | 15.2% | |
Goodwill and financial investments | 467 | 491 | 5.1% | |
Working capital | -5894 | -653 | 10.8% | |
Invested capital | 2,162 | 2,372 | 9.7% | |
Shareholders' funds | 697 | 775 | 11.2% | |
Lease liabilities | 859 | 1,006 | 17.1% | |
Net financial debt | 607 | 591 | -2.6% | |
Sources of financing | 2,162 | 2,372 | 9.7% | |
Total net debt / unEBITDA | 3.5x | 3.3x | - | |
Net financial debt / unEBITDA (pre-IFRS16) | 1.9x | 1.7x | - | |
CASH-FLOW | Full-year | |||
(€m) | 2018 | 2019 | ∆ y.o.y. | |
Underlying EBITDA | 423 | 480 | 13.4% | |
Fixed rents | -105 | -138 | 31.7% | |
Change in working capital5 | -79 | 69 | -188.4% | |
Gross capex | -242 | -309 | 28.0% | |
Maintenance & Optimisation | -146 | -120 | - | |
Expansion | -95 | -107 | - | |
Acquisitions6 | -1 | -82 | - | |
Sales & leaseback divestments | 77 | 23 | - | |
Income tax and net financial activity | -37 | -35 | - | |
Free cash-flow7 | 39 | 91 | €52m | |
Cash conversion | 54.1% | 65.0% | 10.8pp | |
- Includes impacts from the changes in perimeter that occurred during 2018.
- Includes both the equity stake and the assumed debt.
- Corresponds to the change in net debt and dividends.
FULL-YEAR RESULTS 2019
B.
STORE NETWORK AND FREEHOLD
STORE NETWORK | Nº of stores | Sales area ('000 sqm.) | ||||||||||||
2018 | 2019 | Net change | 2018 | 2019 | Net change8 | |||||||||
Total Sonae MC | 1 108 | 1 228 | 120 | 853 | 911 | 58 | ||||||||
Total Company Operated | 758 | 890 | 132 | 776 | 835 | 59 | ||||||||
Continente | 41 | 41 | 0 | 276 | 276 | 0 | ||||||||
Continente Modelo | 126 | 129 | 3 | 260 | 267 | 7 | ||||||||
Continente Bom Dia | 107 | 119 | 12 | 133 | 149 | 17 | ||||||||
Well's | 213 | 234 | 21 | 21 | 23 | 2 | ||||||||
Arenal | 0 | 48 | 48 | 0 | 29 | 29 | ||||||||
Bagga | 132 | 136 | 4 | 8 | 8 | 0 | ||||||||
Note! | 53 | 61 | 8 | 10 | 11 | 1 | ||||||||
Zu | 15 | 20 | 5 | 2 | 2 | 0 | ||||||||
Go Natural supermarkets | 10 | 12 | 2 | 2 | 3 | 0 | ||||||||
Go Natural restaurants | 28 | 37 | 9 | 2 | 3 | 1 | ||||||||
Maxmat | 31 | 31 | 0 | 61 | 61 | 0 | ||||||||
Dr. Wells | 0 | 16 | 16 | 0 | 2 | 2 | ||||||||
Other | 2 | 6 | 4 | 1 | 2 | 1 | ||||||||
Total Franchised | 350 | 338 | -12 | 77 | 76 | -1 | ||||||||
Continente Modelo | 9 | 9 | 0 | 20 | 20 | 0 | ||||||||
Meu Super | 298 | 285 | -13 | 53 | 52 | -2 | ||||||||
Well's | 29 | 29 | 0 | 2 | 2 | 0 | ||||||||
Bagga | 7 | 7 | 0 | 0 | 0 | 0 | ||||||||
Go Natural restaurants | 1 | 3 | 2 | 0 | 1 | 1 | ||||||||
Note! | 6 | 5 | -1 | 1 | 1 | 0 | ||||||||
FREEHOLD (END OF PERIOD) | 2018 | 2019 | ||||||||||||
Dec 31st | Mar 31st | Jun 30th | Sep 30th | Dec 31st | ||||||||||
Total Sonae MC | 45% | 44% | 44% | 43% | 43% | |||||||||
Please visit https://sonaemc.com/en/financial-information/for additional information about the results, including a comprehensive glossary.
8 Includes changes in sales area resulting from store optimization initiatives.
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Sonae SGPS SA published this content on 18 March 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 March 2020 23:37:04 UTC