Sonae Sgps Sa · EURONEXT:SON
Sonae Sgps Sa — Sonae — Investor Presentation (February 2011)
45 slides from Sonae Sgps Sa's investor presentation, February 2011
Slide 1: Investor Presentation February 2011
INVESTOR PRESENTATION February 2011
Slide 2: Investor's Key Questions and Concerns
INVESTOR’S KEY QUESTIONS AND CONCERNS 2
Slide 3: Q1. What is Sonae?
Q1. Q1 WHAT IS SONAE?
Slide 4: We are Sonae, a retail company
Q1. WHAT IS SONAE? WE ARE SONAE A RETAIL COMPANY 100% 100% 100% 50% 53% SONAE MC SONAE SR SONAE RP SONAE SIERRA SONAECOM Food Retail Specialised Retail Properties Shopping Centres Telco • Market leader in food Retail and specialized p retail Hypers Non-Food Non Food Retail Retail real Shopping centr
Slide 5: Stable shareholder structure with free float
Q1. WHAT IS SONAE? WITH A STABLE 34.0% FREE FLOAT SHAREHOLDER STRUCTURE 53.0% OF CIRCA 47% Reference shareholder, Efanor *including BPI equity swap Efanor,, a family y holdingg Bestinver company 2.0% BPI Norges Bank 8.9% Others 2.1% SHARE CAPITAL AVERAGE DAILY MARKET FREE FLOAT BPIstake includes 2,0
Slide 6: Q2. What is your corporate strategy?
Q2. Q2 WHAT IS YOUR CORPORATE STRATEGY?
Slide 7: Value creation through international expansion and strengthening of core businesses
Q2. WHAT IS YOUR CORPORATE STRATEGY? VALUE CREATION CORPORATE STRATEGIC PILLARS THROUGH GO INTERNATIONAL DIVERSIFY LEVERAGE INTERNATIONAL INVESTMENT STYLE EXCEPTIONAL ASSET EXPANSION BASE IN PORTUGAL AND THE • THE MAIN STRATEGIC PRIORITY • ADOPT THE MOST APPROPRIATE • INNOVATE STRENGTHENING • DILUTI
Slide 8: Corporate strategy reflected in each business strategy
Q2. WHAT IS YOUR CORPORATE STRATEGY? CORPORATE SONAE MC SONAE SR SONAE RP STRATEGY REFLECTED FOCUS ON LEADERSHIP FOCUS ON GROWTH AND ASSET IN EACH RETAIL AND PROFITABILITY INTERNATIONALIZATION MONETIZATION BUSINESS • Consolidate market leadership • Configure an ambitious international • Plan to rele
Slide 9: Corporate strategy materialised in MLT financial goals
Q2. WHAT IS YOUR CORPORATE STRATEGY? CORPORATE PROFITABLE INTERNATIONAL REDUCE GROWTH EXPANSION DEBT LEVEL STRATEGY MATERIALISED IN MLT FINANCIAL ROE 25% of turnover Deleveraging over GOALS >15% andd 35% off assets t ti in time i absolute b l t in international and relative terms Deliver growth oper
Slide 10: Q3. What have you done so far?
Q3. Q3 WHAT HAVE YOU DONE SO FAR?
Slide 11: Profitable growth and new adjacent business areas
Q3. WHAT HAVE YOU DONE SO FAR? PROFITABLE GROWTH AND NEW ADJACENT BUSINESS AREAS 11
Slide 12: Profitable growth: leadership of the food retail market
Q3. WHAT HAVE YOU DONE SO FAR? Profitable G th Growth IN 2010 FOOD MARKET WE INCREASED LEADERSHIP MODELO INCREASE IN SALES CONTINENTE OF THE FOOD (+5%) ABOVE THAT RETAIL MARKET OF THE MODERN 1.8X RETAIL MARKET 2 9X 2.9X 3 2X 3.2X 4.1X 4.1X Market 2nd 3rd 4th 5th 6th Leader Player y Player y Player y
Slide 13: Leadership has enabled growth and profitability
Q3. WHAT HAVE YOU DONE SO FAR? Profitable G th Growth LEADERSHIP SALES ON A LIKE FOR LIKE BASIS 2010 = 3% EBITDA margin LTM2010 = 7% IIncreasing i from f 6 4% in 6.4% i 2009 EBITDAR marginLTM2010 = 11% • Increasing I i from f 10% in i 2009 HAS ENABLED Benefiting from a clear value reflecting scale,
Slide 14: Customer centricity retail and loyalty program
Q3. WHAT HAVE YOU DONE SO FAR? Profitable G th Growth PERFORMANCE NEW TECHNIQUES Q OF USING CLIENT INFORMATION: LEVERAGES ‘CUSTOMER CENTRICITY RETAIL’ ON THE VALUE AND SUCESS OF THE LOYALTY 2008 2009 2010 PROGRAM NUMBER OF CLIENTS WITH LOYALTY CARD 2.8 million 2.9 million >3.0 million % OF SALES ASS
Slide 15: International sourcing
Q3. WHAT HAVE YOU DONE SO FAR? Profitable G th Growth PERFORMANCE KEY ISSUE: REFLECTS INTERNATIONAL SOURCING THE STATE OF THE ART BUSINESS • International • Recurrent • ~80.000 SKU’s • Sonae MC PROCESSES procurement, contacts and ~2.000 with 14% quality control, in 50 countries suppliers of internat
Slide 16: Investment in private label
Q3. WHAT HAVE YOU DONE SO FAR? Profitable G th Growth PERFORMANCE # OWN REFERENCES AND % FMCG SALES REFLECTS THE STRONG OWN LABEL OFFERED IN ALL PRODUCT CATEGORIES AND CONTINUOUS AND INCREASING IMPORTANCE INVESTMENT 2,400 2,500 INVESTMENT IN OWN BRAND IN PRIVATE LABEL 2,100 • Broadening of the Own B
Slide 17: Solid organic growth in Portugal
Q3. WHAT HAVE YOU DONE SO FAR? Profitable G th Growth PERFORMANCE ORGANIC GROWTH IN LAST 12 MONTHS REFLECTS Sales area (‘000 m2) THE SOLID STORES NEW STORES: ORGANIC GROWTH 415 +17,000m +17 000m2 IN PORTUGAL 528 544 +44 stores 492 +3% SALES AREA 544,000 M2 2008 2009 2010 Note: 2010 figures released
Slide 18: Operational efficiency
Q3. WHAT HAVE YOU DONE SO FAR? Profitable G th Growth PERFORMANCE COST CONTROL STOCK IMPROVEMENTS REFLECTS OUR OPTIMIZATION IN OPERATIONAL OPERATIONAL EFFICIENCY EFFICIENCY Cost-cutting measures Reduction Implementation Specific teams focused on average stock of the Kaizen method on minimizing (less
Slide 19: Strengthening of competencies
Q3. WHAT HAVE YOU DONE SO FAR? Profitable G th Growth … AND THE CONTINENTE AND MODELO EACH HAVE DISTINCTIVE COMPETENCIES STRENGTHENING OF OUR STRONG BRAND PRODUCT EXCELLENCE COMPETENCIES RECOGNITION OFFER VARIETY OF THE LOGISTICS AND VALUE INFRASTRUCTURE PROPOSAL Continente is considered Continente:
Slide 20: New adjacent business opportunities
Q3. WHAT HAVE YOU DONE SO FAR? New adjacent b i business opportunities t iti LEVERAGE ON KNOW-HOW IN RETAIL • A new store t conceptt • Convenience C i b i business • Reinforcement R i f t off the th for Deep Frozen Products • Franchised local food retail existing wholesale business • Offers a wide r
Slide 21: Profitable growth and international expansion
PROFITABLE GROWTH AND INTERNATIONAL EXPANSION 21
Slide 22: Growth and profitability in Portugal
Q3. WHAT HAVE YOU DONE SO FAR? Profitable G th Growth WE MAINTENED TURNOVER P t l (M€) Portugal EBITDA P t l (M€) Portugal NEW STORES: L 12 months Last h GROWTH *Last twelve months (Oct 09 - Sept 10) AND PROFITABILITY +18,000m2 IN PORTUGAL 898 988 1,041 71 76 +18 stores Strengthening of leadership +
Slide 23: Accelerated international growth
Q3. WHAT HAVE YOU DONE SO FAR? International E Expansion i WE ACCELERATED SPORTZONE = 28 ((+14) 14) | WORTEN = 25 ((+11) 11) | ZIPPY = 36 ((+26) 26) OUR INTERNATIONAL GROWTH INTERNATIONAL TURNOVER NEW STORES: ORGANIC GROWTH International (M€) Last 12 months 000 m2) Sales area ((‘000 +51 stores 108 2
Slide 24: Sonae SR international EBITDA
Q3. WHAT HAVE YOU DONE SO FAR? International E Expansion i INTERNATIONAL EBITDA (M€) *Last twelve months (Oct ( 09 - Sept 10)) Sonae SR Sonae SR Portugal EXPANSION EFFORT Sonae SR International 76 IMPACTING 71 PROFITABILITY BUT 58 IN LINE WITH THE SONAE SR EBITDA GOAL OF POSITIVE EBITDA IN 2012,, RE
Slide 25: Internationalization based on new expansion models
Q3. WHAT HAVE YOU DONE SO FAR? International E Expansion i INTERNATIONALI INTERNATIONALI- 1ST JOINT-VENTURES 1ST FRANCHISING > 110 STORES ZATION BASED CONTRACTS 10 COUNTRIES ON NEW EXPANSION Worten Canary Islands Zippy Canary Islands Spain MODELS: SportZone Canary Islands Zippy Middle East Kingdom o
Slide 26: Asset monetization
ASSET MONETIZATION 26
Slide 27: Retail property: an important source of capital
Q3. WHAT HAVE YOU DONE SO FAR? Asset M Monetization ti ti RETAIL INVESTED CAPITAL HYPERMARKETS 8 SALE & LEASE BACK (end 9M10) TRANSACTIONS PROPERTIES Continente COMPLETED 1.5 Billion Euros 34 stores owned BUSINESS UNIT (Net book value) 90% total sales area Total Cash-In = 117 million € Capital Gain
Slide 28: Q4. Strategic options for shopping centre and telecom businesses
Q4. Q4 WHAT ARE YOUR STRATEGIC OPTIONS FOR THE SHOPPING CENTRE AND TELECOMMUNICATIONS BUSINESSES?
Slide 29: Sierra: a self sustainable company
Q4. WHAT ARE YOUR STRATEGIC OPTIONS FOR THE SHOPPING CENTRE BUSINESS? A SELF AN INTERNATIONAL SHOPPING CENTRE SPECIALIST 50% OWNED JOINT-VENTURE SPECIALIST, JOINT VENTURE COMMITMENT TO ACHIEVE ABOVE INDUSTRY AVERAGE RETURN SUSTAINABLE WITH GROSVENOR • Return on Equity - long term target of 15% COMPA
Slide 30: Sierra: grow in emergent markets
Q4. WHAT ARE YOUR STRATEGIC OPTIONS FOR THE SHOPPING CENTRE BUSINESS? GROW GROW IN PROMISING CONTINUE TO MAKE NEW APPROACH MARKETS: OPERATIONAL TOWARDS EUROPE ASSET IN EMERGENT • Speed up expansion IMPROVEMENTS, PORTFOLIO MARKETS in Brazil, so as to capitalize in spite of the fall • Shift to a more
Slide 31: Sonaecom: a sustainable stand alone business
Q4. WHAT ARE YOUR STRATEGIC OPTIONS FOR THE TELECOMMUNICATIONS BUSINESS? • Stable/growing mobile business: • Comfortable capital structure A SUSTAINABLE growing i market k t share; h sustaining • Good performing wholesale: t i i goodd margins i • Stable f St bl reference shareholder h h ld • Strong
Slide 32: Focus: cash flow management
Q4. WHAT ARE YOUR STRATEGIC OPTIONS FOR THE TELECOMMUNICATIONS BUSINESS? CASH FLOW MANAGEMENT FOCUS On the ggrowth On cash-generation, g of the mobile business, reinforcing efficiency leading mobile market programs share gains, gains particularly in the mobile data segment 32
Slide 33: Q5. Have you reached your financial objectives?
Q5. Q5 HAVE YOU REACHED YOUR FINANCIAL OBJECTIVES?
Slide 34: In 9M10 we continued to deliver profitable growth
Q5. HAVE YOU REACHED YOUR FINANCIAL OBJECTIVES? IN 9M10 WE CONTINUED TO DELIVER PROFITABLE GROWTH ON TRACK GROWTH, OF OUR INTERNAL OBJECTIVES TURNOVER RECURRENT EBITDA TURNOVER RETAIL NET DIRECT PROFITS 6% +6 2% +8 +12 8% +30 0% 34
Slide 35: We continued to improve our return on equity
Q5. HAVE YOU REACHED YOUR FINANCIAL OBJECTIVES? WE 21% 21% CONTINUED 15pp 14% 14pp 14pp 16pp 15pp 17pp 18pp 15% 16pp TO IMPROVE 13pp 13% 11pp pp 11% 14% 11pp 8% OUR RETURN 10pp 11pp 7% 5% 6pp 3pp 3% 2% ON EQUITY 0pp -4pp -3pp -7pp -7pp -2pp Direct Income -10pp -11pp -11pp contribution to RoE ROE Ind
Slide 36: While investing in future growth
Q5. HAVE YOU REACHED YOUR FINANCIAL OBJECTIVES? NUMBER OF STORES W HILE GROSS CAPEX (9M10) OUTSIDE PORTUGAL INVESTING 278M€ IN FUTURE OUTSIDE PORTUGAL GROWTH 70M€ 89 66 High levels of investment i retail in t il unit it organic i expansion: i 27 +40,000m 2 (9M10) 13 9M08 9M09 9M10 2010 36
Slide 37: ... and while reducing net debt
Q5. HAVE YOU REACHED YOUR FINANCIAL OBJECTIVES? DELTA VS. SQLY ... AND NET DEBT W HILE 335 3,136M€ REDUCING NET DEBT 52 -79 -258 -299 -301 2Q 3Q 4Q 1Q 2Q 3Q 4Q 09 09 09 10 10 10 10E 37
Slide 38: Major improvement in debt ratios
Q5. HAVE YOU REACHED YOUR FINANCIAL OBJECTIVES? MAJOR IMPROVEMENT EBITDA/INTEREST NET DEBT/EBITDA IN DEBT CONSOLIDATED FIGURES CONSOLIDATED FIGURES RATIOS 10.9x 11.4x 4.8x 9.7x 4.5x 4.6x 8 2x 8.2x 4.4x 7.8x 7.9x 7.1x 4.1x 3.8x 3.7x 3.6x 6 0x 6.0x WITHOUT SONAE SIERRA 4Q 1Q 2Q 3Q 4Q 4Q 1Q 2Q 3Q 4Q 09
Slide 39: Q6. Isn't Sonae a highly leveraged company?
Q6. Q6 ISN T SONAE ISN’T A HIGHLY LEVERAGED COMPANY?
Slide 40: An appropriate capital structure in each business
Q6. ISN´T SONAE A HIGHLY LEVERAGED COMPANY? AN APPROPRIATE CAPITAL STRUCTURE SHOPPING CENTRES RETAIL AND TELECOM IN EACH BUSINESS AND HOLDING LOAN NET DEBT/EBITDA TO SUPPORT TO VALUE 4.0x FUTURE GROW TH 50.1% 3.4x 3.7x 47.2% PLANS 46.1% 46.8% 3.4x 16.3% 2.2x 2.1x 14.7% 15.4% 14.8% 2.0x 1.9x SIERRA R
Slide 41: Total net debt is expected to drop significantly
Q6. ISN´T SONAE A HIGHLY LEVERAGED COMPANY? TOTAL NET DEBT TOTAL NET DEBT PLAN TO REACH IS EXPECTED IS EXPECTED TO DROP INVESTMENT GRADE TO DROP STEADILY DURING BY 2012 SIGNIFICANTLY THE NEXT 6 YEARS • Strong growth efforts combined • Each company should be perceived with planned reduction of debt a
Slide 42: Q7. Why should we buy into your stock?
Q7. Q7 WHY SHOULD WE BUY INTO YOUR STOCK?
Slide 43: Undervalued share price
Q7. WHY SHOULD WE BUY INTO YOUR STOCK? UNDERVALUED SONAE’S PER HAS BEEN UNDERVALUED BOTH WHEN COMPARED SHARE PRICE TO THE MARKET AND TO THE RETAIL SECTOR SONAE PER SONAE PER (DIRECT) Computed using total income Computed using direct income 22 19 19 22 16 17 16 17 15 14 14 14 15 15 16 15 16 14 12 12
Slide 44: Dividend payer on a regular basis
Q7. WHY SHOULD WE BUY INTO YOUR STOCK? DIVIDEND PAYER The resilence of the cash flows generated gives confidence ON A REGULAR on the th ability bilit to t maintain i t i shareholder h h ld remuneration ti policy li BASIS MAINTAIN THE 3 15 Cents 3.15 C t 3.6 3 6% 37% 67% SHAREHOLDER REMUNERATION DIVI
Slide 45: An attractive investment opportunity
Q7. WHY SHOULD WE BUY INTO YOUR STOCK? AN ATTRACTIVE INVESTMENT OPPORTUNITY • Confirmed growth in Turnover and Profitability in the face of adverse macroeconomic conditions • A cclear ea aand daambitious b t ous st strategy ategy that will enable for future growth and value creation • Strong g cultu