Sonae Sgps Sa · EURONEXT:SON
Sonae Sgps Sa — Sonae — Investor Presentation (October 2016)
54 slides from Sonae Sgps Sa's investor presentation, October 2016
Slide 1: Investor Presentation October 2016
INVESTOR PRESENTATION October 2016
Slide 2: 1. Sonae Overview
Slide 3: History: Start-up and vertical integration
1. SONAE OVERVIEW History | DEVELOPMENT IN THE SECTOR START-UP OF THE BUSINESS AND VERTICAL INTEGRATION | a 2 Foundation of Sonae - Belmiro de Azevedo was hired Diversification of Sonae, through the Sociedade Nacional de (1965) acquisition of NOVOPAN Estratificados (18 (particleboard manufacturing u
Slide 4: History: Diversification through acquisitions
1. SONAE OVERVIEW History DIVERSIFICATION THROUGH ACQUISITIONS AND THE SET UP OF NEW BUSINESSES + Launch of Sonae in the capital markets (1983) * Inauguration of Porto Sheraton Hotel and acquisition of STAR (travel agency) + Set up of Modelo Continente Hipermercados SARL (with the French group Promo
Slide 5: History: Diversification through acquisitions and new businesses
1. SONAE OVERVIEW History DIVERSIFICATION THROUGH ACQUISITIONS AND THE SET UP OF NEW BUSINESSES * Launch of the newspaper Publico (1990) + Set up of Sonae Distribuicao Brasil * Sonae Industria acquires a controlling position in Tafisa (1993 - wood panels) * Set up of Sonae Tourism a aN Sonae: the 1s
Slide 6: History: Strategic businesses and telecommunications
1. SONAE OVERVIEW History DEVELOPMENT OF STRATEGIC BUSINESSES INTERNATIONAL GROWTH AND EXPANSION INTO TELECOMMUNICATIONS AND REORGANISATION OF THE BUSINESS PORTFOLIO technologies WeDo (business assurance company) commercial launching + Sonaecom takeover bid for PT and PT Multimédia (2006) Launch of
Slide 7: History: International growth and reorganisation
1. SONAE OVERVIEW History INTERNATIONAL GROWTH AND REORGANISATION OF THE BUSINESS PORTFOLIO + Launch of the new corporate identity ; Creation of a concept for franchising supermarkets + International expansion of several brands from Sonae (Meu Super) (Zippy, Worten, Sport Zone, Berg, Deeply, ...) fo
Slide 8: History: International growth and reorganisation
1. SONAE OVERVIEW History INTERNATIONAL GROWTH AND REORGANISATION OF THE BUSINESS PORTFOLIO + Roll-out of new store concepts for Worten, Sport Zone,MO and = +_ Sport Zone opens first international store in franchising (Ceuta, Zippy Spain) + Sonaecom launches a tender offer for the acquisition of a +
Slide 9: History: International growth and reorganisation
1. SONAE OVERVIEW History INTERNATIONAL GROWTH AND REORGANISATION OF THE BUSINESS PORTFOLIO + Sport Zone enters the Indian market Paulo de Azevedo becomes Chairman and Co-CEO of Sonae. Angelo Paupério is elected as Co-CEO Continente celebrates 30 years + Sonae RP concludes sale and leaseback transac
Slide 10: History: International growth and reorganisation
1. SONAE OVERVIEW History INTERNATIONAL GROWTH AND REORGANISATION OF THE BUSINESS PORTFOLIO + Sonae RP concludes 3 sale and leaseback transactions amounting to 230 ME + Sonae Sierra sells 25% of Sierra Portugal Fund to Madison International Realty + Sonae SR acquires 50% of Salsa capital + Sonae MC
Slide 11: Group structure
1. SONAE OVERVIEW Group structure PORTFOLIO OF BUSINESSES WITH LEADING POSITIONS IN EACH SECTOR Shopping Centers ial a onal Lary see, es ome Teo P Be and (ay 16% 89.9% * Participation held through Sonaecom . ° ° ° Se ec cceeereeceereeecesres eres cceneeeeeeeeeesesecceeerceeeee® CN) « CWRAYN il
Slide 12: Corporate strategy
1, SONAE OVERVIEW Corporate strategy VALUE CREATION P oe through Sonae'’s 3 Ay scrnationa) A Diversification BA andnenforce . . . : . of Investment f= Exceptional strategic pillars Pa Expansion 7 ; ; Assets and Competencies i WINNING THE CORE is at the po} oar ° LOSAN cornerstone of our ¥ P ulabox s
Slide 13: Group breakdown
1. SONAE OVERVIEW Group breakdown BREAKDOWN PERBUSINESS —juanover UNDERLYING EBITDA MARGIN ME % Turnover Turnover breakdown (1H16) 2014 2015 1HIS 1HI6 2014 2015 1HIS 1HI6 % Total Turnover Sonae 4,974 5014 2,329 2,431 Sonae 7.6% 6.6% 5.7% 4.6% Sonae MC 3.461 3490 1633 1691 Sonae MC 7.0% 6.2% 5.3% 4.8
Slide 14: House of Brands
1. SONAE OVERVIEW House of Brands SONAE'S MISSION IS TO CREATE MORE THAN MORE THAN REPRESENTING REPRESENTING LONG-TERM ECONOMIC AND SOCIAL 80 90.000 L1% 28% VALUE, TAKING THE BENEFITS OF RETAIL BRANDS PRODUCTS 0 Ae] PROGRESS AND INNOVATION TO A OF SONAE MC OF SONAE SR GROWING NUMBEROF PEOPLE WERE BO
Slide 15: 2. Operational Review
Slide 16: Sonae MC
. nai M CtERS STRENGTHENING OF LEADING POSITION IN FOQD RETAIL MARKET, WHILE PROTECTING PROFITABILITY
Slide 17: A leading brand in Portugal
2. OPERATIONAL REVIEW - SONAE MC A leading brand in Portugal CONTINENTE Considered over the last 13 years as one of the most trusted brands in Portugal by consumers (survey “Trusted brands” carried out by Reader's Digest) ~ EXPOSURE TO DIVERSE FOOD FORMATS SINGLE BRANDING OF SONAE MC STORES UNDER “C
Slide 18: Retail area
2. OPERATIONAL REVIEW - SONAE MC Retail area 694,000 sqm SONAE MC RETAIL SPACE BY FORMAT (1Hi6) COF RETAIL SPACE, — MAINLY STORES (total = 526) 303 oon sam (total = 635 thousand) DISTRIBUTED 2u6 BETWEEN HYPERS AND SUPERS D3 4 59 eB * Mainly parapharmacies a t C Model i C LI + other" a = aa - a and c
Slide 19: Market share growth
2. OPERATIONAL REVIEW - SONAE MC Market share growth LEADERSHIP IN THE PORTUGUESE FOOD RETAIL MARKET FOOD RETAIL MARKET SHARES (1016) CONTINENTE Hee Sonae MC 2nd Player 3rd Player 4th Player 5th Player 6th Player Information as of March 2016, according to Homescan Nielsen, Public Information and int
Slide 20: Continente loyalty card
2. OPERATIONAL REVIEW - SONAE MC Continente Loyalty card PERFORMANCE LEVERAGES ON THE VALUE AND SUCESS OF THE LOYALTY PROGRAM Seas A DIFFERENTIATING TOOL AMONG RETAILER IN THE PORTUGUESE MARKET SUPERIOR CUSTOMER INSIGHT IN PORTUGAL * Targeted promotions, with discounts provided as “credit” in repeat
Slide 21: Cartão Universo
2. OPERATIONAL REVIEW - SONAE MC & 2=MC Cartao INNOVATIVE PRQJECT THAT AGGREGATES THE VARIOUS Universo LOYALTY AND PAYMENT CARDS OF SONAE BUSINESSES LAUNCHED IN UNIVERSALLY ACCEPTED MASTERCARD WITH NO ANNUAL FEES NOVEMBER 2015 NEW LOYALTY * Innovative open loop payment and loyalty card FEATURES - Di
Slide 22: E-commerce website
2. OPERATIONAL REVIEW - SONAE MC MC E-commerce website A renewed user experience: new stores, new navigation & new services! Sales caGR: +11% 2014 MERCADO DA FRUTA CONTINENTE Deliveries >450.000 2014 Registered users caGR: +135% 2014: >350.000 Buying users caGR: +15% 2014: >60.000 Pageviews >120M )
Slide 23: Mobile experience and Wi-fi
2. OPERATIONAL REVIEW - SONAE MC Mobile experience Wi-fi emacs | Ohnens Maca Fuji 75/85 Bw @VisRes . vs 23 Oey @Viceu | 77 a Precis ans ° g | Eueaum Se = : | Z ee @setubal — @ Evora Oren i - @ bea APP APP Tira-Vez APP Yammi APP Listas APP Cartao Continente Apr 2015 Oct 2014 Jul 2014 Continente —~ Oc
Slide 24: New adjacent business opportunities: Meu Super franchising
2. OPERATIONAL REVIEW - SONAE MC New adjacent business opportunities LEVERAGE Mileu Meu Super reaches 229 stores A ow Super in the end of June 2016 FRAN C H IS IN G + Franchised local food retail stores * Convenience stores, located in residential areas: sales | Number of stores 205 2 = 183 area bet
Slide 25: New adjacent business opportunities: Well's
2. OPERATIONAL REVIEW - SONAE MC New adjacent business opportunities OWN STORES and FRANCHISING Wells SAUDE-OPTICA Health and well-being + Parapharmacy, beauty products, health and well-being care + Eye glasses and optical services Additional services Spa * Cosmetic + Nutrition + Dental care + Ortho
Slide 26: New adjacent business opportunities: leverage on know-how in retail
2. OPERATIONAL REVIEW - SONAE MC New adjacent business opportunities LEVERAGE ON KNOW-HOW IN RETAIL Coffee shops and small snack-bars + Typically next to Sonae MC supers + Variety and quality with a fast service fresh products and great price + 113 own stores + 5 franchising stores (1H16) Book shops
Slide 27: Private label
2. OPERATIONAL REVIEW - SONAE MC Private label PERFORMANCE # OWN REFERENCES AND % FMCG SALES REFLECTS a THE STRONG OWN LABEL PROGRAMME IS MANAGED INTERNALLY AND CONTINUOUS AND NOW COMPRISES MOST PRODUCT CATEGORIES INVESTMENT INVESTMENT IN OWN BRANDS IN PRIVATE LABEL a + Broadening of private label r
Slide 28: Profitable growth
2. OPERATIONAL REVIEW - SONAE MC Profitable growth GROWING MARKET SHARE, WHILE REINFORCING REFERENCE PROFITABILITY CONTINENTE 1H16 TURNOVER GROWING by 3.6% y.0.y. thanks to store network expansion and a large number of measures aimed at reinforcing the value proposition of Sonae MC, whilst improving
Slide 29: International expansion and consolidation of market leadership in Portugal
INTERNATIONAL EXPANSION AND CONSOLIDATION OF MARKET LEADERSHIP INPORTUGAL
Slide 30: 1,344 2 54 480 4 1 352 5 2 348 3 1 269 39
181 119 659 49 66 1,344 82 66 801 35 33 937 3 1 11 1 1 23 112 54 480 4 1 352 5 2 348 3 1 269 39 12 301 21 6 280 17 4 256 31 5 171 10 3 345 1 0 140 414 250 119 109 61 14
Slide 31: Sonae SR: Number of stores and main financial indicators
2. OPERATIONAL REVIEW - SR Number of stores Portugal STORES Woreen 181 414 wo" oe Zippy 39 including 13 under S. AREA 250k sqm International STORES Worten Spain 49 Sport Zone Spain 35 Sport Zone Others 4 MO Spain 4 MO others 8 Zippy Spain 21 Zippy others 48 Losan nh 180 including 66 under franchisin
Slide 32: International expansion
2. OPERATIONAL REVIEW - SR International Expansion INTERNATIONALI- FRANCHISING CONTRACTS SATION MOSTLY es oN RIES BASED ON NEW | ZIPPY | EXPANSION MODELS: men rue Azerbaijan India Cyprus France JOINT-VENTURES Dominican Rep Portugal FRANCHISING er ] WHOLESALE owas Mo Kazakhstan Bulgaria Kurdistan Can
Slide 33: Salsa acquisition
Salsa ACQUISITION OF AN INTERNATIONALLY RENOWNED JEANSWEAR BRAND This acquisition brings to SONAE... + Astrong brand with proven international track record + Strong growth potential with relatively low capital intensity given relevance of 3-4 party distribution + Reinforcement of internal competenci
Slide 34: Operational Review - RP
2. OPERATIONAL REVIEW - RP ACTIVE MANAGEMENT OF RETAIL REAL ESTATE : ASSETS 34
Slide 35: Assets portfolio
2. OPERATIONAL REVIEW - RP Assets Portfolio Properties anchored by CONTINENTE Properties are presented as factions in Shopping Centres (22 of our 41 hypermarkets) or stand alone stores. Stores are located strategically in highly populated areas. In the case of stand alone stores, the building genera
Slide 36: Strategy of asset monetisation
2. OPERATIONAL REVIEW - RP Strategy of Asset Monetisation GROSS BOOK VALUE (1H16) 1.25 billion Euros 2h3% 16% 4% 46% 29% mContinente mContinente Modelo mContinente Born Dia Logistics & Offices Others ) Assets W/out Income “(rs roman organised by anchor SOMLE RP From 2010 to 2011 Sonae completed 8 sa
Slide 37: Sonae freehold level
2. OPERATIONAL REVIEW - RP Sonae Freehold Level Following the FOOD RETAIL GENERAL RETAIL transactions carried % of space owned freehold % of space owned freehold out over the last 10% wes quarters Sonae retail 0 ao real estate level of 80% average 4% os freehold as of 1H16 om foe — was significantly
Slide 38: Equity consolidated businesses
4. EQUITY CONSOLIDATED BUSINESSES SONAE SIERRA (Shopping Centres) 50% ownership NOS (Telecoms) Ownership through Sonaecom
Slide 39: Sonae Sierra: Resilient performance
3, EQUITY CONSOLIDATED BUSINESSES Resilient Performance A SELF SUSTAINABLE COMPANY WITH INCREASING EXPOSURE TO EMERGING MARKETS IN 1H16*: + Occupancy rate = 96.1% + Tenant sales increased by 2.5% y.0.y. in Europe and decreased by 22.3% in Brazil (decreasing by 3.1% y.o.y. in local currency) + Positi
Slide 40: Strategy of recycling capital and services provision
3. EQUITY CONSOLIDATED BUSINESSES Strategy of Recycling Capital and Services Provision TO GROW IN EMERGING TO MATURE ASSETS Munster (Germany) 2012 MARKETS Parque Principado (Spain) 2013 Valecenter (Italy) 2013 AND SERVICES Airone(Italy) 2013 Le Terraze (Italy) 2014 BUSINESS La Farga (Spain) 2014 Tor
Slide 41: NOS value creation
3. EQUITY CONSOLIDATED BUSINESSES NES Value CONSOLIDATION UNLOCKED A SIGNIFICANT NZ ee Creation VALUE CREATION On May 16" 2014,NOSwas august 27% 2013: ZON OPTIMUS (NOS) was created NOS market performance launched, a single brand for all segments and for all services, replacing ZON 130 A=+2768% OPTIM
Slide 42: 4. Recent Financial Performance
Slide 43: Overview: key financials 1H16
4. RECENT FINANCIAL PERFORMANCE Overview Resilient Efficiency gains allowing for turnover performance reference operating profitability KEY FINANCIALS 1H16 TURNOVER UNDERLYING EBITDA UNDERLYING EBITDA Mg. TOTAL NET DEBT 2.43bn 111m 4.6% 1.59bn a aN .
Slide 44: Turnover
4. RECENT FINANCIAL PERFORMANCE Turnover CONSOLIDATED ... BENEFITING FROM THE POSITIVE CONTRIBUTIONS OF TURNOVER SONAE MC and SONAE SR GREW by 4.4% TO €2.43 BNIN CONSOLIDATED TURNOVER TURNOVER PER BUSINESS (M€) 1H16 a WS 16 you. 2,329 2,431 r 4,821 4974 5,014: ; SONAE RP. -27.0% SONAEIM AT 23% 2,306
Slide 45: EBITDA
4. RECENT FINANCIAL PERFORMANCE EBITDA IN A DIFFICULT .. SUPPORTED BY THE IMPLEMENTATION OF OPERATIONAL MACRO EFFICIENCY PROGRAMMES NUP ENT, UNDERLYING EBITDA UNDERLYING EBITDA PER BUSINESS (M€) UNDERLYING SONAE cs TT EBITDAREACHES 5 “ sa SONAEME 8 ie €111M in 1H16 SONAE RP 154 132 ill 2014 2015 y.0
Slide 46: Capital structure: net financial debt
4. RECENT FINANCIAL PERFORMANCE Capital Structure Net Financial Debt 2Q16 MC, SR and IM 836 Holding & Other 538 Sonae IM 10 TOTAL FINANCIAL NET DEBT 1,385 All refinancing needs for next 18 months already secured an FINANCIAL NET DEBT LTE spectrum From 2Q13 to 2Q14 total payment by decline of €571 M
Slide 47: Capital structure: convertible bonds
4. RECENT FINANCIAL PERFORMANCE Capital Structure June 4th 2014 Sonae issued €210.5 Min convertible bonds COVERTIBLE BONDS 210.5 ME 122 million shares Initial conversion price 1.726 €/share Premium 35% Maturity 5 years-redeemed at par at maturity Coupon 1.625% per annum, payable semi-annually in arr
Slide 48: Capital structure by business
4. RECENT FINANCIAL PERFORMANCE Capital Structure AN APPROPRIATE — RETAIL HOLDING & OTHER CAPITAL NET DEBT/REC. EBITDA LOAN -TO-VALUEC) STRUCTURE IN EACH BUSINESS TO SUPPORT ACTIVITIES AND INVESTMENTS 127 5 1014 1H14 9M14 2014 1015 1H15 9M15 2015 1016 1HI6 TH14 9M14 2014 «1015 IHI5 9MIS5 2015 1016 1
Slide 49: Shareholder remuneration
4. RECENT FINANCIAL PERFORMANCE Shareholder Remuneration DIVIDEND PAYER The resilience of the cash flows generated gives confidence ON AREGULAR © onthe ability to maintain shareholder remuneration policy BASIS OBJECTIVE 3.85 cents 5.5% AN eee DIVIDEND PER SHARE 2015 DIVIDEND YIELD SHAREHOLDER REMUNE
Slide 50: Valuation
4. RECENT FINANCIAL PERFORMANCE Valuation SIGNIFICANT DISCOUNT VS “SUM- OF-THE-PARTS” VALUATION SONAE Market Valuation (€M) €1.69 Sonae MC enterprise value 1649 Sonae SR enterprise value 656 Worten 35 SONAE NAV per share Sports & Fashion 331 Sonae RP (invested capital @ book value) 879 Retail busine
Slide 51: Analyst coverage and share price
4. RECENT FINANCIAL PERFORMANCE Valuation SONAE IS ACTIVELY BROKER Date Recommendation Price Target Average price COVERED BY —fidentis_ Sept u tee target of €1.23 7 SELL SIDE “bardays ll 075 ; EQUITY ANALYSTS CaixaBl ——_Jun16 iso + 75.0% Equita _May16 Buy - Best Picks 1.40 ~ when compared with share
Slide 52: Shareholdings
4. RECENT FINANCIAL PERFORMANCE Shareholdings A STABLE SHAREHOLDER STRUCTURE Reference shareholder, Efanor, a family holding FREE FLOAT OF CIRCA sx 40% compan » BPI stake includes Equity swap Fundacao of circa119 million Sonae shares Berardo (-6% of share capital) 25% BPH 8.9% i EURONEXT SHARE CAPIT
Slide 53: Conclusion
CONCLUSION AN ATTRACTIVE * Growing leading market positions in Portugal, while protecting INVESTMENT operational profitability OPPORTUNITY * An internationalisation strategy based on a “capital light” approach, enabling future growth and value creation * Significant deleveraging made possible by org
Slide 54: Safe Harbour
INVESTOR PRESENTATION Octoberr 2016 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 ar