CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements for the year ended 31 December 2018

NOVABASE S.G.P.S., S.A.

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INDEX

	CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2018
	● Consolidated Statement of Financial Position as at 31 December 2018
●	Consolidated Statement of Profit and Loss for the year ended 31 December 2018
	● Consolidated Statement of Comprehensive Income for the year ended 31 December 2018
	● Consolidated Statement of Changes in Equity for the year ended 31 December 2018
	● Consolidated Statement of Cash Flows for the year ended 31 December 2018	10
●	Notes to the Consolidated Financial Statements for the year ended 31 December 2018	11
	Note 1. General information	11
	Note 2. Significant accounting policies	11
	Note 3. Financial risk management policy	28
	Note 4. Critical accounting estimates and judgements	32
	Note 5. Segment information	33
	Note 6. Companies included in consolidation	35
	Note 7. Property, plant and equipment	37
	Note 8. Intangible assets	38
	Note 9. Investments in associates	39
	Note 10. Financial assets at fair value through profit or loss	40
	Note 11. Deferred tax assets and liabilities	41
	Note 12. Other non-current assets	42
	Note 13. Inventories	42
	Note 14. Financial instruments by category	43
	Note 15. Trade and other receivables	44
	Note 16. Accrued income	45
	Note 17. Derivative financial instruments	45
	Note 18. Other current assets	46
	Note 19. Investment securities and held-to-maturity investments	46
	Note 20. Cash and cash equivalents	46
	Note 21. Share Capital, share premium and treasury shares	47
	Note 22. Reserves and retained earnings	48
	Note 23. Non-controlling interests	48
	Note 24. Borrowings	49
	Note 25. Provisions
	Note 26. Other non-current liabilities	51
	Note 27. Trade and other payables	51
	Note 28. Deferred income and other current liabilities	51
	Note 29. External supplies and services	52
	Note 30. Employee benefit expense	52
	Note 31. Other gains/(losses) - net	52
	Note 32. Depreciation and amortisation	53
	Note 33. Finance income	53 53
	Note 34. Finance costs	53
	Note 35. Share of loss of associates Note 36. Income tax expense	54
	Note 37. Earnings per share	55
	Note 38. Dividends per share	55
	Note 39. Commitments	55
	Note 40. Related parties	56
	Note 41. Discontinued operations	59
	Note 42. Contingencies	59
	Note 43. Additional information required by law	60
	Note 44. Events after the reporting period	60
	Note 45. Note added for translation	60
	REPORTS ISSUED BY THE SUPERVISORY BOARD AND BY THE CMVM REGISTERED AUDITOR	61
●	Report and Opinion of the Supervisory Board - Consolidated Financial Statements	63
●	Auditors' Report - Consolidated Financial Statements	67
	SECURITIES ISSUED BY THE COMPANY AND OTHER GROUP COMPANIES, HELD BY BOARD MEMBERS	75
●	Detail of securities issued by the Company and other group companies, held by board members of Novabase S.G.P.S.	77

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I. CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2018

Consolidated Statement of Financial Position as at 31 December 2018

Note 31.12.18 31.12.17 Assets Non-Current Assets Property, plant and equipment 7 10,235 10,019 Intangible assets 8 16,065 17,162 Investments in associates 9 252 314 Financial assets at fair value through profit or loss 10 3,868 2,796 Held-to-maturity investments 19 - 7,713 Investment securities 19 7,680 - Deferred tax assets 11 10,048 10,448 Other non-current assets 12 1,644 3,256 Total Non-Current Assets 49,792 51,708 Current Assets Inventories 13 33 46 Trade and other receivables 15 45,658 49,745 Accrued income 16 5,464 16,356 Income tax receivable 2,619 1,318 Derivative financial instruments 17 26 18 Other current assets 18 3,851 1,546 Held-to-maturity investments 19 - 7,353 Investment securities 19 1,198 - Cash and cash equivalents 20 63,614 56,136 Total Current Assets 122,463 132,518 Assets from discontinued operations 41 - - Total Assets 172,255 184,226 Equity Share capital 21 15,701 15,701 Treasury shares 21 (188) (188) Share premium 21 43,560 43,560 Reserves and retained earnings 3,016 3,722 Profit for the year 4,737 4,774 Total Equity attributable to owners of the parent 66,826 67,569 Non-controlling interests 23 13,754 13,597 Total Equity 80,580 81,166 Liabilities Non-Current Liabilities Borrowings 24 13,360 16,837 Provisions 25 8,252 10,369 Other non-current liabilities 26 990 744 Total Non-Current Liabilities 22,602 27,950 Current Liabilities Borrowings 24 6,320 6,907 Trade and other payables 27 40,399 41,619 Income tax payable - 578 Derivative financial instruments 17 24 - Deferred income and other current liabilities 28 22,267 25,103 Total Current Liabilities 69,010 74,207 Liabilities from discontinued operations 41 63 903 Total Liabilities 91,675 103,060 Total Equity and Liabilities 172,255 184,226		(Amounts expressed in thousands of Euros)

THE CERTIFIED ACOUNTANT THE BOARD OF DIRECTORS

The accompanying notes are an integral part of these consolidated financial statements

Consolidated Statement of Profit and Loss for the year ended 31 December 2018

		(Amounts expressed in thousands of Euros)
		12 M *
	Note	31.12.18	31.12.17
Continuing operations
Sales	5	894	159
Services rendered	5	147,829	139,563
Cost of sales		(848)	(31)
External supplies and services	29	(53,844)	(51,201)
Employee benefit expense	30	(86,468)	(82,155)
Net impairment losses on trade and other receivables	15	785	-
Other gains/(losses) - net	31	1,951	4,580
Depreciation and amortisation	32	(2,940)	(3,210)
Operating Profit		7,359	7,705
Finance income	33	2,548	6,199
Finance costs	34	(4,039)	(6,776)
Share of loss of associates	35	(62)	(261)
Gain on net monetary position		308	955
Earnings Before Taxes (EBT)		6,114	7,822
Income tax expense	36	(1,100)	(1,382)
Profit from continuing operations		5,014	6,440
Discontinued operations
Profit from discontinued operations	41	-	2,696
Profit for the Year		5,014	9,136
Profit attributable to:
Owners of the parent		4,737	4,774
Non-controlling interests	23	277	4,362
		5,014	9,136
Earnings per share from continuing and discontinued operations attributable to owners of the parent (Euros per share)
Basic earnings per share
From continuing operations	37	0.15 Euros	0.07 Euros
From discontinued operations	37	Zero Euros	0.09 Euros
From profit for the year	37	0.15 Euros	0.15 Euros
Diluted earnings per share
From continuing operations	37	0.15 Euros	0.07 Euros
From discontinued operations	37	Zero Euros	0.09 Euros
From profit for the year	37	0.15 Euros	0.15 Euros

**12 M * - period of 12 months ended**

THE CERTIFIED ACOUNTANT THE BOARD OF DIRECTORS

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2018

	(Amounts expressed in thousands of Euros)
	Note	12 M *
		31.12.18	31.12.17
Profit for the Year		5,014	9,136
Other comprehensive income for the year Items that may be reclassified to profit or loss
Exchange differences on foreign operations, net of tax	11	1,627	(467)
Other comprehensive income for the year		1,627	(467)
Total comprehensive income for the year		6,641	8,669
Total comprehensive income attributable to:
Owners of the parent		5,556	4,533
Non-controlling interests		1,085	4,136
		6,641	8,669

**12 M * - period of 12 months ended**

THE CERTIFIED ACOUNTANT THE BOARD OF DIRECTORS

The accompanying notes are an integral part of these consolidated financial statements

Consolidated Statement of Changes in Equity for the year ended 31 December 2018

(Amounts expressed in thousands of Euros)

		Attributable to owners of the parent
						Exchange dif. Reserves		Non
	Note	Share capital	Treasury shares	Share premium	Legal reserves	operations	on foreign and retained -controlling earnings	interests	Total Equity

Balance at 1 January 2017		15,701	(4)	43,560	3,140	(8,656)	31,164	8,151	93,056
Adjustment on initial application of IAS 29	2.5.	-	-	-	-	-	(693)	(710)	(1,403)
Restated balance at 1 January 2017		15,701	(4)	43,560	3,140	(8,656)	30,471	7,441	91,653
Profit for the year		-	-	-	-	-	4,774	4,362	9,136
Other comprehensive income for the year	23	-	-	-	-	(241)	-	(226)	(467)
Total comprehensive income for the year		-	-	-	-	(241)	4,774	4,136	8,669
Transactions with owners
Dividends	22, 23	-	-	-	-	-	(20,166)	(1,272)	(21,438)
Treasury shares movements	21	-	(184)	-	-	-	(826)	-	(1,010)
Change in consolidation perimeter	23	-	-	-	-	-	-	3,292	3,292
Transactions with owners		-	(184)	-	-	-	(20,992)	2,020	(19,156)
Changes in ownership interests in subsidiaries that do not result in a loss of control
Transactions with non-controlling interests		-	-	-	-	-	-	-	-
Balance at 31 December 2017		15,701	(188)	43,560	3,140	(8,897)	14,253	13,597	81,166
Balance at 1 January 2018		15,701	(188)	43,560	3,140	(8,897)	14,253	13,597	81,166
Adjustment on initial application of IFRS 9 and IFRS 15 (net of tax)	2.2.	-	-	-	-	-	(1,769)	(736)	(2,505)
Restated balance at 1 January 2018		15,701	(188)	43,560	3,140	(8,897)	12,484	12,861	78,661
Profit for the year		-	-	-	-	-	4,737	277	5,014
Other comprehensive income for the year	23	-	-	-	-	1,067	(248)	808	1,627
Total comprehensive income for the year		-	-	-	-	1,067	4,489	1,085	6,641
Transactions with owners
Dividends	22, 23	-	-	-	-	-	(4,654)	(821)	(5,475)
Treasury shares movements	21	-	-	-	-	-	-	-	-
Transactions with owners		-	-	-	-	-	(4,654)	(821)	(5,475)
Changes in ownership interests in subsidiaries that do not result in a loss of control
Transactions with non-controlling interests	22	-	-	-	-	-	124	629	753
Balance at 31 December 2018		15,701	(188)	43,560	3,140	(7,830)	12,443	13,754	80,580

The accompanying notes are an integral part of these consolidated financial statements

Consolidated Statement of Cash Flows for the year ended 31 December 2018

		(Amounts expressed in thousands of Euros)
		12 M *
	Note	31.12.18	31.12.17
Cash flows from operating activities
Cash receipts from customers Cash paid to suppliers and employees		153,600 (138,107)	140,289 (135,426)
Cash generated from operations		15,493	4,863
Income taxes received / (paid) Other operating proceeds / (payments)		(618) (772)	2,016 643
		(1,390)	2,659
Net Cash from operating activities		14,103	7,522
Cash flows from investing activities
Proceeds: Sale of subsidiaries, associates and other partic. companies Loans granted to associates and participated companies Disposal of investment securities / held-to-maturity investments Sale of property, plant and equipment Interest received	19	8 164 11,236 55 1,351	45,636 2,154 3,903 140 1,278
		12,814	53,111
Payments: Acquisition of subsidiaries, assoc. and other partic. companies Purchases of investment securities / held-to-maturity investments Purchases of property, plant and equipment Purchases of intangible assets	19	(462) (5,029) (866) (237)	(371) (11,139) (721) (324)
		(6,594)	(12,555)
Net Cash from investing activities		6,220	40,556
Cash flows from financing activities
Proceeds:
Proceeds from borrowings Capital contribution by non-controlling interests (i) Transactions with non-controlling interests	24 (a) 22	- (60) 741	2,700 883 -
		681	3,583
Payments: Repayments of borrowings Dividends paid Payment of finance lease liabilities Interest paid Purchase of treasury shares	24 (a) 22, 23 24 (a) 21	(4,273) (5,475) (805) (891) -	(6,331) (21,438) (788) (884) (1,010)
		(11,444)	(30,451)
Net Cash used in financing activities		(10,763)	(26,868)
Cash and cash equivalents at 1 January	20	56,136	35,703
Net increase in cash and cash equivalents		9,560	21,210
Effects of exchange rate changes on cash and cash equiv.		(2,053)	(777)
Cash and cash equivalents at 31 December	20	63,643	56,136

12 M * - period of 12 months ended

(i) In 2018: Refund of capital contribution made in excess by the NCI of the Venture Capital Fund created in 2017: FCR NB Capital + Inovação. In 2017: Capital contribution by the NCI of the FCR NB Capital + Inovação.

THE CERTIFIED ACOUNTANT THE BOARD OF DIRECTORS

The accompanying notes are an integral part of these consolidated financial statements

Notes to the Consolidated Financial Statements

for the year ended 31 December 2018

1. General information

Novabase, Sociedade Gestora de Participações Sociais, SA (hereinafter referred to as Novabase, Novabase Group or Group), with its head office in Av. D. João II, 34, Parque das Nações, 1998-031 Lisbon, Portugal, holds and manages financial holdings in other companies as an indirect way of doing business, being the Holding Company of Novabase Group.

Novabase's activity is aggregated into 2 operating segments:

(i) Business Solutions (BS) - This area of Novabase incorporates a number of competencies with technology, management, design and business expertise.

(ii) Venture Capital (VC) - This area develops a corporate venture capital activity throughout Novabase Capital, Sociedade de Capital de Risco, S.A., whose main purpose is to identify and support Portuguese ICT business projects, in early development or expanding, with high value potential and synergies with Novabase.

Novabase is listed on the Euronext Lisbon.

The share capital is represented by 31,401,394 shares (2017: 31,401,394 shares), and all shares have a nominal value of 0.5 Euros each.

These consolidated financial statements were approved and authorized for issuance by the Board of Directors on March 28, 2019. In the opinion of the Board of Directors these financial statements fairly present the Group operations, as well as its financial position, financial performance and cash flows.

These consolidated financial statements will be subject to approval at the Shareholders' General Meeting scheduled for May 7, 2019.

2. Significant accounting policies

The most significant accounting policies applied in the preparation of these consolidated financial statements are described below. These accounting policies have been consistently applied to all years presented in these financial statements, except for the changes mentioned in section 2.2..

2.1. Basis of preparation

The consolidated financial statements of Novabase have been prepared in accordance with International Financial Reporting Standards - IFRS, as adopted by the European Union (EU) as at 31 December 2018.

These financial statements are presented in thousands of euro (EUR thousand).

New standards, interpretations and amendments to existing standards, which became effective as of 1 January 2018

• IFRS 9 (new), 'Financial instruments'. IFRS 9 replaces IAS 39 - 'Financial instruments: recognition and measurement' and brings fundamental change to: (i) classification and measurement of financial assets, introducing a logical approach for the classification driven by the business model in which an asset is held; (ii) recognition in equity of an entity's own credit risk on liabilities elected to be measured at fair value; (iii) impairment recognition on financial assets, by applying the expected credit loss model instead of incurred credit loss model; and (iv) hedge accounting, that aligns the accounting treatment with risk management activities.

• IFRS 15 (new), 'Revenue from contracts with customers'. This new standard applies only to contracts for the delivery of products or services, and requires an entity to recognise revenue when the contractual obligation to deliver the goods or services is satisfied and for the amount that reflects the consideration the entity is entitled to, following a 'five-step model'.

• IFRS 15 (amendment), 'Revenue from contracts with customers - clarifications'. This amendment comprises clarifications to IFRS 15 and provides guidance on: i) identification of the performance obligations in a contract; ii) determination of when revenue from a licence of intellectual property (IP) should be recognised; iii) identification of indicators for the classification of the principal versus agent considerations; and (iv) selection of the practical expedients on transition to IFRS 15.

• IFRS 2 (amendment), 'Classification and measurement of share-based payment transactions'. This amendment clarifies the measurement basis for cash-settled share-based payment transactions and the accounting for changes to a share-based payment plan that change its cashsettled classification to be settled with equity (equity-settled). In addition, it introduces an exception to the principles of IFRS 2, which requires that a share-based payment plan should be treated as entirely equity-settled, when the employer is obliged by tax laws or regulations to withhold an amount for an employee's tax obligation associated with a share-based payment which the entity is then required to transfer to the tax authority on the employee's behalf.

• IAS 40 (amendment), 'Transfers of investment property'. This amendment clarifies that transfers to, or from, investment property can only be made when there is evidence of a change in use. A change in intention is not by itself sufficient to support a transfer.

• 2014 - 2016 Annual cycle of improvements. This cycle of improvements affects the following standard: IFRS 1 - 'First-time adoption of IFRSs', IFRS 12 - 'Disclosure of interests in other entities' (clarification of the scope of the standard) and IAS 28 - 'Investments in associates and joint ventures'.

• IFRIC 22, 'Foreign currency transactions and advance consideration'. This is an interpretation of IAS 21 - 'The effects of changes in foreign exchange rates' and refers to the determination of the 'transaction date' when an entity pays or receives in advance the consideration of contracts denominated in foreign currency. The 'transaction date' determines the exchange rate to be used for currency translation of transactions in foreign currency.

No standard, interpretation or amendment to existing standards adopted by the Group for the first time this year had a significant impact on the consolidated financial statements, except for the changes mentioned in note 2.2..

New standards, interpretations and amendments to existing standards that have been published and are mandatory for annual periods beginning on or after 1 January 2018, but that the Group has not early adopted

• IFRS 9 (amendment), 'Prepayment features with negative compensation' (effective for annual periods beginning on or after 1 January 2019). This amendment enable companies to measure at amortised cost some prepayable financial assets with negative compensation, representing an exemption from the requirements of IFRS 9. In addition, this amendment also clarifies that when a financial liability measured at amortised cost is modified without this resulting in derecognition, a gain or loss should be recognised in profit or loss.

• IFRS 16 (new), 'Leases' (effective for annual periods beginning on or after 1 January 2019). IFRS 16 replaces IAS 17 - 'Leases', with a significant impact on the accounting made by lessees who are now required to recognise for all lease contracts a lease liability, which reflects future lease payments and a 'right-of-use' asset, except for certain short-term leases (<12 months) and low value leases (<\$ 5,000). The definition of a lease has also been changed, based on the 'right to control the use of an identified asset'.

• IAS 19 (amendment), 'Plan amendment, curtailment or settlement' (effective for annual periods beginning on or after 1 January 2019). This amendment is still subject to endorsement by the European Union. This amendment to IAS 19 requires an entity to: (i) use updated assumptions to determine the current service cost and net interest for the remaining reporting period after the change, reduction or settlement of the plan; ii) recognises in profit or loss for the period as part of the past service cost, or as a gain or loss on settlement, any reduction in the surplus of a defined benefit plan, even if that surplus has not previously been recognised due to the impact of the 'asset ceiling'. Changes on 'asset ceiling' is always recorded in other comprehensive income and can not be netted as a result of the year.

• IAS 28 (amendment), 'Long-term interests in associates and joint ventures' (effective for annual periods beginning on or after 1 January 2019). This amendment is still subject to endorsement by the European Union. This amendment clarifies that long-term investments in associates and joint ventures (components of the entity's interest in an associate or a joint venture) that are not being recognised using the equity-method are accounted for in accordance to IFRS 9. This amendment also clarifies that an entity applies the impairment requirements in IFRS 9 when indicators of impairment exist, to long-term interests, which, in substance, form part of the entity's net investment in an associate or joint venture.

• 2015 – 2017 Annual cycle of improvements (effective for annual periods beginning on or after 1 January 2019). This cycle of improvements is still subject to endorsement by the European Union and affects the following standards: IAS 23 - 'Borrowing costs', IAS 12 - 'Income taxes', and IFRS 3 - 'Business combinations' and IFRS 11 - 'Joint agreements'.

• IFRIC 23, 'Uncertainty over income tax treatments' (effective for annual periods beginning on or after 1 January 2019). IFRIC 23 clarifies application of recognition and measurement requirements in IAS 12 - 'Income taxes' when there is uncertainty on the acceptance of a certain tax treatment by Tax Authorities. If there is uncertainty whether tax authorities will accept tax treatment in a particular transaction, the entity shall make its best estimate and record the income tax assets or liabilities according to IAS 12 instead of IAS 37 - 'Provisions, contingent liabilities and contingent assets', based on the expected value or the most probable value.

• 'Amendments to the Conceptual Framework for Financial Reporting (IFRS)' (effective for annual periods beginning on or after 1 January 2020). This amendment is still subject to endorsement by the European Union. As a result of the publication of the new Conceptual Framework, IASB introduced changes to various standards and interpretations: IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, SIC 32, in order to clarify the application of the new definitions of asset / liability and expense / income, as well as some of the qualitative characteristics of useful financial information.

• Amendment to IFRS 3, 'Definition of a business' (effective for annual periods beginning on or after 1 January 2020). This amendment is still subject to endorsement by the European Union. This amendment requires that an acquisition includes an input and a substantial process that together generate outputs. These are defined as goods and services that are provided to customers, which generate income from financial investments and other income, excluding returns in the form of cost reductions and other economic benefits to shareholders. 'Concentration tests' are allowed, which when positive exempt the additional valuation entity from whether it is the acquisition of an asset or business.

• Amendment to IAS 1 and IAS 8, 'Definition of material' (effective for annual periods beginning on or after 1 January 2020). This amendment is still subject to endorsement by the European Union. These changes introduce a modification to the material concept, being part of the wider design of the IASB 'Disclosure Initiative'. Clarifications are made as to the meaning of 'primary users of financial statements'.

It is not expected for new standards, interpretations and amendments to existing standards not yet mandatory and not early adopted, to have a significant impact on the consolidated financial statements, considering the mentioned below in note 2.2. on IFRS 16.

The Group's consolidated financial statements were prepared on a going concern basis, based on the historical cost principle except for 'Financial assets at fair value through profit or loss' and 'Derivative financial instruments', which were measured at fair value (notes 10 and 17).

The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on the Management's best knowledge of current events and actions, actual results ultimately may differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

The Board of Directors believes that the estimates and assumptions adopted do not involve significant risks that may, over the course of the coming financial year, cause material adjustments in the value of the assets and liabilities.

2.2. Changes in significant accounting policies

With reference to 1 January 2018, the accounting standards IFRS 9 - 'Financial Instruments' and IFRS 15 - 'Revenue from contracts with customers' came into force, and were adopted by Novabase in the preparation of its annual financial statements for 2018. In 2019, IFRS 16 - 'Leases' will take place, the last of the 'big 3', the so-called set of standards IFRS 9, IFRS 15 and IFRS 16.

The objective of this note is to give an overview of the impacts of these new standards, IFRS 9 and IFRS 15 in 2018, as well as the expected impact of adopting IFRS 16 in 2019.

Standards that became effective as of 1 January 2018

The following tables summarise the impacts, net of tax, of transition to IFRS 9 and IFRS 15 on reserves and retained earnings and noncontrolling interests, and on the Group's financial position.

Summary of the impacts of adopting IFRS 9 and IFRS 15 on Equity as at 1 January 2018:

	IFRS 9	IFRS 15	Total
Reserves and retained earnings
Services rendered	-	(1,473)	(1,473)
Recognition of expected credit losses	(764)	-	(764)
Related tax	159	309	468
Impact at 1 january 2018	(605)	(1,164)	(1,769)
Non-controlling interests
Services rendered	-	(667)	(667)
Recognition of expected credit losses	(263)	-	(263)
Related tax	54	140	194
Impact at 1 january 2018	(209)	(527)	(736)

Summary of the impacts of adopting IFRS 9 and IFRS 15 on the Financial Position as at 1 January 2018:

	IFRS 9	IFRS 15	Total
Assets
Non-Current Assets	(120)	449	329
Current Assets	(694)	(1,963)	(2,657)
Total Assets	(814)	(1,514)	(2,328)
Equity
Equity attributable to owners of the parent	(605)	(1,164)	(1,769)
Non-controlling interests	(209)	(527)	(736)
Total Equity	(814)	(1,691)	(2,505)
Liabilities
Non-Current Liabilities	-	-	-
Current Liabilities	-	177	177
Liabilities from discontinued operations	-	-	-
Total Liabilities	-	177	177
Total Equity and Liabilities	(814)	(1,514)	(2,328)

The following tables summarise the impacts of adopting IFRS 9 and IFRS 15 on the Group's Consolidated Statement of Financial Position as at 31 December 2018 and its Consolidated Statements of Profit and Loss for the year ended 31 December 2018. There was no material impact on the Consolidated Statement of Cash Flows for the year ended 31 December 2018.

Impact on Consolidated Statement of Financial Position as at 31 December 2018:

				Amounts without
	As reported			adoption of
	31.12.18	IFRS 9	IFRS 15	IFRS 9 and 15
Assets
Non-Current Assets	49,792	(186)	-	49,978
Current Assets	122,463	(517)	-	122,980
Total Assets	172,255	(703)	-	172,958
Equity
Equity attributable to owners of the parent	66,826	(502)	-	67,328
Non-controlling interests	13,754	(201)	-	13,955
Total Equity	80,580	(703)	-	81,283
Liabilities
Non-Current Liabilities	22,602	-	-	22,602
Current Liabilities	69,010	-	-	69,010
Liabilities from discontinued operations	63	-	-	63
Total Liabilities	91,675	-	-	91,675
Total Equity and Liabilities	172,255	(703)	-	172,958

Impact on Consolidated Statement of Profit and Loss for the year ended 31 December 2018 (extract**):

	As reported 12 M *			Amounts without adoption of
	31.12.18	IFRS 9	IFRS 15	IFRS 9 and 15
Continuing operations
Services rendered	147,829	-	6,493	141,336
External supplies and services	(53,844)	-	(1,814)	(52,030)
Employee benefit expense	(86,468)	-	(2,539)	(83,929)
Net impairment losses on trade and other receivables	785	93	-	692
Operating Profit	7,359	93	2,140	5,126
Earnings Before Taxes (EBT)	6,114	141	2,140	3,833
Income tax expense	(1,100)	(30)	(449)	(621)
Profit from continuing operations	5,014	111	1,691	3,212
Profit for the period	5,014	111	1,691	3,212
Profit attributable to:
Owners of the parent	4,737	103	1,164	3,470
Non-controlling interests	277	8	527	(258)

12 M * - period of 12 months ended

** Line items that were not affected by the changes have not been included here. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.

The adoption of these standards led to several changes in the Group accounting policies, models and procedures, as described below, as well as in disclosures.

IFRS 9 - 'Financial instruments'

On 24 July 2014, the International Accounting Standards Board (IASB) issued IFRS 9 - 'Financial Instruments', effective for annual periods beginning on or after 1 January 2018. This standard introduces fundamental changes in accounting for financial instruments and replaces IAS 39 - 'Financial Instruments: recognition and measurement'.

This standard brings together all three aspects of the accounting for financial instruments: classification and measurement of financial assets, impairment of financial assets and hedge accounting.

Novabase has adopted IFRS 9 on the required effective date, i.e. 1 January 2018, with the cumulative effect of the initial application of the standard recognised in Equity at the date of initial application, and has not restated comparative information, as provided by the standard.

According to the analysis performed, the main impacts on Novabase Group from the adoption of IFRS 9 were as follows:

(a) Classification and measurement

Under IFRS 9, the classification and measurement of financial assets shall be based on the business model used ('business model test') and on the characteristics of their contractual cash flows ('SPPI test'). In this context, a financial asset is measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the remaining financial assets measured at fair value recognised through other comprehensive income (if there is also an intention to sell the assets) or through profit or loss (if they do not fall within any of the previous models and are, for example, managed based on their fair value). Regarding the classification and measurement of financial liabilities, amendments made to IAS 39 are residual.

Except for the following paragraph, Novabase had no impacts on applying the classification and measurement requirements of IFRS 9. On the one hand, the Group continues to measure at fair value all the financial assets that were already measured at fair value in accordance with IAS 39. On the other hand, since loans and trade receivables are held to collect contractual cash flows and these cash flows represent only payments of principal and interest, they meet the criteria for amortised cost measurement under IFRS 9.

Given the previous standard, the category of "Held-to-maturity investments" ceases to exist. Accordingly, the amounts recorded under this caption as at 31 December 2017 were reclassified to "Investment securities".

The following table and the accompanying notes explain the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group's financial assets and liabilities as at 1 January 2018 (see notes 2.8. and 14). The effect of adopting IFRS 9 on the carrying amounts at 1 January 2018 relates solely to the new impairment requirements.

			Amount	Amount
	Original classification	New classification	under IAS 39 under IFRS 9
	under IAS 39	under IFRS 9	01.01.18	01.01.18
Financial assets
Financial assets at fair value through profit or loss	Fair value thr. P&L (FVTPL)	Fair value thr. P&L (FVTPL)	2,796	2,796
Held-to-maturity investments / Investment securities	Held-to-maturity	Amortised cost	15,066	14,617
Other non-current assets	Loans and receivables	Amortised cost	3,256	3,256
Trade and other receivables	Loans and receivables	Amortised cost	47,831	47,289
Accrued income	Loans and receivables	Amortised cost	16,356	16,356
Derivative financial instruments	Fair value thr. P&L (FVTPL)	Fair value thr. P&L (FVTPL)	18	18
Cash and cash equivalents	Loans and receivables	Amortised cost	56,136	56,100
Total financial assets			141,459	140,432
Financial liabilities
Borrowings	Other financial liabilities	Other financial liabilities	23,744	23,744
Other non-current liabilities	Other financial liabilities	Other financial liabilities	744	744
Trade and other payables	Other financial liabilities	Other financial liabilities	41,619	41,619
Derivative financial instruments	Fair value thr. P&L (FVTPL)	Fair value thr. P&L (FVTPL)	-	-
Deferred income and other current liabilities	Other financial liabilities	Other financial liabilities	25,103	25,103
Total financial liabilities			91,210	91,210

(b) Impairment

IFRS 9 establishes a new impairment model based on the expected credit losses (ECLs), which replaces the previous impairment model based on the incurred credit losses set out in IAS 39. This model is the basis for the recognition of impairment losses on financial instruments that are measured at amortised cost or at fair value through other comprehensive income (which includes, namely, trade receivables, debt securities and bank balances).

Once the loss event occurs (previously defined in IAS 39 as 'objective evidence of impairment'), the accumulated impairment is allocated directly to the financial instrument concerned, which provides the existing accounting treatment, from that point, similar to the previous IAS 39, including the treatment of interest revenue.

One of the main changes resulting from the adoption of this standard is the recognition of impairment on the exposure to securities, bank deposits and other financial applications which was not required under IAS 39, provided that there was not objective evidence of impairment.

Trade and other receivables

Regarding accounts receivable, and since receivables are recorded by the various Group companies under IFRS 15, Novabase chose to apply the simplified approach and record lifetime expected losses. These losses were calculated based on the experience of actual losses over the period that, by business or type of customer, was considered statistically significant and representative of the specific characteristics of the underlying credit risk.

The key assumptions used by the Group in applying this model were the following:

• Preparation of an allowance matrix for Novabase's subsidiaries considering sales and losses for the year 2017, except for two entities (the Angolan and Mozambican subsidiaries) for which it was used the years 2016 and 2017, given that 2017 was not considered representative;

• The matrices were prepared by entity, and it has not been identified the need to differentiate types of clients;

• These matrices are applied to the outstanding balances of receivables for which Novabase expects to receive fully the amounts owed ('Healthy receivables'). Despite not expecting losses, the Group applied to these amounts the allowances matrices in order to apply the ECL model under IFRS 9;

• The expected credit loss was calculated by applying to the 'Exposure at default', the expected losses rates (or probability of default), which were based on the matrices;

• For receivables already with default events, that is, that the Group already classified as 'Bad debts', the impairment loss already recognised was maintained, and the simplified model was not applied.

The application of this model had a negative impact on total equity at 1 January 2018 amounting to EUR 542 thousand (before taxes). At 31 December 2018, the Group reassessed the expected credit losses, and reversed part of the initially recognised impairment in the amount of EUR 93 thousand.

Debt securities and bank balances

Regarding debt securities and bank balances, impairment is calculated by assigning (i) a Probability of Default (PD) arising from the rating of the issuer or counterparty, and (ii) a Loss Given Default (LGD) that results from market parameters. For these assets, loss allowances are measured at 12-month ECLs, provided that credit risk has not increased significantly since its initial recognition. Since the available PD corresponds to the expected losses within a 12-month period, Novabase applied to the debt securities and bank balances a PD adjusted for the maturity of the instrument on a 'pro rata' basis. LGD used were 62% for Portugal, 60% for Angola and 45% for Mozambique.

The application of the new standard had a negative impact on total equity at 1 January 2018 in the amount of EUR 485 thousand (before taxes). At 31 December 2018, the Group reassessed its exposure to debt securities and bank balances, recognising an impairment reversal of EUR 48 thousand.

Impact of the new impairment model and presentation on the financial statements

For assets in the scope of IFRS 9 impairment model, impairment losses are generally expected to increase and become more volatile. The Group has determined that the application of IFRS 9's impairment requirements at 1 January 2018 resulted in an additional impairment allowance as follows:

Loss allowance at 31 December 2017 under IAS 39	4,007
Additional impairment recognised at 1 January 2018 on:
Trade and other receivables	542
Debt securities	449
Cash and cash equivalents	36
Loss allowance at 1 January 2018 under IFRS 9	5,034

For the purposes of presenting the statement of financial position, loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Regarding the statement of profit and loss, the Group has applied judgement in determining an appropriate presentation of impairment losses under IFRS 9, taking into account the specific requirements to present the effect of certain events or circumstances as a single amount in the statement of profit and loss, ensuring that the chosen presentation is relevant to the users' understanding of its financial statements. Consequently, the Group has disaggregated the impairment loss amount into:

• Impairment related to trade and other receivables, which is presented separately in the statement of profit and loss. The standard does not explicitly requires the reclassification of the comparative impairment loss, and therefore the Group chose to present the impairment recorded in 2017 (recognised under IAS 39 - 'Financial instruments: recognition and measurement') in 'Other gains/(losses) - net' caption; and

• Impairment related to debt securities and bank balances, which is included under 'Finance costs' or 'Finance income' (for the reversals of impairment losses) due to materiality considerations.

(c) Hedge accounting

IFRS 9 introduces new requirements for hedge accounting, promoting a closer alignment of hedge accounting rules with companies' risk management strategies. The new rules also establish a more principles-based approach to hedge accounting and eliminate inconsistencies and weaknesses in the hedge accounting model of IAS 39.

On initial application of IFRS 9, entities have an accounting policy choice to apply the IFRS 9 hedge accounting guidance or to continue applying the IAS 39 hedge accounting guidance. In order to avoid a partial application of IFRS 9 hedge accounting premises, Novabase Group decided to continue to apply IAS 39 until the ongoing project Dynamic Risk Management on the accounting for macro hedging is completed. Therefore, Novabase Group will maintain its accounting policy, as described in note 2.22..

Novabase uses derivative financial instruments (forward contracts) to hedge exchange rate risk to which is exposed to. At 31 December 2018 and 31 December 2017, these instruments do not meet the requirements of hedge accounting. Accordingly, there were no impacts to the Novabase Group arising from this component.

IFRS 15 – 'Revenue from contracts with customers'

The International Accounting Standards Board (IASB) issued IFRS15 - 'Revenue from contracts with customers' on 28 May 2014, and amended it on 12 April 2016, effective for annual periods beginning on or after 1 January 2018.

The basic principle of IFRS 15 is for an entity to recognise the revenue to reflect the transfer of goods and services contracted to customers, in an amount that reflects the consideration that the entity expects to be entitled to receive as consideration for the delivery of those goods or services, based on a five-step model:

identify the contract with a customer;
identify the performance obligations of a contract;
determine the transaction price;
allocate the transaction price to performance obligations; and
recognise revenue when or as the entity satisfies a performance obligation.

According to this model, the revenue recognition depends on whether the performance obligations are satisfied over the period or, on the contrary, the control of the goods or services is transferred to the customer at a given point in time. The revenue should be recognised for the amount that the entity expects to be entitled to receive as consideration for the delivery of these goods or services.

Novabase adopted IFRS 15 using the modified retrospective approach, with the cumulative effect of the initial application of the standard recognised in Equity at the date of initial application, i.e. 1 January 2018, therefore the amounts of the comparative period were not restated. Under this approach, Novabase applied IFRS 15 retrospectively only to contracts that were not completed at the date of initial application.

By the adoption of the new standard, the Group registered a decrease on shareholders' equity at 1 January 2018 of EUR 1,164 thousand and this impact was recognised in profit or loss for the period ended 31 December 2018 by the fulfillment of the defined performance obligations.

According to the analysis performed, the main impacts on the Novabase Group from the adoption of IFRS 15 were as follows:

(a) 'Time and materials' projects (T&M)

There were no significant impacts on the revenue recognition related to 'time and materials' projects, once the revenue inherent to these services continues to be recognised at the date the services are rendered according to IFRS 15 (except where there is evidence that the customer does not receive or consume goods and services over time, situations in which the revenue is recognised only when the performance obligation is satisfied), as it already happened under the previous standard.

(b) 'Turn key' projects (TK)

As anticipated in the last annual report and accounts, IFRS 15 had effects especially in the recognition of the revenue from 'turn key' projects (which represented, at the end of 2017, just over 1/3 of the total revenue and only 10% were related to ongoing projects). According to the new standard, revenues from the services rendered in 'turn key' projects are recognised, in each year, according to the performance obligation to which they comply, depending on the percentage of completion of these, that is, for each performance obligation, the Group recognises revenue over time by measuring progress towards full compliance with such performance obligation.

The main impact under IFRS 15 was related to the recognition of contract assets for amounts whose receipt was conditional to the completion of the services rendered, which were recognised in revenue according to the previous standard. Additionally, by the evaluation of the allocation of the transaction price to each performance obligation in accordance with IFRS 15 (which is made based on the stand-alone selling prices, therefore with impacts in the amount and timing of revenue recognition), the Group registered a slight deferral of revenue and its margin in some projects.

It should also be noted that during 2018 there was a change to Novabase revenue typology, with a decrease in the number of TK projects against T&M (for which, as mentioned above, revenue recognition is 'point in time'). Additionally, initiatives have been taken by Management to align business practices with the requirements of the standard, namely the reinforcement of contractual measures to guarantee the enforceability of the main contracts. Work-In-Progress (WIP) at the end of the year was reduced to 3% of total revenues.

No information is provided about remaining performance obligations at 31 December 2018 as they have an original expected duration of one year or less, as allowed by IFRS 15.

Standards that will become effective as of 1 January 2019, and which the Group has decided not to early adopt

IFRS 16 – 'Leases'

The International Accounting Standards Board (IASB) issued, in January 2016, IFRS 16 - 'Leases', effective for annual periods beginning on or after 1 January 2019. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases, and supersedes IAS 17 - 'Leases' and its associated interpretative guidance.

Under this accounting standard, most leases will be recognised in the balance sheet as a right-of-use asset and a financial liability. Subsequently, the right-of-use asset will be depreciated through the shortest of its economic useful life or the lease agreement term. The financial liability will consider interest based on the interest rate implicit in the lease or the entity's incremental borrowing rate. Lease payments will be reflected as a reduction of lease liabilities.

Novabase will adopt IFRS 16 using the modified retrospective approach, with the cumulative effect of the initial application of the standard recognised in retained earnings at 1 January 2019, with no restatement of prior-period financial information. On transition to IFRS 16, the Group decided to "grandfather" the previous assessment made under IAS 17, that means, it will apply IFRS 16 only to contracts that were previously identified as leases under IAS 17 and IFRIC 4.

For leases that were classified as finance leases under IAS 17, the carrying amount of the right-of-use assets and the lease liability at 1 January 2019 are determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date, therefore no impacts are expected.

As for leases classified as operating leases under IAS 17, they refer mainly to the lease of the Company's headquarter, which was renegotiated during 2018, and to lease agreements of other facilities where Novabase operates. The initial term of these contracts is between 1 and 5 years, with a renewal option after this period. Payments are updated annually, reflecting inflation and/or market valuation.

As at the reporting date, the Group has non-cancellable operating lease commitments in the amount of EUR 9,261 thousand (see note 39), of which EUR 42 thousand relate to short-term leases which will be recognised on a straight-line basis as expense in profit or loss. For the remaining lease commitments, the Group will recognise right-of-use assets, measured as if the new rules had always been applied, discounted using the Group's incremental borrowing rate at the date of initial application, and lease liabilities. In addition, the Group elected not to apply the practical expedient that allows to account for a contract that contains both a lease and non-lease component as a single lease.

Based on the assessment under IFRS 16, the Group estimates a decrease on equity of approximately EUR 1.4 Million, which arises from the recognition of approximately EUR 8.0 Million in right-of-use assets and EUR 9.4 Million in additional lease liabilities. The Group expects that EBT will increase by approximately EUR 0.2 Million as a result of adopting the new requirements of IFRS 16. EBITDA, an indicator that Novabase defines as the 'Operating Profit' less 'Depreciation and amortisation' and which the Group generally uses to assess its performance, is expected to increase between approximately EUR 2.4 Million and EUR 2.5 Million, as the operating lease payments were included in EBITDA, but the depreciation of the right-of-use assets and interest on the lease liabilites are excluded from this measure. Operating cash flows will increase and financing cash flows will decrease as repayments of the principal portion of the lease liabilities will be classified as cash flows from financing activities.

The actual impacts of adopting the standard on 1 January 2019 may change because:

• the Group is still finalising the testing and assessment of controls over its new IT systems; and

• the new accounting policies are subject to change until the Group presents its first financial statements that include the date of initial application.

2.3. Consolidation

The consolidated financial statements, with reference to 31 December 2018, include assets, liabilities and results of the Group companies, understood as Novabase and its subsidiaries and associates, which are presented in note 6.

(1) Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has the power to manage the relevant activities, that is, is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. These are de-consolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group, and the fair value of the acquirer's previously held equity interest in the acquiree before control is transferred to the Group. Acquisition-related costs are expensed as incurred. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any non-controlling interests. The excess of the acquisition cost, the fair value of the acquirer's previously held equity interest in the acquiree before control is transferred to the Group and the fair value of non-controlling interest, over the net identifiable assets acquired and liabilities assumed is recorded as goodwill. If the acquisition cost, the fair value of the acquirer's previously held equity interest in the acquiree before control is transferred to the Group and the fair value of non-controlling interest, is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date, regardless of the probability of occurrence. Subsequent changes to the fair value of the contingent consideration do not affect goodwill.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Accounting policies of subsidiaries are changed when necessary to ensure consistency with the policies adopted by the Group.

(2) Transactions with non-controlling interests

Non-controlling interests corresponds to the proportion of the fair value of assets, liabilities and contingent liabilities of acquired subsidiaries, which are not directly or indirectly attributable to Novabase. Transactions with non-controlling interests are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners.

The Group recognises any non-controlling interest in a business combination either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets. This option is performed separately for each transaction.

In any acquisition to non-controlling interests, the difference between any consideration paid and the carrying amount of the relevant share acquired is recorded in equity. Gains or losses on disposals to non-controlling interests that do not result in a loss of control are also recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured at its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as a financial asset.

(3) Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted by the equity method and are initially recognised at cost. The Group's investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The Group's share of its associates' post-acquisition profits or losses is recognised in the statement of profit or loss, and its share of postacquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group's share of losses in an associate exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Accounting policies of associates are changed when necessary to ensure consistency with the policies adopted by the Group.

2.4. Segment reporting

Operating segments are reported consistently with the internal reporting provided to the Management.

An operating segment is a component or a set of components of the Group that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the Management and for which discrete financial information is available.

Novabase monitors the performance of its operations according to the nature of the business, having identified its reportable operating segments based on the activity developed by each of them: the Business Solutions segment, which develops a consulting activity, and the Venture Capital segment, which develops a venture capital activity, and did not aggregate operating segments (see note 5).

General information on how Novabase identified its reportable operating segments, including the organizational basis, activities developed by each segment, as well as the types of products and services from which each operating segment derives its revenues are presented in note 5.

2.5. Foreign currency translation

(1) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in thousands of euros (EUR thousand). Euro is the Company's functional and presentation currency.

The subsidiaries included in consolidation with a functional currency different from the Group's presentation currency are those operating in Angola, in Mozambique, in Turkey and in the United Kingdom, as shown in the table of note 6.

(2) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Translation differences on non-monetary financial assets such as equities held at fair value through profit or loss are recognised in profit or loss in the consolidated statement of profit and loss. Translation differences on monetary items are included in other comprehensive income in the consolidated statement of comprehensive income.

The main exchange rates applied on the reporting date are those listed below:

	Euro foreign exchange reference rates	Rate on	Average rate
	(x foreign exchange units per 1 Euro)	31.12.18	31.12.17	2018	2017
•	Angolan Kwanza (AOA)	362.2335	205.9815	303.6640	196.9427
•	Mozambican Metical (MZN)	71.0702	71.1905	75.3864	70.8421
•	Turkish Lira (TRY)	6.0588	4.5464	5.8349	4.6086
•	US Dollar (USD)	1.1450	1.1993	1.1830	1.1247
•	British Pound (GBP)	0.8945	0.8872	0.9003	0.8999

With the exception of AOA and MZN, all exchange rates used are the official EUR exchange rate at 31.12.18 as published on 'Banco de Portugal' website. Regarding the AOA and the MZN exchange rates, it was used the most appropriate exchange rate as if the transactions were settled at the reporting date, according to IAS 21.26.

(3) Group companies

The results and financial position of all the Group's entities that have a functional currency different from the presentation currency that is not the currency of a hyperinflationary economy, are translated into the presentation currency as follows:

(i) assets and liabilities at the reporting date are translated at the closing exchange rate in force at the reporting date;

(ii) income and expenses in results are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

(iii) all resulting exchange differences are recognised in the statement of comprehensive income.

When an entity has foreign operations whose functional currency is the currency of a hyperinflationary economy, its financial statements are restated before being translated and included in the consolidated financial statements as described above. The assets, liabilities, equity, income and expenses are first restated in accordance with IAS 29, using a general price index that reflects changes in general purchasing power, as follows:

(i) monetary items are not restated because they are already expressed in terms of the monetary unit current at the end of the reporting period;

(ii) assets and liabilities linked by agreement to changes in prices are adjusted in accordance with the agreement in order to ascertain the amount outstanding at the end of the reporting period;

(iii) all other assets and liabilities are non-monetary and are restated (with the exception of some non-monetary items that are carried at amounts current at the end of the reporting period, such as net realisable value and market value);

(iv) all items of the income statement are restated by applying the change in the general price index from the dates when the items of income and expenses were initially recorded in the financial statements.

The gain or loss on the net monetary position is included in profit or loss and separately disclosed.

In 2017, as a result of high levels of inflation in the last three years approaching 100% in cumulative terms, and analysing some qualitative aspects of the Angolan economy (the use of the USD as the reference currency), Angola was qualified as a hyperinflationary economy. This qualification, requires that entities that report in the Angolan currency (Kwanza) apply standard IAS 29 - 'Financial reporting in hyperinflationary economies' in the financial statements since the beginning of the reporting period in which hyperinflation is identified, which in this case means 1 January 2017.

Considering the Group's exposure to Angola through its subsidiary NBASIT-Sist. de Inf. and Telecomunic., S.A., Novabase applied IAS 29 in its consolidated accounts with reference to the year ended 31 December 2017, and recognised directly in Equity, in that year, the loss on the net monetary position related to price changes in prior periods, in the total amount of EUR -1,403 thousand. In 2018, this economy continues to meet one of the main criteria to be considered hyperinflationary, since 3-year inflation exceeded 100% (it was around 108%).

The price index used was the National Consumer Price Index (NCPI) released by the National Statistics Institute of Angola. The table below presents the price index and the cumulative percentage variation at the end of each of the periods presented:

		31.12.18	31.12.17
•	Index (Base: Dec. 2014 = 100)	232.02	195.63
•	Cumulative percentage variation	18.6%	23.7%

The Group is applying the net investment in foreign entities for loans without defined repayment term granted to its subsidiaries with a functional currency other than the Euro. This treatment is due to the fact that the settlement of the outstanding amount is neither planned nor likely to occur in a foreseeable future. In addition, investments in Government of Angola Treasury Bonds were considered as an integral part of the Group's net investment, since its contractual purpose is to provide the natural hedging of the Angolan operation.

In consolidation, exchange differences arising from the translation of net investments in foreign entities, i.e., exchange differences arising from the conversion of monetary items at rates other than those at which they were converted at their initial recognition, or in previous financial statements, are recognised in other comprehensive income in the line item 'Exchange differences on foreign operations'. Likewise, exchange differences arising from the early repayment of monetary items that are included in the net investment in foreign entities are recognised in other comprehensive income, remaining in reserves until the sale or liquidation of such foreign entities.

Once the criteria for continuing to classify the amount receivable (in part or all) as net investment in foreign entities are no longer met, the future foreign exchange gains and losses related thereto are recognised in statement of profit and loss, and the historical gains and losses recorded up to that time are not reclassified to results.

When a foreign entity is sold or liquidated, accumulated exchange differences are recognised in profit or loss as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

2.6. Property, plant and equipment

Property, plant and equipment comprise mainly buildings and other constructions (construction works done in 'Edifício Caribe', the Company's headquarter), basic and transport equipment. Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items (purchase price and all the expenses supported direct or indirectly to bring the asset to its current condition).

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of profit and loss during the financial period in which they are incurred.

Depreciation is calculated using the straight-line method, over their estimated useful lives, as follows:

		No. of years
•	Buildings and other constructions	3 to 50
•	Basic equipment	3 to 4
•	Transport equipment	4
•	Tools and utensils	4
•	Furniture, fittings and equipment	3 to 10

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

An asset's carrying amount is written down to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount, and are included in profit or loss.

2.7. Intangible assets

(1) Goodwill

Goodwill represents the excess of the cost of acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'Intangible assets'. Goodwill on acquisitions of associates is included in 'Investments in associates'.

Goodwill (that has an undetermined useful life), is carried at cost less accumulated impairment losses, being tested annually for impairment, in the second half of the year. Impairment losses on Goodwill are recognised whenever its carrying amount exceeds its recoverable amount, and are not reversed. Gains and losses on the disposal of an entity include the carrying amount of Goodwill relating to the entity sold.

For the purpose of performing impairment tests, goodwiil is allocated to cash generating units (CGUs). Cash generating units represent the lowest level within the entity at which the goodwill is monitored for internal management purposes and not be larger than an operating segment before aggregation.

The cash generating units identified by Novabase represent the Group's investment in the operating segments in which Novabase operates: Business Solutions and Venture Capital. There is no Goodwill not allocated to those cash-generating units. Note 8 gives information on Goodwill's allocation to the CGU's.

(2) Internally generated intangible assets

Research expenses in the search for new technical or scientific knowledge are recognised in the statement of profit and loss as and when incurred. Development expenses are accounted as intangible fixed assets when: i) it is technically feasible to complete the asset or process; ii) the Group has the intention and capacity to complete its development; iii) market viability is assured and iv) its cost can be reliably measured.

These assets are recorded at its production or acquisition cost, which include the acquisition cost of the assets plus employee costs directly involved in the production or outsourcing costs incurred for the same purpose, as well as an appropriate portion of relevant overheads.

Amortisation is calculated using the straight-line method, for periods between 3 to 10 years. Impairment of internally generated assets in progress is tested at each reporting date.

(3) Industrial property and other rights

Industrial property and other rights are recorded at acquisition cost. These assets have a finite useful life and are recognised at cost less accumulated amortisation for a period between 3 to 10 years. Amortisation is calculated using the straight-line method to allocate the cost of the industrial property and other rights over their estimated useful lives.

(4) Work in progress

Intangible assets in progress refer to, mainly, the ongoing internal development of software products.

2.8. Financial assets and liabilities

Policy applicable from 1 January 2018

Financial assets are recognised in the consolidated statement of financial position on the trade or contracting date.

At the initial recognition, except for trade accounts receivable, financial assets are recognised at fair value plus directly attributable transaction costs, except for assets at fair value through profit or loss in which transaction costs are recognised immediately in profit or loss. The subsequent measurement depends on the category of the investment, Level 1, Level 2 or Level 3, which are described in note 14.

Fair value is determined using the quoted price in an active market, or based in valuation methods and techniques (when there is no active market). A market is regarded as 'active', and therefore liquid, if transactions for the asset take place on a regular basis.

Trade accounts receivable, at the initial recognition, are recognised at their transaction price, as defined in IFRS 15.

Financial assets are derecognised when: (i) the contractual rights of the Group to receive their cash flows expire; (ii) the Group has transferred substantially all the risks and rewards of the ownership; or (iii) despite retaining a portion, but not substantially all the risks and rewards of the ownership, the Group has transferred control over the assets.

The Group classifies its financial assets into the following categories: (i) financial assets measured at amortised cost, (ii) financial assets at fair value through other comprehensive income, and iii) financial assets at fair value through profit or loss. lts classification depends on the entity's business model to manage the financial assets and the contractual characteristics in terms of the cash flows of the financial asset.

Management determines the classification of its investments at the date of acquisition and reassesses this classification at each reporting date. Regarding changes in the fair value measurement from period to period, the Group considers whether the inputs of the models initially used in its measurement became, for instance, observable and whether they have adherence to the financial instrument under analysis. If the inputs are observable and representative, Novabase changes the category from Level 3 to Level 2.

(i) Financial assets measured at amortised cost

Are those financial assets that are included in a business model whose purpose is to hold financial assets in order to collect the contractual cashflows, and these contractual cashflows represent solely payments of principal and interest.

(ii) Financial assets at fair value through other comprehensive income

Are those financial assets that are part of a business model whose objective is achieved through the collection of contractual cashflows and the sale of financial assets, these contractual cashflows being solely payments of principal and interest.

(iii) Financial assets at fair value through profit or loss

This category includes derivative financial instruments and equity instruments that the Group has not classified in category (ii). This category also includes all financial instruments whose contractual cashflows are not exclusively capital and interest.

The Group's financial assets are mostly classified in the category of 'Financial assets measured at amortised cost' and include investment securities, trade and other receivables, other assets, accrued income and cash and cash equivalents. These items are included in the statement of financial position in current assets, except for maturities greater than 12 months after the end of the reporting period that are classified as noncurrent assets.

The Group has also financial assets classified at fair value through profit or loss, such as derivative financial instruments and certain interests in companies mainly held through its Venture Capital Funds, NB Capital Inovação e Internacionalização e NB Capital +Inovação. In this category, fair value is calculated using the method of discounted cash flows, with the changes in fair value recognised in profit or loss in the period in which they occur, except in cases where fair value is observable in the market.

Financial liabilities are classified according to the contractual substance regardless of their legal form. They are derecognised only when they are extinguished, that is, when the obligation is settled, canceled or expired.

ln accordance with IFRS 9, financial liabilities are subsequently measured at amortised cost, except for:

• Financial liabilities at fair value through profit or loss. These liabilities, including derivatives that are liabilities, should subsequently be measured at fair value;

• Financial liabilities that arise when a transfer of a financial asset does not meet the conditions for derecognition or when the continued involvement approach is applied;

Financial guarantee contracts;
Commitments to grant a loan at a lower interest rate than the market;

• The contingent consideration recognised in a business combination to which IFRS 3 applies, which shall be subsequently measured at fair value, with changes recognised in profit or loss.

The Group's financial liabilities include borrowings, trade and other payables, derivative financial instruments and other liabilities. They are classified in the statement of financial position as non-current liabilities if the remaining maturity is greater than 12 months and as current liabilities if their maturity is less than 12 months.

Policy applicable before 1 January 2018

Financial assets and liabilities are recognised on the date of the negotiation or contract, regardless of the date of their financial settlement.

A financial asset or financial liability is measured initially at fair value. The fair value is the amount that a determined asset or liability can be transferred or paid in an orderly transaction between market participants at the measurement date. In the contracting date, the fair value is usually the amount of the transaction.

The subsequent measurement depends on the category of the investment, Level 1, Level 2 or Level 3, which are described in note 14.

These assets are derecognised when i) contractual rights to receive cash flows have expired, ii) the Group has transferred substantially all risks and rewards of ownership or iii) nevertheless, retains a portion but not substantially all the risks and rewards of ownership, the Group has transferred the control of the assets.

The fair value is based in current bid prices, or in valuation methods and techniques (if the market for the financial asset is not active). A market is considered active if regular transactions occur.

The Group classifies its financial assets and liabilities in the following categories: (i) financial assets at fair value through profit or loss, (ii) loans and receivables and (iii) held-to-maturity financial assets. The classification depends on the intention inherent to the investment's acquisition. Management determines the classification of its investments at initial recognition and reappreciate this classification on each reporting date (considering the reclassification rules).

In what concerns to changes in fair value measurement from period to period, Novabase considers whether the inputs of the models initially used in its measurement became, for instance, observable and whether they have adherence to the financial assets and liabilities under analysis. If inputs are observable and representative, the entity reclassifies from Level 3 to Level 2.

(1) Financial assets and liabilities at fair value through profit or loss

A financial asset or financial liability at fair value through profit or loss is a financial asset that, at the time of initial recognition, is managed and its performance evaluated on a fair value basis, in accordance with a documented risk or investment management. Information about the group is provided internally to key elements in the Group management on that basis. Except in cases where fair value is observable in the market, the fair value is calculated using the method of discounted cash flows, with the changes in fair value recognised in profit or loss in the period in which they occur.

(2) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables are subsequently measured at amortised cost accordingly to the effective interest method. These are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group's loans and receivables are included in the current assets in 'Trade and other receivables' and 'Accrued income' captions and in non-current assets in 'Other non-current assets' caption.

(3) Held-to-maturity financial assets

A held-to-maturity investment is a nonderivative financial asset that has either fixed or determinable payments and a fixed maturity, and for which an entity has the intention to collect the original principal, and not to sell or trade in the market. This class of financial instrument is recorded at amortised cost.

2.9. Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and depreciation and are tested annually for impairment. Assets that are subject to amortisation and depreciation are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.

The value in use is the present value of the estimated future cash flows from the continuous use of the asset and from its sale at the end of its useful life. In determining the value in use, estimated future cash flows are discounted using a pre-tax rate that reflects current market assessments of the time value of money and the specific risks of the asset in question.

For the purposes of assessing impairment, assets are allocated by segment, given that it is at this level that management monitors its return on investment.

2.10. Impairment of financial assets

Policy applicable from 1 January 2018

At each reporting date, Novabase assesses whether financial assets carried at amortised cost are credit-impaired and recognise loss allowances for ECLs on: (1) Trade, debtors and other receivables, and (2) Debt securities and bank balances.

A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

(i) significant financial difficulties on the counterparty's side to settle its debts;
(ii) failure to meet payment obligations on the counterparty's side of loans granted by the Group;
(iii) high probability that the counterparty enters a process of bankruptcy or debt restructuring.

ECLs are a probability-weighted estimate of credit losses and are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive), discounted at the effective interest rate of the financial asset.

The objective of this impairment policy is to recognise expected credit losses over the respective duration of financial instruments that have undergone significant increases in credit risk since initial recognition, assessed on an individual or collective basis. lf, at the reporting date, the credit risk associated with a financial instrument has not increased significantly since the initial recognition, the Group measures loss allowances relating to that financial instrument by an amount equivalent to the expected credit losses within a period of 12 months.

In terms of the presentation in the statement of financial position, loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

(1) Trade, debtors and other receivables

With regard to trade and other receivables, Novabase measures loss allowances at an amount equal to lifetime ECLs. With receivables being recorded by the various group companies under IFRS 15, the Group applies the simplified approach to measure the expected credit losses, that means, it uses an allowance matrix per company, which is based on the past experience of actual losses over a period considered statistically relevant (see also note 2.2.) These allowance matrices are reviewed whenever there is a significant change in the company's credit risk, changes in the type of customers or significant changes in the business or macroeconomic environment.

When determining whether the credit risk of a financial asset has increased significantly, the Group considers all reasonable and supportable information that is relevant and available without undue cost or effort, which includes both quantitative and qualitative information and analysis, based on the Group's historical experience and forward-looking information. Novabase defines a financial asset relating to trade and other receivables to be in default when is more than 360 days past due.

Despite the 90 days past due presumption under IFRS 9, the Group considers 360 days past due to be a more appropriate default definition, since its experience of actual losses before this maturity is reduced, apart from being aligned with the entity's current credit risk management policies, namely because there are no sales / contracts with significant financing components in accordance with the principles of IFRS 15. It should be noted that the Group, based on balances and specific past events and taking into account counterparties historical information, its risk profile and other observable data, assesses whether there are objective indicators of impairment, and records impairment losses accordingly. Furthermore, the Group assessed the impact of considering 360 days of default over 90 days and concluded that the 'Expected Credit Losses' would not change significantly.

The impairment losses are recorded in profit or loss under 'Net impairment losses on trade and other receivables'. When an amount receivable from customers and debtors is considered unrecoverable, it is written off using the same caption in the income statement. The Group expects no significant recovery from the amounts written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due. Subsequent recoveries, if any, are recorded in profit or loss under 'Net impairment losses on trade and other receivables'.

(2) Debt securities and bank balances

Regarding debt securities and bank balances for which credit risk has not increased significantly since its initial recognition, the Group measures loss allowances at 12-month ECLs (or a shorter period if the expected life of the instrument is less than 12 months).

The Group considers a debt security or a short term bank deposit to have a low credit risk when its credit risk rating is equivalent to CCC or higher (weighted-average rating per various agencies, namely, Standard & Poor's and Moody's).

The impairment losses related to investment in debt securities and bank balances are recorded in profit or loss, under 'Finance costs' heading. If the Group's exposure declines or if the annual reassessment of the PD and LGD used to calculate the impairment leads to a reduction of the ECLs, the carrying amount of these assets is increased, against 'Finance income' in the statement of profit and loss.

Policy applicable before 1 January 2018

The Group assesses at each reporting date whether there is objective evidence that a financial or a group of financial assets is impaired.

(1) Trade receivables, other debtors and other financial assets

In the case of other financial assets that show objective impairment evidence, their present value is determined, and an impairment loss (which is considered the difference between the asset's present value of estimated future cash flows and the carrying amount) is recognised in the statement of profit and loss. Several indicators are used to identify if there is objective evidence of impairment, such as:

(i) the Group is not able to collect amounts according to the original terms of the receivables;
(ii) the Group is not able to collect amounts due over 6 months;
(iii) significant financial difficulties of the debtor;
(iv) it becomes probable that the debtor will enter bankruptcy or other financial reorganization.

The amount of the impairment allowance is measured as the difference between the asset's present value of estimated future cash flows, discounted at the financial asset's original effective interest rate, and its carrying amount and is recognised in the statement of profit and loss within 'Other gains/(losses) - net'. The carrying amount of the asset is reduced through the use of an allowance account. When a trade receivable is unrecoverable, it is written off against the same allowance account. Subsequent recoveries of amounts previously written off are credited against 'Other gains/(losses) - net' in the statement of profit and loss.

2.11. Trade and other receivables

Trade and other receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less impairment losses.

2.12. Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term highly liquid investments with original maturities of three months or less, which are subject to an insignificant risk of change in value.

For the purpose of presentation in the statement of cash flows, this caption also includes bank overdrafts. Bank overdrafts are shown within 'Borrowings' in current liabilities in the statement of financial position.

2.13. Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or stock options of the Company and its subsidiaries are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or stock options, or for the acquisition of a business, are included in the cost of acquisition as part of the purchase consideration.

Where the Company or any Group companies acquire treasury shares of parent company, they are recorded at cost and the consideration paid is deducted from the equity attributable to owners of the parent until the shares are cancelled, reissued or sold. When such shares are subsequently sold or reissued, any consideration received is included in equity attributable to owners of the parent.

2.14. Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Interest costs on borrowings are included in the statement of profit and loss under 'Finance costs' caption.

2.15. Current and deferred tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of profit and loss, except to the extent that it relates to items recognised directly in equity. The current income tax charge is calculated on the basis of profit before income tax, adjusted according to the tax laws enacted at the reporting date.

Deferred tax is recognised, using the liability method at the reporting date, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax is not accounted for if it arises from the recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred tax is determined using tax rates that are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be used.

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

2.16. Employee benefits

Personnel expenses are recognised when the service is rendered by employees regardless of their date of payment. Some specificities are disclosed below:

Bonus

The Group recognises a liability and an expense for bonuses, based on a formula that takes into consideration the profit attributable to the Company's employees after adjustments.

Obligations for holiday, holiday allowance and Christmas allowance

In accordance with Portuguese legislation, employees have, annually, the right to receive two months of salary, for a holiday period and a holiday allowance, right earned in the previous year to its settlement. The employees also have, annually, the right to a Christmas allowance, which is earned over the year and paid each December. These obligations are recorded in the respective period in which the right is earned, regardless its payment date.

Labor Compensation Fund (FCT) and Labour Compensation Guarantee Fund (FGCT)

Based on the publication of Law No. 70/2013 and subsequent regulation by Order No. 294-A /2013, entered into force on 1 October the Labor Compensation Fund schemes (FCT) and the Guarantee Fund Compensation of Labor (FGCT). In this context, companies that hire a new employee are required to deduct a percentage of the respective salary for these two new funds (0.925% to FCT and 0.075% for FGCT), in order to ensure, in the future, the partial payment the compensation in the event of dismissal. Considering the characteristics of each Fund, the following is considered:

• the monthly deliveries to FGCT, made by Novabase, are recognised as an expense in the period to which they relate;

• the monthly deliveries to FCT, made by Novabase, are recognised as a financial asset, measured at fair value with changes recognised in the income statement.

2.17. Provisions

Provisions are recognised at the reporting date when: i) the Group has a present legal or constructive obligation as a result of past events; ii) it is probable that an outflow of resources will be required to settle the obligation and; iii) the amount has been reliably estimated. Provisions for restructuring include all liabilities to be paid, namely employee termination payments. These provisions do not include any estimated future operating losses or estimated profits from the disposal of assets.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any of the items included in the same class of obligations may be small. Note 25 gives information about the type of provisions.

Provisions are reviewed at each reporting date and adjusted to reflect the best estimate at that date. Whenever possible, the time effect is taken into account in the annual adjustment of provisions. For those in which there is no predictability of the moment of reversal, the Group does not proceed with the financial update.

Onerous contracts

The Group recognises a provision for onerous contracts on the date on which it is established that the costs to be incurred to satisfy the obligation assumed exceed the future economic benefits. This analysis is made on an individual basis.

Legal claims in progress

Provisions relating to legal proceedings brought against Novabase and which essentially relate to contractual disagreements with third parties. Provisions for legal proceedings in progress are recorded for the amounts estimated to represent future outflows in accordance with the risk assessments made by Management based on the opinions of its legal and internal experts and counselors, based on success.

For legal proceedings where the probability of having an unfavorable outcome is less than probable, the Group does not recognise provisions, as described in note 42, unless the possibility of an outflow of resources is remote, in which case it is not disclosed. For each legal proceeding a brief description of the process is given, as well as an estimate of its financial effect, and when practicable an indication of the uncertainties that relate to the moment of any outflow. If any repayment is possible, this information is also included in the 'Contingencies' note.

2.18. Trade and other payables

Trade and other payables balances are obligations to pay goods or services that have been acquired in the ordinary course of the business. They are initially recognised at fair value and subsequently at amortised cost accordingly with the effective interest rate method.

2.19. Revenue recognition

Policy applicable from 1 January 2018

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities. Revenue is shown net of Value Added Tax (V.A.T.), rebates and discounts and after eliminating intra-group transactions.

The recognition of the Group's revenue is based on the five-step model established by IFRS 15:

identification of the contract with the customer;
identification of performance obligations;
determination of the price of the transaction;
allocation of transaction price to performance obligations; and
recognition of revenue when or as the entity meets a performance obligation.

Thus, at the beginning of each contract, the Group evaluates the promised goods or services and identifies, as a performance obligation, every promise of transfer to the customer of any distinct good or service (alone or together). These promises in customer contracts may be explicit or implicit, since such promises create a valid expectation on the customer that the entity will transfer a good or service to the customer, based on the entity's published policies, specific statements, or customary business practices.

ln determining and allocating the transaction price of each performance obligation, the Group used the stand-alone prices of the promised products and services, at the date of conclusion of the contract with the customer.

The recognition of revenue occurs at the time of the fulfillment of each performance obligation.

Novabase's revenues derive from: (a) sales of goods, (b) services rendered, (c) interest and (d) dividend income. The recognition of revenue is detailed below, by type of revenue:

(a) Sales of goods

Revenue from the sale of goods is recognised in the statement of profit and loss when all the following conditions have been satisfied: (i) the entity has transferred to the buyer the significant risks and rewards of ownership of the goods; ii) the entity retains neither continuing management involvement to the degree usually associated with ownership nor effective control over the goods sold; (iii) the amount of revenue can be reliably measured; iv) it is probable that the economic benefits associated with the transaction will flow to the entity; and v) the costs incurred or to be incurred in respect of the transaction can be reliably measured.

Software products are usually sold without a right of return. However, if there is any chance of return, the Group estimates an amount for such return at the time of sale.

(b) Services rendered

Revenue from services rendered is recognised in the statement of profit and loss when all the following conditions have been satisfied: i) the amount of revenue can be reliably measured; ii) it is probable that future economic benefits associated with the transaction will flow to the Group; iii) the stage of completion of the performance obligation at the reporting date can be reliably measured; and (iv) the costs incurred for the transaction and the costs to complete the transaction can be reliably measured. For Novabase Group, the revenue from services rendered relates to 'time and materials' projects, 'turn key' projects and outsourcing or maintenance projects.

Revenue from time and materials consulting projects is recognised at the date the services are rendered, given that is the time when the benefits of the performance obligation are transferred to the customer (the customer simultaneously receives and consumes the benefits of the goods and services provided). In cases where the customer does not receive or consume goods and services over time, Novabase does not recognise any revenue, recognising only when the performance obligation is satisfied.

Revenues from the services rendered in 'turn key' projects are recognised, in each year, according to the performance obligation to which they comply, depending on it percentage of completion. That is, for each performance obligation, the Group recognises revenue over time by measuring progress towards full compliance with such performance obligation. The assessment of the percentage of completion of each performance obligation is reviewed periodically taking into account the most recent information available from project managers and subject to further review by the respective controllers. The amount of the transaction whose receipt is conditional to the completion of the services rendered is recognised as a contract asset (included in accrued income) rather than a receivable.

Revenue from outsourcing or maintenance projects is recognised as a single performance obligation on a straight-line basis over the contract period.

(c) Interest income

Interest received is recognised on the accrual basis, taking into account the outstanding balance and the effective rate during the period up to maturity. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount (estimated future cash flows, discounted at the original effective rate of the instrument), and records the discount as a financial gain.

(d) Dividend income

Dividends are recognised when the shareholders' rights to receive such amounts are appropriately established and communicated.

Policy applicable before 1 January 2018

the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the entity;
the costs incurred or to be incurred in respect of the transaction/rendering of services can be measured reliably;

• the percentage of completion of the transaction/rendering of services at the end of the reporting period can be measured reliably, in situations in which the transaction/rendering of services is recognised based on the percentage of completion.

The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Novabase's revenues derive from: (a) sales of goods, (b) services rendered, (c) interest and (d) dividend income. The recognition of revenue is detailed below, by type of revenue:

(a) Sales of goods

Sales of goods are recognised when a Group entity has delivered products to the customer, the customer has accepted the products and collectability of the related receivables is reasonably assured.

Software products are usually sold without a right of return. However, if there is any chance of return, accumulated experience is used to estimate and provide for such returns at the time of sale.

(b) Services rendered

Revenue from consulting projects classified as "time and materials" is recognised in the accounting period in which the services are rendered.

In turn-key consulting projects, the Group recognises income and costs associated with contracts, on an individual basis, according to the percentage of completion method, which is understood as the ratio between costs incurred up to the financial position date and the total estimated contract costs. The assessment of the percentage of completion of each contract is reviewed periodically taking into account the most recent information available from project managers and subject to further review by the respective controllers. The differences between the amounts resulting from the application of the percentage of completion to the estimated income and the amounts invoiced are recorded under 'Accrued income' and 'Deferred income and other current liabilities' captions, respectively. When it is probable that the total estimated costs to complete the project exceed the income defined therein, the expected loss is immediately recognised in profit or loss.

Revenue from outsourcing and maintenance projects is recognised linearly over the period of the contract, where there are no significant and specific activities foreseen.

(c) Interest income

(d) Dividend income

Dividend income is recognised when the right to receive payment is established.

2.20. Grants

Government grants are recognised at fair value, when there is high likelihood that the grant will be received and the Group fulfils all the requirements to receive it.

Non-refundable grants to finance development projects are recorded as a liability at the reporting date, in 'Other non-current liabilities' caption, if the remaining maturity is greater than 12 months or under 'Deferred income and other current liabilities' if the maturity is less than 12 months, and are recognised in profit or loss of each period by the useful life of the financed assets.

Operating grants are aimed to recovering the costs, incurred and recorded, with training initiatives and projects of research for new technological or scientific knowledge, and are recognised in the statement of profit and loss as the related expenses are incurred, regardless of when the grant is received.

2.21. Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are expensed over the period of the lease.

Lease contracts for tangible assets where the Group has substantially all the risks and benefits of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are recorded under liabilities (current and non-current). The interest element of the finance cost is expensed over the lease period so as to produce a constant periodic rate of interest on the remaining balance of liability for each period. Tangible assets acquired under finance leases are depreciated over the shorter of the useful life and the lease term.

2.22. Derivative financial instruments

Novabase uses derivative financial instruments to hedge foreign exchange risks to which is exposed. The financial instruments used to manage this risk are the forward foreign exchange contracts. Novabase does not take speculative positions. The treasury department is responsible for managing derivative financial instruments, under the guidance of the Executive Committee. Derivative financial instruments are measured initial and subsequently by its fair value. The method of recognising the resulting gain or loss depends on the nature and objective of the item being hedged.

(1) Hedging derivatives

Pursuant to IFRS 9, the Novabase Group chooses to continue to apply the hedge accounting requirements in IAS 39 until there is greater visibility of the current Dynamic Risk Management project (macro-hedging), in order to avoid a partial application of the hedge accounting premises of the new standard.

The possibility of qualifying a derivative financial instrument as a hedging instrument meets the criteria of IAS 39, namely, in what respect to the documentation required and effectiveness assessment, which is performed at the inception of the hedge and on an ongoing basis.

For hedging relationships designated as a net investment in a foreign operation hedge and that are determined to be an effective hedge, the gain or loss in the fair value of the hedging instrument is recognised in other comprehensive income. The ineffective portion is recognised immediately as a financial result of the period.

The cumulative foreign exchange gains and losses relating to a net investment and its respective hedging operation, both registered in other comprehensive income, are included in the consolidated statement of profit and loss when the foreign operation is disposed of, liquidated or discontinued, as an integral part of the gain or loss on sale.

Where the hedging relationship fails to comply with the qualifying criteria to be designated as hedge accounting, the fair value changes of the hedging instrument are recognised in profit or loss.

(2) Trading derivatives

Regarding derivative financial instruments that, although complying with the Group's financial risk management policies, do not comply with all the requirements of IAS 39 to qualify for hedge accounting, the respective changes in fair value are included in the consolidated statement of profit and loss, under financial results, in the period in which they occur.

2.23. Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which dividends are approved by the Company's shareholders.

2.24. Discontinued operations

A discontinued operation is a component of the Group's business that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Group, and:

represents either a separate major line of business or a geographical area of operations;
is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
is a subsidiary acquired exclusively with a view to resale and the disposal involves loss of control.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale.

When an operation is classified as a discontinued operation, the comparatives of the statement of profit and loss and of the statement of other comprehensive income are re-presented as if the operation had been discontinued from the start of the comparative year.

In terms of income statement, the profit or loss is recognised in 'Profit from discontinued operations' and, in terms of the statement of financial position, under the captions 'Assets from discontinued operations' and 'Liabilities from discontinued operations'.

For the Group, discontinued operations correspond to the IMS segment, discontinued at the end of 2016, as the result of the sale agreement of the Infrastructures & Managed Services business to VINCI Energies Portugal, SGPS, S.A. - see note 41.

2.25. Comparatives

The consolidated financial statements for the year ended 31 December 2018, except as referred at the beginning of this note, are comparable in all material aspects with 2017, and except for the accounting policies changes mentioned in note 2.2., no other changes have occurred when compared to those used for preparation of the financial statements of the previous year, presented for comparative effects.

3. Financial risk management policy

The Group's activities expose it to a variety of financial risks, namely, Foreign exchange risk, Interest rate risk (cash flows and fair value), Credit Risk, Liquidity risk and Capital management risk.

The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

a) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk, mainly arising from U.S. Dollar, Kwanza and Metical exposures, since some subsidiaries perform transactions in these currencies.

The finance department is responsible for monitoring the evolution of the exchange rate of the currencies mentioned above, in order to reduce the impact of their fluctuations in consolidated results. The Group uses derivative financial instruments to hedge certain risk exposures (see note 17). These financial instruments do not comply with hedge accounting requirements therefore being classified as trading derivatives, with changes in fair value recognised in profit or loss.

With reference to the rates disclosed in note 2.5. (2) Transactions and balances, the most significant changes observed after the reporting date were in the EUR/GBP exchange rate. From the reporting date until 28 February, the British Pound appreciated against the Euro 4.22%, with the EUR/GBP exchange rate returning to the level of two years ago. For its part, the EUR/AOA and EUR/MZN exchange rates presented slight variations, less than 2%, from the reporting date until 28 February, and the EUR/AOA exchange rate has maintained the depreciation trend recording the highest value of the last 5 years.

It should also be noted that, until the issue of this report, negotiations on the exit model of the United Kingdom from the EU were not concluded, as a result of the outcome of the referendum that led to Brexit. On 14 March 2019, the British Parliament approved the Government's proposal to prevent UK from leaving the EU without a deal on March 29, while also rejected the possibility of a second EU referendum to break the Brexit deadlock. Therefore, it remains a high degree of uncertainty regarding the evolution of the British economy and, consequently, of the British Pound. Novabase is following closely this topic, however, it does not expect significant impacts with the actual exit of the UK. On the one hand, the Group's exposure to this currency is low; on the other hand, sales and services rendered in this geography in 2018 represented less than 1% of total Turnover, so the Group does not have a dependence on the UK market, which is jeopardising the continuity of its activity in a scenario of total loss of this market.

The table below summarises the Group's exposure to foreign currency exchange rate risk at 31 December based on the amounts of the Consolidated Statement of Financial Position of the Group's financial assets and liabilities:

At 31 December 2017	Euro	Dollar	Kwanza	Metical	Other	Total
Assets
Financial assets at fair value through profit or loss	2,796	-	-	-	-	2,796
Held-to-maturity investments	-	-	15,066	-	-	15,066
Investment securities	-	-	-	-	-	-
Other non-current assets	3,256	-	-	-	-	3,256
Trade and other receivables	38,384	2,513	358	6,564	12	47,831
Accrued income	15,809	-	492	-	55	16,356
Derivative financial instruments	18	-	-	-	-	18
Cash and cash equivalents	51,667	27	3,814	365	263	56,136
	111,930	2,540	19,730	6,929	330	141,459
Liabilities
Borrowings	23,744	-	-	-	-	23,744
Other non-current liabilities	744	-	-	-	-	744
Trade and other payables	36,468	523	2,870	1,402	356	41,619
Derivative financial instruments	-	-	-	-	-	-
Deferred income and other current liabilities	20,266	-	362	4,475	-	25,103
	81,222	523	3,232	5,877	356	91,210

At 31 December 2018	Euro	Dollar	Kwanza	Metical	Other	Total

Assets	3,868	-	-	-	-	3,868
Financial assets at fair value through profit or loss	-	-	-	-	-	-
Held-to-maturity investments	-	-	8,878	-	-	8,878
Investment securities	1,644	-	-	-	-	1,644
Other non-current assets	36,856	4,697	1	40	31	41,625
Trade and other receivables	5,344	-	108	12	-	5,464
Accrued income	26	-	-	-	-	26
Derivative financial instruments Cash and cash equivalents	53,712	264	5,297	4,016	325	63,614
	101,450	4,961	14,284	4,068	356	125,119

Liabilities	19,680	-	-	-	-	19,680
Borrowings	990	-	-	-	-	990
Other non-current liabilities	37,787	571	1,273	577	191	40,399
Trade and other payables	24	-	-	-	-	24
Derivative financial instruments Deferred income and other current liabilities	21,707	-	38	522	-	22,267

The Group uses a sensitivity analysis technique that measures the estimated changes in profit or loss and shareholders' equity of either an instantaneous 10% strengthening or weakening in Euro against all other currencies, from the rates applicable at 31 December 2018, for each class of financial instrument with all other variables held constant. This analysis has illustrative purposes only, as in practice market rates rarely change alone.

Under this assumption, with a 10% strengthening or weakening of Euro against all exchange rates, profit before income tax (and inherent capital) would have increased or decreased, respectively, by EUR 2,050 thousand in 2018 (2017: EUR 1,954 thousand). There are no direct impacts on equity since the Group does not hold financial instruments with fair value changes recognised in equity nor is applying hedge accounting.

b) Interest rate risk (cash flows and fair value)

Interest rate risk reflects the possibility of changes in future interest charges in loans obtained as a result of changes in market interest rate levels.

Novabase Group's financial liabilities are indexed to short-term reference interest rates, revised in periods shorter than one year plus duly negotiated risk spreads. Hence, changes in interest rates can impact the Group's earnings.

The Group's exposure to interest rates is related to financial liabilities contracted with a fixed and/or floating rate. In the first case, the Group faces a risk of fair value variation in these assets or liabilities, since every change in market rates involves an opportunity cost. In the second case, such change has a direct impact on interest value, consequently causing cash variations.

Exposure to interest rate risk is monitored continuously by the finance department. The purpose of managing interest rate risk is to reduce the volatility of financial costs in the income statement.

Novabase's exposure to interest rate risk is currently very low, not only because of the expected maintenance of very low indexes but also because it is in a cash surplus position. As at 31 December 2018, approximately 11% of bank borrowings are contracted at fixed rates (2017: 13%). However, as a result of the negative indexes during the year, this amount rises to 43%, bearing in mind that some of the borrowings are negotiated at variable rates but with minimum index level conditions. All of the borrowings were denominated in Euros.

The Group uses a sensitivity analysis technique that measures the estimated changes in profit or loss and shareholders' equity of either an instantaneous increase or decrease of 0.5% (50 basis points) in market interest rates, from the rates applicable at 31 December 2018, for each class of financial instrument with all other variables held constant. This analysis has illustrative purposes only, as in practice market rates rarely change alone. The sensitivity analysis is based on the following assumptions:

(i) Changes in market interest rates affect the interest income or expense of variable interest financial instruments;

(ii) Changes in market interest rates only affect interest income or expense in relation to financial instruments with fixed interest rates if these are recognised at their fair value;

(iii) Changes in market interest rates affect the fair value of derivative financial instruments and other financial assets and liabilities;

(iv) Changes in the fair values of derivative financial instruments and other financial assets and liabilities are estimated by discounting the future cash flows of net present values using appropriate market rates prevailing at the year end.

Under these assumptions, an increase or decrease of 0.5% in market interest rates, would impact respectively in an increase or decrease of profit before income tax of approximately EUR 89 thousand in 2018, and in an increase or decrease, respectively, of approximately EUR 80 thousand in 2017. There are no impacts on shareholders' equity without being those inherent to the impact on results.

c) Credit Risk

Credit risk is managed, simultaneously, on business units' level, for the amounts of outstanding trade and other receivables, and on Group basis, for financial instruments. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently well rated parties are accepted. Credit risk management of trade and other receivables is based in credit limits, taking into account the financial position of the customer and past experience.

At 31 December 2018, the 60 customers with greater balances of the Group represented approximately 86% of the total balance (2017: 82%).

The distribution by geographical market of those customers is shown in the table below:

	31.12.18	31.12.17
Portugal	51%	38%
Europe	33%	31%
Africa	12%	27%
Middle East	4%	2%
Asia	-	1%
North America	-	1%
	100%	100%

The distribution by business sector of those customers is shown in the table below:

	31.12.18	31.12.17
Telecommunications	44%	30%
Public Administration	25%	32%
Financial Services	11%	14%
Information Technology	7%	13%
Energy	6%	6%
Transport	2%	1%
Aeronautics	1%	1%
Other	4%	3%
	100%	100%

The table below shows the ratings attributed by Moody's Investors Services (unless otherwise stated) to the financial institutions and to the Government of Angola with whom the Group as higher balances of bank deposits at 31 December 2018 (note 20) and Treasury Bonds (note 19), respectively. These balances are shown before impairment losses recognised according to IFRS 9.

		31.12.18	31.12.17
	A1	-	5,248
	A2	4,079	-
	Baa1	18,652	3,218
	Baa2	12,490	-
	Baa3	-	25,999
	Ba3	14,026	-
	B1	-	13,130
	B2	-	15,066
	B3	9,286	-
	Caa1	4,866	3,006
(*)	B	3,956	-
		67,355	65,667

(*) Rating attributed by Standard & Poor's (for short term) to Banco BIM (Mozambique), as the Group did not obtain rating from Moody's.

All bank deposits are highly liquid, readily convertible to known amounts of cash.

d) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions.

Management monitors rolling forecasts of the Group's liquidity reserve (which comprises undrawn committed borrowing facilities and cash and cash equivalents) on the basis of expected cash flows, taking into account the analysis of the remaining contractual maturity of the financial liabilities and the expected date of financial assets inflows, and taking into account the cash transfer restrictions from Angola (see also note 20). Additionally, the maturity concentration of derivative financial instruments, borrowings and liabilities of the Group are regularly monitored. Notes 17 and 24 present those Novabase's liabilities, respectively, by intervals of contractual residual maturity at 31 December 2018 and 31 December 2017.

Details on the borrowings balances and short term lines of credit negotiated by Novabase Group, by financial institution, at 31 December 2018 are as follows:

	Borrowings
	Euro	Kwanza
Banco BPI (BPI)	10,000	-
Banco Europeu de Investimento (BEI)	5,300	-
Novo Banco	7,000	-
Caixa Geral de Depósitos (CGD)	5,000	-
Banco Santander Totta (Santander)	1,200	-
Bankinter	1,563	-
Novo Banco ES	1,000	-
Banco de Fomento de Angola (BFA)	-	200,000
	31,063	200,000

As stated in the Consolidated Statement of Cash Flows, Novabase finances itself through cash flows generated by its operations. Additionally, and as shown in the analysis of the table above, the Group maintains a diversified portfolio of loans and has access to credit amounts that are not fully used but that are at its disposal. These credits can cover all loans that are repayable in 12 months.

The available short term lines of credit that are not being used, amount to approximately EUR 20,362 thousand as at 31 December 2018 and are sufficient to meet any immediate demand. In addition to these credits, the Group has EUR 63,614 thousand of cash and cash equivalents as at 31 December 2018, as stated in the Consolidated Statement of Financial Position, which combined with the credit facilities amounts to EUR 83,976 thousand of liquidity.

e) Capital management risk

The Group's objectives when managing capital, which is a broader concept than 'equity' in the consolidated statement of financial position, are:

(i) To safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders;

(ii) To maintain a solid capital structure to support the development of its business;

(iii) To maintain an optimal capital structure to reduce the cost of capital.

Management monitors the Return on Capital (ROC) ratio, which the Group defines as the 'Operating Profit' divided by 'Total Equity', to measure the Group ability to generate cash flows related to the capital invested in its business.

	31.12.18	31.12.17
Operating Profit	7,359	7,705
Total Equity	80,580	81,166
Return on Capital	9.1 %	9.5 %

The Group has the objective to maintain ROC above the cost of capital (measured by WACC - Weighted Average Cost of Capital), which allows the Group to add value. The Group's WACC in 2018 is around 7.7% (2017: 7.4%). In 2018, the objective was achieved.

4. Critical accounting estimates and judgements

The preparation of financial statements requires the use of certain critical accounting estimates by the Management, that affect assets, liabilities, and the disclosure of assets and contingent liabilities at the reporting date in the financial statements, as well as income and expenses during the reporting period, consequently future results can differ from the estimated ones. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The estimates and judgements considered more relevant in the preparation of these financial statements are presented below.

a) Goodwill impairment analysis

The Group tests annually, on the second half of the year, whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.7.. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates, to forecast the cash flows of each cash-generating units, and the choice of a discount rate and a perpetual grow rate (see note 8).

b) Financial instruments measured at fair value

The fair value of financial instruments not quoted on an active market is determined based on valuation methods and financial theories. The use of valuation methodologies requires using assumptions, with some assumptions requiring the use of estimates. Therefore, changes in those assumptions could result in a change in the fair value reported.

c) Income taxes and deferred taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes and the use of deferred tax assets and liabilities. Deferred tax assets and liabilities were determined based on tax legislation currently in effect for the Group's companies, or on legislation already published for future application. Changes in the tax legislation may influence the value of deferred taxes.

The Group recognises deferred tax assets related to tax incentives obtained under SIFIDE based on estimates. The final amount of these tax incentives is only known in future years based on the approval by the competent body of the Group's applications to these incentives. The booked amount of tax credits not yet approved reach EUR 2,903 thousand (2017: EUR 3,796 thousand).

Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax assets and liabilities in the period in which such determination is made.

d) Revenue recognition

Revenue recognition in respect of 'turn key' projects requires the use of judgements, starting with the application of the five-step model established in IFRS 15, namely, in the identification of performance obligations and in the allocation of the transaction price to defined performance obligations, based on their relative stand-alone selling prices. In addition, Management carries out analysis and estimates of the current and future developments of consulting projects in place, which may have a different development in the future from the present estimates performed by project managers.

Eventual changes in the estimates would be reflected under 'Accrued income' and 'Deferred income and other current liabilities' captions in the statement of financial position and under 'Services rendered' in the statement of profit and loss, however, historically there have been no material deviations in the estimates of costs to be incurred in ongoing projects from the year before (which represent around 3% in 2018 and 10% in 2017) nor in the outcome of the transaction.

e) Impairment losses on financial assets

Loss allowances for trade and other receivables are based on risk default assumptions and expected loss rates. The Group makes judgements for these assumptions and selects the inputs to the impairment calculation, based on the group's past history (such as the ageing of accounts receivable balances and historical write-off experience, customer credit worthiness and changes in customer payment terms), existing market conditions and forward-looking estimates at the end of each reporting period. If the customer's financial conditions deteriorate, actual impairment losses and write-offs might be higher than expected. With regard to loss allowances for debt securities and bank balances, the Group also assesses whether credit risk has increased significantly since initial recognition.

f) Legal claims provisions

The Group exercises judgment in measuring and recognising provisions and its exposure to contingent liabilities related to legal proceedings, based on the assessment of its specialists and legal advisers (internal and/or external). This judgment is necessary to determine the probability of the outcome for each lawsuit. Provisions are recognised when the Group expects that the proceedings in progress will result in cash outflows or disclose it in the notes when the probability of having an unfavourable outcome is less than probable - unless the possibility of an outflow of resources is remote, where disclosure is not required. These estimates are subject to changes as new information becomes available. Due to the uncertainties inherent in the evaluation process, real losses may be different from those originally estimated.

The Group discloses in 'Contingencies' (note 42) all the legal proceedings in which it considers that there is a possibility of an outflow of resources, although it is not probable, reason why no liabilities have been recognised. The Management believes, based on the opinions of its specialists and legal advisors (internal and/or external), that there is sufficient substance for its defence in court and therefore considers that such actions will have a successful outcome.

g) Bonus

The Group recognises on a monthly basis an estimate for bonus and other variable remunerations, which considers the theoretical amounts agreed with employees, the monitoring of the expected objective's achievement rates and the general situation of the Company's business. The variable remuneration of the elements of the Board of Directors is set by the Remuneration Committee based on the evaluation of the previous year performance. Therefore, the cost estimate for the current exercise booked under 'Trade and other payables' caption, is prepared based on the Management's best estimate to the performance of the current year, where the actual final outcome is only known in the following exercise, after the Remuneration Committee's deliberation. More information about the Shareholders' remuneration can be found in the point regarding Remuneration, included in the Corporate Governance Report, which is an integral part of the Consolidated Annual Report, and in note 40.

5. Segment information

Novabase activity is aggregated into two operating segments:

Business Solutions
Venture Capital

Operating segments are reported consistently with the internal reporting that is provided to the management, namely to the Board of Directors. Based on this report, the Management evaluates the performance of each segment and allocates the available resources. Novabase identified its reportable operating segments based on the activity developed by each segment and did not aggregate operating segments.

The Business Solutions segment develops an activity of consulting and services in the IT area. There is several business units included in this segment, set out based on the industries for which the solutions are oriented, that combine teams of specialists with a mix of competencies with technology, management, design and business expertise, as follows:

Financial Services Vertical business solutions for Banks, Insurance Companies and Stock Markets
Government Vertical business solutions for Government
Transport Vertical solutions for Transport
Energy Vertical solutions for Energy
Telecommunications Vertical solutions for Telecommunications Operators

These business units share structures, such as resources and technologies, but they do not represent an isolated segment. In fact, Management monitors the performance of the Business Solutions segment and allocates available resources as a single area, which is specialized in business process consulting and in the design and implementation of software solutions to support them. This segment derives its revenues mainly from time and materials consulting projects, turn-key consulting projects and outsourcing and maintenance projects, and may also include a small component of sales.

The Venture Capital segment develops a venture capital activity through Novabase Capital, Sociedade de Capital de Risco, S.A., which is substantially different from the rest of Novabase's activity, and whose operating results are monitored by Management as an isolated area for decision-making purposes, performance evaluation and resource allocation. Although this segment has immaterial expression in the total activity of the Group, Management considers that information on this operating segment is useful to the users of financial statements and should therefore be reportable and disclosed separately. Venture Capital segment derives its revenues mainly from the valuation and sale of its Venture Capital Fund's investees and advisory services in purchase and sale and M&A processes.

The companies considered in each operating segment are presented in note 6. Novabase S.G.P.S., S.A. and Novabase Serviços, S.A. appear isolated in the referred note, to highlight the Parent Company which includes the top management of the Group and the company that includes the Group's shared services, respectively. However, for the purposes of preparing segment information, both belong to Business Solutions segment.

Revenues from operating segments, as well as other measures of profit or loss and material items within the consolidated income statement, can be analysed as follows:

	Business	Venture	Disc. operations
	Solutions	Capital	NOVABASE	IMS
At 31 December 2017
Total segment sales and services rendered	190,596	5,895	196,491	-
Inter-segment sales and services rendered	56,092	677	56,769	-
Sales and services rendered	134,504	5,218	139,722	-
Depreciation and amortisation	(2,821)	(389)	(3,210)	-
Operating profit/(loss)	8,598	(893)	7,705	2,696
Finance costs – net	(1,668)	1,091	(577)	-
Share of loss of associates (note 35)	-	(261)	(261)	-
Gain on net monetary position	955	-	955	-
Income tax expense	(1,310)	(72)	(1,382)	-
Profit/(Loss) from operations	6,575	(135)	6,440	2,696
Other information:
(Provisions) / Provisions reversal	(1,241)	(19)	(1,260)	-
Impairment of receivables	7,758	(95)	7,663	-
Inventory impairment	30	-	30	-
	Business	Venture		Disc. operations
	Solutions	Capital	NOVABASE	IMS
At 31 December 2018
Total segment sales and services rendered	203,327	6,791	210,118	-
Inter-segment sales and services rendered	60,554	841	61,395	-
Sales and services rendered	142,773	5,950	148,723	-
Depreciation and amortisation	(2,456)	(484)	(2,940)	-
Operating profit/(loss)	9,044	(1,685)	7,359	-
Finance costs – net	(1,572)	81	(1,491)	-

Share of loss of associates (note 35) - (62) (62) - Gain on net monetary position 308 - 308 - Income tax expense (1,382) 282 (1,100) - Profit/(Loss) from operations 6,398 (1,384) 5,014 -

(Provisions) / Provisions reversal 2,132 (15) 2,117 - Impairment of receivables 746 39 785 - Inventory impairment - - - -

In 2017, the amount recorded in results from discontinued operations reflects the adjustment on the gain generated by the sale of IMS Business (see note 41).

Novabase does not disclose information on assets and liabilities for each reportable segment since it does not provide such information to those responsible for operational decision making.

Management monitors Turnover in countries outside Portugal. These amounts are generally obtained through Portugal-based subsidiaries.

Sales and services rendered to external clients, by destination geography, in 2017, are analysed as follows:

Other information:

	Portugal	Europe	Others	Novabase
Sales and services rendered	64,182	51,895	23,645	139,722

Sales and services rendered to external clients, by destination geography, in 2018, are analysed as follows:

	Portugal	Europe	Others	Novabase
Sales and services rendered	67,802	55,649	25,272	148,723

Novabase does not disclose geographical information of non-current assets since the cost of preparing this information, which is not used by the Management, would be excessive (see note 6 - A. Subsidiaries with material non-controlling interests, for some information on non-current assets in Angola and Mozambique).

6. Companies included in consolidation

The companies consolidated by the full method, as at 31 December 2018, were the following:

Holding company	Principal place	Share capital	% Interest held
and Subsidiaries	of business	31.12.18	31.12.18	31.12.17
Parent company:
Novabase S.G.P.S., S.A.	Portugal	15,700,697 €	-	-
Business Solutions:
Novabase Business Solutions, S.A.	Portugal	3,366,000 €	100.0%	100.0%
(a1) Novabase Neotalent, S.A.	Portugal	52,630 €	95.0%	100.0%
Novabase Consulting S.G.P.S., S.A.	Portugal	11,629,475 €	100.0%	100.0%
Novabase E.A., S.A.	Portugal	150,000 €	100.0%	100.0%
CelFocus, S.A.	Portugal	100,000 €	55.0%	55.0%
Nbase International Investments B.V.	The Netherlands	1,220,800 €	100.0%	100.0%
Novabase Solutions Middle East FZ-LLC	Dubai	699,670 €	100.0%	100.0%
(a2) Novabase Digital, S.A.	Portugal	500,000 €	90.1%	100.0%
Evolvespace Solutions, Lda.	Portugal	5,000 €	100.0%	100.0%
Binómio, Lda.	Portugal	2,626 €	100.0%	100.0%
NBMSIT, Sist. de Inf. e Tecnol., S.A.	Mozambique	8,235,000 MZN	74.0%	74.0%
Celfocus B. T. T. H. T. Limited Ş.	Turkey	100,000 TRY	55.0%	55.0%
(b1) NBASE S.G.P.S., S.A.	Portugal	328,125 €	100.0%	100.0%
Celfocus LTD	UK	15,000 GBP	55.0%	55.0%
(a1) Novabase Sistemas de Informacion, S.A.	Spain	1,000,000 €	95.0%	100.0%
(*) NBASIT-Sist. de Inf. e Telecomunic., S.A.	Angola	47,500,000 AOA	49.4%	49.4%
(b1) Novabase Interactive TV S.G.P.S., S.A.	Portugal		-	100.0%
NOVABASE IMS 2, S.A.	Portugal	220,500 €	100.0%	100.0%
TVLab, S.A.	Portugal	52,517 €	70.0%	70.0%
Venture Capital:
Novabase Capital S.C.R., S.A.	Portugal	2,500,000 €	100.0%	100.0%
(a3) COLLAB – Sol. I. Com. e Colab., S.A.	Portugal	63,833 €	77.8%	81.0%
FCR NB Capital Inovação e Internacionalização	-	11,360,000 €	51.6%	51.6%
FCR Novabase Capital +Inovação	-	7,021,278 €	53.1%	53.1%
Novabase Shared Services:
Novabase Serviços, S.A.	Portugal	€ 50,000	100.0%	100.0%

^(*) Novabase has control of this company, as described in note 2.3., therefore it is fully consolidated.

In 2018, the following changes occurred in the consolidation perimeter:

a) Transactions with non-controlling interests (see note 22):

(a1) Share capital increase in Novabase Neotalent, S.A. subscribed by a new shareholder, resulting in a dilution of the Group's interest in the company and, consequently, in Novabase Sistemas de Informacion, S.A..
(a2) Share capital increase in Novabase Digital, S.A. subscribed by a new shareholder, resulting in a dilution of the Group's interest in the company.
(a3) Share capital increase in COLLAB – Sol. I. Com. e Colab., S.A. subscribed by (i) a new shareholder and (ii) another shareholder already existing, resulting in a dilution of the Group's interest in the company.

b) Other changes in the consolidation perimeter:

(b1) With reference to 1 October 2018, a merger took place, and NBASE S.G.P.S., S.A. incorporated the assets and liabilities of the company Novabase Interactive TV S.G.P.S., S.A..

The companies consolidated using the equity method, as at 31 December 2018, were the following:

Associates		Principal placeShare capital % Interest held			Equity	Net Profit
(see note 9)	of business	31.12.18	31.12.18	31.12.17	31.12.18	31.12.18
Fundo Capital Risco NB Capital	Portugal	7,142,857 €	30.0%	30.0%	879	(205)

A. Subsidiaries with material non-controlling interests

Novabase considers that the principal subsidiaries with material non-controlling interests at 31 December 2018 are those set out below, which jointly account for 68% (2017: 95%) of the amount of 'Non-controlling interests' of profit or loss. They have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business.

Subsidiary	Principal activity
NBMSIT, Sist. de Inf. e Tecnol., S.A.	Consulting services and the development and implementation of information systems, applications, computer software and equipment
NBASIT-Sist. de Inf. e Telecomunic., S.A.	Production, commercialization, import and export of goods and IT services and related activities, and information systems
CelFocus, S.A.	Services and information systems solutions for the Telecommunications industry
COLLAB – Sol. I. Com. e Colab., S.A.	Design, production, commercialization and consulting services of communication systems and professional collaboration

Summarised financial information on subsidiaries with significant Non-controlling interests (amounts before inter-company eliminations):

At 31 December 2017			NBMSIT S.A. NBASIT S.A. CelFocus, S.A. Collab, S.A.
Total Non-Current Assets Total Current Assets Total Non-Current Liabilities Total Current Liabilities	530 7,281 - (10,454)	15 20,636 (2) (23,383)	4,063 36,063 (1,827) (20,606)	3,487 5,195 (1,212) (3,068)
Net Assets	(2,643)	(2,734)	17,693	4,402
Net Assets attrib. to NCI	(977)	(2,149)	8,031	954
Sales and Services rendered Profit for the year	6,724 820	7,143 3,212	54,597 3,965	5,040 (505)
Total Comprehensive Income	820	3,212	3,965	(505)
Comprehensive Income attrib. to NCI	126	2,374	1,784	(124)
Cash and cash equiv. at beg. of year Cash and cash equiv. at end of year	2,708 376	9,812 3,849	7,984 10,734	1 1,787
Change in cash and cash equiv.	(2,332)	(5,963)	2,750	1,786
Dividends paid to NCI (note 23)	-	-	1,272	-

At 31 December 2018			NBMSIT S.A. NBASIT S.A. CelFocus, S.A. Collab, S.A.
Total Non-Current Assets Total Current Assets Total Non-Current Liabilities Total Current Liabilities	458 4,357 (99) (7,139)	7,685 7,217 (5) (17,195)	4,318 35,260 (1,766) (21,446)	2,479 4,179 (647) (2,805)
Net Assets	(2,423)	(2,298)	16,366	3,206
Net Assets attrib. to NCI	(936)	(2,128)	7,654	761
Sales and Services rendered Profit for the year	6,465 399	1,105 (54)	55,690 2,435	5,782 (1,194)
Total Comprehensive Income	399	(54)	2,435	(1,194)
Comprehensive Income attrib. to NCI	74	(508)	932	(311)
Cash and cash equiv. at beg. of year Cash and cash equiv. at end of year	376 4,016	3,849 5,584	10,734 14,569	1,787 1,321
Change in cash and cash equiv.	3,640	1,735	3,835	(466)

B. Interests in associates that are material

Novabase considers that its 30% ownership interest in Fundo de Capital de Risco NB Capital is not a material interest to the Group (see note 9). However, in order to provide useful information to the users of the financial statements, some financial information on this associate is disclosed below, in addition to that presented in the table of the companies included in the consolidation by the equity method.

'Fundo de Capital de Risco NB Capital' presents in its financial statements as at 31 December 2018 a Total Non-Current Assets of EUR 692 thousand and a Total Current Assets of EUR 191 thousand. Liabilities (all Current) amounts to EUR 4 thousand, for a Total Net Asset of EUR 879 thousand. Given the venture capital activity developed by this associate, Turnover is nil, while Net Profit for the year is equal to Earnings Before Taxes, in the amount of EUR -205 thousand. In 2018, there was a Net decrease in Cash and cash equivalents in the amount EUR -242 thousand, for a balance at the end of the period of EUR 130 thousand. This associate did not attribute or pay dividends in any of the periods of this report.

7. Property, plant and equipment

		31.12.18		31.12.17
		Accumulated	Net book		Accumulated	Net book
	Cost	depreciation	value	Cost	depreciation	value
Buildings and other constructions	3,201	2,829	372	3,155	2,772	383
Basic equipment	7,237	5,763	1,474	6,517	5,103	1,414
Transport equipment	9,733	1,641	8,092	10,048	2,202	7,846
Furniture, fittings and equipment	1,830	1,533	297	1,807	1,432	375
Other tangible assets	12	12	-	12	11	1
	22,013	11,778	10,235	21,539	11,520	10,019

During 2017, movements in property, plant and equipment were as follows:

	Balance at 01.01.17	Application IAS 29	Acquisitions / increases	Write-offs	Exchange differences	Balance at 31.12.17
Cost:
Buildings and other constructions	3,160	-	1	(6)	-	3,155
Basic equipment	6,095	28	648	(254)	-	6,517
Transport equipment	8,319	153	3,706	(2,087)	(43)	10,048
Furniture, fittings and equipment	1,826	6	72	(92)	(5)	1,807
Other tangible assets	17	-	-	(5)	-	12
	19,417	187	4,427	(2,444)	(48)	21,539
Accumulated depreciation:
Buildings and other constructions	2,487	-	291	(6)	-	2,772
Basic equipment	4,629	27	649	(174)	(28)	5,103
Transport equipment	2,059	149	821	(741)	(86)	2,202
Furniture, fittings and equipment	1,329	4	181	(71)	(11)	1,432
Other tangible assets	14	-	2	(3)	(2)	11
	10,518	180	1,944	(995)	(127)	11,520

During 2018, movements in property, plant and equipment were as follows:

	Balance at 01.01.18	Application IAS 29	Acquisitions / increases	Write-offs	Exchange differences	Balance at 31.12.18
Cost:
Buildings and other constructions	3,155	-	46	-	-	3,201
Basic equipment	6,517	8	769	(35)	(22)	7,237
Transport equipment	10,048	51	3,493	(3,718)	(141)	9,733
Furniture, fittings and equipment	1,807	2	37	(10)	(6)	1,830
Other tangible assets	12	-	-	-	-	12
	21,539	61	4,345	(3,763)	(169)	22,013
Accumulated depreciation:
Buildings and other constructions	2,772	-	57	-	-	2,829
Basic equipment	5,103	8	700	(28)	(20)	5,763
Transport equipment	2,202	49	734	(1,205)	(139)	1,641
Furniture, fittings and equipment	1,432	1	114	(10)	(4)	1,533
Other tangible assets	11	-	1	-	-	12
	11,520	58	1,606	(1,243)	(163)	11,778

Since the year ended at 31 December 2017, Angola was considered as a hyperinflationary economy, therefore Novabase applied IAS 29 to the financial statements of its subsidiary in Angola, before being translated into the presentation currency of the Group, as mentioned in note 2.5. (3) Group companies. The application of the hyperinflation standard to the Angolan accounts had a net impact on property, plant and equipment, at 31 December 2018, of EUR +3 thousand (2017: EUR +7 thousand).

Property, plant and equipment increases in 2018 are primarily in 'Transport equipment' heading, which also showed a similar amount of writeoffs. These acquisitions and write-offs are part of the normal renewal of the Group's fleet.

In 2018, no events or circumstances that indicated that the carrying amount of tangible assets exceeded its recoverable amount were identified; consequently, no impairment tests have been carried out.

Depreciation is included in 'Depreciation and amortisation' heading in the statement of profit and loss (note 32).

8. Intangible assets

	31.12.18		31.12.17
		Accumulated	Net book		Accumulated	Net book
	Cost	amortisation	value	Cost	amortisation	value
Internally generated intangible assets	14,431	13,439	992	14,020	12,117	1,903
Industrial property and other rights	11,059	11,055	4	11,059	11,043	16
Work in progress	183	-	183	357	-	357
Goodwill	14,886	-	14,886	14,886	-	14,886
	40,559	24,494	16,065	40,322	23,160	17,162

During 2017, movements in intangible assets were as follows:

	Balance at	Acquisitions	Impairm. ch.		Balance at
	01.01.17	/ increases	/ Write-offs	Transfers	31.12.17
Cost:
Internally generated intangible assets	13,950	70	-	-	14,020
Industrial property and other rights	11,049	10	-	-	11,059
Work in progress	113	244	-	-	357
Goodwill	14,886	-	-	-	14,886
	39,998	324	-	-	40,322
Accumulated amortisation:
Internally generated intangible assets	10,866	1,251	-	-	12,117
Industrial property and other rights	11,028	15	-	-	11,043
	21,894	1,266	-	-	23,160

During 2018, movements in intangible assets were as follows:

	Balance at	Acquisitions	Impairm. ch.		Balance at
	01.01.18	/ increases	/ Write-offs	Transfers	31.12.18
Cost:
Internally generated intangible assets	14,020	-	-	411	14,431
Industrial property and other rights	11,059	-	-	-	11,059
Work in progress	357	237	-	(411)	183
Goodwill	14,886	-	-	-	14,886
	40,322	237	-	-	40,559
Accumulated amortisation:
Internally generated intangible assets	12,117	1,322	-	-	13,439
Industrial property and other rights	11,043	12	-	-	11,055
	23,160	1,334	-	-	24,494

Amortisation is included in 'Depreciation and amortisation' heading in the statement of profit and loss (note 32).

The captions 'Internally generated intangible assets' and 'Work in progress' include costs incurred in software development projects.

The amount with research and development recognised as a cost, related to the main research projects, reached EUR 4.0 Million (2017: EUR 4.9 Million).

Movements in goodwill were as follows:

	31.12.18	31.12.17
Balance at 1 January	16,413	16,413
Discontinued operations (IMS)	-	-
Balance at 31 December	16,413	16,413
Movements in goodwill impairment were as follows:
	31.12.18	31.12.17
Balance at 1 January	(1,527)	(1,527)
Discontinued operations (IMS)	-	-
Balance at 31 December	(1,527)	(1,527)

Impairment tests for goodwill

Goodwill is allocated to the Group's Cash-Generating Units (CGUs) identified according to operating segments.

	31.12.18	31.12.17
Business Solutions	14,886	14,886
	14,886	14,886

The impairment test for goodwill was performed based on the discounted cash flow method, using a 5 year business plan forecasted by Management, with the following key assumptions:

	31.12.18	31.12.17
Discount rate (post-tax)	7.7%	7.4%
Perpetual growth rate	2.0%	2.0%
Annual growth rate of turnover	7.3%	5.0%

The application of the previously described method generates a recoverable amount (determined by value in use) of assets that exceeds its carrying amount, concluding therefore that there is no need for an impairment charge to the goodwill allocated to the Cash-Generating Units. A possible increase or decrease of 1 percentage point in the WACC would result in an Equity Value of EUR 110 Million and EUR 149 Million, respectively, not becoming lower than the carrying amount of assets.

9. Investments in associates

		Amount		% Interest held directly
	31.12.18	31.12.17	31.12.18	31.12.17
Fundo Capital Risco NB Capital (notes 6 and 35)	30.0%	30.0%	252	314
			252	314

10. Financial assets at fair value through profit or loss

			% Interest held directly		Amount
		31.12.18	31.12.17	31.12.18	31.12.17
(i)	Feedzai, S.A.	1.7%	1.7%	1,926	1,569
(ii)	Globaleda, S.A.	25.1%	25.1%	598	563
(iii)	FCR IStart I	11.6%	11.6%	459	296
(iv)	CB Talents Global, S.A.	13.3%	-	200	-
(v)	Aixtel Technologies, S.A.	5.7%	-	188	-
(vi)	Probely, Lda.	3.3%	-	75	-
(vii)	Bright Innovation, Lda. ("BI")	90.0%	90.0%	-	23
	(viii) Powergrid, Lda.	88.9%	88.9%	-	-
(ix)	Other			422	345
				3,868	2,796

(i) Company held by FCR NB Capital Inovação e internacionalização, dedicated to the development of solutions for processing large volumes of data in real time.

(ii) Held by Novabase Business Solutions S.A., this company is a technology-based company in the area of information systems and telecommunications engineering.

(iii) Venture Capital Fund established in 2011 and held by Novabase Capital S.C.R., S.A., focused on creating proofs-of-concept and prototypes and developing intellectual property and business models. This Fund is managed by Armilar Venture Partners SCR.

(iv) Company held by FCR NB Capital +Inovação (established in 2017), specialized in the international recruitment of IT professionals.

(v) Company held by FCR NB Capital Inovação e internacionalização and FCR NB Capital +Inovação, which developed FIBERCLOUD, a network management platform for the global market.

(vi) Company held by FCR NB Capital +Inovação, focused on cybersecurity.
(vii) Company specialized in incubate projects in the area of Information and Communication Technologies (ICT) and provide integrated services in the administrative and financial areas, training and assistance for ICT SMEs applications, supported by a multi-channel platform. This company is held by FCR NB Capital Inovação e Internacionalização.
(viii) Company, held by FCR NB Capital Inovação e Internacionalização, focused on developing an application platform for SmartGrids.
(ix) In 2018 and 2017, the amount of this caption refers to FCT - Labor Compensation Fund. This item also includes the companies held by FCR NB Capital Inovação e Internacionalização, PowerData and Radical Innovation ("RI"), with a fair value of nil.

Novabase does not have control of the companies held by FCR NB Capital Inovação e Internacionalização and FCR NB Capital +Inovação, understood as the power to manage the relevant activities of an entity, being exposed to the risks of variation of the return obtained and having the capacity to affect those returns through its power over the entity, therefore they were not considered subsidiaries or associates.

Movements in this caption were as follows:

	31.12.18	31.12.17
Balance at 1 January	2,796	4,353
Acquisitions / share capital increase	531	-
Transfers	-	345
Disposals / share capital decrease	-	(1,566)
Profit or loss charge (see notes 33 and 34)	541	(336)
Balance at 31 December	3,868	2,796

In 2018, the change in this caption is mainly due to: i) the investments made by the recently created FCR Novabase Capital +Inovação, in Probely, Lda., CB Talents Global, S.A. and Aixtel Technologies, S.A.; and ii) the changes in fair value of the investees of the funds, mainly a valuation of Feedzai, S.A., in the amount of EUR 357 thousand. It is recalled that, in 2017, FCR Novabase Capital Inovação e Internacionalização sold part of its investment in the company Feedzai by the amount of EUR 4,564 thousand to the North American companies Sapphire Ventures and Sapphire Sap, obtaining a gain of EUR 3,008 thousand (see note 33).

A. Fair value measurements

Note 14 provides information on the fair value hierarchy of these financial assets.

There were no transfers between levels 3 and 2 for recurring fair value measurements during 2018.

For the FCT valuation, the fair value was determined with reference to observable input data: the value of 'Participation Units' at the reporting date (level 1 in the fair value hierarchy).

For the valuation of the companies held by FCR NB Capital Inovação e Internacionalização, the discounted cash flow method was used, considering a 5-year business plan forecasted by Management. The key assumptions used in Feedzai, the main financial asset in this category (since Powergrid, Powerdata, Radical Innovation and Bright Innovation have a nil fair value at 31 December 2018) are set out below:

		Feedzai
	31.12.18	31.12.17
Discount rate (post-tax)	13.6%	14.4%
Perpetual growth rate	0.5%	0.5%
Annual growth rate of turnover	16.8%	16.4%

According to the sensitivity analysis performed on Feedzai, a possible increase or decrease of 1 percentage point in WACC would result in a fair value change of approximately EUR -116 thousand and EUR +136 thousand, respectively.

11. Deferred tax assets and liabilities

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts were determined after its offsetting:

	31.12.18	31.12.17
Deferred tax assets
To be recovered within 12 months	349	1,375
To be recovered after more than 12 months	9,699	9,073
	10,048	10,448
Deferred tax liabilities
To be recovered within 12 months	-	-
To be recovered after more than 12 months	-	-
	-	-
Movements in the deferred tax assets were as follows:
	31.12.18	31.12.17
Balance at 1 January	10,448	9,545
Adjustment on initial application of IFRS 9 and IFRS 15 (note 2.2.)	662	-
Exchange differences	(4)	23
Other comprehensive income charge	(147)	302
Profit or loss charge (see note 36)	(911)	578
Balance at 31 December	10,048	10,448

The amount recognised in other comprehensive income of EUR -147 thousand in 2018 (2017: EUR 302 thousand) refers to the tax related to the net investment accounting and to the economic hedge of the operations in Angola (see note 19).

The movement in deferred tax assets during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

	Tax Losses /	Tax	Provisions /
	Other	Incentives	Adjustments	Total
Balance at 1 January 2017	128	6,400	3,017	9,545
Profit or loss charge	(1,276)	3,354	(1,500)	578
Other comprehensive income charge	302	-	-	302
Exchange differences	23	-	-	23
Balance at 31 December 2017	(823)	9,754	1,517	10,448
Adjustment on initial application of IFRS 9 and IFRS 15	662	-	-	662
Profit or loss charge	(1,069)	362	(204)	(911)
Other comprehensive income charge	(147)	-	-	(147)
Reclassifications	600	(600)	-	-
Exchange differences	(4)	-	-	(4)
Balance at 31 December 2018	(781)	9,516	1,313	10,048

Deferred tax assets related to tax incentives result from projects of research and development submitted under the incentive program SIFIDE.

The expiry date of the deferred tax assets can be analysed as follows:

	Tax Losses /	Tax	Provisions /
	Other	Incentives	Adjustments	Total
No later than 1 year	-	9	-	9
Between 1 and 2 years	-	-	-	-
Between 2 and 3 years	-	-	-	-
Between 3 and 4 years	52	2,382	-	2,434
Between 4 and 5 years	130	1,610	-	1,740
Between 5 and 6 years	-	2,396	-	2,396
Over 6 years	-	3,119	-	3,119
With no defined date	(963)	-	1,313	350
	(781)	9,516	1,313	10,048

12. Other non-current assets

	31.12.18	31.12.17
Loans to related parties (note 40 iii)	4,769	4,769
Capital subscribers of Fundo de Capital de Risco NB Capital +Inovação	-	1,234
Provision for impairment of loans to related parties (note 40 iii)	(3,125)	(2,747)
	1,644	3,256

The fair value of 'Other non-current assets' balance approximates its carrying amount.

Movements in the provision for impairment of loans to related parties are analysed as follows:

	31.12.18	31.12.17
Balance at 1 January	2,747	3,438
Impairment (note 34)	378	1,753
Impairment reversal (note 33)	-	-
Usage / write-offs	-	(2,444)
Balance at 31 December	3,125	2,747

In 2017, the amount of 'Usage / write-offs' is related to the dissolution and sale of the companies Livian Technologies, City Pulse and SmartGeo, held by FCR NB Capital Inovação e Internacionalização. This amount was considered in the computation of the gains or losses on disposal of these financial assets (disclosed in notes 33 and 34).

13. Inventories

	31.12.18	31.12.17
Merchandise	50	62
Raw materials, subsidiary goods and consumables	119	119
	169	181
Inventory impairment	(136)	(135)
	33	46
Movements in inventory impairment are analysed as follows:
	31.12.18	31.12.17
Balance at 1 January	135	160
Impairment (note 31)	-	18
Impairment reversal (note 31)	-	(48)
Exchange differences	1	5
Balance at 31 December	136	135

14. Financial instruments by category

		Assets/liabilit.	Other	Non-financial
	Loans and	at fair value	financial	assets/
At 31 December 2017	receivables	through P&L	liabilities	liabilities	Total
Assets
Financial assets at fair value through profit or loss	-	2,796	-	-	2,796
Held-to-maturity investments	15,066	-	-	-	15,066
Investment securities	-	-	-	-	-
Other non-current assets	3,256	-	-	-	3,256
Trade and other receivables	47,831	-	-	1,914	49,745
Accrued income	16,356	-	-	-	16,356
Derivative financial instruments	-	18	-	-	18
Other current assets	-	-	-	1,546	1,546
Cash and cash equivalents	56,136	-	-	-	56,136
	138,645	2,814	-	3,460	144,919
Liabilities
Borrowings	-	-	23,744	-	23,744
Other non-current liabilities	-	-	744	-	744
Trade and other payables	-	-	41,619	-	41,619
Derivative financial instruments	-	-	-	-	-
Deferred income and other current liabilities	-	-	25,103	-	25,103
	-	-	91,210	-	91,210

At 31 December 2018	Financial assets at amortised cost	Assets/liabilit. at fair value through P&L	Other financial liabilities	Non-financial assets/ liabilities	Total
Assets
Financial assets at fair value through profit or loss	-	3,868	-	-	3,868
Held-to-maturity investments	-	-	-	-	-
Investment securities	8,878	-	-	-	8,878
Other non-current assets	1,644	-	-	-	1,644
Trade and other receivables	41,625	-	-	4,033	45,658
Accrued income	5,464	-	-	-	5,464
Derivative financial instruments	-	26	-	-	26
Other current assets	-	-	-	3,851	3,851
Cash and cash equivalents	63,614	-	-	-	63,614
	121,225	3,894	-	7,884	133,003
Liabilities
Borrowings	-	-	19,680	-	19,680
Other non-current liabilities	-	-	990	-	990
Trade and other payables	-	-	40,399	-	40,399
Derivative financial instruments	-	24	-	-	24
Deferred income and other current liabilities	-	-	22,267	-	22,267
	-	24	83,336	-	83,360

Except for the following paragraph, the application of the classification and measurement requirements of IFRS 9 had no impact on the Group, as described in note 2.2.. For more information about the categories of financial assets and liabilities, see policy in note 2.8..

IFRS 9 eliminates the previous IAS 39 category of 'held to maturity'. Accordingly, the amounts recorded at 31 December 2017 in the caption 'Held-to-maturity investments' were reclassified at 1 January 2018 to the caption 'Investment securities'.

The following table shows the Group's financial assets and liabilities that are measured at fair value according to the following hierarchy levels:

- Level 1: The fair value of financial instruments is based on quoted prices in active and liquid markets at reporting date.
- Level 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Key inputs used on these valuation models are based on observable market data.
- Level 3: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques, and key inputs are not based on observable market data.

	31.12.18			31.12.17
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
Financial assets at fair value
(*) Financial assets at fair value through profit or loss	422	-	-	345	-	-
Financial assets at fair value through profit or loss	-	-	3,446	-	-	2,451
Derivative financial instruments	-	26	-	-	18	-
	422	26	3,446	345	18	2,451
Financial liabilities at fair value
Derivative financial instruments	-	24	-	-	-	-
	-	24	-	-	-	-

(*) Refers to FCT - Labor Compensation Fund (see note 10).

15. Trade and other receivables

	31.12.18	31.12.17
Trade receivables	42,475	48,088
Impairment allowance of trade receivables	(2,212)	(2,802)
	40,263	45,286
Prepayments to suppliers	167	419
Employees	87	86
Value added tax	1,298	1,409
Receivables from related parties (note 40 iii)	-	15
Amount receivable from non-controlling interests (note 22)	12	-
Receivables from financed projects	1,946	1,660
Capital subscribers of Fundo de Capital de Risco NB Capital +Inovação	2,469	1,174
Other receivables	558	901
Impairment allowance of other receivables	(1,142)	(1,205)
	5,395	4,459
	45,658	49,745

The balance of 'Capital subscribers of Fundo de Capital de Risco NB Capital +Inovação' refers to the amount receivable expected within 1 year, regarding the called-up share capital of this Fund due for shares issued but not fully paid, as established in Article 2 of its Management Regulation. The increase of this balance year-on-year is due to the classification as current of an amount that was considered in 'Other noncurrent assets' in the previous year.

The fair value of 'Trade and other receivables' balance approximates its carrying amount.

The carrying amount of this caption plus the balance of 'Accrued income' (see note 16) represents the maximum exposure to credit risk.

An analysis of the credit quality of trade receivables not due and trade receivables due and not impaired, and the ageing of trade receivables due and not impaired and due and impaired as at 31 December 2017, under IAS 39, is as follows:

	31.12.17
Carrying amount of receivables not due	29,130
Carrying amount of receivables not impaired
Past due for less than 6 months	15,454
Past due for more than 6 months	587
Carrying amount of receivables due and not impaired	16,041
Carrying amount of receivables impaired
Past due for less than 6 months	-
Past due for more than 6 months	2,917
Carrying amount of receivables due and impaired	2,917
	48,088

80% of trade receivables not due and trade receivables past due and not impaired was owed by entities with which there is no past experience of default, and the remaining 20% were distributed by 179 entities with an average balance of EUR 50 thousand.

As of 1 January 2018, with the entry into force of IFRS 9, the Group uses an allowance matrix to measure the ECLs of trade receivables, which comprise a very large number of small balances. Loss rates are calculated using a method based on the probability of a receivable progressing through successive stages of delinquency to write-off. The following table provides information about the exposure to credit risk and ECLs for the Group's trade receivables as at 31 December 2018.

At 31 December 2018	Weighted- -average loss rate	Gross carrying amount	Loss allowance	Credit impaired
Current (not past due)	0.43%	32,946	140	No
1-180 days past due	2.37%	6,679	157	No
181-360 days past due	14.49%	882	128	No
More than 360 days past due	90.82%	1,968	1,787	Yes
		42,475	2,212

Details on the customer concentration / dependency as well as the distribution of the customers with greater balances of the Group by geographical market and business sector can be found in note 3 c) about credit risk.

Movements in impairment allowances of trade and other receivables are analysed as follows:

	Trade receivables		Other receivables		Total
	31.12.18	31.12.17	31.12.18	31.12.17	31.12.18	31.12.17
Balance at 1 January	2,802	11,160	1,205	1,131	4,007	12,291
Adj. on initial application of IFRS 9 (note 2.2.)	542	-	-	-	542	-
Impairment	490	885	-	91	490	976
Impairment reversal	(1,267)	(8,639)	(8)	-	(1,275)	(8,639)
Recovery of bad debts	12	-	-	-	12	-
Exchange differences	(361)	(115)	(55)	(17)	(416)	(132)
Write-offs	(6)	(489)	-	-	(6)	(489)
Balance at 31 December	2,212	2,802	1,142	1,205	3,354	4,007

Impairment and impairment reversal of trade and other receivables recognised in results in accordance with IFRS 9 and included in 'Net impairment losses on trade and other receivables' is EUR 785 thousand (in 2017 an impairment reversal was recognised in amount of EUR 7,663 thousand, which is included under 'Other gains/(losses) - net' - see notes 2.2. and 31).

16. Accrued income

	31.12.18	31.12.17
- Ongoing projects	4,106	14,087
- Other accrued income	1,358	2,269
	5,464	16,356

17. Derivative financial instruments

The fair value of derivative financial instruments can be analysed as follows:

	Assets		Liabilities
	31.12.18	31.12.17	31.12.18	31.12.17
- Forward foreign exchange contracts	26	18	24	-
	26	18	24	-

The Group is exposed to foreign exchange risk in sales and purchases in various currencies, primarily with respect to the U.S. Dollar, Kwanza and Metical. Novabase's exposure to currency risk mainly results from the presence of several of its subsidiaries in various markets, namely, in Angola and Mozambique.

The forward foreign exchange contracts are the financial instruments used to manage this risk, and they are contracted on the net exposure to currencies, according to the terms of receipts and payments agreed with third parties, in order to set the exchange rate associated with these operations. The nature of the hedged risk is the exchange variation recorded in foreign currency denominated transactions.

The fair value is classified as a non-current asset or liability if the remaining maturity is greater than 12 months and as current asset or liability if the remaining maturity is less than 12 months. In 2018, derivative financial instruments were classified as current assets and liabilities. Although contracted with the purpose of economic hedge in accordance with the Group's risk management policies, changes in the fair value of these derivatives were recognised in profit or loss (see note 2.22. (2)). Note 14 provides information on the fair value hierarchy of these financial assets and liabilities.

At 31 December 2018, the Group had forward foreign exchange contracts of EUR Call / USD Put with the notional amount of USD 6,422,270 and forward foreign exchange contracts of EUR Put / USD Call with the notional amount of USD 899,063.

18. Other current assets

The amounts recorded regarding prepayments of contracted services are as follows:

- Rents 294	31.12.17
	513
- Software licensing 3	40
- Hardware and software maintenance and specialized services 3,554	993
3,851	1,546

In order to ensure the proper balancing of the services provided by third parties, expenses and revenues were deferred and will be recognised in profit or loss in the next period.

19. Investment securities and held-to-maturity investments

With reference to 1 January 2018, the Group adopted IFRS 9 in accordance with the modified retrospective approach, and therefore the amounts of the comparative period are not restated (see note 2.2.). Accordingly, the amounts currently shown in the caption 'Investment securities' are shown under the caption 'Held-to-maturity investments' in 2017, as follows:

	Investment securities (*)		Held-to-maturity invest.
	31.12.18	31.12.17	31.12.18	31.12.17
Non-Current
Government of Angola Treasury Bonds	7,680	-	-	7,713
	7,680	-	-	7,713
Current
Government of Angola Treasury Bonds	1,198	-	-	7,353
	1,198	-	-	7,353

(*) In 2018 includes accumulated impairment losses in the amount of EUR 408 thousand.

The Group invests part of the cash surplus of its Angolan subsidiary in Government of Angola Treasury Bonds indexed to USD. At 31 December 2018, the Group has 13 Treasury Bonds, most of them purchased from BFA during 2018, in the total amount net of impairment losses of EUR 8,878 thousand, with maturities in 2019 (EUR 1,198 thousands), in 2020 (EUR 6,581 thousands), in 2021 (EUR 701 thousands) and in 2022 (EUR 398 thousands).

As disclosed in note 2.5. (3) Group companies, the Group is applying the net investment in foreign entities. Since the purpose of contracting these Government of Angola Treasury Bonds is to provide economic hedge of the Angolan operation, the impact of this hedge was recognised in other comprehensive income, in the amount of EUR 12,512 thousand in 2018.

Movements in impairment allowance of debt securities are analysed as follows:

	31.12.18
Balance at 1 January	-
Adjustment on initial application of IFRS 9 (note 2.2.)	449
Impairment (note 34)	-
Impairment reversal (note 33)	(41)
Balance at 31 December	408

20. Cash and cash equivalents

With reference to the statement of cash flows, the detail and description of cash and cash equivalents is analysed as follows:

	31.12.18	31.12.17
- Cash	35	13
- Short-term bank deposits	63,608	56,123
Cash and cash equivalents at 31 December Caixa e equivalentes a caixa	63,643	56,136
- Impairment allowance of short-term bank deposits	(29)	-
Cash and cash equivalents	63,614	56,136

'Cash and cash equivalents' evolution in 2018 reflects mainly two effects: a significant release of working capital and the payment of dividends to shareholders and non-controlling interests, in a total amount of EUR 5,475 thousand (see notes 22 and 23).

34% of the balance of cash and cash equivalents (net of impairment losses) refers to wholly-owned Novabase subsidiaries. Of the remainder, 24% is related to subsidiaries based outside Portugal.

At 31 December 2018 and 31 December 2017, no restrictions exist as to the usage of the amounts recorded in the caption 'Cash and cash equivalents', considering the text below about Angola.

'Short-term bank deposits' caption includes EUR 5,584 thousand from Novabase's Angola-based subsidiary which, due to the financial and foreign currency crisis in the country, are subject to restrictions on transfers out of Angola, with a slowdown in the repatriation of capital being observed. However, there are no restrictions on its usage.

The ratings attributed to the financial institutions with which the Group has higher balances of bank deposits are detailed in note 3 c).

The fair value of 'Cash and cash equivalents' balance approximates its carrying amount.

Movements in impairment allowance of short-term bank deposits are analysed as follows:

	31.12.18
Balance at 1 January	-
Adjustment on initial application of IFRS 9 (note 2.2.)	36
Impairment (note 34)	7
Impairment reversal (note 33)	(14)
Balance at 31 December	29

21. Share Capital, share premium and treasury shares

The share capital at 31 December 2018, fully subscribed and paid of 15,700,697 Euros, is represented by 31,401,394 shares with a nominal value of 0.5 Euros each.

	Number of shares (thousands)	Share capital	Treasury shares	Share premium	Total
Balance at 1 January 2017	31,401	15,701	(4)	43,560	59,257
Treasury shares purchased	-	-	(184)	-	(184)
Treasury shares transferred	-	-	-	-	-
Balance at 31 December 2017	31,401	15,701	(188)	43,560	59,073
Treasury shares purchased	-	-	-	-	-
Treasury shares transferred	-	-	-	-	-
Balance at 31 December 2018	31,401	15,701	(188)	43,560	59,073

'Treasury shares' caption reflects the number of shares held by the Group at its nominal value.

According to the legislation in force, by deliberation of the General Meeting of Shareholders held on 12 April 2007, the purchase of treasury shares by Novabase S.G.P.S. is permitted up to a maximum of 10% of its share capital.

At 31 December 2017, Novabase S.G.P.S. held 376,611 treasury shares, representing 1.20% of its share capital.

During 2018 there were no treasury shares transactions. Thus, at 31 December 2018, Novabase S.G.P.S. held 376,611 treasury shares, representing 1.20% of its share capital.

Issuance share premiums resulted from gains obtained with share capital increases. According to the current legislation, the amounts included under this caption can be used only to increase share capital or to absorb losses carried forward (no need for prior use of other reserves), but it cannot be used for attribution of dividends or purchase of treasury shares.

22. Reserves and retained earnings

According to legislation in force, Portuguese based companies that integrate Novabase Group are required to transfer a minimum of 5% of annual net profit to legal reserves until this balance reaches at least 20% of the share capital. This reserve cannot be distributed to shareholders, though it may be used to absorb losses carried forward or to increase share capital.

There is also a reserve of an amount equal to the one by which the treasury shares are accounted for, which, in accordance with subparagraph b) of paragraph 1 of article 324 of the Portuguese Companies Code, is unavailable for distribution.

In the General Meeting of Shareholders held on May 2018, it was approved the payment to shareholders of an amount of EUR 4,710 thousand, corresponding to 0.15 Euros per share. The payment occurred in June 2018.

	31.12.18	31.12.17
Payment to shareholders Remuneration of the treasury shares held by the Company	4,654 56	20,166 245
	4,710	20,411

In 2018, the Group performed transactions with non-controlling interests (NCI), with the following impact (see note 6):

			31.12.18
		Consideration	Carrying	Impact on
		to be received	amount of NCI		equity attrib.
		from NCI		to owners
		(in cash)	disposed	of the parent
(i)	Share capital increase in Collab S.A.	50	130	(80)
(ii)	Share capital increase in Novabase Digital, S.A.	247	288	(41)
(iii)	Share capital increase in Novabase Neotalent, S.A.	456	211	245
		753	629	124

(i) Share capital increase in COLLAB – Sol. I. Com. e Colab., S.A. subscribed by (i) a new shareholder and (ii) another shareholder already existing, resulting in a dilution of the Group's interest in the company.

(ii) Share capital increase in Novabase Digital, S.A. subscribed by a new shareholder, resulting in a dilution of the Group's interest in the company.

(iii) Share capital increase in Novabase Neotalent, S.A. subscribed by a new shareholder, resulting in a dilution of the Group's interest in the company and, consequently, in Novabase Sistemas de Informacion, S.A..

As the operations described above were transactions with non-controlling interests in subsidiaries already controlled by the Group that did not result in loss of control, the difference between the consideration received and the carrying amount of net assets disposed of was recorded in equity attributable to owners of the parent, in the total amount of EUR 124 thousand. The non-controlling interests increased by EUR 629 thousand (note 23). The consideration, in cash, was received in 2018, with the exception of a EUR 12 thousand balance (see note 15).

23. Non-controlling interests

		31.12.18	31.12.17
	Balance at 1 January	13,597	8,151
	Adjustment on initial application of IAS 29	-	(710)
	Adjustment on initial application of IFRS 9 and IFRS 15 (net of tax) - see note 2.2.	(736)	-
	Transactions with non-controlling interests (note 22)	629	-
(*)	Change in consolidation perimeter	-	3,292
(**)	Distribution of dividends to non-controlling interests	(821)	(1,272)
	Exchange differences on foreign operations	808	(226)
	Profit attributable to non-controlling interests	277	4,362
	Balance at 31 December	13,754	13,597

(*) In 2017, it was established a new venture capital fund, 'FCR Novabase Capital +Inovação'.

(**) In 2018 and 2017, CelFocus, S.A. approved dividends to its shareholders. These dividends were paid in the year of their attribution (see note 6 - A. Subsidiaries with material non-controlling interests).

24. Borrowings

	31.12.18	31.12.17
Non-current Bank borrowings Finance lease liabilities	6,294 7,066	10,563 6,274
	13,360	16,837
Current Bank borrowings Finance lease liabilities	4,959 1,361	4,963 1,944
	6,320	6,907
Total borrowings	19,680	23,744
The periods in which the current bank borrowings will be paid are as follows:
	31.12.18	31.12.17
6 months or less 6 to 12 months	2,824 2,135	2,831 2,132
	4,959	4,963
The maturity of non-current bank borrowings is as follows:
	31.12.18	31.12.17
Between 1 and 2 years Between 2 and 5 years	3,594 2,700	4,269 6,294
	6,294	10,563
The effective interest rates at the reporting date were as follows:
	31.12.18	31.12.17
Bank borrowings	2.112%	2.092%
Gross finance lease liabilities – minimum lease payments:
	31.12.18	31.12.17
No later than 1 year Between 1 and 5 years	1,594 7,426	2,182 6,947
	9,020	9,129
Future finance charges on finance leases	(593)	(911)
Present value of finance lease liabilities	8,427	8,218
The present value of finance lease liabilities is analysed as follows:
	31.12.18	31.12.17
No later than 1 year Between 1 and 5 years	1,361 7,066	1,944 6,274
	8,427	8,218

The covenants of the Group's bank borrowings are as follows:

Solvability ratio ≥40%; Net Debt / EBITDA ≤3
Solvability ratio ≥35%; Net Debt / EBITDA ≤2.5 ; Net Debt / Total Equity ≤0.5
Solvability ratio ≥40%; Net Debt / EBITDA <2; Net Debt / Total Equity <0.5; EBIT / Interest paid >3
A consolidated amount of Cash and cash equivalents and other investments in bank deposits and in securities of at least EUR 15,000,000 (fifteen million euros)
Bond seniority determined pari passu
Cross Default
Good standing with tax and social security authorities
Published accounts
Information disclosure obligations regarding court disputes
Active insurance policies
At 31 December 2018, the Group was complying with the covenants.

(a) Net debt reconciliation

This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.

	31.12.18	31.12.17
Cash and cash equivalents (amount before impairment losses)	63,643	56,136
Borrowings - repayable within one year (including overdrafts)	(6,320)	(6,907)
Borrowings - repayable after one year	(13,360)	(16,837)
Net debt	43,963	32,392

	Cash and cash equivalents	Bank borrow. Bank borrow. due within 1 year	due after 1 year	Finance lease liab. due within 1 year	Finance lease liab. due after 1 year	Net debt
Balance at 1 January 2017	35,703	(5,376)	(13,907)	(1,540)	(4,990)	9,890
Cash flows Acquisitions - finance lease liabilities Exchange rate changes Other non-cash movements	21,210 - (777) -	413 - - -	3,218 - 126 -	788 - - (1,192)	- (3,706) - 2,422	25,629 (3,706) (651) 1,230
Balance at 31 December 2017	56,136	(4,963)	(10,563)	(1,944)	(6,274)	32,392
Cash flows Acquisitions - finance lease liabilities Exchange rate changes Other non-cash movements	9,560 - (2,053) -	4,273 - - (4,269)	- - - 4,269	805 - - (222)	- (3,478) - 2,686	14,638 (3,478) (2,053) 2,464
Balance at 31 December 2018	63,643	(4,959)	(6,294)	(1,361)	(7,066)	43,963

25. Provisions

Movements in provisions are analysed as follows:

	Legal	Other Risks
	Claims	and Charges	Total
Balance at 1 January 2017	130	8,979	9,109
Additional provisions (note 31)	-	4,917	4,917
Reversals / utilisations (note 31)	(130)	(3,527)	(3,657)
Balance at 31 December 2017	-	10,369	10,369
Additional provisions (note 31)	-	1,464	1,464
Reversals / utilisations (note 31)	-	(3,581)	(3,581)
Balance at 31 December 2018	-	8,252	8,252

The balance of 'Provisions' refers to liabilities with costs to be incurred with possible contractual penalties relating to ongoing projects and to risks related to miscellaneous events / disputes of various kinds, the settlement of which may result in cash outflows, and other probable liabilities related to several transactions from previous periods, and whose outflow of cash is probable, for which it is not possible to estimate reliably the time of occurrence of the expense. These risks related to miscellaneous events / disputes include, among others, contingencies of tax and labour natures, and involve customers, suppliers, business partners, employees or others.

26. Other non-current liabilities

	31.12.18	31.12.17
Research and development grants	990	744
	990	744

This caption corresponds to the amount of grants for research and development with a maturity of more than 12 months.

The fair value of 'Other non-current liabilities' balance approximates its carrying amount.

27. Trade and other payables

	31.12.18	31.12.17
Trade payables	5,469	5,616
Remunerations, holiday and holiday allowance	8,997	8,062
Bonus	8,256	9,684
Ongoing projects	4,551	3,841
Value added tax	3,106	3,394
Social security contributions	2,389	2,040
Income tax withholding	1,518	1,334
Employees	130	320
Amount to be paid to non-controlling interests	2	5
Prepayments from trade receivables	2	13
Other accrued expenses	5,748	6,943
Other payables	231	367
	40,399	41,619

The fair value of 'Trade and other payables' balance approximates its carrying amount.

The maturity of these liabilities is as follows:

	31.12.18	31.12.17
No later than 1 year	40,399	41,619
	40,399	41,619

28. Deferred income and other current liabilities

	31.12.18	31.12.17
Research and development grants Consulting projects	170 22,097	461 24,642
	22,267	25,103

The table below shows the financial incentives for research and development at 31 December 2018, by type of incentive program:

		Contracted Acum. received
	amount	amount
Grants:
- FAI - Innovation Support Fund	1,706	719
- P2020 - Portugal 2020	1,265	305
	2,971	1,024

29. External supplies and services

	31.12.18	31.12.17
Subcontracts	34,026	28,684
Supplies and services
Commissions and consultancy fees	6,928	8,236
Transportation, travel and accommodation expenses	6,081	6,387
Rents	2,963	3,520
Freight	92	229
Advertising and promotion	916	947
Water, electricity and fuel	639	653
Communications	572	675
Insurance	324	417
Utensils, office supplies and technical documentation	554	424
Other supplies and services	749	1,029
	19,818	22,517
	53,844	51,201

30. Employee benefit expense

	31.12.18	31.12.17
Key management personnel compensation (note 40 i)	2,594	4,759
Wages and salaries of the employees	67,333	61,559
Employees social security contributions	12,078	10,906
Other employee expenses	4,463	4,931
	86,468	82,155

Other employee expenses include labour accident insurance, social responsibility costs, training costs and indemnities.

Average number of employees is analysed as follows:

	31.12.18	31.12.17
Business Solutions	1,941	1,899
Venture Capital	57	52
Novabase Shared Services	87	81
	2,085	2,032

At the end of the year, the number of employees was 2,157 (2017: 1,991).

At 31 December 2018, 32% of Novabase's employees are women (2017: 30%). This gender imbalance is in line with trends in the information technology industry in Portugal and abroad, and also reflects the higher education choices of each gender.

31. Other gains/(losses) - net

	31.12.18	31.12.17
Impairment and impairment reversal of trade and other receivables - IAS 39 (note 15)	-	7,663
Impairment and impairment reversal of inventories (note 13)	-	30
Legal claims provision (note 25)	-	130
Provisions for other risks and charges (note 25)	2,117	(1,390)
Other operating income and expense (*)	(166)	(1,853)
	1,951	4,580

(*) In 2017, the caption 'Other operating income and expense' includes EUR -5,785 thousand of extraordinary costs associated with a project, for which provisions had been made at the end of 2016. On the other hand, the amounts of EUR 4,905 thousand of impairment of trade receivables and EUR 1,537 thousand of provisions for other risks and charges were reversed during that year, related to this client / project.

32. Depreciation and amortisation

	31.12.18	31.12.17
Property, plant and equipment (note 7):
Buildings and other constructions	57	291
Basic equipment	700	649
Transport equipment	734	821
Furniture, fittings and equipment	114	181
Other tangible assets	1	2
	1,606	1,944
Intangible assets (note 8):
Internally generated intangible assets	1,322	1,251
Industrial property and other rights	12	15
	1,334	1,266
	2,940	3,210

	31.12.18	31.12.17
Interest received	326	438
Foreign exchange gains	1,604	2,300
Fair value of financial assets adjustment (note 10)	563	70
Gain on disposal of financial assets	-	3,391
Reversal of impairment losses on debt securities and bank balances (note 2.2.)	55	-
	2,548	6,199

The decrease in the 'Finance income' caption in 2018 is mainly due to the decrease of gains on disposal of financial assets compared to the previous year, which essentially reflected the gain on the sale of part of the investment in Feedzai (EUR 3,008 thousand) - see note 10.

34. Finance costs

	31.12.18	31.12.17
Interest expenses
- Borrowings	(291)	(446)
- Finance lease liabilities	(293)	(289)
- Other interest	(21)	(2)
Bank guarantees charges	(81)	(92)
Bank services	(205)	(186)
Foreign exchange losses	(2,557)	(3,141)
Fair value of financial assets adjustment (note 10)	(22)	(406)
Provisions for loans to related parties (note 12)	(378)	(1,753)
Loss on disposal of financial assets	-	(375)
Fair value adjustment for contingent consideration	-	(86)
Impairment losses on debt securities and bank balances (note 2.2.)	(7)	-
Other financial losses	(184)	-
	(4,039)	(6,776)

The decrease in the 'Finance costs' caption in 2018 is mainly due to the decrease of the provisions for loans to related parties compared to the previous year. Foreign exchange losses also declined year-on-year, however, a joint reading with the foreign exchange gains presented in 'Finance income' caption, shows that the Group's results with foreign exchange differences have remained stable.

35. Share of loss of associates

	31.12.18	31.12.17
Fundo Capital Risco NB Capital (notes 5 and 9)	(62)	(261)
	(62)	(261)

36. Income tax expense

Novabase and its subsidiaries with head offices in Portugal are subject to Corporate Income Tax at the nominal rate of 21%, which can be increased by a Municipal Surcharge up to a maximum rate of 1.5% of taxable income, resulting in a total tax rate of 22.5%. Additionally, taxable income exceeding EUR 1,500 thousand and up to EUR 7,500 thousand is subject to a State Surcharge at the rate of 3%, from EUR 7,500 thousand and up to EUR 35,000 thousand is subject to a State Surcharge at the rate of 5%, and the part of taxable income exceeding EUR 35,000 thousand is subject to a State Surcharge at the rate of 7%.

Since 1 January 2009, Novabase is being taxed in Corporate Income Tax under the Special Taxation Regime for Groups of Companies (Group taxation relief). For taxation purposes, this group includes companies detained in 75% or more by Novabase S.G.P.S. which comply with the further requirements under article 69 and following of the Corporate Income Tax Code.

The remaining subsidiaries, not contemplated by this mechanism, are taxed individually, based on their taxable profits and the tax rates applicable.

The net income generated by foreign subsidiaries is taxed at local tax rates, namely, those generated in Spain, in Angola, in Mozambique, in The Netherlands, in the United Kingdom and in Turkey are taxed at 25%, 30%, 32%, 20%, 19% and 22%, respectively.

According to the current tax legislation, in general terms tax returns can be reviewed by the tax authorities during a subsequent period. In Portugal, this period is 4 years or, if any deduction is made or tax benefit granted, the exercise term of that right. Therefore, all annual tax returns for the year 2015 through 2018 are still open to such review.

Legislative changes that became effective on 1 January 2018

With regard to the changes introduced by 2018 State Budget (Law no. 114/2017 of 29 December), there were no impacts on the Group's income tax expense.

Legislative changes introduced by 2019 State Budget

Regarding the State Budget Law for 2019 (Law no. 71/2018), no significant changes were made. Worthy of note is the automatic waiver of the special payment on account for taxpayers that comply with the requirements.

Management considers that these changes will not have a significant impact on the income tax expense of Novabase's Group.

This caption is analysed as follows:

	31.12.18	31.12.17
Current tax	189	1,960
Deferred tax on temporary differences (note 11)	911	(578)
	1,100	1,382

The tax on the Group's earnings before taxes differs from the theoretical amount that would arise using the weighted average rate applicable to profits of the consolidated entities as follows:

	31.12.18	31.12.17
Earnings before taxes	6,114	7,822
Income tax expense at nominal rate (21% in 2018 and 2017)	1,284	1,643
Tax benefit on the net creation of employment for young and long term unemployed people	-	(274)
Provisions and amortisations not considered for tax purposes	(64)	718
Provisions reversal	358	-
Recognition of tax on the events of previous years	-	147
Associates' results reported net of tax	13	55
Autonomous taxation	562	515
Losses in companies where no deferred tax is recognised	188	(1,125)
Expenses not deductible for tax purposes	(248)	1,836
Differential tax rate on companies located abroad	27	408
Research & Development tax benefit	(1,816)	(3,253)
Municipal surcharge and State surcharge	109	346
Impairment of SIFIDE R&D	591	-
Impairment of Special Payment on Account, tax losses and withholding taxes	96	366
Income tax expense	1,100	1,382
Effective tax rate	18.0%	17.7%

37. Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares (note 21).

Diluted

Diluted earnings per share corresponds to basic earnings per share, since both in 2018 and in 2017 there are no dilutive potential ordinary shares.

Earnings per share are analysed as follows:

	31.12.18	31.12.17
Weighted average number of ordinary shares in issue	31,024,783	31,037,282
Profit attributable to owners of the parent	4,737	4,774
Basic earnings per share (Euros per share)	0.15 Euros	0.15 Euros
Diluted earnings per share (Euros per share)	0.15 Euros	0.15 Euros
Profit from continuing operations attributable to owners of the parent	4,737	2,078
Basic earnings per share (Euros per share)	0.15 Euros	0.07 Euros
Diluted earnings per share (Euros per share)	0.15 Euros	0.07 Euros
Profit from discontinued operations attributable to owners of the parent	-	2,696
Basic earnings per share (Euros per share)	-	0.09 Euros
Diluted earnings per share (Euros per share)	-	0.09 Euros

38. Dividends per share

The amounts distributed in 2018 and 2017 reached EUR 4,710 thousand (0.15 Euros per share) and EUR 20,411 thousand (0.65 Euros per share, from which 0.15 Euros per share corresponding to a distribution of reserves and 0.50 Euros per share regarding to an extraordinary shareholder remuneration), respectively. These amounts differ from the ones shown in the consolidated statement of cash flows due to the remuneration of the treasury shares held by the Company, which remained in Novabase, having been transferred to retained earnings (note 22). In respect to the year 2018, the Board of Directors will propose to the Annual General Meeting of Shareholders of 2019, the payment of 0.15 Euros per share, that is, a total amount of EUR 4,710 thousand. These financial statements do not reflect this dividend payable.

39. Commitments

The financial commitments not included in the Consolidated Statement of Financial Position related with bank guarantees provided to third parties for ongoing projects and operating leases, are detailed as follows:

	Bank	31.12.18	31.12.17
Novabase S.G.P.S., S.A.	Santander	2,500	-
Novabase S.G.P.S., S.A.	BTA	-	5,000
Novabase Business Solutions, S.A.	BCP	3,848	4,717
Novabase Business Solutions, S.A.	Santander	281	-
Novabase Business Solutions, S.A.	Novo Banco	48	241
Novabase Business Solutions, S.A.	BPI	33	33
Novabase Business Solutions, S.A.	Bankinter	12	-
Novabase Business Solutions, S.A.	BTA	-	21
Novabase Serviços, S.A.	Novo Banco	505	484
CelFocus, S.A.	BPI	72	72
CelFocus, S.A.	Santander	50	-
CelFocus, S.A.	BAR	-	511
CelFocus, S.A.	POP	-	50
CelFocus, S.A.	Novo Banco	-	27
Novabase Digital, S.A.	BCP	1,144	82
NOVABASE IMS 2, S.A.	BCP	4	4
Novabase Sistemas de Informacion, S.A.	Novo Banco	100	108
NBMSIT, Sist. de Inf. e Tecnol., S.A.	BIM	249	201
		8,846	11,551

To ensure compliance with the responsibilities associated with the December 19, 2014 finance contract between the European Investment Bank (EIB) and Novabase S.G.P.S., there is a Promissory Note signed by Novabase S.G.P.S. and endorsed by the remaining Guarantors in favour of EIB. At 31 December 2018, the guarantors are: Novabase Business Solutions, S.A.; Novabase Neotalent, S.A.; Novabase E.A., S.A.; NOVABASE IMS 2, S.A.; Novabase Serviços, S.A.; Novabase Digital, S.A.; and Binómio, Lda. (Novabase IMS Infr. & Manag. Services, S.A. ceased to be a guarantor at December 23, 2016, as a result of the sale of IMS Business, as established in the 1 st Consent and Amendment Agreement relating to the Finance Contract and Guarantee and Indemnity Agreement).

Following the sale of IMS Business at the end of 2016, Novabase undertook the following commitments:

A Liability Cap of EUR 5 Million by irrevocable bank guarantee of equal amount for a period of 18 months (duration of guarantees), that is, between 5 January 2017 and 5 July 2018, and EUR 2.5 Million between 18 months and 5 years (expiry of tax and Social Security guarantees), that is, between 6 July 2018 and 5 January 2022;
Constitution of a basket deductible for further corrections in the amount of EUR 400 thousand, minimis of EUR 40 thousand, until the end of the period, that is, 5 January 2022;
Non-competition obligation for 3 years between VINCI Energies Portugal, S.G.P.S., S.A. and Novabase in its core business areas, that is, until 5 January 2020.

In 2018, the Group had the following grouped credit line contracted:

Group of companies	Plafond
Novabase S.G.P.S.; NB Business Solutions, S.A.	EUR 5.0 Million
Novabase S.G.P.S.; Novabase Serviços, S.A.; Novabase Neotalent, S.A.; NB Business Solutions, S.A.	EUR 7.0 Million

There are commitments resulting from operating leases. These responsibilities refers mainly to the lease of the Company's headquarter and to lease agreements of other facilities where Novabase operates. The initial term of these contracts is between 1 and 5 years, with a renewal option after this period. Payments are updated annually, reflecting inflation and/or market valuation.

The minimum lease payments related to these operating lease agreements are as follows:

	31.12.18	31.12.17
No later than 1 year	2,425	2,081
Between 1 and 5 years	6,575	720
Over 5 years	261	-
	9,261	2,801

The increase of the liabilities under operating leases is mainly due to the renegotiation, during 2018, of the lease agreement of the Company's headquarter.

In the Group's next annual report and accounts, with the entry into force of IFRS 16 - 'Leases', commitments under operating lease contracts (with few exceptions for short-term and low-value leases) will be recognised in the statement of financial position, under the caption 'Finance lease liabilities'. For information about the impacts estimated by the Management on initial application of this standard, see note 2.2..

40. Related parties

For reporting purposes, related parties include subsidiaries and associates, other participated companies classified as financial assets at fair value through profit or loss, shareholders and key elements in the management of the Group, and companies related to them that provide management services to the Group (Autonomy Mastery and Purpose, S.A. and Groovesnore Investimentos Imobiliários, Lda.).

i) Key management personnel compensation

Remuneration assigned to the Board of Directors, other key management personnel and related companies providing management services to the Group, during the years ended 31 December 2018 and 31 December 2017, are as follows:

	31.12.18	31.12.17
Short-term employee benefits	2,813	4,455
Other long-term benefits	690	1,238
	3,503	5,693

Of the total amount of short-term employee benefits, which includes remuneration, social security charges and other costs, EUR 2,594 thousand were recognised in 'Employee benefit expense' (2017: EUR 4,759 thousand) and EUR 909 thousand in 'External supplies and services' (2017: EUR 934 thousand).

'Other long-term benefits' caption corresponds to 50% of the variable remuneration recognised in the year on the accrual basis (the final amount is only known in the following exercise), with payment to be deferred for more than 1 year after the reporting date.

The total variable remuneration assigned to the Board of Directors of Novabase S.G.P.S. and other key management elements of the Group, regardless the year of allocation, which payment is deferred, amounts to EUR 1,751 thousand (31.12.17: EUR 1,661 thousand).

In addition, there are outstanding current account balances with key management personnel in the amount of EUR 14 thousand at 31 December 2018 (31.12.17: EUR 9 thousand).

The remuneration policy of the Board of Directors and of the Supervisory Board of Novabase S.G.P.S. is stated in this Consolidated Report and Accounts, in the Remuneration Chapter of the Corporate Governance Report, which is reproduced below.

By unanimous decision of the Remuneration Committee, fixed remuneration components were set for members of the Novabase Board of Directors in 2018, along with annual variable remuneration, as shown in the chart below. This remuneration is distributed among the members of the Board of Directors in accordance with the breakdown stipulated by the Remuneration Committee, whereby directors receive (i) fixed remuneration in cash, and (ii) variable remuneration in cash; this remuneration is distributed among the directors in accordance with the following table, in view of their responsibilities at Novabase and as indicated by the Remuneration Committee.

The remuneration of non-executive, non-independent directors may include a variable component. The performance of remunerated duties by these members of the Board of Directors allows Novabase to leverage their extensive know-how acquired as company founders and accumulated over more than 20 years, especially since these directors continue to have major responsibilities in the Group.

The variable component in cash of directors' remuneration is determined with a view to aligning this component with the organization's performance in the year in question, measured by the net profits generated, and correlates with the responsibility and performance of each director in particular. A proper balance is also ensured between the fixed and variable portions of these remunerations. The variable remuneration in cash paid in 2018 corresponds to only 50% of the variable remuneration in cash due for 2017 and 1/6 of the amount allocated for 2016 in 2017, 1/6 of the amount allocated for 2015 in 2016 and 1/6 of the amount allocated for 2014 in 2015. The remaining 50% of the amount allocated for 2017 is subject to deferred payments in the following 3 years (2019, 2020 and 2021) in equal parts (corresponding to 1/6 of each year's total), conditional upon positive company performance during this time period.

Director 1	Fixed annual remuner. (€)	Annual variable remuner. in cash paid in 2018 (€) 2, 3	Total Partial (Fixed + Variable in cash paid in 2018) (€)	Variable in cash paid in 2018 / Partial Total (%)	Deferred annual variable remuner. (€) 4
João Nuno da Silva Bento	188,458	13,414	201,872	6.64	-
Álvaro José da Silva Ferreira	128,667	13,414	142,081	9.44	-
Francisco Paulo Figueiredo Morais Antunes	121,700	116,311	238,011	48.87	144,865
María del Carmen Gil Marín	92,670	-	92,670	-	-
Executives Total	531,494	143,139	674,633	21.22	144,865
(% total)	58.31	30.64	48.93
Luís Paulo Cardoso Salvado	284,133	235,304	519,437	45.30	289,730
José Afonso Oom Ferreira de Sousa	34,475	44,383	78,858	56.28	57,951
Pedro Miguel Quinteiro de Marques Carvalho	34,475	44,383	78,858	56.28	57,951
Marta Isabel dos Reis Graça Rodrigues do Nascimento	26,950	-	26,950	-	-
Non-executive Total	380,033	324,070	704,103	46.03	405,632
(% total)	41.69	69.36	51.07
TOTAL	911,527	467,209	1,378,735	33.89	550,497

1 Directors João Nuno da Silva Bento, Álvaro José da Silva Ferreira, María del Carmen Gil Marín and Marta Isabel dos Reis Graça Rodrigues do Nascimento were elected in the General Meeting of Shareholders of 10 May 2018. The remuneration shown here for these directors only refers to after the election. The amounts received up until the election date from other group companies are shown below.

2 The amount shown represents the total amount paid to each director in 2018: 50% of the total amount allocated for 2017 in 2018, and 1/6 of the amount allocated for 2016 in 2017, 1/6 of the amount allocated for 2015 in 2016 and 1/6 of the amount allocated for 2014 in 2015. The remaining 50% of the amount allocated for 2017 in 2018 will be paid in the following 3 years (2019, 2020 and 2021) in equal parts (corresponding to 1/6 of each year's total), conditional upon positive company performance during this time period.

3 Amount used to reinforce capitalization insurance contributions currently in effect at the company.

4 Amounts allocated for 2018 in 2017 but deferred for the following 3 years. There are also deferred amounts referring to amounts allocated for 2017 in 2016, and allocated for 2016 in 2015 according to the results disclosed in the Corporate Governance Reports of the respective years.

In 2018, an additional amount of EUR 10,163 thousand was paid to the members of the Board of Directors in meal allowances. There are no relevant amounts of non-monetary benefits considered as remuneration and not covered by the previous situations.

In 2018, and prior to her election on May 10 as a director, the director María del Carmen Gil Marín, received the following amounts from Novabase Capital - Sociedade de Capital de Risco, S.A., a company fully owned by Novabase S.G.P.S., S.A.:

Director	Fixed annual remuner. (€)	Annual variable remuner. in cash paid in 2018 (€) 5, 6	Total Partial (Fixed + Variable in cash paid in 2018) (€)	Variable in cash paid in 2018 / Partial Total (%)	Deferred annual variable remuner. (€) 7
María del Carmen Gil Marín	47,297	270,334	317,632	85.11	273,715

5 The amount shown represents the total amount paid in 2018: 50% of the amount allocated for 2017 in 2018, plus 1/6 of the amount allocated for 2016 in 2017, 1/6 of the amount allocated for 2015 in 2016 and 1/6 of the amount allocated for 2014 in 2015. The remaining 50% of the amount allocated for 2017 in 2018 will be paid in the following 3 years (2019, 2020 and 2021) in equal parts (corresponding to 1/6 of each year's total), conditional upon positive company performance during this time period.

6 Amount used to reinforce capitalization insurance contributions currently in effect at the company.

7 Amounts allocated for 2018 in 2017 but deferred for the following 3 years. There are also deferred amounts referring to amounts allocated for 2017 in 2016, and allocated for 2016 in 2015 according to the results disclosed in the Corporate Governance Reports of the respective years.

In 2018, an additional amount of EUR 601 thousand in meal allowances was paid to this director by Novabase Capital – Sociedade de Capital de Risco, S.A..

In 2018, no additional remuneration was awarded in the form of profit sharing and/or payment of bonuses.

No compensations were paid, nor are any compensations owed, to former executive directors as a result of their duties no longer being performed in 2018.

ii) Balances and transactions with related parties

Group companies have commercial relations with each other that qualify as related parties transactions. All of these transactions are performed on an arm's length basis, meaning, the transaction value corresponds to prices that would be applicable between non-related parties.

In consolidation, all of these transactions are eliminated, since the consolidated financial statements disclose information regarding the holding company and its subsidiaries as if they were a single entity.

Balances and transactions with related parties are as follows:

	Trade and other receivables		Trade and other payables
	31.12.18	31.12.17	31.12.18	31.12.17
Associates Other participated companies	- 489	47 886	- 95	- 409
Shareholders and other entities	-	-	-	-
	489	933	95	409
Provision for impairment of trade and other receivables	(31)	-
	458	933

		Services rendered		Supplementary income		Interest received
	31.12.18	31.12.17	31.12.18	31.12.17	31.12.18	31.12.17
Associates	181	198	-	-	-	-
Other participated companies	635	974	-	57	-	32
Shareholders and other entities	-	-	-	-	-	-
	816	1,172	-	57	-	32
					Purchases (*)
					31.12.18	31.12.17
Associates					-	-
Other participated companies					1,697	2,651
Shareholders and other entities					-	-
					1,697	2,651

(*) In 2018, purchases include EUR 1,034 thousand of passing-through invoicing on behalf of Globaleda S.A. to external client. Once the Group acted as an agent on behalf of the principal, the purchases (and the associated turnover) were eliminated in the consolidated financial statements.

In addition to the balances and transactions described in the tables above and below, no other balances or transactions exist with the Group's related parties.

Outstanding balances of accounts receivable and payable between Group Companies and related parties will be cash settled and are not covered by any guarantees.

iii) Other balances with related parties

		Non-current (note 12)		Current (note 15)
	31.12.18	31.12.17	31.12.18	31.12.17
Associates	-	-	-	-
Other participated companies
Loan to Powergrid, Lda.	2,050	2,050	-	-
Loan to Bright Innovation, Lda.	1,477	1,477	-	-
Loan to Radical Innovation, Lda.	994	994	-	-
Loan to Power Data, Lda.	248	248	-	-
Shareholders and other entities
Loans to other shareholders	-	-	-	15
	4,769	4,769	-	15
Provisions for impairment of loans to related parties	(3,125)	(2,747)	-	-
	1,644	2,022	-	15

41. Discontinued operations

At 12 October 2016, Novabase has entered into a sale and purchase agreement with VINCI Energies Portugal, S.G.P.S., S.A. ("VINCI Energies") to sell its Infrastructures & Managed Services business ("IMS Business") by the amount of EUR 38,365 thousand, to be paid on the date of completion of the transaction, subject to certain adjustments, as established in the sale and purchase agreement. The sale was substantially completed, namely through the approval of the Competition Authority, at the end of 2016, and a gain of EUR 17,567 thousand was recognised in that year. In the first half of 2017, the final price was revised to EUR 41,061 thousand, with the final calculation of working capital and net debt under the terms of the agreement, resulting in a EUR 2,696 thousand adjustment to the gain generated by the sale of the IMS business.

At the end of 2016, it was also recorded a provision of EUR 2 Million for responsibilities associated with the disposal of the IMS Business, under the caption 'Liabilities from discontinued operations' in the consolidated statement of financial position, which was partially used in 2017, being reduced to the amount of EUR 0.9 Million. During 2018, there was an additional use of the provision in the amount of EUR 840 thousand, therefore, the liability was reduced to EUR 0.1 Million.

The cash flows for discontinued operations are detailed as follows:

	31.12.18	31.12.17
Cash flows used in operating activities	(816)	(1,036)
Cash flows used in investing activities	-	-
Cash flows used in financing activities	(23)	(61)
Net cash flows for the period from discontinued operations	(839)	(1,097)

42. Contingencies

At 31 December 2018, the Group was part intervenient in the following legal process:

Novabase Business Solutions has been served with a procedure from the Instituto de Gestão Financeira da Segurança Social regarding the alleged absence of payment of social security contributions and interests of some months of 2014, 2015 and 2016, in the amount of 59,290 Euros. The company has filed opposition regarding the allegations demonstrating compliance with applicable laws, payment of all amounts due and providing documents to that respect. The procedure is pending analysis and decision from the IGFSS.
Novabase Digital has been served with a procedure from the Instituto de Gestão Financeira da Segurança Social regarding the alleged absence of payment of social security contributions and interests of some months of the years 2012, 2013 and 2014, in the amount of 3,763 Euros. The company has filed opposition regarding the allegations demonstrating compliance with applicable laws, payment of all amounts due and providing documents to that respect. The procedure is pending analysis and decision from the IGFSS.
Novabase S.G.P.S. has been served with a procedure from the Instituto de Gestão Financeira da Segurança Social regarding the alleged absence of payment of social security contributions of some months of 2015, in the amount of 25,758 Euros. The company has filed opposition regarding the allegations demonstrating compliance with applicable laws, payment of all amounts due and providing documents to that respect. The procedure is pending analysis and decision from the IGFSS.
Celfocus has been served with a procedure from the Instituto de Gestão Financeira da Segurança Social regarding the alleged absence of payment of social security contributions of some months of the years 2015 and 2016 in the total amount of 72,148 Euros. The company has filed opposition regarding the allegations demonstrating compliance with applicable laws, payment of all amounts due and providing documents to that respect. The authorities have analysed the Company's opposition and a ruling issued in favour of the Company.

43. Additional information required by law

In accordance with article 508-F of the Portuguese Commercial Companies Code, we hereby inform of the following:

(i) In addition to all operations described in the notes above, as well as in the Management's Report, there are no other operations considered relevant which are not already contained either in the consolidated statement of financial position or its notes;
(ii) The total remuneration of the Statutory Auditor in 2018 was 110,350 Euros (2017: 110,000 Euros), which corresponds in full to the legal accounts audit services;
(iii) Note 40 of the Notes to the Consolidated Financial Statements includes all the related parties' disclosures, in accordance with the International Financial Reporting Standards.

44. Events after the reporting period

In 2019, until the issuance of this report, have occurred the following material events:

Dividend to shareholders

Novabase informed the intention of the Board of Directors to propose, at the 2019 Annual General Meeting of Shareholders, the distribution of EUR 4.7 Million to shareholders. This payment, equal to 99.4% of the consolidated net profit, represents a dividend of 15 Euro cents per share.

45. Note added for translation

These financial statements are a translation of financial statements originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.

II. REPORTS ISSUED BY THE SUPERVISORY BOARD AND BY THE CMVM REGISTERED AUDITOR

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REPORT AND OPINION OF THE AUDIT BOARD ON THE CONSOLIDATED FINANCIAL STATEMENTS OF NOVABASE – SOCIEDADE GESTORA DE PARTICIPAÇÕES SOCIAIS, S.A. FOR THE FINANCIAL YEAR ENDED ON DECEMBER 31, 2018

To the Shareholders

INTRODUCTION

In compliance with the Law and for the purposes of paragraph g) of article 420 of the Portuguese Companies Code and the Company's bylaws, the Audit Board hereby presents for appreciation its Report on the supervising activity that was carried out and issues its Opinion on the Management Report and Consolidated Financial Statements of Novabase – Sociedade Gestora de Participações Sociais, S.A. for the financial year ended on December 31, 2018.

ACTIVITIES CARRIED OUT

Supervision of the Company

During the financial year, the Audit Board regularly followed up the evolution of the company's business and the business of its subsidiaries, ensuring compliance with the law and the relevant bylaws, and monitored the Company's management, the efficiency of the risk management and internal control systems and the preparation and disclosure of financial information, as well as the regularity of the accounting records, the accuracy of the consolidated financial statements and the accounting policies and metrical valuation criteria adopted by the company, in order to verify that they lead to an adequate expression of its consolidated assets, results and cash flows.

During the year, the Audit Board met five times and the respective meetings were formally recorded in minutes. At these meetings there was always attendance of 100% of the respective members. In addition, the Audit Board took part in the meeting of the Board of Directors that approved the Management Report and the Consolidated Financial Statements for the 2018 financial year.

Within its duties, the Audit Board maintained the necessary contacts with the representatives of the Chartered Accountants Company and External Auditor, in order to monitor the planning and audit work that was carried out and to take note of the respective findings. The meetings held with the representatives of the Chartered Accountants Company and External Auditor enabled the Audit Board to reach a positive opinion on the integrity, rigor, skill, quality of work and objectivity with which they carried out their work, as well as the reliability of the financial information.

Relevant matters concerning auditing were also analyzed with the representatives of the Chartered Accountants Company and External Auditor; the Audit Board refers to their report on the consolidated financial statements for the description of the essential elements subject to analysis.

During the meetings of the Audit Board, the main risks affecting Novabase - Sociedade Gestora de Participações Sociais, S.A. and the companies included in the consolidation perimeter were analyzed and discussed with Management and the Statutory Auditor, based on presentations prepared by these corporate bodies. The Audit Board considers that it has obtained the explanations and clarifications considered relevant.

Whistleblowing procedures

During 2018, the Audit Board did not receive any communications on irregularities through the means established for this purpose.

Related Party Transactions

During the 2018 financial year, no related party transactions, in accordance with the regulation in force, were submitted to assessment by the Audit Board.

Independence of the External Auditor

The Audit Board received the statement by the Statutory Auditor confirming its independence in relation to the Company and communicating all relationships that may be perceived as a threat to its independence, as well as the safeguards that were implemented.

RESPONSIBILITY STATEMENT

Pursuant to paragraph 1/c) of article 245 of the Portuguese Securities Code, applicable by virtue of paragraph 1/a) of article 8 of the CMVM Regulation no. 5/2008 (Information Duties), we hereby declare that, to the best of our knowledge and belief, the aforementioned financial statements were prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union, giving a true and appropriate view of the assets and liabilities, financial position and results of Novabase - Sociedade Gestora de Participações Sociais, S.A. and the companies included in the consolidation perimeter, and the management report faithfully describes the evolution of the business, performance and position of Novabase - Sociedade Gestora de Participações Sociais, S.A. and the companies included in the consolidation perimeter, containing an adequate description of the main risks and uncertainties which they face.

OPINION

The Audit Board analyzed the Management Report and the Consolidated Financial Statements for the 2018 financial year, which comprise the Consolidated Statement on the Financial Position as of December 31, 2018, the Consolidated Income Statement, the Consolidated Statement on Comprehensive Income, the Consolidated Statement on the Changes to Equity and the Consolidated Statement on the Cash Flows, as well as the accompanying notes, which were prepared in accordance with the International Financial Reporting Standards, as adopted in the European Union.

Within its duties the Audit Board has analyzed the Legal Certification of Accounts and the Audit Report on the Consolidated Financial Information for the 2018 financial year, prepared by the Statutory Auditor, document which does not present any reservation and with which the Audit Board agrees.

The Audit Board further analyzed the Corporate Governance Report for the 2018 financial year, which is attached to the Management Report prepared by the Board of Directors in compliance with the CMVM Regulation no. 4/2013 (Corporate Governance of Listed Companies), and the Audit Board certifies that it includes all the elements referred to in article 245-A of the Portuguese Securities Code.

In this context, it is the Audit Board's opinion that:

There are no objections to the approval of the Management Report for the 2018 financial year;
There are no objections to the approval of the Consolidated Financial Statements for the 2018 financial year.

Lisbon, March 28, 2019

The Audit Board

Álvaro Nascimento – Chairman

Fátima Farinha – Member

Miguel Ribeiro Ferreira – Member

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KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. Edifício Monumental - Av. Praia da Vitória, 71 - A, 8º 1069-006 Lisboa - Portugal +351 210 110 000 | www.kpmg.pt

STATUTORY AUDITORS' REPORT AND AUDITORS' REPORT

(Free translation to English from a report originally issued in Portuguese language. In case of doubt the Portuguese version will always prevail.)

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Opinion

We have audited the accompanying consolidated financial statements of Novabase, SGPS, S.A. (the Group), which comprise the consolidated statement of financial position as at 31 December 2018 (showing a total of 172,255 thousand euros and equity of 80,580 thousand euros, including non-controlling interests of 13,754 thousand euros and a net profit attributable to the shareholders of Novabase of 4,737 thousand euros), the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the accompanying notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements give a true and fair view, in all material respects, of the consolidated financial position of Novabase, SGPS, S.A. as at 31 December 2018 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) and further technical and ethical standards and guidelines as issued by Ordem dos Revisores Oficiais de Contas the Portuguese Institute of Statutory Auditors. Our responsibilities under those standards are further described in the "Auditors' responsibilities for the audit of the financial statements" section below. We are independent of the entities that comprise the Group in accordance with the law and we have fulfilled other ethical requirements in accordance with the Ordem dos Revisores Oficiais de Contas' code of ethics.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

As matérias relevantes de auditoria são as que, no nosso julgamento profissional, tiveram maior importância na auditoria das demonstrações financeiras consolidadas do ano corrente. Essas matérias foram consideradas no contexto da auditoria das demonstrações financeiras consolidadas como um todo, e na formação da opinião, e não emitimos uma opinião separada sobre essas matérias.

KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a firma portuguesa membro da rede KPMG, composta por firmas independentes afiliadas da KPMG International Cooperative ("KPMG International"), uma entidade suíça.

KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A. Capital Social: 3.916.000 Euros - Pessoa Colectiva Nº PT 502 161 078 - Inscrito na O.R.O.C. Nº 189 - Inscrito na C.M.V.M. Nº 20161489 Matriculada na Conservatória do registo Comercial de Lisboa sob o Nº PT 502 161 078

Revenue recognition

The revenue recognition policy regarding turnkey consulting projects, which represent a significant part of the Group's business, requires judgment as disclosed in note 4(d) of the notes to the consolidated financial statements.

The recognition of such projects overtime in accordance with IFRS 15, as described in note 2.19(b), involves a number of qualitative factors such as estimated billing, estimated costs, including contingency values for contractual risks, which justify the consideration of this issue as a relevant matter to the audit of the Group's consolidated financial statements as at 31 December 2018.

The Risk Our response to the identified risk

Our audit procedures included, among others, the following:

We have analyzed the revenue recognition policy adopted by the Group with reference to the applicable accounting standards;
We have tested the relevant controls, including application controls and general IT controls, related to the revenue recognition process;
We have critically analyzed the estimates and assumptions made by management, namely regarding estimated billing, estimated costs and contingencies;
Substantive analytical procedures and tests of detail regarding the accounting records in order to identify and test the risk of fraud and eventual override of controls implemented; and,
We have assessed the adequacy of the Group's disclosures over revenue recognition considering the applicable accounting standards.

International exposure

The Group's operations outside Portugal represented more than 54% of total consolidated revenue in 2018. In recent years, as a result of the assessment of business risks, the Group has limited its activity in more volatile geographies. Currently, the European market accounts for about 69% of the international business. The past internationalization process exposes the Group to the risk of foreign exchange fluctuation, mainly to the dollar, kwanza and metical.

As disclosed in notes 3(a) and 3(d), increased exposure to these currencies and geographies results in increased risks for the Group, mainly:

Foreign exchange risk, in result of the strong devaluation of local currencies against the euro; and,
Liquidity risk, in result of the difficulty of capital repatriation from those geographies;

which justify the consideration of this issue as a relevant matter to the audit of the Group's consolidated financial statements as at 31 December 2018.

The Risk Our response to the identified risk

Our audit procedures included, among others, the following:

We have assessed the degree of exposure to geographies of high exchange and liquidity risks, namely at the level of receivables impairment and going concern;
We have critically assessed estimates and assumptions performed by management, particularly regarding the impairment of receivables and the feasibility of implementing the business plans associated with these geographies units;
We have analyzed the valuation of financial instruments used by the Group to hedge the exchange rate risk;
We have analyzed the currency translation of the financial statements of the subsidiaries located in these geographies by reference to the applicable accounting standards; and,
We have assessed the adequacy of the Group's disclosure over financial risk management policy, considering the applicable accounting standards.

Recoverability of goodwill

As disclosed in note 8, as at 31 December 2018, the net book value of goodwill of the Business Solutions segment.amounted to 14,886 thousand euros.

The determination of the recoverable value of these assets is subjective due to the uncertainty inherent to the financial projections and to the discount of future cash flows, since many key assumptions are based on management expectations, not observable in the market.

The Group performs, on an annual basis, goodwill impairment tests based on the discounted cash flows method, considering a 5-year business plan estimated by management, as mentioned in notes 2.7(1), 4(a) and 8.

The complexity and the inherent degree of judgment justify the consideration of this issue as a relevant matter to the audit of the Group's consolidated financial statements as at 31 December 2018.

The Risk Our response to the identified risk

Our audit procedures included, among others, the following:

We have analyzed the budgeting procedures on which the projections are based, by comparing current performance with estimates made in prior periods, and the integrity of the discounted cash flow model;
We have compared the internal and external assumptions used and we have considered their reasonableness such as current business trends, market performance, inflation, projected economic growth and discount rates;
We have involved specialists in the measurement of the average cost of capital ratio; and,
We have assessed the adequacy of the Group's disclosure over recognition of deferred tax assets considering the applicable accounting standards.

Recoverability of deferred tax assets

As disclosed in note 11, as at 31 December 2018, the amount of deferred tax assets was of 10,048 thousand euros, of which 9,516 thousand euros related to tax benefits arising from Research and Development projects presented under the SIFIDE incentive scheme.

The deferred tax assets recorded by management are based on its best estimate on the timing and future amounts required for its recovery, using assumptions that require judgment, as mentioned in notes 2.15 and 4(c).

The level of uncertainty associated and the inherent degree of judgment justify the consideration of this issue as a relevant matter to the audit of the Group's consolidated financial statements as at 31 December 2018.

The Risk Our response to the identified risk

Our audit procedures included, among others, the following:

We have analyzed the budgeting procedures on which the projections are based, by comparing current performance with estimates made in prior periods;
We have analyzed the assumptions and methodology used by management to assess the recoverability of deferred tax assets, namely projections of taxable income; and,
We have assessed the adequacy of the Group's disclosure over recognition of deferred tax assets considering the applicable accounting standards.

Responsibilities of Management and the Supervisory Board for the Consolidated Financial Statements

Management is responsible for:

the preparation of consolidated financial statements that give a true and fair view of the Group's financial position, financial performance and the cash flows, in accordance with the International Financial Reporting Standards, as adopted by the European Union;
the preparation of the management report and the corporate governance report, in accordance with applicable laws;
designing and maintaining an appropriate internal control system to enable the preparation of consolidated financial statements that are free from material misstatement whether due to fraud or error;
the adoption of accounting policies and principles appropriate in the circumstances; and,
assessing the Group's ability to continue as a going concern and disclosing, as applicable, the matters that may cast significant doubt about the Group's ability to continue as a going concern.

The supervisory body is responsible for overseeing the Group's financial reporting process.

Auditor´s Responsibilities for the Audit of the Consolidated Financial Statements

Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatements whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control;
obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control;
evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material

uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern;

evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion;
communicate with those charged with governance, including the supervisory body, regarding, among other matters, the planned scope and timing of the audit, and significant audit findings including any significant deficiencies in internal control that we identify during our audit;
determine, from the matters communicated with those charged with governance, including the supervisory body, those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes their public disclosure; and,
provide the supervisory body with a statement that we have complied with the relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Our responsibility also includes the verification that the information contained in the management report is consistent with the consolidated financial statements, and the verification of the requirements as provided in numbers 4 and 5 of article 451 of the Portuguese Companies' Code.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

On the Management Report

Pursuant to article 451, nr. 3, al. (e) of the Portuguese Companies' Code, it is our opinion that the management report was prepared in accordance with the applicable legal and regulatory requirements and the information contained therein is consistent with the audited consolidated financial statements and, having regard to our knowledge and assessment of the Group, we have not identified any material misstatements.

On the Corporate Governance Report

Pursuant to article 451, nr. 4, of the Portuguese Companies' Code, it is our opinion that the corporate governance report includes the information required to the Group to provide under article 245-A of the Securities Code, and we have not identified any material misstatements on the information provided therein in compliance with paragraphs c), d), f), h), i) and m) of that article.

Sobre a informação não financeira prevista no artigo 508.º-G do Código das Sociedades Comerciais

Dando cumprimento ao artigo 451.º, n.º 6, do Código das Sociedades Comerciais, informamos que o Grupo incluiu no seu relatório de gestão a demonstração não financeira prevista no artigo 508.º-G do Código das Sociedades Comerciais.

On the non-financial information defined in the article 508º-G of the Portuguese Companies' Code

Pursuant to article 451, nr. 6, of the Portuguese Companies' Code, we inform that the Group inform that the Group included in its management report the non-financial information defined in article 508º-G of the Portuguese Companies' Code.

On the additional matters provided in article 10 of the Regulation (EU) nr. 537/2014

Pursuant to article 10 of the Regulation (EU) nr. 537/2014 of the European Parliament and of the Council, of 16 April 2014, and in addition to the key audit matters mentioned above, we also report the following:

We were first appointed as auditors of Novabase, SGPS, S.A. (parent Entity of the Group) in the shareholders general assembly held on 29 April 2015 for a first mandate from 2015 to 2017. We were appointed in the shareholders general assembly held on 10 May 2018 for a second mandate from 2018 to 2020;
Management as confirmed to us that they are not aware of any fraud or suspicion of fraud having occurred that has a material effect on the financial statements. In planning and executing our audit in accordance with ISAs we maintained professional skepticism, and we designed audit procedures to respond to the possibility of material misstatement in the consolidated financial statements due to fraud. As a result of our work, we have not identified any material misstatement of the consolidated financial statements due to fraud;
We confirm that the audit opinion we issue is consistent with the additional report that we prepared and delivered to the Group's supervisory body on 28 March 2019; and,
We declare that we have not provided any prohibited services as described in article 77, nr. 8 of the Ordem dos Revisores Oficiais de Contas' statutes, and we have remained independent of the Group in conducting the audit.

28 March 2019

SIGNED ON THE ORIGINAL

KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. (nr. 189) represented by Paulo Alexandre Martins Quintas Paixão (ROC nr. 1427)

III. SECURITIES ISSUED BY THE COMPANY AND OTHER GROUP COMPANIES, HELD BY BOARD MEMBERS

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	Share Capital	Total Number of Shares / Quotas	Number of Shares / Quotas held by Board Members at 31.12.17	Transactions	Number of Shares / Quotas held by Board Members at 31.12.18	% held by Board Members at 31.12.18
Novabase S.G.P.S., S.A.	15,700,697 €	31,401,394	12,603,803	48,739	12,652,542	40.3%
HNB - S.G.P.S., S.A. (a)			10,261,395	240,194	10,501,589	33.4%
Pedro Miguel Quinteiro Marques de Carvalho			2,289,068	(191,455)	2,097,613	6.7%
Francisco Paulo Figueiredo Morais Antunes			30,335	0	30,335	0.1%
María del Carmen Gil Marín (b)			23,001	0	23,001	0.1%
Luís Paulo Cardoso Salvado			1	0	1	0.0%
João Nuno da Silva Bento (b)			1	0	1	0.0%
Álvaro José da Silva Ferreira (b)			1	0	1	0.0%
José Afonso Oom Ferreira de Sousa			1	0	1	0.0%
Marta Isabel dos Reis da Graça Rodrigues do Nascimento (b)			0	0	0	0.0%
NBASIT - Sist. Inf e Telecomunicações, S.A. 47,500,000 AOA		100,000	800	0	800	0.8%
Álvaro José da Silva Ferreira (b)			400	0	400	0.4%
Luís Paulo Cardoso Salvado			200	0	200	0.2%
Francisco Paulo Figueiredo Morais Antunes			200	0	200	0.2%
CelFocus, S.A.	100,000 €	100,000	1	0	1	0.0%
José Afonso Oom Ferreira de Sousa			1	0	1	0.0%
FeedZai, S.A.	170,154 €	21,768,183	112,500	0	112,500	0.5%
Pedro Miguel Quinteiro Marques de Carvalho			112,500	0	112,500	0.5%

(b) Designated as a member of the board of directors of the Company as of May 10, 2018.

Novabase reports as directors the company HNB - S.G.P.S., S.A. and the members of the board of directors of the Company.

DETAIL ON SECURITIES ISSUED BY THE COMPANY AND OTHER GROUP COMPANIES, HELD BY BOARD MEMBERS OF NOVABASE S.G.P.S.

(a) José Afonso Oom Ferreira de Sousa, Luís Paulo Cardoso Salvado, Álvaro José da Silva Ferreira and João Nuno da Silva Bento are the only shareholders of HNB - S.G.P.S., S.A., where they hold management positions.

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STATEMENT OF COMPLIANCE

NOVABASE S.G.P.S., S.A.

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Statement of the Board of Directors (Free translation from the original version in Portuguese) SIGNED ON THE ORIGINAL

According to the terms of sub-paragraph c), paragraph 1 of article 245 of the Portuguese Securities Code, the undersigned below identified, as members of the Board of Directors of Novabase S.G.P.S., S.A., declare that to the fullest extent of their knowledge:

(i) the information contained in the management report, annual accounts, Auditors' Report and all other accounting documentation required by law or regulation, regarding the year ended 31 December 2018, was prepared in compliance with the applicable accounting standards and gives a true and fair view of the assets and liabilities, financial position and results of Novabase S.G.P.S., S.A. and the companies included in the consolidation perimeter; and

(ii) the management report faithfully states the evolution of the businesses, performance and position of Novabase S.G.P.S., S.A. and the companies included in the consolidation perimeter, containing (namely) an accurate description of the main risks and uncertainties which they face.

Lisbon, March 28, 2019

Luís Paulo Cardoso Salvado Chairman of the Board of Directors

João Nuno Bento Executive member of the Board of Directors and CEO

Álvaro José da Silva Ferreira Executive member of the Board of Directors

Francisco Paulo Figueiredo Morais Antunes Executive member of the Board of Directors and CFO

María del Carmen Gil Marín Executive member of the Board of Directors

José Afonso Oom Ferreira de Sousa Non-Executive member of the Board of Directors

Pedro Miguel Quinteiro Marques de Carvalho Non-Executive member of the Board of Directors

Marta Isabel dos Reis da Graça Rodrigues do Nascimento Non-Executive member of the Board of Directors

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Statement by the members of the Audit Board under paragraph 1, c) of article 245 of the Portuguese Securities Code

Álvaro Nascimento, chairman of the Audit Board of Novabase S.G.P.S. S.A. declares that, to the best of his knowledge, the information contained in the management report, the annual accounts, the chartered accountant legal certification and all other financial statement documentation was drafted in accordance with the applicable accounting standards, give a true and appropriate view of the assets and liabilities, the financial position and the results of the issuer and, when applicable, of the companies included in the consolidation perimeter, and the management reports faithfully state the evolution of the businesses, performance and position of the issuer and, when applicable, of the companies included in the consolidation perimeter, containing a description of the main risks and uncertainties which they face.

Lisbon, March 28, 2019

Fátima Farinha, member of the Audit Board of Novabase S.G.P.S. S.A. declares that, to the best of her knowledge, the information contained in the management report, the annual accounts, the chartered accountant legal certification and all other financial statement documentation was drafted in accordance with the applicable accounting standards, give a true and appropriate view of the assets and liabilities, the financial position and the results of the issuer and, when applicable, of the companies included in the consolidation perimeter, and the management reports faithfully state the evolution of the businesses, performance and position of the issuer and, when applicable, of the companies included in the consolidation perimeter, containing a description of the main risks and uncertainties which they face.

Lisbon, March 28, 2019

Miguel Ribeiro Ferreira, member of the Audit Board of Novabase S.G.P.S. S.A. declares that, to the best of his knowledge, the information contained in the management report, the annual accounts, the chartered accountant legal certification and all other financial statement documentation was drafted in accordance with the applicable accounting standards, give a true and appropriate view of the assets and liabilities, the financial position and the results of the issuer and, when applicable, of the companies included in the consolidation perimeter, and the management reports faithfully state the evolution of the businesses, performance and position of the issuer and, when applicable, of the companies included in the consolidation perimeter, containing a description of the main risks and uncertainties which they face.

Lisbon, March 28, 2019

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AI Terminal

Novabase SGPS

1943_10-k_2019-03-28_f4e79dba-c715-4d7b-aa26-a09fc2cee703.pdf

CONSOLIDATED FINANCIAL STATEMENTS

INDEX

Consolidated Statement of Financial Position as at 31 December 2018

Consolidated Statement of Profit and Loss for the year ended 31 December 2018

12 M * - period of 12 months ended

Consolidated Statement of Comprehensive Income

12 M * - period of 12 months ended

Consolidated Statement of Changes in Equity for the year ended 31 December 2018

Consolidated Statement of Cash Flows for the year ended 31 December 2018

1. General information

2. Significant accounting policies

2.1. Basis of preparation

New standards, interpretations and amendments to existing standards, which became effective as of 1 January 2018

New standards, interpretations and amendments to existing standards that have been published and are mandatory for annual periods beginning on or after 1 January 2018, but that the Group has not early adopted

2.2. Changes in significant accounting policies

Standards that became effective as of 1 January 2018

Summary of the impacts of adopting IFRS 9 and IFRS 15 on Equity as at 1 January 2018:

Impact on Consolidated Statement of Financial Position as at 31 December 2018:

IFRS 9 - 'Financial instruments'

(a) Classification and measurement

(b) Impairment

Trade and other receivables

Debt securities and bank balances

Impact of the new impairment model and presentation on the financial statements

(c) Hedge accounting

IFRS 15 – 'Revenue from contracts with customers'

(a) 'Time and materials' projects (T&M)

(b) 'Turn key' projects (TK)

Standards that will become effective as of 1 January 2019, and which the Group has decided not to early adopt

IFRS 16 – 'Leases'

2.3. Consolidation

(1) Subsidiaries

(2) Transactions with non-controlling interests

(3) Associates

2.4. Segment reporting

2.5. Foreign currency translation

(1) Functional and presentation currency

(2) Transactions and balances

(3) Group companies

2.6. Property, plant and equipment

2.7. Intangible assets

(1) Goodwill

(2) Internally generated intangible assets

(3) Industrial property and other rights

(4) Work in progress

2.8. Financial assets and liabilities

Policy applicable from 1 January 2018

(i) Financial assets measured at amortised cost

(ii) Financial assets at fair value through other comprehensive income

(iii) Financial assets at fair value through profit or loss

Policy applicable before 1 January 2018

(1) Financial assets and liabilities at fair value through profit or loss

(2) Loans and receivables

(3) Held-to-maturity financial assets

2.9. Impairment of non-financial assets

2.10. Impairment of financial assets

Policy applicable from 1 January 2018

(1) Trade, debtors and other receivables

(2) Debt securities and bank balances

Policy applicable before 1 January 2018

(1) Trade receivables, other debtors and other financial assets

2.11. Trade and other receivables

2.12. Cash and cash equivalents

2.13. Share capital

2.14. Borrowings

2.15. Current and deferred tax

2.16. Employee benefits

Bonus

Obligations for holiday, holiday allowance and Christmas allowance

Labor Compensation Fund (FCT) and Labour Compensation Guarantee Fund (FGCT)

2.17. Provisions

Onerous contracts

Legal claims in progress

2.18. Trade and other payables

2.19. Revenue recognition

Policy applicable from 1 January 2018

(a) Sales of goods

**12 M * - period of 12 months ended**

**12 M * - period of 12 months ended**