Annual Report • Mar 24, 2009
Annual Report
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SONA REPO AE RT AND ACCOUNTS 2008
| MANAGEMENT REPORT 4 | ||
|---|---|---|
| 1. | Leading business indicators 5 | |
| 2. | Message from the CEO 7 | |
| 3. | Management bodies 11 | |
| 4. | Shareholder structure 11 | |
| 5. | Investment portfolio 12 | |
| 6. | Historical milestones 15 | |
| 7. | Success factors 17 | |
| 8. | Sonae performance in 2008 27 | |
| 9. | Outlook for 2009 35 | |
| 10. Proposed appropriation of profit for the year 37 | ||
| 11. Financial glossary 38 | ||
| 12. Acknowledgements 39 | ||
| CORPORATE GOVERNANCE REPORT 40 | ||
| Introduction 41 | ||
| 0. | Statement of compliance 41 | |
| 1. | Shareholders' General Meeting 48 | |
| 2. | Management and auditing bodies 51 | |
| 3. | Information 78 | |
| APPENDIX 84 | ||
| Statement under the terms of Article 245, paragraph 1, c) of the Securities Code 85 | ||
| Art. 447 of Portuguese Company Law and Art. 14, § 7 of CMVM Regulation nr. 05/2008 86 | ||
| Article 448 87 | ||
| Qualified holdings 88 | ||
| CONSOLIDATED FINANCIAL STATEMENTS 89 | ||
| INDIVIDUAL FINANCIAL STATEMENTS 151 | ||
| STATUTORY AUDITOR AND AUDITOR'S REPORT 181 | ||
| REPORT AND OPINION OF THE STATUTORY AUDIT BOARD 184 |
(i) This document was prepared to comply with article 508, nr.6, paragraph c) of the Portuguese Company Law and applies to both consolidated and individual accounts of Sonae;
(ii) In order to facilitate comparisons of 2008 results against the previous year, the 2007 comparative figures have been restated ( 2007(R)) to: (i) exclude Sonae Capital's contribution to the Sonae consolidated accounts during 2007, given the conclusion of the Sonae Capital demerger and consequent exclusion from the Sonae consolidation perimeter, from October 2007; (ii) Consolidate in 2H08 the Portuguese shopping centres comprising the Sierra Portugal Fund by the equity method; and (iii) perform the fair value allocation of the retail acquisition in the 2H07;
(iii) Sonae sub-holdings financial figures, as reported in section 8 - Sonae performance in 2008 - , are presented on the basis of their contribution to the consolidated accounts; references to stand alone means figures presented at the individual financial statements of each business;
(iv) All the references in this document to "stand alone basis" should be understood as figures presented at the financial statements of each business;
(v) The consolidated income statement included in section 8 is presented dividing Direct Income and Indirect Income as common practice in Real Estate Industry, in which Shopping Centres Segment is included. Indirect Income includes the Shopping Centres segment contributions net of taxes to consolidated income statement, arising from: i) investment properties valuations; ii) capital gains (losses) with the sale of financial investments, joint ventures or associates; iii) impairment losses (including goodwill) and; iv) provision for "Development Funds at Risk". The comparative figures for 2007 were restated in order to facilitate comparisons with 2008. Consequently figures presented as Direct Income, including EBITDA and EBIT exclude such contributions.
MANAGEMENT REPORT
| Million euros | 2006(R) | 2007(R) | 2008 | y.o.y |
|---|---|---|---|---|
| DIRECT INCOME (13) | ||||
| Turnover | 4,036.9 | 4,417.3 | 5,353.1 | 21.2% |
| Retail | 3,086.5 | 3,376.0 | 4,210.7 | 24.7% |
| Shopping Centres (1) | 132.5 | 145.1 | 168.8 | 16.3% |
| Telecoms | 804.4 | 877.0 | 953.7 | 8.7% |
| Holding & others | 13.4 | 19.2 | 20.0 | 3.8% |
| EBITDA (2) | 470.0 | 536.4 | 616.8 | 15.0% |
| EBITDA margin (%) (3) | 11.6% | 12.1% | 11.5% | -0.6pp |
| Retail | 254.0 | 299.9 | 353.7 | 17.9% |
| Shopping Centres (1) | 72.9 | 69.2 | 89.5 | 29.4% |
| Telecoms | 144.8 | 172.7 | 178.9 | 3.6% |
| Holding & others | -1.6 | -5.4 | -5.4 | 0.4% |
| EBIT (13) | 297.8 | 297.8 | 328.1 | 10.2% |
| Net Financial Results | -114.1 | -114.1 | -173.7 | -52.2% |
| Direct Net Income Group Share (4) (13) | 198.9 | 198.9 | 159.1 | -20.0% |
| INDIRECT INCOME (13) | ||||
| Value created on investment properties (5) | 128.4 | 158.2 | -121.4 | - |
| CAPEX AND CASH FLOW | ||||
| CAPEX | 700.3 | 1,453.6 | 901.8 | -38.0% |
| CAPEX as a % of turnover | 17.3% | 32.9% | 16.8% | -16.1pp |
| EBITDA minus CAPEX | -230.3 | -917.2 | -285.1 | 68.9% |
| CONSOLIDATED BALANCE SHEET | ||||
| Total Assets | 5,657.6 | 6,862.4 | 7,306.2 | 6.5% |
| Liquidity (6) | 678.0 | 344.5 | 247.9 | -28.0% |
| Total Shareholders' Funds | 1,383.1 | 1,568.5 | 1,562.5 | -0.4% |
| Gross Debt (7) | 2,571.2 | 2,870.8 | 3,386.5 | 18.0% |
| Retail net debt/EBITDA (last 12 months) | 1.5 x | 3.6 x | 3.5 x | -0.2x |
| Shopping centres Loan to Value (8) | 31.2% | 41.0% | 46.7% | 5.7pp |
| Telecoms net debt/EBITDA (last 12 months) | 1.8 x | 1.9 x | 2.5 x | 0.6x |
| Holding & Others Loan to Gross Asset Value (9) | - | 11.8% | 23.2% | 11.4pp |
| OPERATING DATA | ||||
| Retail sales growth | 13.0% | 9.5% | 24.7% | 15.2pp |
| Retail sales area ('000 m2) | 545 | 709 | 809 | 14.1% |
| NAV per share (euros) | 45.8 | 52.7 | 43.6 | -17.3% |
| Assets under management (million euros) (10) | 4,728.0 | 6,153.5 | 6,173.0 | 0.3% |
| GLA under development (million m2) (11) | 338.6 | 473.8 | 700.5 | 47.9% |
| Mobile customers (EOP) ('000) | 2,601.9 | 2,893.5 | 3,191.6 | 10.3% |
| Mobile ARPU (euros) (12) | 19.7 | 18.2 | 16.8 | -7.6% |
| Direct fixed services (EOP) | 281,541 | 470,673 | 455,027 | -3.3% |
| Sonae employees | 28,107 | 34,896 | 37,437 | 7.3% |
(1) Shopping centres are proportionally consolidated; (2) EBITDA = Turnover + other revenues - impairment reversion - badwill- operating costs; (3) EBITDA margin = EBITDA / turnover; (4) Direct Net income attributable to Sonae shareholders; (5) Increase (decrease) in the valuation of the shopping centres proportionally consolidated; (6) Liquidity includes cash & equivalents and current investments; (7) Gross debt = non current borrowings + current borrowings; (8) Net debt / (Investment properties + Properties under Development ); (9) Holding & Others Net debt/Holding Investment Portfolio Gross Asset Value; gross asset value based on Market multiples, real estate NAV and market capitalization for listed companies; unaudited; (10) Open market value = fair value of real estate in operation (100%), provided by an independent entity; (11) Gross lettable area in operating centres; excludes the brazilian operation; (12) Average revenues per user; (13) refer to note (V) in the table of contents; (R) Restated to exclude Sonae Capital contribution in 2007, to consolidate the Portuguese shopping centres comprising the Sierra Portugal Fund underthe equity method in 2H08 and to include the fair value allocation of the Carrefour acquisition by end 2007.
Return on Equity = Net income Group share n / Shareholders' funds Group share n-1
Shareholders' equity per share = Shareholders' funds Group share n / total outstanding shares
254.0 299.9 353.7 72.9 69.2 144.8 89.5 172.7 178.9 11.6% 12.1% 11.5% 470.0 536.4 616.8
2006(R) 2007(R) 2008 Retail Shopping Centres Telecoms Margin
CAPEX (million euros) Total Net Income breakdown (million euros)
0.5
1,453.6
During 2008, the macroeconomic and financial environment continued to deteriorate across the world, far beyond most initial expectations. Nonetheless, Sonae continued to deliver growth and increased operational profitability, posting an increase of 21% in turnover and 15% in EBITDA, thanks to our execution capability and a balanced portfolio that proved its robustness in the face of challenging macroeconomic conditions. The last quarter was particularly important for this performance, posting a turnover and an EBITDA growth of 18% and 21%, compared with the homologous period, and contributing to 28% and 33% of the annual figures, respectively.
I am very pleased to report that our Retail business fully delivered its disclosed guidance for the year of turnover growth above 20% and a sustained recurrent EBITDA margin of 8.5% (both on an ex-fuel basis). These goals had been considered difficult to achieve, given the acquisition of less profitable hypermarkets at end 2007, as well as the deterioration of demand for non-food retail products. Contributing to this performance, was the successful integration of the assets acquired, and the entrepreneurial and innovative spirit of the Retail team, examples of which were the strong investment made in the development of private and exclusive label programmes and the upgrade and segmentation of the perishable category. Particularly noteworthy was the solid growth posted by our specialized retail formats, strengthening our market share in several categories and showing resilience to the negative trend of consumer confidence.
Our Shopping Centre business managed to optimize the operating performance of its units, posting, on a stand alone basis, turnover growth of 12% and an EBITDA increase of 15%, mainly driven by an underlying 5% like for like growth of rents and the centres opened in 2007 (+3) and 2008 (+3). These results were only possible due to the experience and recognized the management skills of the team, which were also apparent in the ability to launch, in the middle of the real estate and financial crisis, a 300 million euros equity fund and to place a 58% shareholding of this Fund to international institutional investors without any discount to fair value.
The Telecommunication business achieved significant growth in turnover (+9%) while maintaining its EBITDA level, a clear sign of the success of its ambitious investment programme, namely in network extension and capacity, brand promotion and distribution. The business is today strongly placed to successfully develop its activity as the leading global operator in Portugal, and even better positioned to achieve the long term objectives of sustainable growth and superior economic value.
Indirect income registered a significant negative value in 2008 due to variations in the value of our shopping centres. It is important to stress that these variations are only negative because of increases in market capitalization yields, which are used to discount cash-flow projections. These projections have in fact increased substantially and, together with the new openings, amounted to 84 million euros, were responsible for a significant improvement in this negative value.
Our consolidated financial structure should not be analysed by a single consolidated ratio as our businesses have very different cash flow profiles and can only be correctly analysed with the relevant ratios for each sector. We feel comfortable with the debt levels in all our businesses, each with low refinancing and liquidity risk. Also, our average maturity of debt stood at approximately 5.7 years by end 2008, with only 100 million euros to be refinanced in 2009, with the sum of cash and unused short term credit lines totalling 1,112 million euros.
Looking forward our Group has several important decisions to take, including setting long term strategic objectives. The last 18 months have been extremely important in our internal 'strategizing' process. Our Senior Executives have spent a lot of time building a shared vision of our future and in selecting those strategic guidelines which we feel will be the most important growth drivers for the future. Much thought is still necessary in crafting out the portfolio strategy and the shaping of company strategies, steps that are still to be completed at all levels in the organization and which will be essential to set a clear action plan to guide us in the pursuit our strategic objectives.
As importantly, Álvaro Portela and Nuno Jordão have each taken decisions for personal reasons not to accept new terms as CEOs from March 2010 onwards. Although the reasons
behind their individual decisions are quite different, they were in both cases totally resolute and unmovable in their resolutions, reflecting the unparalleled work ethic and loyalty they have always shown. They were simply not willing to consider any other way to perform their CEO roles other than the '120% share of mind and time' that they have always displayed. I have learnt an enormous amount from them over the last 20 years and I am sure I will continue to do so in the future.
Our new corporate strategic guidelines and these important changes to be made to our top management team have already triggered a number of important decisions:
The challenge of preparing successors for Álvaro Portela and Nuno Jordão as the respective CEOs of Sonae Sierra and Sonae Distribuição, as from March 2010, is no small task.
Álvaro Portela is the best shopping centre developer I know and has been the CEO of Sonae Sierra from its beginning. There can be no doubt in anyone's mind that his individual contribution to the creation of the economic and social value, which Sonae Sierra represents today, was absolutely fundamental and instrumental in all that was achieved. After stepping down as CEO, Álvaro Portela will assume a number of advisory non-executive positions in our Group.
Nuno Jordão has had an equally significant role and determining impact in the creation of Sonae Distribuição, where he has been CEO since 1991. He worked in our first hypermarket, managed the second one and then progressively instigated a series of successful moves to create what is now the largest retailer in Portugal. He was also responsible for a constant stream of format and process innovations, which have greatly increased the competitive position and potential of the organization. Nuno Jordão will remain a Director of Sonae in roles that are compatible with the time he is still willing to dedicate to work.
Were it not for the depth of our management, the large pool of leaders available to us, our clear strategic intent and the fact that both of them have carefully prepared their retirement from full time executive roles, we would be facing a daunting task.
As it is, I feel confident that our organisation will rise to the task. We will in fact learn from the process and find unexpected value whilst overcoming the difficulties before us. For the coming year, the Executive Committee, especially Álvaro Portela and Nuno Jordão, will dedicate a fair amount of time to preparing the teams for the future; in addition, they are both committed to advising and coaching these teams beyond their terms as CEOs. The new structure of our retail businesses and the management changes at retail and Sonae Sierra, which will be implemented on 1 April 2009, bring new opportunities and represent important steps in the development programs of some of our key executives.
At Sonae Distribuição and at the Sonae corporate centre, the organizational challenge we face goes beyond succession planning, as we need to prepare our organizational structure to allow us to deliver our corporate strategic objectives.
We have defined a limited number of strategic objectives that we strongly believe in as a Group. We feel that they will guide our moves and allow us to craft individual strategic plans. They are not business strategies, nor a detailed series of action plans, but rather central ideas that will guide us through the necessary adaptations to continually changing circumstances. They clearly reflect how we see ourselves developing in the future and our resolution could not have suffered a greater test than the radical changes that have occurred in the 18 months during which we worked on defining these goals:
Internationalisation, focused on our core businesses including adjacent arenas, will be our key growth driver for many years to come. This is our top strategic priority and we will deploy our resources accordingly, as we have the opportunity to enlarge our international footprint and transform Sonae into a large multinational corporation.
Our strategy will target opportunities in 'growth geographies' and in mature markets. In 'growth geographies' we will look for economic growth, developing retail markets and relatively good governance practices. In the mature markets, where we are already present, we will look for opportunities, where our distinctive concepts, competences and strategic assets can give us a clear edge over installed competitors.
Considering our economic exposure to the businesses in our portfolio, we aim to reach 25% of turnover and 35% of assets in international operations by 2012.
We will leverage our resources and the effectiveness of our strategy implementation plans, by adopting the most appropriate investment style or mix of styles for each business, including wholly owned businesses and majority stakes, but also minority stakes with or without special rights.
Non-controlling stakes will be considered where we do not have all the required resources or would benefit from the contribution of partners to achieve superior value creation. We will, in these circumstances, facilitate consolidation and other industry restructuring movements, enter new geographies as technical partners and develop an appropriate high level business relationship network.
We aim to dedicate more than 10% of our capital employed to non-controlling stakes.
We will continue to explore new business opportunities that leverage on our exceptional asset base in Portugal, as a way to expand our portfolio of future growth options. These new ventures should have most of the following characteristics: (i) a clear path to internationalisation; (ii) potentially attractive profitability levels; (iii) alignment with global trends; (iv) opportunity to reinforce our competitive position, and; (v) potential to become a large business in the medium term.
We will dedicate a suitable part of our capital to these new ventures, according to the potential of each venture to deliver growth and create value. We also will look for early signs of success or failure, guaranteeing that scaling-up, merger or divestment decisions are taken as early as possible.
The current economic environment has forced us to concentrate most of our focus and actions on the generation of cash and the preservation of capital, which has significantly altered our plans and tactics, but not our beliefs or our vision of our future.
We have an additional important task on our hands which is of a somewhat 'softer' nature but equally relevant. Sonae is a company with very strong values which are really shared and lived by everyone. One of these values, with which we feel particularly committed, is independence. This, together with our strong ethical standards, commitment to excellence and transparency, means, among other things, that we always take decisions using our best judgment and in strict compliance with the law and our code of conduct. We also clearly explain our decisions and the reasoning behind them. In the Portuguese political context, this has been frequently confused with being in opposition to ruling powers, despite our constant willingness to collaborate with central and local authorities in all areas where our technical skills and assets are useful.
We believe that companies with strong work ethics, independence and commitment to excellence are essential to the development of competitive and competent economies. Sonae also has an particularly high commitment to promote Education and Social Responsibility. We clearly have not been able to communicate this in Portugal, which has been negative for Sonae and, in our opinion, for the country. We will strive to better communicate and clearly demonstrate the beneficial nature of our intents and to achieve political recognition for our contributions to economic and social welfare.
We will implement a number of important organizational changes designed to provide the necessary focus as well as to further develop our competences and management abilities:
Organize most of the curre (Modelo Continente), Non-F Real Estate (IGI) – This new opportunities, which are sign instrumental to the developm Real Estate business unit is e ent retail business into 3 separate units: Fo Food Based Retail (Sonae Retalho Especiali w structure takes into consideration the different in nificantly different for food and non-food busine ment of Senior Executives in this area. Additional expected to be an important source of capital. ood Based Retail zado) and Retail nternationalization esses, and will be lly, the new Retail
Merge Sonae Distribuição release resources that are ne We will also focus more on re assets which we believe wi development. corporate centre with Sonae Holding – We ecessary for the new developments without incre etail and retail related businesses and on those c ill provide significant leveraging opportunities f will, in this way, easing headcount. competencies and for new business
Merged corporate centre w investments are defined as t achieve our value creation o investments in the insurance joint ventures with RAR group will be organized to manage 'active inves he units where M&A activity is as important as objectives. In the first phase, this unit will be re e area (MDS, Cooper Gay and LazamMDS), tra p – Star and Geotur) and DIY (joint venture with C stments' – active organic growth to esponsible for our avel agencies (the CRH – Maxmat).
Last year we showed our ab under much more favourabl actually seen during the year positive evolution of our sha shareholders that have chos communicating the value of o and the potential value of the ility to manage in tough times, achieving objecti le economic and regulatory assumptions than r. However, we were not able to translate this p are price, relative to the market index. I wish sen to stay invested with the Company. We our strategic assets and management team, as w company. ives that were set those that were erformance into a h to thank all the are committed to well as the current
I am grateful for and proud equally conscious that this w minded business partners. I w venture partners and member of the extraordinary commitment our team has would not have been possible without the huge would like to extend my gratitude to our supplie rs of our governing bodies. shown and I am effort of our likers, advisors, joint-
Last, but most certainly not th in our products and services their suggestions and reques anyone else, is a critical motiv work every day. he least, I would like to thank all our customers fo and, in particular, those customers that take th sts. Our will to fully satisfy those needs, faste vator and a key source of the energy, attributes th or their confidence he time to give us r and better than hat we bring to our
Sonae's Board of Directors is composed of 8 members and includes four Non-Executive Directors. Sonae complies with the Corporate Governance principles of separation of responsibilities, namely the separation of the roles of Chairman of the Board of Directors and the CEO, and of the power given to independent Non-Executive Directors to influence the decision making process and the development of the Group's strategy.
The Board of Directors is responsible for ensuring the management of the Company's business, monitoring risks, managing conflicts of interests and developing the organization's goals and strategy. Sonae's Articles of Association permit the Board to delegate day to day company business, duties and responsibilities, as considered appropriate, to an Executive Committee. The Board of Directors has also 2 specialized working committees, namely the Board Audit and Finance Committee (BAFC) and the Board Nomination and Remuneration Committee (BNRC), with the former being responsible, among others, for monitoring and supervising the Group's financial reporting, accounting and audit and risk management activities, and the latter responsible, among others, for supervising Senior Management remuneration. It is worth noting that the BAFC is solely made up of Independent Non-Executive members whom, during 2008, have periodically met and exercised an important influence over decision-making processes and the development of strategy and policy, and did not encounter any restraints in the execution of their functions.
At 31 December 2008, Efanor Investimentos, a family holding company of which Belmiro de Azevedo is chairman, held a majority stake in Sonae, with approximately 53.1% of the shares and voting rights. Regarding the remaining 46.9% of free float capital (excluding Efanor, the major shareholder), it was held by 41,919 shareholders, of whom 40,965 were individuals owning 21.7% of the capital, while 954 institutional investors and companies owned 25.2% of the capital. A substantial 44.7% of free float capital was held by Portuguese investors, with most of the remaining stock being dispersed across several European countries.
At this date, there were no shares directly owned by Sonae holding, as the total of 132.9 million Sonae treasury shares were sold in a market operation in November 2007. Nevertheless, Sonae did not recognize the cost of the own shares sold in its balance sheet, since,
simultaneously , it entered into a derivative financial instrument – Cash Settled Equity Swap –, hence maintaining full economic exposure to them
In accordance with article 16 of the Portuguese Securities Code, shareholdings directly or indirectly amounting to or exceeding the thresholds of 2%, 5%, 10%, 20%, 33.33%, 50%, 66.66% and 90% of the voting rights must be reported to the Portuguese Securities Market Commission and disclosed to the capital market. Reporting is also required if the shareholdings fall below the same percentages.
At end 2008, and based on notifications made, shares held by companies owning more than 2% of Sonae's share capital were the following:
| Shareholder | Number of shares | % Share capital | ||
|---|---|---|---|---|
| Efanor Investimentos | 1,061,514,990 | 53.08% | ||
| Banco BPI (1) | 178,039,855 | 8.90% | ||
| Fundação Berardo (2) | 49,849,514 | 2.49% | ||
| (1) Shareholding owned according to the announcement made to the market on 16 November 2007; (2) Shareholding owned according to the announcement made to the market on 14 February 2006. |
Sonae was incorporated in Portugal in 1959 in the wood products business, more specifically as a producer of high-pressure decorative laminates. The business grew steadily during the 70's and into the 80's, when it began a process of diversification through the acquisition of a supermarket chain followed by the opening of Portugal's first hypermarket. Later, came further diversification into shopping centres and telecommunications.
As it stands today, Sonae is a company that actively manages a portfolio of businesses with a focus on the consumer, divided into three main areas: retail, shopping centres and telecommunications. The various Group companies are run in an independent manner, by a fully dedicated and experienced management team that develops strategies focused on their own key value-adding drivers.
Sonae's business portfolio at 31 December 2008
Sonae's retail activities are carried out by Sonae Distribuição, which became a benchmark reference in the retail market, after revolutionising the consumer habits and commercial landscape in Portugal with the opening of the first hypermarket in the country in 1985. Its market position has been achieved based on a profound knowledge of the market, and the ability to provide a reliable and high quality service to all its customers; a continuous investment in innovation, as a means of going beyond the demands of its customers and differentiating itself from the competition; a focus on operational efficiency, by improving information systems, modernising the logistics structure and training internal staff; a consistently well executed growth strategy, ending 2008 with 793 stores, and a total of 809 thousand m2 of sales area covering more than 70% of the Portuguese population; and a well known brand name, with one of the highest awareness and confidence levels among Portuguese consumers. Continente, Sonae Distribuição's hypermarket brand, has been considered the "Brand of Trust" by Portuguese Consumers for 7 consecutive years.
The company operates three different food retail chains: (i) Continente: hypermarkets with an average sales area of approximately 7,500 m2 and located, as anchor stores, within big shopping centres in the main cities in Portugal; (ii) Modelo: supermarkets with sales area of approximately 2,000 m2 and located in medium sized urban centres; and (iii) Modelo Bonjour: with sales area of approximately 1,000 m2 and a strong presence in residential urban areas in the metropolitan zones of Lisbon and Porto. Sonae Distribuição also operates thirteen different non food retail formats, the most significant being Worten, a consumer electronics format, SportsZone, a sports clothing and equipment format, and Modalfa, an apparel format. The company has broadened its business portfolio, taking advantage of existing synergies with the Sonae Group and developed new innovative non food concepts, examples of which are Área Saúde (para-chemist), Zippy (children and baby apparel) and Worten Mobile (specialist in mobile telecommunications equipment). During 2008, three innovative concepts were launched on the market, namely Loop – footwear chain, Book.it – books, stationery and tobacco, and Bom Bocado – an innovative coffee shop concept.
During 2008 Sonae Distribuição expanded its operations internationally entering into the Spanish market with 2 of its non-food formats, namely SportZone and Worten. SportZone's expansion into Spain resulted from organic growth through the opening of 6 stores in the cities of Madrid, Corunha, Ferrol, La Gavia, Murcia and Zaragoza. Worten's expansion has been achieved through the acquisition of Boulanger's Spanish stores, specialized in consumer electronics, and comprising nine stores in operation, in Spain's main cities with a total of 22 thousand m2 of sales area and a turnover in excess of 100 million euros. Viability of further international expansion of additional formats to new countries is also being studied.
Sonae's shopping centre activity is carried out by Sonae Sierra, a company launched in 1989 to help manage the hypermarkets' shopping galleries and explore opportunities for the expansion of Sonae's retail activities. Sonae Sierra is an international shopping centre specialist, with the goal of being a leading operator of innovative shopping and leisure destinations in the markets in which it operates, and with an integrated approach to the business that includes development, ownership, and management activities – both asset and property management. This approach of being present across the value chain of the business, embedded in a longterm view of investment, ensures that shopping centres increase in value over time.
Sonae Sierra has earned an international reputation for the development of innovative products as well as for its management skills, having been awarded several international prizes over the years from recognized institutions in the shopping centre sector.
Sonae Sierra's strong partnership policy, both with international investors and local partners, allows the company to be financially strong and capable of both rapidly gaining an in-depth knowledge of a market and creating new business opportunities. At the end of 2008, Sonae Sierra was present in Portugal, Spain, Italy, Germany, Greece, Romania and Brazil, and owned 50 shopping centres, with a total GLA of more than 1,900 thousand m2 ; had more than 2,200 thousand m2 of GLA under management with over 8,450 tenants; and had 14 projects under development with a total GLA in excess of 700 thousand m2 .
Sonae's telecommunications activity is carried out by Sonaecom, an integrated telecom group with a complete range of mobile, fixed communications and multimedia services targeting residential and business customers in Portugal. The company is currently one of the main communications' traffic generators in Portugal, and has reached a market share of 13.1% in the Portuguese telecommunications market at end 2008, based on revenues. The mobile business, better known through its brand Optimus, has strengthened its market position in Portugal with 3.2 million subscribers and a market share of 20%, at the end of 2008. The fixed residential business, better known through its brand Clix, has consolidated its position as a leading altnet operator in Portugal, providing triple play services of voice, internet and IPTV to its residential,
SME and corporate customers, as well as providing voice and data capacity, and connectivity services to telecommunications operators worldwide. By the end of 2008, Sonaecom Fixed attained a 12.5% market share of the broadband market and 9.1% market share of the fixed voice telephony market.
The business network is a distinctive competitive advantage for the organization and represents a fundamental strategic asset for both its mobile and wireline divisions. By end 2008, Optimus' 3G network covered approximately 90% of the Portuguese population and over 80% with HSDPA technology, offering bandwidths of up to 7.2 Mbps. The substantial investment made in its network during 2008 allowed the business to continue to lead in mobile broadband and attain additional growth. In relation to the fixed network, the company ended 2008 with a high capacity fiber optical network, with a Gigabit Ethernet transport technology, covering more than 6,000 km across most of the country. This ultra broadband network was carefully prepared to increase transmission capacity and thus cope with the growing capacity needs for circuits and broadband services, mainly IP based services (voice, internet, TV and Video), while maintaining a light operational cost base. To complement its network footprint, the business has deployed metropolitan transmission rings (MANs), over the main city centers, and unbundled 174 PT central offices for SHDSL circuit interconnection, and is capable of operating direct connections for most of its mobile access network, thus reducing the dependency on the incumbents' leased lines. Total central offices, unbundled in order to provide residential ULL services amounted to 166, covering approximately 55% of total fixed lines in Portugal, of which 72% are prepared with full triple play capacity.
Sonaecom also has a presence in the Media sector through the ownership of Público, a reference national daily newspaper in Portugal ranking third in terms of paid circulation. It is also present in the Software and System Information sector, the most significant company being WeDo, a provider of systems integration products and consultancy, specialized in the telecom sector and world leader in Revenue Assurance competencies.
MDS is the Sonae sub-holding for the Insurance brokerage and Risk Management businesses. MDS operates in all insurance and reinsurance areas, following a strategy marked by growth and international expansion. Insurance brokerage retail operations in Portugal are developed through mds insurance brokerage and Seguros Continente, and in Brazil through Lazam|mds. In reinsurance, MDS holds a 32.12% interest in Cooper Gay, the fifth largest worldwide reinsurance broker. MDS has also the responsibility for the management and placement of risk and insurance for the entire Sonae Group, through its reinsurance captive company Sonae Re. mds insurance brokerage is currently the leader in the Portuguese insurance brokerage market managing over 20,000 clients in a wide range of business sectors and accounting with written premiums of approximately 90 million euros in 2008. In 2004, mds insurance brokerage founded an international network of brokers, the Brokers Link, thus assuring its global presence. In 2008, and in a stand alone basis, MDS consolidated turnover totalled 18.3 million euros.
| 1959 | 60's | 70's | 80's | 90's | 2000 | 2001 | 2002 | 2003 | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1983 - Sonae IPO on Lisbon | Banco Universo is created to be the first savings bank in Portugal. Sonae sold the project to Banco BPI |
Share capital increase to 2,0 billion. |
Sonae Imobiliária is delisted from the Stock Market. Sonae retained a |
Acquisition of an additional 3.79% interest in Sonae |
Disposal of its 4.31% shareholding in Banco BPI. |
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| Sonae | Stock Exchange with a market capitalization of 2.5 million |
1990 - diversification of Portfolio and launch of Publico 1993 - Sonae Distribuição IPO on Lisbon Stock Exchange. |
Sonaecom IPO on Lisbon Stock Exchange. |
67% interest and Grosvenor 33%. Disposal of |
Distribuição increasing ownership to 72.2%, after launching a public tender offer over Sonae |
Reduction of its shareholding in Portucel by |
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| 1997 - Sonae Imobiliária IPO on Lisbon Stock Exchange. |
Sonae sold Público Newspaper to Sonaecom |
shareholding in Soporcel. |
Distribuição's free float. | 4.89% to 25%. | |||||||||
| 1990 - Entry in the Brazilian Retail market |
Establishment of a 50/50 partnership with Sonae |
Marketing innovation through the launch of 2 main campaigns: 50% price reductions on a selected range of products and petrol discounts for |
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| 1985 - Sonae diversifies its business into modern retail with the opening of the first |
1993 - Sonae Distribuição is listed on Lisbon Stock Exchange |
Commercial and financial | Commercial and financial |
Turismo for Star travel agencies. |
customers. Received the European Trusted Brands Award for |
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| Sonae Distribuição |
hypermarket in Portugal, in partnership with French Promodés (later acquired by Carrefour). |
1997 - Expansion within the Brazilian market through the acquisition of 7 companies, resulting in a leadership position in the Southern regions. |
consolidation of non-food retail formats in Portugal. |
consolidation of non food retail formats in Portugal. |
being the Portuguese retailer with the highest level of consumer confidence. |
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| Development of several non-food formats in the retail business, throughout the '90s, namely Modalfa, Worten, Sport Zone, Max Mat and Vobis. |
Continente is considered Portuguese Consumer's "Brand of Trust". |
Continente is considered Portuguese Consumer's "Brand of Trust" for the second consecutive year. |
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| 1991 - Opening of first modern shopping centre in Portugal, CascaisShopping |
The company is delisted from Lisbon Stock Exchange. |
Entrance into the Spanish market with the acquisition of Filo, on a 50/50 joint |
Launch of Sierra Fund, the Company's first real estate fund with an equity of 1.0 billion and to which |
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| 1997 - IPO on Lisbon Stock Exchange. |
Algarve Shopping is inaugurated. |
venture with ING Real Estate. The portfolio acquired included 6 operating assets: |
contributes with some of its assets. |
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| 1989 - Sonae starts its | 1997 - Colombo Shopping, the first regional shopping centre and the largest in Iberia Peninsula, is inaugurated in Lisbon. |
Vasco da Gama won the ICSC Awards for Best Large Centre and the |
Opening of | - Grancasa; - La Farga; - Max Center; - Parque Principado; |
Increase of Sierra's Portuguese Portfolio with the inauguration of 2 new shopping centers: - Estação Viana Shopping, |
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| Sonae Sierra |
activity on the retail real estate business as Sonae Imobiliária. |
1998 - Colombo received ICSC award for Best Large Shopping Centre and Mipim Award for best shopping centre. |
Design and Development Award. It also won the Award for Best Shopping Centre from MIPIM. |
MadeiraShopping in Funchal, Madeira Island |
- Valle Real; and - Plaza Mayor Leisure Center |
in Viana do Castelo; - Parque Atlântico located in Ponta Delgada, Azores Island. |
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| 1998 - NorteShopping, the largest shopping centre in the North of Portugal is inaugurated near Oporto. 1999 - NorteShopping won the |
AlgarveShopping receives a mention from ICSC on the Large Shopping Centre category. |
Opening of Parque D. Pedro in Brazil, |
Considered the best Shopping Center developer in Europe by PROCOS |
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| ICSC Award for Best Shopping Centre Expansion &Renovation. 1999 - Vasco Da Gama Shopping, another Flagship asset is inaugurated in Lisbon. |
Madeira Shopping is distinguished with ICSC Award for Best Small Shopping centre |
considered the best shopping center in Brazil by "Master do Imobiliário". |
Plaza Mayor Leisure Center receives the ICSC Award for Best Specialized Center |
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| 1998 - Launch of Optimus (third mobile telecom operator in Portugal); |
Company is listed on Lisbon Stock Exchange. |
Clix innovates by launching a VOIP solution |
Novis launched ADSL offer for corporate customers. |
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| Optimus wins 1 of the 4 available UMTS licenses; |
WeDo commercial offer is launched on |
including a handset for the computer |
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| Sonaecom acquires Público Newspaper from Sonae |
the market. | Clix received 3 awards at the Publicity International |
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| Sonaecom | 1999 - Novis (fixed telecom operator) and Clix (internet provider) are launched, creating the first integrated alternative operator in Portugal |
BizDirect is incorporated as a new business arm of S&SI focused on B2B hardware retail. |
WeDo opened offices in Brazil and Spain. |
Festival | |||||||||
| Acquisition of CelData (ENABLER), a software development company |
Optimus is distinguished with the GSM World |
Mainroad is incorporated | |||||||||||
| 1999 - Optimus is distinguished with the GSM World Association Award; |
Optimus distinguished with GSM World Association Award for the second year |
Association Award for the third consecutive year; |
within the Software and System Information division |
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| Sonae started its |
Sonae Indústria focused its growth on expanding its wood based panels |
Sonae Indústria became leading particleboard manufacturer in Portugal with acquisition of AGLOMA, SIAF and Paivopan. |
Sonae Indústria acquired Tafisa (Spain) and became the market leader on the Iberian Peninsula in the wood based panels business. |
Sonae Indústria acquired Sappi Novoboard in South Africa, becoming the largest supplier of particleboard in the country. |
Sonae Indústria new | mds established a partnership with Brazilian Lazam, the fourth largest |
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| Others | business as a wood based panels |
business, both organically and via acquisitions. Sonae Indústria Integrated vertically into the |
1984 - mds is created to manage Sonae's insurance and risk policy. |
Sonae Indústria extended its commercial and production activities to Canada, Brazil and South Africa. |
Sonae Capital acquired a 52% stake in Soltroia through Sonae Turismo. |
MDF and particleboard production plants started operating in |
Brazilian broker, in which mds holds a 45% interest. |
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| producer in Maia, Portugal. |
production cycle and started its international exposure by exporting its products. |
Sonae entered the Tourism sector, namely in the Health Club (Solinca) and Hotel sectors. |
In the late '90s, Sonae Indústria acquired 85% of Glunz (Germany) and became the world leader in the wood based panels industry. |
mds started providing insurance brokerage and risk management services outside Sonae; Sonae RE incorporated to place and manage Sonae Group risks |
France and Germany. |
Sonae Turismo established a 50/50 partnership with Sonae Distribuição for Star travel agencies. |
| 2004 2005 |
2006 | 2007 | 2008 | ||
|---|---|---|---|---|---|
| Sonae disposed its 25% shareholding in Portucel after failing to acquire the Portuguese |
Sale of additional 17% stake in Sonae Sierra to Grosvenor (UK). As such, Sierra becomes a 50/50 jointly |
Long serving leader Belmiro de Azevedo is appointed Chairman. |
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| government's stake. Sonae acquired the 22% stake owned by Carrefour in Sonae |
controlled company by Sonae and Grosvenor. |
Sonae acquired the remaining free float of Sonae Distribuição, delisted it from the stock market |
Paulo Azevedo became Sonae CEO. |
Sonae | |
| Distribuição and increased its shareholding to 98%. Sonae sold its shareholding in ba Vidro through a MBO. |
Spin-off of Sonae Indústria from its portfolio. |
and became its sole shareholder. | Spin-off of Sonae Capital from Sonae portfolio. |
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| Sonae Distribuição is delisted from Lisbon Stock Exchange |
Acquisition of Carrefour operation in Portugal and consolidation of leadership position in the |
Internationalization of SportZone into the Spanish retail market. |
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| Disposal of São Paulo (Brazil) metropolitan region stores to |
Launch of 2 new non-food retail formats: - Área Saúde, focused on para-pharmaceutical and |
Portuguese retail market. Launch of Continente and Modelo |
Internationalization of Worten into the Spanish consumer electronics retail market, after the acquisition of |
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| Zippy, a new retail format targeting children apparel is launched. |
Carrefour and of the remaining Brazilian retail operations to Wal Mart |
health products; - Worten Mobile, exclusively dedicated to mobile communications; |
loyalty card Launch of Book.it, a new retail |
Boulanger' Spanish operation. Launch of Loop, a footwear chain. |
|
| Acquisition of the remaining share capital of Star - Travel Agency. |
format focused on books, stationery and tobacco. Seguros Continente, an insurance |
Star-Travel Agency is merged with Geotur into a 50/50 joint venture. |
Sonae Distribuição |
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| Continente is considered one of Portugal's Superbrands |
broker focused on car insurance, is launched. Continente is considered the Best |
Modelo was considered 2008 Magnetic Brand by Marklab and Brandia Central. |
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| Continente is considered Portuguese Consumer's "Brand of Trust" for the third consecutive |
Continente is considered Portuguese Consumer's "Brand of Trust" for 4 consecutive years. |
Continente is considered the Best on-line store in Portugal by "PC Guia" magazine |
on-line store in Portugal by "PC Guia" magazine Continente and Modelo conside-red Portugal's Superbrands |
Continente and Modelo are considered Portugal's Superbrands Continente considered the Best on-line store in Portugal by "PC Guia" |
|
| year. | Continente is considered Portuguese Consumer's "Brand of Trust" for the 5th year. |
Continente is considered Portuguese Consumer's "Brand of Trust" for 6 consecutive years. |
Continente is considered Portuguese Consumer's "Brand of Trust" for 7 consecutive years. |
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| Change of brand name from Sonae Imobiliária into Sonae |
International expansion: - Opening of first asset in Greece, Mediterranean Cosmos, a |
Sale of 50% of Sonae Sierra Brasil to DDR - Developers Diversified Realty, one of the |
Reinforced its international footprint and entered the Romanian Market with the acquisition of River Plaza. |
Launch of Sierra Portugal Fund in order to reduce exposure to the Portuguese market. The new fund |
|
| Sierra | partnership with Charagionis Group and Lamda Development; - Acquisition of first 2 shopping |
largest US listed REITs (real estate investment trust). |
Acquisition of the first asset in | equity amounts to 300 million. Reached the landmark of 50 shopping |
|
| Strengthening of international exposure with the opening of 4 |
centres in Italy: Valecenter and Airone |
Sonae Sierra opened Rio Sul Shopping Center (Lisbon) |
Germany (Munster Arkaden). Inauguration of 3 new developments in Europe: |
centres with the inauguration of 3 new schemes in Europe: - 2 in Italy (Freccia Rossa,Gli Orsi); |
|
| shopping centers in Spain, namely: - M40; |
Strenghthening of leadership position in Portugal with the opening of: |
Shopping CampoLimpo is inaugurated by Sonae Sierra Brasil |
- 1 in Portugal (8ª Avenida); - 1 in Germany (Alexa); |
- 1 in Greece (Pantheon Plaza) Inauguration of Plaza Mayor |
|
| - Dos Mares; - Luz del Tajo; and - Zubiarte. |
- LoureShopping, near Lisbon; - SerraShopping in Covilhã. |
Awarded the Best Portuguese Company in Spain by the Spanish Portuguese Chamber for Industry and Commerce |
- 1 in Spain (El Rosal); Considered the Best European Retail/Leisure Developer in the |
expansion. Recognized as Developer of the year on the Global Retail & Leisure |
Sonae Sierra |
| and Boavista Shopping in Brazil. | Considered the Best European Retail Developer in the European |
Considered the Best Developer and the Best Property Manager in Portugal by EuroMoney Real |
European Property Awards. Received the ICSC ReSource Award for its long term commitment |
International Awards. Liquidity Real Estate considers Sonae Sierra as: |
|
| Plaza Mayor Leisure Center | Property Awards. | Estate. PerSonae project is considered |
to sustainable development. Received the Milano Finanza Real |
- the Best Developer in Western Europe; |
|
| receives the Best Development of New Retail Formats Award by AECC and an ICSC mention on |
Estação Viana is distinguished with | the Best Social Responsibility Project by AMCHAM |
Estate Elite Award for the Best Retail Strategy in Italy. |
- the Best Retail/Shopping Center Company in Italy |
|
| Design and Development | the ICSC Design and Development Award and with a merit mention in New Small Centres |
Luz Del Tajo is distinguished by AECC with the Best Large Center Award. |
Rio Sul Shopping is considered the Best Retail Project by "Imobiliária" magazine. |
Distinguished with the Green Thinker Award for the Best Sustainability Strategy |
|
| Novis acquired and merged | Optimus launched "Kanguru" the first mobile broadband internet service provider. |
Launch of Public Tender Offer for Portugal Telecom and PT Multimédia. |
Tender offer for PT and PTM fails. Acquisition of Tele2 Portugal and |
Wedo received the "Business Expansion Award" from UK Trade & Investment |
|
| KPNQuest Portugal; | Optimus also Launched of Rede4 a mobile virtual network operator. |
Sale of Enabler, Sonaecom's in house grown software developer, |
Oni SOHO fixed telecom businesses. Optimus offers high definition |
Optimus launches "TAG", an innovative offer aimed at the youth market, introducing unlimited |
|
| Initial launch of Optimus Home, an | Clix is repositioned as residential voice and internet service provider. |
to WiPro. Roll up of EDP and Parpublica stakes in Optimus into Sonaecom |
mobile TV service Merger of the mobile and fixed |
communications among user groups at an attractive flat fee. |
|
| innovative and first covergence fixed-mobile service in Portugal; |
Fixed telecom businesses, Novis and Clix, become centrally managed |
with the consequent increase of Sonaecom stake in Optimus to 100%. |
divisions Clix launched an integrated product offering 5 services under 1 brand |
Announcement of a 3-year plan for the deployment of fibre, aimed at building the most advanced |
|
| under Sonaecom Fixed. | Optimus launched push e-mail solution |
and 1 invoice (fixed telephone&internet , IPTV, Home |
telecommunications network in Portugal Kanguru was considered the best |
Sonaecom | |
| Optimus commercial UMTS offer is launched |
Clix initiates pilot tests for a IPTV offer (Clix SmarTV). |
Mass market launch of Clix SmarTV, the first IPTV service in |
video and mobile internet). WeDo acquired Cape Tech, Praesidium and Tecnológica |
wireless internet service provider by "Exame Informatica" magazine |
|
| Sonaecom Fixed reached 50% coverage of the Portuguese direct access market |
Portugal. WeDo opened its offices in |
becoming world leader in fraud and risk assurance software. |
Mainroad achieved the second position as "Best Disaster Recovery Provider" in the Data Centres Europe Awards |
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| Novis and Clix strongly invest in fixed direct access and abolish |
Germany and UK | WeDo opened its offices in Egypt and Malaysia (Kuala Lumpur) Optimus brand started being used |
2008 Kanguru received the international |
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| monthly mininum fees. | WeDo opened offices in France. | Mainroad develops its security operation center and fast recovery service offer. |
award for product innovation from for all corporate and SME activities, "Global Telecoms Business" including both the mobile and Magazine. wireline services, replacing Novis Brand. |
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| Spin-off of Sonae Capital from Sonae portfolio and subsequent |
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| mds established a partnership with Cooper Gay (UK) which became |
listing on the Lisbon Stock Exchange |
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| the Sonae Group reinsurance broker. |
Spin-off of Sonae Indústria from Sonae portfolio. |
mds acquired a 14% interest in Cooper Gay (UK), a reinsurance brokerage company. |
mds Shareholding in Cooper Gay is increased to 32%. |
Others | |
| Seguros Continente, a mass market insurance broker focused on car |
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| mds led the creation of Brokers Link, an international network of brokers through which several worldwide partnerships were established. |
insurance and supported by Sonae Distribuição's retail chain, is created, held 25% by mds and the remaining 75% by Sonae Distribuição. |
Innovation is seen as one of the key pillars of Sonae's sustainability and long-term differentiation and, accordingly, Sonae continuously explores and examines opportunities that can generate value. Innovation is embedded in Sonae's "DNA" and forms an integral part of its culture and attitude of all its employees.
For Sonae, innovation is much more than simply creating new products and services. It entails screening the market and consumers, analyzing and anticipating their needs and, based on the results achieved, do one or all of the following: offer an attractive, unique and value enhancing proposition; expand the targeted markets; implement new or altered business processes within the organization; adopt new management concepts; or build new skills and knowledge of employees. During 2008, Sonae took great strides forward in innovation, among which we highlight:
(i) Implementation, of the Kaizen method in the Retail business unit, aimed at identifying, reducing and eliminating suboptimal processes through the use of "Continuous Improvement Processes", thus reducing costs by increasing productivity, and increasing customer satisfaction. A "Continuous Improvement Process" is a management process whereby delivery processes (output to customer effectiveness) are constantly evaluated and improved in the light of their efficiency, effectiveness and flexibility (needed to meet changing needs). These processes are implemented at the operational level, examples of which are: better organization and cleaning of the warehouses, aiming at reducing partial out-of-stock situations resulting from the difficulty of finding stored products; a faster, cleaner and more efficient replenishment before store opening, aiming at improving productivity and allocating resources to other tasks; visual management, by using simple graphic tools to convey rules and required behaviours.
Since its inception, the policy has had remarkable success in the operation and organization of the stores, due mainly to the open and participative nature of the programme in which all employees are called upon to contribute with ideas and suggestions and find specific solutions to problems. The programme has been implemented in 152 stores, involving approximately 19,400 employees and a total investment of 490,500 hours, accounted for as training time.
(iii) Work was completed on the implementation of personAE project in the Shopping Centre business, carried out in partnership with a leading international consulting firm to develop integrated actions and attitudes towards people safety with special emphasis on changing individual behaviour. The programme combines the implementation of best management practices in hygiene, Safety and Social Responsibility with the development of internal capabilities through training and knowledge sharing. An essential part of the methodology is to integrate responsible attitudes and behaviour into the culture of the business. The programme involved all operations world wide and all business activities of the unit, from project development through to the management of the shopping centre, including investment and construction. The project lasted for 4 years and represented, in consulting and training alone, an investment of 5 million euros.
(i) Implementation of the project "Mercado de Ideias" in the telecommunications business unit, which consists of a platform for "Ideas Management". Its goal is to collect spontaneous ideas from all employees and allow them to get involved in the organizational improvement of processes and products. This platform supports the entire process of submitting, evaluating, discussing and improving ideas, as well as attributing incentives. By the end of 2008, there were over 1200 registered users, 593 ideas submitted and 68 ideas approved by the market.
(i) Implementation in the Retail business unit of a project to increase its leadership in the perishable products category "Missão frescos". The project improved the quality of fresh products on offer, as well as segmenting them at 3 levels: Economic, for the most affordable fresh products available; Quality & Freshness, for the medium range priced product; and Selection, for the gourmet assortment, thus better meeting customer needs and revolutionizing the market. The Retail business constantly stresses the importance of
making the customer a pivotal element in all decisions taken and thus carried out the project by constantly questioning customers, listening to their opinions, explanations, and taking on board their suggestions.
(ii) Strong investment made in the Retail business unit in the development and launch of own and exclusive brands, adapted to the macroeconomic environment and market demands, reflecting lower disposable income and the prevalence of a "trading-down" phenomenon. This customer focused attitude led to the own brand offer to be extended to 8 new segments targeting: cosmetics, biological products, toddlers, babies, pets, hygiene, and dietary & health products.
Working at Sonae means contributing to the performance of a fast moving, innovative, proactive and exciting Group, where current and future employees may expect: (i) career development opportunities, where meritocracy is promoted and discrimination is not tolerated; (ii) lifelong training; and (iii) both a demanding and friendly work environment.
Sonae considers its employees as one of the Group's most valuable assets: it is the talent, expertise, professionalism and dedication of each and every one of them that contribute to Sonae's continued success, distinctive business knowledge and competences.
Sonae has changed significantly over the years, with a far larger product offering, a wider geographic reach and a workforce that has increased not only in numbers but also its diversity in terms of skills, backgrounds and nationalities. At 31 December 2008, Sonae's workforce numbered 37,437 employees, of which 31,900 were full-time-equivalent employees (FTE's), 7.3% or 2,541 more than in the previous year. All employees generated a total cost of 612.4 million euros, equal to 11.4% of consolidated turnover.
The Retail business increased its employees by 7.7% compared to2007, essentially as a result of the acquisition of a major retail company at the end of 2007 and the continued organic expansion of its store network, both nationally and internationally, although offset by the continuous productivity improvement schemes implemented in stores. The Shopping Centre business increased its employees1 by almost 7.9%, mainly reflecting the higher number of projects under development in the year and the larger base of assets under management compared to 2007. In the Telecoms business, total employees slightly increased by 0.4% compared to 2007, mainly due to the growth and international expansion of its Software and System Information division.
Educational backgrounds vary widely across Sonae's businesses. 99% of employees are estimated to have upper secondary-level education (beyond compulsory level) ),in the telecoms business, and more than 74% in the Shopping centre business, while only reaching 40% at the Retail business, due to the particular nature of its operations. In line with the Group's general approach of continuously investing in employee career development through access to training and educational programmes, the Retail business joined, in 2008, the "new opportunities programme", a government initiative aimed at increasing the Portuguese population's educational qualifications with the opening of training centers for providing teaching up to the compulsory level of education, and other professional and training courses.
1 The shopping centre business changed its criterion for measuring Headcount in Brazil, by including those employees working for the shopping centres' condominium, regardless of whether they had a work contract with Sonae Sierra or not.
Internationally, Sonae strengthened its presence in Europe, North America, Brazil and Australia, operating in 12 countries. Outside Sonae's home country, Portugal, the Retail business is present in Spain and China, in the former through the international expansion of both its sportswear and consumer electronics chains, and in the latter through representative offices for procurement; the Shopping centre business is present in Spain, Italy, Germany, Greece, Italy, Romania and Brazil; and the Telecoms business is present in Spain, Ireland, Poland, the United Kingdom and Brazil, with representative offices of its Software and System Information business, WeDo, which specializes in the telecom sector and with competencies in areas such as Revenue Assurance. Spain is by far the most representative international country for Sonae, employing 924 people, of which 782 work in the Retail business and 132 in the Shopping centre business. Brazil also accounts for a significant percentage of Sonae's workforce, totaling 436 employees, of which 371 work for the Shopping centre business and 53 for the Telecommunications business.
Sonae needs the right mix of talented and experienced commercial and marketing managers, technology experts (R&D, Engineering, IT/IS), functional managers (Finance, HR, Legal) together with general managers who have acquired experience in different areas. In this respect, the Group believes that new challenges, learning opportunities, increasing job responsibilities, project work, network participation, and job rotation within one functional area or between businesses, are the best way of guaranteeing progress throughout a career.
Internal mobility within Sonae is nurtured and promoted based on the following principles: (i) talent has to be managed at the service of the entire Group, not to one specific unit or function; (ii) every individual has a responsibility to take his/her career development into his/her own hands; (iii) the company offers guidance, opportunities and resources to maintain employability throughout a manager's career; and (iv) Sonae looks for a balance between developing competencies internally and attracting competencies from outside.
For Sonae, although each of its businesses is independently managed with its own strengths and unique skills, they belong to one single organization, working together with a commonly shared culture and values mindset. By encouraging the sharing of knowledge and experiences between its businesses, bringing different ideas together, sharing know-how and insights, and challenging people with a unique combination of talents and characteristics to work together, Sonae enables innovation to take place, reduces the risk of mistakes, and promotes the adoption and sharing of best practices. To support this expertise sharing attitude, Sonae fosters the following forums:
(ii) Sustainability Forum, with the purpose of sharing knowledge and best practices, increasing awareness of sustainability across Sonae and identifying relevant common issues to encourage synergies and cohesion in dealing with the various challenges in this area;
(iii) Planning & Control Methodologies Forum, with the purpose of promoting and discussing the implementation of best control methodologies across the group;
In addition to the above described forums, there are 2 internal commissions created as platforms for sharing knowledge and experience, namely:
Each of these informal bodies commonly referred to as sharing and coordination bodies meet several times during the year and often organize specific seminars, workshops and internal training courses.
As a general principle, Sonae wants training and investments in competence building to be regarded as a key factor to understand, anticipate and respond to today's market and competition challenges, as well as to meet the strategic needs of the Group.
In this sense, Sonae employees are constantly challenged to learn and update skills and competences, with the following training plans being worthy of mention:
To energize initiative and sharpen commitment of its employees, Sonae offers an attractive and competitive remuneration, and a comprehensive and flexible benefits package. Above and beyond the fixed remuneration, a performance bonus is paid, aimed at rewarding the achievement of previously defined annual objectives, linked to "key performance indicators of Sonae's businesses activities", "department key performance indicators" and "personal key performance indicators". Contributing to this performance assessment, Sonae's culture strongly encourages employees to take an active role in the planning of their own "key performance indicators" for the year, in accordance with the company's goals and strategy.
As usual, in 2008 Sonae carried out its annual performance appraisal process, through which each individual's performance and contribution to the organization's success was measured and assessed, and the variable remuneration to be awarded was calculated.
Further detailed information about the performance reward system can be found under section 2.16 of the Corporate Governance Report.
Sonae's corporate values and beliefs, shared by all of its investment portfolio units' culture and employees, is considered a fundamental and structural cornerstone of many of the Group's distinctive competencies. Given Sonae's size and organizational structure, with a business portfolio made up of independently managed companies with their own strengths and unique skills, operating in different countries and cultures often with different market positioning and approaches, the Groups' corporate values and principles are viewed as the glue that keeps all the businesses together and guarantees their collective strength and common future.
These key features of Sonae's corporate culture are broken down into the following 5 major behavioural principles:
Sonae's ambition, which transformed a small laminate business into one of the best Portuguese based companies, with a growing international footprint and as a leading player in almost all sectors in which it is present, continues to be the driving force of the Group's success.
Sonae always aims to achieve leadership positions in its business areas. It continuously sets ambitious goals, above and beyond benchmarks and best practices, constantly stretching its competences and demanding a bold and entrepreneurial attitude from its managers. The Group is highly resilient in pursuing its ambitious goals and implementing "best in class" risk management practices to balance its bold attitudes and guarantee that adverse situations are detected and managed swiftly.
Sonae strives to excel in all its activities and to generate sustainable growth and superior economic value to its shareholders. This quest is pursued through the relentless exploitation of innovative solutions and new business opportunities to find new ways of creating value, by continuously questioning both its business models and industry orthodoxies. It is with this mission in mind, targeted to better satisfy the Group's customer needs and revolutionize the market, that Sonae builds its future and earns the trust of its shareholders.
Sonae eliminates superfluous expenditures and is cost conscious, always looking to improve its operational efficiency and organisational structure. Sonae looks to optimise the use of its resources, carefully choosing where and when to use them and maximising their return. The Group invests wisely in all areas and in initiatives that improve its ability to create value.
Sonae establishes long-term partnerships with third parties based on principles of honesty, integrity and transparency. Sonae is fully committed to the success of each established partnership adopting an active role by sharing objectives and risks, making valuable contributions, and committing the necessary resources.
Sonae looks to cooperate with central or regional governments, whenever the Group is in a position to contribute with expertise, aiming to improve the regulatory, legislative and social environment. Nonetheless, Soane's commitment and willingness to help society never leads to loss of independence or to any involvement with political parties activity.
Sonae believes that investors in listed companies should take into account the extent to which companies have adopted Corporate Governance best practices and the timely disclosure of material information to the capital markets. To this end, and acknowledging the benefits of such practices in day to day management, Sonae is committed to complying with best practices in Corporate Governance both in terms of leading international benchmarks and Portuguese Corporate Governance regulations and practices. These practices are responsible for the development of a clear set of rules and responsibilities for its different governing bodies, influencing their respective decision making processes and the development of the Group's strategy. Sonae's Directors accept and look for a regular evaluation by its stakeholders, being not only shareholders (or their representatives) but also customers, employees, market analysts and other outside observers.
Sustainability principles have been an integral part of Sonae since its creation. Over the years, Sonae has performed positively, not only in terms of profitability, but also in progress made socially through support to the community, environmentally and on the basis of a concern for proper governance by adopting a policy of transparency and internal rules designed to guarantee the ethical and responsible behaviour of the organization.
In view of the economic, social and environmental impacts of the Group, a sustainability policy has been progressively integrated into Sonae's management model and implemented by each of its business units. Economic growth has always been accompanied by an active involvement in international discussion of issues relating to sustainable development, through membership of important international organizations and signing up to their principles.
Sonae's main sustainability related initiatives
This commitment to the principles of sustainability development is visible in the fact that Sonae, in 1995, was one of the first Portuguese companies to join the World Business Council for
Sustainable Development and was also one of the founders of the Business Council for Sustainable Development – Portugal in 2001. In 2004, Sonae adhered to the ten principles of the United Nations Global Compact, which require the adoption of a set of values regarding Human rights, Labour standards, Environment and Anti-corruption.
Sonae has therefore implemented a series of environmental processes and policies in such a way as to minimize the Group's impact on the environment, as well as adopting several social initiatives towards minimizing the impact of social problems present in the countries in which it operates. To this end, risk management of social and environmental issues are considered a cornerstone of Sonae's sustainability strategy, being applied to all management processes and considered as a responsibility of all employees. Through the risk management process, Sonae controls uncertainties and threats that can impact its businesses, with the aim of creating value. The methodology used in this process is based on international standards, namely the Enterprise Risk Management – Integrated Framework of the Committee of Sponsoring Organizations of the Treadway Commission.
Sonae has carried out actions over its business chain, promoting not only the quality and safety of its products and services, but also improving the Group's performance in the environmental and social areas. The Group's business chain embraces a range of stakeholders – suppliers, employees, visitors, store tenants, clients, business partners and society in general, which are crucial to the development of the business and, as such, are the target of specific actions aimed to promote regional and national socio-economic growth.
Among these actions should be highlighted the following:
Sonae believes that its businesses can contribute towards the promotion of the social and cultural well-being of the communities in which they operate. Over the years, it has thus encouraged the development of education and culture through support to activities, projects and events carried out in partnership with other organizations.
During 2008, Sonae has been very active in the field of social cooperation, increasing its focus on education and community cooperation and giving support to a variety of social initiatives:
(v) Launch of community panels at shopping centres, aimed at encouraging debate and the exchange of ideas regarding environment, health, safety and work, among others, between the community and the shopping centre's management;
(vi) Founder member of "Casa da Música" and "Fundação de Serralves", two Portuguese cultural benchmarks;
As an environmentally conscious Group, Sonae has implemented environmental policies and adapted its products, services, infrastructure and facilities in such a way as to minimize their impact on the environment, namely:
Of the environment related activities carried out during 2008, the following should be highlighted:
For Sonae, transparency, ethical and responsible behaviour are fundamental principles guiding its business operations and contributing towards its performance.
Sonae promotes, through its Code of Conduct, the adoption of certain behavioural principles and rules ranging from integrity, transparency, respect, social responsibility, environmental commitment, health and safety, confidentiality and use of privileged information, to managing conflicts of interest and communicating irregularities.
Sonae Holding's Directors, senior managers and employees, including external consultants, are required to comply with the Code of Conduct in the performance of their daily activities and in both internal and external relationships. Sonae Holding also requires its consultants and suppliers to follow similar ethical standards.
In line with Sonae's culture of social corporate responsibility, Sonae Holding has in place a policy for communicating internal irregularities, which sets out procedures to efficiently and fairly respond to the reporting of alleged irregularities. By successfully implementing these procedures and by making efforts to respond to alleged irregularities, Sonae Holding aims to involve all employees in the creation of a healthy and balanced work environment.
Sonae Holding has always given to employees and to the general public through its website (www.sonae.pt) direct access to its Ombudsman, who reports directly to the Chairman of the Board of Directors. This has proven to be an effective means of facilitating the report of complaints, to make sure that independence and freedom of opinion are guaranteed and that all issues are treated equally and fairly.
Further detailed information on Sonae Holding's governance regulations can be found under section 2.6 of the Corporate Governance Report.
According to the International Monetary Fund (IMF) the World Economy is estimated to have grown by 3.4% in 2008 decelerating compared to 2007 by 1.8 p.p.. At the root of this slowdown has been the financial crisis which has worsened since the autumn. Though slowing from 8.3% in 2007 to 6.3% in 2008, the economic growth of Emerging and Developing Countries continued to post a robust contribution to the growth of the global economy. The Advanced Economies led the slowdown, decelerating from 2.7% in 2007 to 1.0% growth in 2008.
During 2008, Brent crude oil prices fell by 56% to reach 42 USD per barrel at the end of the year. In the first half of the year, they rose 54% to a maximum of 146 USD in July. Following this peak in the summer, the financial crisis weakened growth prospects and depressed commodity prices which lead to the oil price falling 71% from its yearly maximum, despite OPEC's decision to reduce production.
In 2008, the financial crisis that began in 2007 with the US sub prime crisis deepened and worsened, particularly after the summer when several financial institutions went bankrupt. In 3Q08, US GDP fell by 0.5%, a substantial decrease from the 2.8% growth of 2Q08. In the full year, the economy is estimated to have grown by 1.1%. The slowdown has been mainly driven by a fall in consumer spending as a result of the housing market slowdown. The US is going through a strong deleveraging process: in 3Q08 credit to households decreased for the first time since the 50s. In order to encourage economic growth, the Federal Reserve Bank cut the bank interest reference rate by a cumulative 325 b.p. from the beginning of 2008 to 0.25% by the end of the year.
The speed of economic slowdown was the most unusual feature of the 2008 crisis. The impact of the financial crisis on the economy in real terms became more pronounced in the autumn and the Euro Area (EA) entered its first technical recession in 3Q08. Growth in GDP in both the European Union (EU) and EA is forecast to have slowed down from 2007 levels. The EU is estimated to have grown 1.0% in 2008 (2.9% in 2007) and the EA 0.9% (2.7% in 2007), mainly driven by the slowdown in investment and private consumption.
Domestic demand has also decelerated mainly due to the performance of investment and consumption.
Corporate Investment slowed down due a fall in capacity utilization and to a significant worsening in the economic outlook. Household investment in the EA also decelerated because of higher interest rates due to the financial crisis, and of adjustments to the over-heated housing markets. The financial crisis has affected confidence and the availability of funds in the market, making it difficult to raise funds, which in turn hampers investment projects.
Private consumption fell by 1.2 p.p. in the EU to a 1.0% growth and also by 1.1 p.p. in the EA to a 0.5% growth. Consumption slowed as a consequence of sluggish real disposable income as a result of high inflation, rising unemployment as well as lower levels of confidence.
The behaviour of labour markets varied across member states, but most started to weaken during 2008. Countries most severely affected by the housing market downturns, such as Spain and Ireland, account for the biggest increases in unemployment rates. Nevertheless, Germany registered robust job creation in the first three quarters of 2008. The unemployment rate in 2008 was 7.0% in the EU, down from 7.1% in 2007, and 7.5% in the EA, up from 7.4% in the previous year.
Foreign demand was a significant brake on growth accounting for -0.6 p.p. of the yearly growth of GDP in the EA. Exports posted the lowest growth rate since 2003 growing by 2% as a result of the world trade slowdown.
In the first half of 2008, the European Central Bank (ECB) adopted a tighter monetary policy (the base rate increased 25 b.p. in July to 4.25%) to control inflationary pressures arising mainly from food and energy prices. After the intensification of the financial crisis, the prospect of economic slowdown alleviated inflationary pressures, and from October onwards, the ECB adopted an expansionary policy cutting the bank reference rate by 175 b.p. until, by the end of the year, the rate fell to 2.50%. In January 2009, the ECB cut the reference rate further to 2.00% and in March by 50bp to the historical minimum of 1.50%.
In 2008 in the EA, GDP is estimated to have grown in Spain by 1.2% (3.7% in 2007), in Germany by 1.3% (2.5% in 2007), in Greece by 2.9% (4.0% in 2007) but to have contracted in Italy by 0.6% (after growing 1.5% in 2007). Central and Eastern Europe posted stronger growth rates with GDP estimated to have grown by 3.2% (decelerating from 5.4% in 2007).
The strong pace of growth achieved in 2007 was sustained in the first half of 2008, showing strong fundamentals. During 2008, two rating agencies revised Brazil's rating upward to 'investment grade' which increased capital flows into the country. Brazilian GDP is estimated to have accelerated from a 5.7% growth rate in 2007 to 5.8% in 2008.
A sustained easing of monetary policy, credit expansion and improving labour market conditions have fuelled the economic expansion. Investment had strong momentum, supported by the above mentioned rating revision while exports benefited from high food prices.
Food and energy prices increased inflationary pressures and, in order to keep inflation in the target range (4.5% +/- 2 p.p.), the Brazilian Central Bank increased the reference rate during the year.
According to the Portuguese Central Bank, the Portuguese economy grew 0.3% in 2008, continuing to diverge from the EA average and slowing from the previous year's 1.9% growth. GDP growth was driven by domestic demand, while, contrary to 2007, external demand acted as a brake on growth.
Despite continuing to post a positive contribution to economic growth in 2008, the contribution of domestic demand decreased to 1.1 p.p., with the strongest fall being in the investment component of demand.
Investment accounted for the biggest drop in domestic demand, decreasing 0.8% in 2008, down from 3.2% growth in 2007. The main drivers of this poor investment performance were housing investment and the impact on the 2007 base from aircraft acquisitions in that year.
Private consumption slowed to 1.4% growth for the year. During 2008, interest rates increased well above historical levels (the EA bank reference rate reached 4.25% in July but fell to 2.50% at the end of the year; the reference rate for many loans - 3 month Euribor - reached a maximum of 5.393% in October) which, together with the high level of indebtedness of Portuguese families, hampered consumption. Nevertheless, the rate of unemployment is expected to have decreased from 8.1% in 2007 to 7.8% in 2008
As a result of the economic downturn, government expenditure grew by 0.2%. Despite this increase, the government managed to meet the Stability and Growth Pact threshold, achieving a public deficit of below 3% of GDP.
As for external demand, the contribution of net exports to the growth of Portuguese GDP decreased and became negative by 0.8 p.p.. Portuguese exports fell sharply from 7.5% in 2007 to 0.6% in 2008, as a result of the strong economic downturn in major target countries for Portuguese exports.
Portuguese inflation was 2.6% in 2008, 0.1 p.p. above the previous year. Portuguese inflation remained below the EA average, despite high pressure from food and energy prices.
8.2. Corporate events
The following corporate events that took place during 2008 should be noted:
Sonae's good operational performance and resilience to the financial crisis, clearly visible in 2008, was not reflected in its share price at 31 December 2008 and its trend since end 2007.
| Analyst's | Market multiples , real estate NAV and | ||||||
|---|---|---|---|---|---|---|---|
| Million euros | consensus | market capitalization for listed companies | |||||
| NET ASSET VALUE (6) | % stake latest valuations | 2008 | 9M08 | ∆ | 2007 | ∆ | |
| Gross Asset Value (GAV) | 2,760 | 2,792 | 2,689 | 3.9% | 3,381 | -17.4% | |
| Retail(1) | 100% | 1,461 | 1,707 | 1,367 | 24.9% | 1,713 | -0.3% |
| Shopping Centre(2) | 50% | 780 | 795 | 924 | -14.0% | 949 | -16.3% |
| Insurance Brokerage(3) | 100% | 57 | 95 | 77 | 23.8% | 77 | 23.8% |
| Total unlisted holdings | 2,298 | 2,597 | 2,368 | 9.7% | 2,739 | -5.2% | |
| Telecommunications(4) | 53% | 462 | 195 | 321 | -39.1% | 642 | -69.5% |
| Total listed holdings | 462 | 195 | 321 | -39.1% | 642 | -69.5% | |
| Holding costs (5) | 57 | 52 | 49 | 6.6% | 81 | -36.1% | |
| Holding&Others Net debt (5) | 573 | 648 | 584 | 11.0% | 402 | 61.4% | |
| Net Asset Value | 2,130 | 2,092 | 2,056 | 1.8% | 2,897 | -27.8% | |
| shares outstanding ('000) | 2,000,000 | 2,000,000 | 2,000,000 | 0.0% | 2,000,000 | 0.0% | |
| NAV/share (€) | 1.07 | 1.05 | 1.03 | 1.8% | 1.45 | -27.8% | |
| closing price last trading day | 0.44 | 0.44 | 0.53 | -18.2% | 1.78 | -75.4% | |
| NAV premium/(discount) to closing price last trading day | 144% | 139% | 92% | 46.9pp | -18% | - |
(1) based on food retail sector EV/EBITDA 08 & EV/Sales 08 multiple, the consensus 2008 Sales & EBITDA for Sonae Distribuição, and non-operating real estate gross book value; (2) includes European and Brazilian properties in operation and under development at NAV; Property and Asset Management businesses based on EV/EBITDA market multiples; (3) Acquitisition value to Sonae Capital at end November 2007 and increase at December 2008 in shareholding at Cooper Gay, from 14% to 32.12%; (4) valuation at market prices with the exception of analyst's consensus column; (5) Values reported by Sonae with the exception of analyst's consensus column; the reported holding costs are a perpetuity based on food retail EV/EBITDA 08 and the costs incurred ; (6) Unaudited figures.
Based on the latest available research by analysts on Sonae, the consensus value of the Group's net assets at end 2008 amounted to 2,130 million euros, equal to 1.07 euros per share, implying a premium of 144% over the Sonae share closing price of 0.44 euros at 31 December
Taking into account market multiples, real estate NAV and market capitalization for listed companies, Group net asset value at end 2008 amounted to approximately 2,092 million euros, representing 1.05 euros per share, implying a premium of 139% over the Sonae share closing price of 0.44 euros as at 31 December 2008. Compared to year end 2007, the market multiples based estimate of the Group's net asset value fell by 27.8%, driven mainly by a 69.5% decrease in Sonaecom market capitalization and a 16.3% reduction of the Shopping Centre valuation.
From Sonae's current portfolio and taking into account the consensus of analysts, Retail represented 52.9% of total GAV, Shopping Centres 28.3% and Telecommunications 16.7%. When based on market multiples and market capitalization for quoted companies, investments in Retail accounted for 61.1% of total GAV, Shopping Centres represented 28.5% and Telecommunications 7.0%.
| CONSOLIDATED INCOME STATEMENT (8) 2007(R) 2008 y.o.y DIRECT INCOME Turnover 4,417 5,353 21.2% Retail 3,376 4,211 24.7% Shopping centres (1) 145 169 16.3% Telecommunications 877 954 8.7% Holding & others 19 20 3.8% Other revenues 338 456 34.8% Operating costs 4,216 5,179 22.8% COGS 2,623 3,304 26.0% Personnel costs 509 612 20.4% Other operating costs 1,085 1,262 16.4% EBITDA (2) 536 617 15.0% EBITDA margin (%) (3) 12.1% 11.5% -0.6pp Retail 300 354 17.9% Shopping centres (1) 69 90 29.4% Telecommunications 173 179 3.6% Holding & others -5 -5 0.4% Provisions and impairment losses 13 28 111.8% Depreciation & amortization 228 274 20.0% EBIT 298 328 10.2% Net financial results -114 -174 -52.2% Financial income 53 43 -18.3% Financial expenses 167 217 29.9% Share of results of associated undertakings 4 15 - Investment income (4) 34 4 -88.7% EBT 222 173 -22.2% Taxes 16 -2 - Direct Net income 238 171 -28.3% Group Share (7) 199 159 -20.0% Attributable to minority interests 39 12 -70.0% INDIRECT INCOME Value created on investment properties (5) 158 -121 - Investment income (6) 8 12 61.6% Impairment losses -5 -37 Taxes -44 15 - Indirect Net income 117 -132 - Group Share (7) 76 -79 - Attributable to minority interests 41 -53 - TOTAL NET INCOME Total Net income 355 39 -89.0% Group Share (7) 275 80 -70.9% Attributable to minority interests 80 -41 - |
Million euros | ||
|---|---|---|---|
(1) Shopping centres are proportionally consolidated; (2) EBITDA = Turnover + other revenues -impairment reversion - badwill- operating costs; (3) EBITDA margin = EBITDA / Turnover; (4) Capital gains (losses) with financial investments excluding those generated at shopping centres plus dividends received; (5) Increase (decrease) in the valuation of the shopping centres proportionally consolidated; (6) Capital gains (losses) with financial investments generated at Sonae Sierra ; (7) Net income attributable to Sonae shareholders; (8) the financial information regarding 4Q07(R) and 4Q07 was not audited; (R) Restated to exclude Sonae Capital contribution in 2007 and to consolidate the Portuguese shopping centres comprising theSierra Portugal Fund underthe equity method in 2H08.
Consolidated turnover increased by 936 million euros in 2008 compared to 2007(R), driven by strong growth across all the businesses, a remarkable achievement given the deterioration of macroeconomic conditions. The breakdown of this consolidated performance was as follows:
EBITDA amounted to 616.8 million euros, 15.0% above 2007(R), generating a margin of 11.5% compared to a margin of 12.1% in 2007(R). This value reflects the following contributions:
(i) The Retail business increased its contribution to EBITDA by 17.9% compared to 2007(R), mainly reflecting the turnover performance detailed above, as well as the implementation of cost reduction and operational efficiency programmes. On a standalone basis, total EBITDA reached 355 million euros, generating an EBITDA margin of 8.4%. Two extraordinary impacts affected both 2008 and 2007 results: (a) a 9 million euros capital gain in 2008 generated by the sale of a Brazilian site in Florianópolis; and (b) a 12 million euros capital gain in 2007 generated by the sale of the real estate assets of the Albufeira and Portimão shopping centres galleries in Portugal. Excluding the impact of these non-recurrent capital gains, EBITDA rose by 20% to 346 million euros, generating a margin of 8.5%, in line with guidance. Food retail EBITDA increased by 26.8% over 2007 to 263 million euros and nonfood retail EBITDA was up 5.7% over 2007 to 76 million euros;
Net Financial results deteriorated by 52.2% to a negative 174 million euros in 2008 compared to a negative 114 million euros in 2007(R), mainly comprising: (i) a 29.9% increase in financial expenses, explained by the Group's higher average net debt in 2008 and by the increase in Euribor market rates (the 3 and 6 months Euribor increasing by 0.4pp compared to 2007); and (ii) a 9.6 million euros decrease in financial income. The Group's higher average net debt in 2008 compared to 2007(R) is primarily explained by the financing requirements of the retail acquisition successfully completed at the end of 2007, and progress in the development pipeline of the Shopping Centre business.
The group share of direct net income decreased by 20.0% from 198.9 million euros in 2007(R) to 159.1 million euros in 2008, mainly due to: (i) the above mentioned higher net financial charges incurred in the period; (ii) a decrease of 30 million euros of investment income, with the 2007 figure mainly comprising capital gains of 27.5 million euros arising from the sale of 6.7 million shares of Sonaecom; and (iii) Sonae's ambitious investment plan for the year, which involved store network expansion in Retail and extension of the mobile and wireline network in Telecommunications, driving up depreciation and amortization costs in 2008 against 2007(R) but not yet fully contributing to the Group's operational profitability.
Value created on investment properties at the Shopping Centres business amounted to a negative 121.4 million euros, compared to a positive 158.2 million euros in 2007(R), primarily reflecting the following factors in the shopping centre business, on a standalone basis: (i) 413.9 million euros decrease in the value of the European shopping centres in the portfolio, explained by the general yield increase in Europe, compared to a yield compression trend still prevailing in 2007; in 2008, average yields in Portugal increased by 56bp, in Spain by 95bp, in Italy by 78bp, in Germany by 42bp and in Romania by 125bp; (ii) 129.7 million euros positive impact on valuation reflecting the improved performance of the shopping centres owned; (iii) 37.3 million euros positive impact on valuation resulting from the 3 openings and 1 expansion in 2008, and (iv) 3.0 million euros increase in the value of the Brazilian Shopping Centres, impacted by the 8bp yield decrease compared to 2007;
Investment income totalled 12 million euros in 2008 compared to 8 million euros in 2007(R), mainly relating to gains on the launch of the Sierra Portugal Fund on 27 March 2008 and the corresponding placement of 58% of the fund with international institutional investors, namely a Finnish pension fund, a Finnish mutual pension insurance company, two real estate funds managed by Schroeder Investment Management and one client of Aberdeen Property Investors.
The above mentioned trend of value created on investment properties at the Shopping Centres business was the main factor responsible for the reduction of the group share of consolidated net income to 80 million euros in 2008.
| Million euros | |||
|---|---|---|---|
| CONSOLIDATED BALANCE SHEET | 2007(R) | 2008 | y.o.y |
| Total Net Assets | 6,862 | 7,306 | 6.5% |
| Non current assets | 5,449 | 5,871 | 7.7% |
| Tangible and intangible assets | 2,566 | 2,948 | 14.9% |
| Goodwill | 676 | 697 | 3.2% |
| Investment properties in operation (1) | 1,659 | 1,683 | 1.4% |
| Investment properties under development (2) | 192 | 159 | -17.0% |
| Other investment | 121 | 156 | 28.8% |
| Deferred tax assets | 148 | 207 | 39.5% |
| Others | 87 | 21 | -75.6% |
| Current assets | 1,413 | 1,435 | 1.5% |
| Stocks | 469 | 560 | 19.6% |
| Trade debtors | 229 | 215 | -6.2% |
| Liquidity (3) | 344 | 248 | -28.0% |
| Others | 371 | 411 | 11.0% |
| Total Equity | 1,568 | 1,563 | -0.4% |
| Group ahare | 1,121 | 1,151 | 2.7% |
| Minority interests | 448 | 412 | -8.1% |
| Total liabilities | 5,294 | 5,744 | 8.5% |
| Non current liabilities | 3,475 | 3,560 | 2.4% |
| Bank loans | 965 | 1,281 | 32.7% |
| Other loans (4) | 1,769 | 1,735 | -1.9% |
| Deferred tax liabilities | 319 | 331 | 3.7% |
| Provisions | 109 | 57 | -47.8% |
| Others | 312 | 155 | -50.2% |
| Current liabilities | 1,818 | 2,184 | 20.1% |
| Bank loans | 127 | 259 | 103.8% |
| Other loans (4) | 9 | 111 | - |
| Trade creditors | 990 | 1,050 | 6.1% |
| Others | 693 | 763 | 10.2% |
(1) Value of shopping centres in operation owned by Sonae Sierra; (2) Properties under development owned by Sonae Sierra; (3) Liquidity includes cash & equivalents and current investments; (4) Other loans include bonds, leasing, derivatives and shareholder loans; (R) 2007 figures restated for the fair value allocation of the Carrefour acquisition by end 2007, to exclude SonaeCapital contribution in 2007 and to consolidate the Sierra Portugal Fund by the equity method in 2H08.
Sonae's levels of investment essentially continued, although the increase in hurdle rates has resulted in a decrease of absolute values in 2H08 compared to the same period of last year. CAPEX amounted to 901.8 million euros in 2008, equal to 16.8% of turnover, with key strategic investment objectives maintained, namely the increase in the pace of international development, the strengthening of Retail's leadership position, the expansion of the shopping centre portfolio and the improvement in quality, reach and bandwidth of the telecommunications network.
| Million euros | ||||
|---|---|---|---|---|
| CAPEX | 2007(R) | 2008 | y.o.y | |
| Total CAPEX (1) | 1,454 | 902 | -38.0% | |
| Retail | 800 | 388 | -51.6% | |
| Shopping Centres (2) | 417 | 185 | -55.7% | |
| Telecommunications | 236 | 299 | 26.9% | |
| Holding & others | 1 | 30 | - | |
| CAPEX as a % of turnover | 32.9% | 16.8% | -16.1pp | |
| EBITDA minus CAPEX | -917 | -285 | 68.9% | |
| (1) Capex includes gross investments in tangible, intangible, investment properties and investments in acquisitions; (2) shopping centres proportionally consolidated; (R) |
Restated to exclude Sonae Capital contribution in 2007 and to consolidate the Portuguese shopping centres comprising the Sierra Portugal Fund by the equity method in 2H08.
Retail CAPEX, responsible for 43.0% of consolidated investment as at end 2008, was mainly focused on the Company's strong expansion plan, with the company ending the year with 793 operating units with a total of 809 thousand m2 of sales area (+14% compared to the end of the previous year). In 2008, the company: (i) opened 77 thousand m2 of sales area in Portugal; (ii)
entered the Spanish market with the opening of 6 SportZone stores and the acquisition of 9 consumer electronics and household appliances units (to which a new store was later added), totalling 34 thousand m2 of sales area. Additionally, the company dedicated part of its investment effort to the store remodelling programme (in order to guarantee that the store portfolio remains a benchmark in the sector), and the development of the logistic infrastructure. The decrease in investment compared to 2007(R) is explained by the acquisition, at the end of last year, of Carrefour Portugal Hypermarkets, an investment of 664 million euros.
Telecommunications CAPEX accounted for 33.2% of consolidated investment as at 2008, and was mainly made up of investments in the Mobile division, totalling 244.7 million euros (+117.6 million euros increase in 2008 over 2007), of which 91 million euros related to the recognition of the net present value of the Company's contribution to the "e-Initiatives" programme, a government initiative which offers laptops and discounts for broadband access to school teachers and students. The remaining Mobile CAPEX reflects the ambitious investment plan aimed at increasing the coverage and capacity of the mobile access network: by end 2008, the 3G network covered circa 90% of the Portuguese population and over 80% with HSDPA technology, offering bandwidths of up to 7.2 Mbps. Total CAPEX also included the initial phase of the announced fibre optic cable deployment plan.
The Shopping Centres business represented 20.5% of consolidated CAPEX, entirely due to investments in development activities in Romania, Brazil, Germany, Italy, Greece and the Iberian Peninsula. The decrease in investment compared to 2007(R) is explained by: (i) the acquisitions concluded during the previous year, namely Munster Arkaden, in Germany, River Plaza Mall, in Romania, Albufeira and Portimão in Portugal; (ii) the increase, during 2007, of shareholding positions in Brazilian and Portuguese shopping centres; (iii) the acceleration, in 2007, of the development of projects opened in 2008; and (iv) some slowing down of development projects in 2008.
CAPEX at the Holding company amounted to 30 million euros compared to 1 million euros in 2007(R), mainly relating to the acquisition of approximately 13.3 million Sonaecom shares during the period.
The Group's debt has evolved in line with expectations in all businesses and in the Holding company, maintaining levels considered clearly adequate for each activity, with relatively long average maturities and no major debt repayments in the short term.
| Million euros | |||
|---|---|---|---|
| CAPITAL STRUCTURE | 2007(R) | 2008 | y.o.y |
| Gross debt (1) | 2,871 | 3,387 | 18.0% |
| Net debt (2) | 2,526 | 3,139 | 24.2% |
| Retail | 1,072 | 1,218 | 13.6% |
| Shopping centres (3) | 745 | 876 | 17.5% |
| Telecommunications (4) | 307 | 397 | 29.1% |
| Holding & others | 402 | 648 | 61.4% |
| Retail net debt/EBITDA (last 12 months) | 3.6 x | 3.5 x | -0.2x |
| Shopping centres Loan to Value (5) | 41.0% | 46.7% | 5.7pp |
| Telecoms net debt/EBITDA (last 12 months) | 1.9 x | 2.5 x | 0.6x |
| Holding&Others Loan to Gross Asset Value (6) | 11.8% | 23.2% | 11.4pp |
(1) Gross debt = non current borrowings + current borrowings; (2) Net debt = gross debt - liquidity; (3) Shopping Centres are proportionally consolidated; (4) excluded securitization transaction completed at end 2008; (5) Net debt / Investment properties + properties under development ); (6) Holding Net debt/Holding Investment Portfolio Gross Asset Value; gross asset value based on Market multiples, real estate NAV and market capitalization for listed companies; unaudited; (R) Restated to exclude Sonae Capital contribution in 2007 and to consolidate the Sierra Portugal Fund by the equity method in 2H08.
Compared to the end of 2007,(R), net debt increased 612.3 million euros, reflecting: (i) the retail investment plan of organic growth and store refurbishment, responsible for a 145.7 million euros increase in the contribution to consolidated net debt from the Retail business in 2008; the Company's Retail business Net Debt to EBITDA (last 12 months) reached 3.5x, decreasing from 3.6x at end of 2007(R) and continuously improving from the 4.4x leverage ratio at end 1H08; (ii) the acquisition of 13.3 million Sonaecom shares during 2008, and the 209.7 million euros impact from the payments under the cash settled equity swap covering approximately 6.6% of Sonae's share capital, the main factor responsible for a 246 million euros higher contribution to consolidated net debt from the Holding & Others; loan to value at the Holding company reached 23.2%; (iii) the growth led investment in the Telecommunications business, including the expansion of the network, responsible for a 90 million euros increase in its contribution to consolidated Net Debt; nonetheless, the Telecommunications' Net Debt to EBITDA (last 12 months) remained at an adequate level of 2.5x; and (iv) the successful placement of 58% of the Sierra Portugal Fund and consequent proceeds from the operation, which offset the Shopping Centre business' financial needs for the on-going development pipeline.
Holding & Others net debt totalled 648.2 million euros, 246.5 million euros above the level at end of 2007(R), and was made up mainly of: (i) 145.3 million euros used under the 340 million euros of committed short term credit facilities; of which 295 million euros can be cancelled with a prior notice of 1 year and 45 million euros with a prior notice of 6 months; and (ii) 500 million euros of long-term bonds, of which 250 million euros are due in May 2011 and the remainder in 2013 and 2014.
Overall, refinancing risk continued at a low level at the end of 2008, the weighted average maturity of Sonae Group debt standing at approximately 5.7 years (considering 100% of Sonae Sierra's debt), with the Retail business having more than 61% of its debt repayable after 2012, the Shopping centre business with more than 79% of its debt repayable after 2012 and the Telecommunications business with no amortizations of bank debt scheduled before 2010. Liquidity risk was also maintained at a low level, with the sum of cash and unused credit facilities standing at 1,112 million euros. Worth mentioning is the fact that the Group's debt has no financial covenants, with the exception of Shopping Centres non-recourse project financing.
8.5. Sonae Holding financial results
The activity of Sonae as a stand alone company is focused on the management of its holdings in affiliated companies.
Total operating income of Sonae as a stand alone company totalled 2.3 million euros, a similar value to that of 2007, and EBITDA amounted to negative 8.2 million euros, compared to 8.4 million euros in 2007. Net profit for the year 2008 amounted to 30.5 million euros, which was favourably impacted the dividends received from its affiliated companies Sonae Distribuição and Sonae Sierra.
It seems now inevitable that, as a result of the financial crisis, the World will experience a downturn in 2009. The IMF forecasts 0.5% growth in the World Economy for 2009. Advanced Economies are expected to brake world output, decreasing by 2.0%. Emerging and Developing Economies are expected to slow sharply from 6.3% growth in 2008 to 3.3% growth in 2009, with China and India expected to grow by 6.7% and 5.1% respectively in 2009. Emerging and Developing Economies will be hurt by falling export demand, lower commodity prices and much tighter external financing constraints.
According to Bloomberg, analysts forecast a Brent crude oil price of around 68 USD per barrel by the end of 2009.
In January 2009, the IMF forecasted a 1.6% fall in GDP in the US for the full year. The subprime crisis, the resulting turmoil in both credit and money markets and the necessary deleveraging of financial institutions and companies, recent bankruptcies and rising unemployment are expected to negatively impact economic growth in 2009. Credit tightening, the severe wealth effects arising from the housing market downturn and labour market deterioration will negatively impact consumption. It is expected that the positive contribution from net exports to economic growth will at least partially offset the forecasted weakness in domestic demand. Headline inflation is forecast to fall temporarily below zero in 2009.
The impact of the financial crisis on the EU economy in real terms is expected to be tougher than in the US. The EU will be hurt by the fall in global trade, confidence deterioration and the required de-leveraging process. Soft data indicates persistent weakness of the economy: consumer confidence fell to an all-time low in December 2008; the annual growth rate of loans to households is decelerating; and firms are cutting back on their recruitment plans. The European Commission expects a 2.8 p.p. decline in the 1.0% growth of 2008 to -1.8% in 2009 for the EU. For the EA, the forecast is a slowdown from 0.9% growth in 2008 to -1.9% in 2009.
In relation to domestic demand, both investment and consumption are expected to fall.
Reduced availability of credit arising from the need for de-leveraging in the financial sector and the lowered expectations of investors are expected to hamper investment projects severely. Investment growth is expected to experience a slowdown of 6.5 p.p. to -5.9% in 2009 in the EU and of 6.1 p.p. to -5.5% in the EA, with residential and corporate investment forecasted to decline strongly, while public investment will increase as part of governments' expansionary plans.
Private consumption growth is expected to fall to -0.4% in the EU and to -0.1% in the EA, as a result of credit tightening, increasing unemployment, and deteriorating levels of wealth and confidence.
Net exports in the Euro Area are expected to have an approximately neutral contribution to GDP growth as a result of deterioration in external demand.
As the world began to face the prospect of economic downturn, inflationary pressures eased with food and energy prices decreasing. Inflation is expected to fall to 1.2% in the EU and to 1.0% in the EA in 2009, well below the ECB 2% target for the EA. This background of low inflation has created room for expansionary monetary policy to prevail in 2009.
GDP growth is expected to be negative by 2.0% in Spain, 2.3% in Germany, 2.0% in Italy and to remain positive by 0.2% in Greece, while Central and Eastern Europe are also expected to see economic growth of 0.4%.
In 2009, the Brazilian economy is expected to grow by 1.8% according to the IMF. Domestic demand has been the main driver of growth and the labour market is expected to continue to post robust job creation. The trade surplus is shrinking due to the fall in world trade and an increase in imports. As a result of the worsening of the financial crisis last autumn, capital outflows from Brazil have been depreciating the currency. Monetary policy will remain tight as inflationary pressures arising from exchange rate depreciation continue throughout 2009. The bank reference rate is now at 12.75% and inflation is forecasted to remain below the central bank's target (4.5% +/- 2 p.p.). In March 2009, the Brazilian Central Bank cut the reference rate further by 150 bp to 11.25%.
According to the European Commission, Portuguese GDP is likely to contract by 1.6% in 2009. Domestic demand is forecasted to make a negative contribution to 2009 growth (-1.3 p.p. of GDP growth) since the positive growth of public expenditure will not be enough to offset decreases in private consumption and investment. The Portuguese Central Bank forecasted in its early January 2009 Winter Economic Bulletin -0.8% GDP growth, but the governor of the bank has since said publicly that he now expects the Portuguese economy to perform worse than stated in that report.
Investment is expected to fall by 5.5% in 2009, with the business sector contributing heavily to this performance with an 11% decrease.
Private consumption is expected to decrease by 0.2%. This can be explained mainly by the tighter credit conditions, deteriorating consumer confidence and the higher unemployment rate (expected to increase to 8.8% during 2009).
The government is expected to adopt an expansionary public expenditure policy, leading to an expected increase of 0.3%, accelerating from an increase of 0.1% in 2008. This increase is explained both by the automatic increases that tend to take place in a year of economic
recession and by the fact that 2009 is an election year (European, local and central government elections). The overall public deficit is expected to be in excess of 3% of GDP in 2009.
External demand is also forecasted to contribute negatively to growth (-0.1 p.p. of GDP growth). Exports are projected to slow from 0.3% growth in 2008 to a fall of 3.8% in 2009, as a result of the expected slow down in world trade and of the severe recession affecting Spain, Portugal's major export market. Imports are also expected to decrease, from 2.3% growth in 2008 to a 2.8% fall in 2009, in line with the decline in internal demand.
In 2009, inflation is expected to decrease to around 1.0%. Falls in both food and energy prices and the expected economic recession will check any further inflationary pressures.
Sonae ended 2008 with a comfortable balance sheet, strong competitive positions in its main markets and an outstanding, highly skilled management team in each business, with expertise and recognised reputation in their sectors. This, together with a corporate culture of ambition, excellence, flexibility and innovation, allows the Group's management team to be confident of achieving the commitments of sustainable growth and superior value creation. In addition, the role and competencies of the corporate centre will continue to be fine tuned and shaped so that it can best help the Group towards success in achieving future profitable growth.
The Retail business will maintain its focus on pushing for growth and strengthening its value proposal, by: (i) continuing to expand it sales area until reaching 1 million m2 over the next 2 years through implementing its growth plan in Portugal and maintaining progress with its international expansion programme (with the opening of 80 thousand m2 of sales area in Spain); (ii) developing the own brand program; (iii) strengthening sourcing skills with the aim of increasing competitiveness and the variety of the commercial offer of each format; (iv) implementing innovative commercial strategies based upon the information and know how obtained from the customer loyalty programme; (v) implementing productivity enhancement programmes at the store level; (vi) improving logistics, benefiting internal efficiency and productivity; and (vii) optimising operational working capital management. In relation to debt levels, the company does not anticipate increasing its financial exposure in 2009.
The Shopping Centre business will focus on optimizing the operational performance of its shopping centre portfolio, while adapting the pace of its development activity to the recovery of the financial system. Of the disclosed 14 projects under development, the projects LeiriaShopping, in Portugal, Loop 5, in Germany, and the 4 disclosed projects in Brazil will continue their development and open on schedule. Additionally, the pace of the launch of new development projects will probably slow down, given lower funding availability (only projects with financing already finalised will be started), an increase in the minimum required return on equity rate, and also expectations of further yield increases in Europe, although of a lower magnitude than in 2008 but mitigated by yield compression in Brazil. Rental income is expected to increase in 2009, benefiting from the full year contribution to turnover of the 3 shopping centres opened in 2008.
The Telecommunication business will continue to push for customer growth in its mobile business, based on the foundations built during 2008 in terms of brand investments, organisational and commercial initiatives, and improvements in customer service. The wireline segment will continue to be very competitive and we will look to protect margins in residential direct access ULL services, push for necessary regulatory improvements and continue to focus on the second phase of our fibre deployment plan.
In 2008, the net profit of Sonae Holding was 30,472,155.03 euros. The Board of Directors will propose to the Shareholders' Annual General Meeting that this profit should be appropriated as follows:
Legal reserves 1,523,607.75 euros Dividend 28,948,547.28 euros
For 2008, a gross dividend of 0.03 euros per share has been proposed and the Board of Directors will recommend that free reserves of 31,051,452.72 euros are used for this purpose totalling 60,000,000 euros.
| CAPEX | Investments in tangible, intangible, investment properties and investments in acquisitions |
|---|---|
| Indirect income | Indirect Income includes the Shopping Centres segment contributions net of taxes to consolidated income statement, arising from: (i) investment properties valuations; (ii) capital gains (losses) with the sale of financial investments, joint ventures or associates; (iii) impairment losses (including goodwill) and; (iv) provision for "Development Funds at Risk |
| Direct income | Direct income excludes the contributions to indirect income |
| EBITDA | EBITDA = Turnover + other revenues - impairment reversion - badwill- operating costs |
| EBITDA margin | EBITDA / turnover |
| Interest cover | EBITDA / interest expenses |
| Investment income | Capital gains (losses) on financial investments plus dividends received |
| Investment properties | Shopping centres owned by Sonae Sierra |
| Like for Like sales | Sales made by stores that operated in both periods under the same conditions. Excludes stores opened, closed or which suffered major upgrade works in one of the periods |
| Net asset value (NAV) | Open market value attributable to Sonae Sierra less net debt less minorities plus deferred tax assets |
| Net debt | Bonds + bank loans + other loans + finance leases – cash, bank deposits and current investments |
| Non food retail | Specialized retail which is not related to food based retail |
| Net gearing | Debt / (Debt + total equity) |
| Net income group share | Net income attributable to Sonae shareholders |
| Open market value | Fair value of real estate in operation and under development (100%), provided by an independent entity. |
| Shareholders' funds | Share capital + reserves + net income group share. |
| Value created on investment properties | Increase/decrease in the fair value of shopping centres. |
The Board of Directors would like to thank the Statutory Audit Board and the Statutory External Auditor for the valuable advice and help given during 2008. The Board would also like to express its gratitude to suppliers, banks and other business associates of the Group for their continuing involvement and the confidence that they have shown in our organization. Finally, the Board expresses its gratitude to the Non-Executive Directors for their work and valuable advice and to all employees for their effort and dedication throughout the year.
Maia, 17 March 2009
Belmiro de Azevedo
Álvaro Cuervo Garcia
Michel Marie Bon
José Neves Adelino
Duarte Paulo Teixeira de Azevedo
Álvaro Carmona e Costa Portela
Ângelo Gabriel Ribeirinho dos Santos Paupério
Nuno Manuel Moniz Trigoso Jordão
Sonae SGPS, SA, (hereinafter referred to as "Sonae Holding") has been consistently committed to and has actively participated in the public discussions launched by the CMVM (Portuguese Securities Market Commission) regarding recommendations on corporate governance practices, thereby sharing our view and experience.
Sonae Holding has decided to implement CMVM Regulations and Recommendations on corporate governance as explained below.
This Corporate Governance Report provides a description of the Corporate Governance structure and practices followed by Sonae Holding, under the terms of article 245-A of Portuguese Securities Code, and was prepared to comply with CMVM Regulation nr. 1/2007, of 21 November, as amended by CMVM Regulation nr. 5/2008, of 15 October, and has the structure required by the appendix to that CMVM Regulation.
It also includes the information required by articles 447 and 448 of the Portuguese Commercial Company Law and by CMVM Regulation nr. 5/2008.
This section should be read together with and as a complement to the Management Report and Annual Accounts.
This report was prepared to comply with CMVM Regulation nr. 1/2007, of 21 November, as amended by CMVM Regulation nr. 5/2008, of 15 October, and with the 2007 CMVM Recommendations, issued in September 2007, all publicly available at www.cmvm.pt.
0.2. CMVM Recommendations on Corporate Governance that are Fully Adopted
CMVM recommendations I.3.1, I.4.1 e II.5.2 are not fully adopted by Sonae Holding, for the reasons explained in 0.3 below.
I.1.1 The Chairman of the Board of the Shareholders' General Meeting shall be given adequate human and logistical resources, taking the financial position of the company into consideration.
The Chairman of the Board of the Shareholders' General Meeting is given the support of the legal and administrative Company's teams in the preparation of each General Meeting. Specific logistical support is given for the public disclosure of the convening notice for the Shareholders' General Meeting, as well as for the reception of the documents for the General Meeting sent to Sonae Holding by shareholders and addressed to the Chairman. Sonae Holding also facilitates the logistics of the contact between the Chairman and the shareholders, for the collection of all preparatory documents necessary for participation in General Meetings, thereby actively promoting attendance by shareholders.
I.1.2 The remuneration of the Chairman of the Board of the Shareholders' General Meeting shall be disclosed in the annual corporate governance report.
Sonae Holding discloses the remuneration of both the Chairman of the Board of the Shareholders' General Meeting, as well of its Secretary, in section 1.3 below.
I.2.1 The requirement to deposit or block shares before the General Meeting, contained in the Articles of Association, shall not exceed 5 working days.
RECOMMENDATION FULLY ADOPTED
The Articles of Association only require that proof of shareholding should be received at Sonae Holding's head office 5 working days before the Shareholders' General Meeting. Hence, the blocking period does not exceed 5 working days. The Chairman of the Board of the Shareholders' General Meeting accepts that proof of shareholding may be sent by email or by fax, as long as the original documents are received at Sonae Holding's head office at least three days before the date of the General Meeting.
I.2.2 Should the General Meeting be suspended, the Company shall not require share blocking during the full period until the meeting is resumed, but shall apply the same period as for the first session.
The Articles of Association establish, in paragraph 1 of article 21, that share blocking will only be required for the five working days before the date of the Shareholders' General Meeting. Thus, and according to the interpretation of the Chairman of the Board of the Shareholders' General Meeting, in the event of suspension of a General Meeting, the maximum period of blocking required to attend the General Meeting in the subsequent session will never be more than five working days.
I.3.2 The statutory advance deadline for receiving voting ballots by post should not exceed 3 working days.
It is expressly established in Sonae Holding's Articles of Association that the deadline for reception of postal votes is three days.
I.3.3 The Company's Articles of Association shall respect the one share-one vote principle.
Since 2007 Shareholders' General Meeting, held on 3 May, the Company's Articles of Association have included this principle in paragraph 1 of article 22.
I.5.1 The minutes of Shareholders' General Meetings shall be made available to shareholders on Sonae Holding's website within a 5 day period, irrespective of the fact that such information may not be legally classified as material information. The lists of attendees, agendas items and resolutions adopted shall be kept in a historic file on Sonae Holding's website, covering meetings held for at least the last 3 years.
RECOMMENDATION FULLY ADOPTED
Sonae Holding's website – www.sonae.pt – has information on the list of attendees, agendas items and resolutions adopted in the last 3 years. The resolutions adopted at the 2008 Shareholders' General Meeting were made available at Sonae Holding's website within a 5 day period, and the respective minutes are also available.
I.6.1 Measures aimed at preventing the success of takeover bids, shall respect the interests of both the Company and its shareholders.
Sonae Holding has not implemented any measures to prevent the success of takeover bids, nor is it aware of the existence of any such measures between the shareholders.
I.6.2 In accordance with the principle established in the previous sub-paragraph, any Company that has Articles of Association with clauses that restrict or limit the number of votes that may be held or exercised by a single shareholder, either individually or acting in concert with other shareholders, shall also require that, at least once every five years, the subsistence of such clauses must be ratified at a Shareholders' General Meeting, at which the quorum shall not exceed the legal minimum and all votes cast shall count, without applying any restriction.
Sonae Holding's Articles of Association do not contain any clauses which restrict or limit the number of votes that may be held or exercised by a single shareholder.
I.6.3 Defensive measures should not be adopted that automatically lead to a serious erosion in the value of Sonae Holding's assets, when there has been a change in control or a change in Sonae Holding's management, as this
prevents the free transmission of shares and the ability of shareholders to evaluate those responsible for managing the Company.
RECOMMENDATION FULLY ADOPTED No such measures have been adopted.
II.1.1.1 The Board of Directors shall, in its corporate governance report, assess the governance model adopted by the Company, by identifying any restrictions that are holding back performance and proposing actions to be taken that are judged to be appropriate to resolve them.
The Board of Directors has assessed the impact of the corporate governance model adopted and has not encountered any restrictions that might affect the overall performance, as described in paragraph 2.1 below.
II.1.1.2 Companies shall set up internal control systems in order to efficiently detect risks relating to Sonae Holding's activity, in order to protect its assets and keep its corporate governance transparent.
Sonae Holding has established internal risk control systems has described below in paragraph 2.4.
II.1.1.3 The management and audit boards shall establish internal regulations, which shall be disclosed on Sonae Holding's website.
The management and audit boards have established their regulations which are currently available on our website – www.sonae.pt.
II.1.2.1 The Board of Directors shall include a sufficient number of non-executive members to ensure that there is the capacity to effectively supervise, audit and assess the activity of the executive members.
The Board of Directors has a total number of eight members, of which four are Non-Executive members (please refer to paragraph 2.9 for more detail on the composition of the Board), thereby representing 50% of the total number of Board members.
II.1.2.2 Non-executive members shall include an adequate number of independent members, taking into account the size of the Company and its shareholder structure, but this shall never be less than one quarter of the total number of Board members.
The Board of Directors has three independent non-executive members, of a total of eight Board members (please refer to paragraph 2.9 for more detail on the composition of the Board), thereby representing 37.5% of the total number of Board members.
II.1.3.1 Depending on the governance model adopted, the Chairman of the Statutory Audit Board, or of the Board Audit Committee or of the Financial Matters Committee shall be independent and possess the necessary skills to perform their duties.
The Chairman of the Statutory Audit Board, as well as the other members of the this body, are independent under the terms of paragraph 5 of article 414.º of the Portuguese Commercial Company Law (please refer below to paragraph 2.12). Their respective CVs are disclosed in paragraph 2.13 below.
II.1.4.1 The Company shall adopt a policy of reporting irregularities that allegedly occurred, which includes the following information: i) the means through which such irregularities may be reported internally, including the persons that are
entitled to receive the reports; ii) how the report is to be handled, including confidential treatment, should this be requested by the person who has filled the report.
Sonae Holding has a long established policy covering the reporting of irregularities that may have occurred in order to be able to uphold its principles and values which are available on Sonae Holding's website – www.sonae.pt. For this purpose, Sonae Holding has centralized the reception of any communication on Sonae's Ombudsman who has the role and functions described in paragraph 2.20 below.
II.1.4.2 General guidelines of this policy should be disclosed in the Corporate Governance Report.
A description of Sonae Holding's policy on reporting irregularities can be found in paragraph 2.20 below.
II.1.5.1 The remuneration of the members of the Board of Directors shall be structured to be aligned with the interests of the shareholders. In this sense: i) The remuneration of Directors carrying out executive duties should include a variable component based on performance linked to a performance assessment that shall be carried out periodically by the governance body or committee appointed for this purpose; ii) the variable component shall be consistent with the maximization of the long term performance of the Company, and shall be dependent on sustainability of the variables adopted to measure performance; iii) non-executive members of the Board of Directors shall only receive fixed remuneration, unless the legal requirements dictate otherwise.
Specific details of the compensation policy that apply to members of the Board of Directors can be found in paragraph 2.16 below, which is based on the proposal of the Shareholders' Remuneration Committee approved at the Shareholders' General Meetings, held on 3 May 2007, and confirmed at the General Meeting held on 21 April 2008, being applicable for duration of the current mandate from 2007 to 2010. The remuneration of Executive Members includes an annual and a medium term performance bonus, both of which are based on the assessment of real performance. This performance is assessed by the Shareholders' Remuneration Committee, liaising with the Board Nomination and Remuneration Committee. Non-Executive Members of the Board receive a fixed remuneration only.
II.1.5.2 The Shareholders' Remuneration Committee and the Board of Directors shall present to the Shareholders' Annual General Meeting a statement of the remuneration policy applied to management and audit boards, as well as to other strategic decision makers ("dirigentes") as defined in Article 248 B, sub-paragraph 3 of the Portuguese Securities Code. The information to shareholders shall include the criteria and main indicators proposed to be used in assessing of performance and determining the variable component, independently of whether this in the form of bonuses paid in shares, share options, annual bonuses or other awards.
The remuneration policy of the statutory governing bodies was approved at the Shareholders' General Meeting, held on 3 May 2007, and was updated at the Shareholders' General Meeting on 21 April 2008, to include the remuneration policy for people discharging managerial responsibilities ("dirigentes" - under the terms of article 248 B, paragraph 3, of the Portuguese Securities Code). In both situations, the policy was approved by proposal of the Shareholders' Remuneration Committee and is applicable for the mandate starting in 2007 and ending in 2010. The proposal includes the criteria and the indicators used to determine the variable component of the remuneration received by the Executive Members of the Board.
II.1.5.3 At least one representative of the Shareholders' Remuneration Committee shall be present at the Shareholders' Annual General Meeting.
Belmiro Mendes de Azevedo, who is a member of the Shareholders' Remuneration Committee, has been present at the Shareholders' Annual General Meeting.
II.1.5.4 A proposal shall be submitted to the Shareholders' General Meeting to approve plans to grant shares and/or share options or award compensation based on variations in share prices, to members of the management and audit boards, as well as to other senior management ("dirigentes") as defined in Article 248 B, sub-paragraph 3 of the Portuguese Securities Code. The proposal shall include all information necessary for an comprehensive assessment of the plan. The proposal shall be presented together with regulation that governs the plan or if this has not yet been prepared, the general conditions that will be applied. In the same way, the main characteristics of any retirement benefit plan that benefits the management and audit boards, as well as other senior management ("dirigentes") as defined in
Article 248 B, sub-paragraph 3 of the Portuguese Securities Code, shall also be approved at a Shareholders' General Meeting.
A proposal to approve a Deferred Performance Bonus Plan ("Plan") was submitted and approved at the Shareholders' Annual General Meeting held on 21 April 2008 (please refer to proposal nr. 8 for that General Meeting available on Sonae Holding's website at www.sonae.pt). The specific terms of this Plan are described in paragraph 3.10 below, and were also presented at the same General Meeting under proposal nr. 9 (please refer to Sonae Holding's website – www.sonae.pt). There is no retirement benefit plan.
II.1.5.5 The remuneration of the members of the management and audit boards shall be individually disclosed on an annual basis. Fixed and variable components must be disclosed separately, when applicable, as well as any other remuneration received from other companies within the same Group or from companies controlled by shareholders with qualifying shareholdings.
This recommendation is considered to be fully adopted, as the information set out below in paragraph 2.18, is in line with CMVM's assessment of compliance in its 2008 annual report on Portuguese Listed Companies - Corporate Governance.
II.2.1 Within the limits established by Portuguese Company Law for each management and audit governance structure, and unless the Company is restricted by its size, the Board of Directors shall delegate the day-to-day running of the Company and the powers and terms of the delegation should be set out in the Corporate Governance Report.
The delegation of powers by the Board of Director to the Executive Committee is described in paragraph 2.3.1 below.
II.2.2 The Board of Directors shall ensure that the Company acts in accordance with its objectives, and should not delegate its own responsibilities, including: i) definition of Sonae Holding's strategy and general policies; ii) definition of the corporate structure of the Group; iii) decisions that are considered to be strategic due to the amounts, risks and special circumstances involved.
II.2.3 Should the Chairman of the Board of Directors have an executive role, the Board of Directors shall set up efficient mechanisms to co-ordinate the work of the non-executive members, to ensure that they may take decisions in an independent and informed manner, and shall also explain these mechanisms to the shareholders in the Corporate
RECOMMENDATION NOT APPLICABLE
Governance Report.
The Chairman of the Board of Directors does not have any executive role (please refer to paragraphs 2.2, 2.3, 2.9 and 2.17, below).
II.2.4 The Annual Management Report shall include a description of the activity carried out by the non-executive Board Members and shall, in particular, report any restrictions that they encountered.
A description is included in section 3 of the Annual Management Report.
II.2.5. The governing body responsible for management (Board of Directors) should promote the rotation of the Board member responsible for financial matters (CFO) at least at the end of every two mandates.
The Board of Directors has not appointed a CFO, as the Chief Executive Officer (CEO) accumulates this role and currently covers the areas of financial responsibility.
II.3.1 When Directors, who carry out executive duties are requested by other Board Members to supply information, they shall provide answers in a timely manner with information that adequately responds to the request made.
The Executive Committee discloses their decisions to the Board of Directors on a regular and timely basis. The Executive Members provide clarifications, by their own initiative, as well in response to requests from the Non-Executive members of the Board, so that the latter have the necessary information to fulfill their roles.
II.3.2 The Chairman of the Executive Committee shall send the notices convening meetings and minutes of the respective meetings to the Chairman of the Board of the Directors and, when applicable, to the Chairman of the Statutory Audit Board or the Audit Committee.
The CEO has made available to the Chairman of the Board of Directors and to the Chairman of the Statutory Audit Board all relevant information from the meetings held.
II.3.3 The Chairman of the Executive Board of Directors shall send the notices convening meetings and minutes of the respective meetings to the Chairman of the General and Supervisory Board and to the Chairman of the Financial Matters Committee.
Sonae Holding has not adopted this governance model.
II.4.1 In addition to fulfilling its supervisory and verification roles, the General and Supervisory Board shall perform a role of advisor, as well as monitor and continually assess the management of the Company by the Executive Board of Directors. Amongst the other matters on which the General and Supervisory Board should opine are the following: i) definition of the strategy and general policies of the Company; ii) the corporate structure of the Group; and iii) decisions that are considered to be strategic due to the amounts, risks and special circumstances involved.
Sonae Holding has not adopted this governance model.
II.4.2 The annual reports on the activity of the General and Supervisory Board, the Financial Matters Committee, the Audit Committee and the Statutory Audit Board shall be disclosed on Sonae Holding's website together with the financial statements.
The Statutory Audit Board's annual report is available on Sonae Holding's website – www.sonae.pt - together with the financial statements.
II.4.3 The annual reports on the activity of the General and Supervisory Board, the Financial Matters Committee, the Audit Committee and the Statutory Audit Board shall include a description of the supervisory and verification work completed and shall, in particular, report any restrictions that they encountered.
Please refer to the Statutory Audit Board's annual report issued for 2008.
II.4.4 The Financial Matters Committee, the Audit Committee or the Statutory Audit Board (depending on the governance model adopted) shall represent the Company, for all purposes, in the relationship with the external auditor. This shall include proposing who will provide this service, their respective remuneration, and ensuring that the Company provides adequate conditions to allow them to deliver their service, as well as acting as the point of contact with the Company and being the first recipient of their reports.
The Statutory Audit Board is the body at Sonae Holding responsible for overseeing the work performed by the Statutory External Auditor, including independence. The Statutory Audit Board interacts with the Statutory External Auditor in the exercise of its functions, as determined by this Board's Rules and Regulations, available on Sonae Holding's website - www.sonae.pt. The Statutory External Auditor was appointed at the Shareholders' Annual General Meeting held on 3 May 2007 by proposal of the Statutory Audit Board.
II.4.5 The Financial Matters Committee, the Audit Committee or the Statutory Audit Board (depending on the governance model adopted), shall assess the external auditor on an annual basis and propose to the Shareholders' General Meeting that the external auditor should be discharged, should justifiable grounds exist.
RECOMMENDATION FULLY ADOPTED
Please refer to the Statutory Audit Board's annual report, which includes the assessment of the work performed by the Statutory External Auditor in the last financial year.
II.5.1 Unless Sonae Holding is restricted by its size, the Board of Directors and the General and Supervisory Board, depending on the governance model adopted, shall set up the necessary Committees in order to: i) ensure that a robust and independent assessment of the performance of the Executive Directors is carried out, as well as of its own overall performance and including the performance of all existing Committees; ii) consider the governance system adopted and assess its efficiency and propose to the respective bodies, measures to be implemented to achieve improvements.
The Board of Directors has established two specialised working committees to ensure the effectiveness of the work performed by the Non-Executive Directors and of the main Board meetings. Those committees currently created are the Board Audit and Finance Committee (BAFC) and the Board Nomination and Remuneration Committee (BNRC). Their respective role and functions are described in section 2.3.2. below.
II.5.3 All Committees shall draw up minutes of the meetings they hold.
The committees meetings have minutes drawn up under the terms of article 8 of the Board of Directors' Rules and Regulations (which is available on Sonae Holding's website – www.sonae.pt).
III.1.2 Companies shall ensure that permanent contact is maintained with the market, upholding the principle of equal treatment for all shareholders and avoiding any asymmetry in the access to information by investors. To achieve this, Sonae Holding shall set up an Investor Relations Office.
Sonae Holding's has an active Investor Relations Office that provides shareholders and financial community at large, with regular, comprehensive and transparent information (please refer to section 3.12 below for more detail).
III.1.3 The following information disclosed on Sonae Holding's Internet website, shall be available in English:
c) Identification of the members of the Statutory Governing Bodies and of the Representative for Relations with the Market;
d) Investor Relations Office — its functions and contact details;
e) Financial Statements;
f) Half-Yearly Calendar of Company Events;
g) Proposals presented to Shareholders' General Meetings;
h) Notices convening Shareholders' General Meetings.
All of the information above mentioned is presently available on Sonae Holding's website www.sonae.pt.
I.3.1 Companies should not impose any statutory restriction on postal voting.
The Articles of Association currently only allow shareholders to vote by post in relation to changes to the Articles of Association and to the election of the Statutory Governing Bodies, subjects that under Portuguese Company Law cannot be excluded from postal voting. An amendment of the articles will be proposed to the 2009 Shareholders' Annual General Meeting in order to adopt this CMVM recommendation.
I.4.1 Companies shall not set a constitutive or deliberative quorum that exceeds the minimum required by Portuguese Company Law.
Sonae Holding believes that a minimum quorum should be required for the Shareholders' General Meeting to guarantee an adequate representation and participation of shareholders in the adoption of resolutions.
II.5.2 Members of the Shareholders' Remuneration Committee or alike, shall be independent from the Members of the Board of Directors.
Belmiro Mendes de Azevedo, the Chairman and Non-Executive Member of Sonae Holding's Board of Directors, is a member of the Shareholders' Remuneration Committee. Nevertheless, he was elected to the Shareholders' Remuneration Committee by Sonae Holding's major shareholder, Efanor Investimentos, SGPS, S.A, and is acting in representation of the interests of this major shareholder and not in his role as Chairman of the Board of Directors. Furthermore, to ensure the independence of the two roles, he does not take part in any discussion or resolution where there is or could exist a conflict of interest, including decisions in relation to his own remuneration as member of the Board of Directors.
0.4. Assessment of Independence of the Member of the Board of Directors
The Board of Directors did not identify any fact or circumstance that could have caused the loss of their independence by any of the Independent Non-Executive members during the period to which this report refers. This was also confirmed in writing by the Independent members at the request of the Board.
The Board of the Shareholders' General Meeting is composed as follows:
| Board of the Shareholders' General Meeting | |
|---|---|
| Manuel Cavaleiro Brandão …………Chairman Maria da Conceição Cabaços ………Secretary |
Sonae Holding's Shareholders' General Meetings are conducted by a Board elected by shareholders for a four-year mandate. The current mandate is from 2007 to 2010.
1.3. Remuneration of the Board of the Shareholders' General Meeting
The remuneration of the members of the Board of the Shareholders' General Meeting is made up of a fixed amount which is based on Sonae Holding's economic and financial dimension and market comparables.
| 2007 (1) Total Fixed Remuneration |
2008 Total Fixed Remuneration |
|---|---|
| 0,005 | 0,008 |
| 0,002 | 0,003 |
| 0,007 | 0,011 |
The Shareholders' General Meetings may only be attended by shareholders with the right to vote based on shares they own or equivalent subscription rights, which, in the five working days prior to the General Meeting, have provided confirmation of ownership to Sonae Holding, as required by the Portuguese Company Law. This proof of title must be issued by a financial
institution where records of title are kept, which must also reach Sonae Holding's Head Office within the same deadline of five working days. The Chairman of the Shareholders' General Meeting has accepted that the confirmation of ownership is delivered by fax or email, as long as the original documents are received at Sonae Holding' head office within the deadline established by him.
1.5. Rules for the blocking of shares upon a suspension of the General Meeting
In case of suspension of the Shareholders' General Meeting the Articles of Association does not enforce the blocking of the shares over the period until the meeting is reconvened, it is sufficient for the shareholders to attend the meeting to block their shares in the five working days prior to the reconvening date.
One share corresponds to one vote.
The Shareholders' General Meetings may only be attended by shareholders who respect the deadline for blocking shares as in 1.4 above.
Shareholders' General Meetings are conducted by the Chairman or, in his absence, by the Chairman of the Statutory Audit Board or, in his absence, by the shareholder present at the General Meeting representing the largest shareholding position. Shareholders' General Meetings are held in two possible circumstances: (i) in ordinary session, at a date set by law for the Shareholders' Annual General Meeting; (ii) in extraordinary session, whenever the Board of Directors or the Statutory Audit Board deem necessary or at the request of shareholders, representing the legally required minimum percentage of Sonae Holding's share capital (currently 5%).
During 2008, a Shareholders' General Meeting was held in an ordinary session on 21 April, with 57,02% of share capital represented. At this meeting, there were 119 shareholders present, all of which were corporate shareholders.
The proposals for discussion and decision at Sonae's Shareholders' General Meetings, as well as other supporting information, are made available to shareholders at Sonae Holding's Head Office, and are posted on Sonae Holding's website - www.sonae.pt - at least 15 calendar days before the respective meeting or at the time the meeting is convened, for proposals in relation to changes in the Articles of Association.
The right to vote by appointing a representative and the way in which this right is exercised are in accordance with the law and the Sonae Holding's Articles of Association, under the terms set down in the respective notices convening Shareholders' General Meetings.
Shareholders who are private individuals can be represented at Shareholders' General Meetings by any representative, by sending a letter to the Chairman of the Board of the Shareholders' General Meeting, stating the name and address of the representative and the date of the meeting. Corporate entities may be represented by a person nominated by them by written letter, whose authenticity will be verified by the Chairman of the Board of the Shareholders' General Meeting.
Sonae Holding provides appropriate information to enable shareholders, wishing to be represented, to give voting instructions by making available the proposals to be submitted at the General Meeting and a template of the representation letter, within the legally established time limits on Sonae Holding's website.
Under the terms of Sonae Holding's Articles of Association, the Shareholders' General Meeting may only adopt resolutions the first time it is convened if there are shareholders present or represented holding more than 50% of Sonae Holding's share capital.
If that quorum is not reached and the meeting is reconvened, resolutions may be adopted by the Shareholders' General Meeting regardless of the number of shareholders present or represented and of the percentage of share capital they hold, as required by the Portuguese Company Law.
The deliberative quorum for resolutions taken by the Shareholders' General Meeting is as established by the Portuguese Company Law.
Shareholders can vote by post, but only in relation to changes to the Articles of Association and to elections of the Statutory Governing Bodies. Postal votes will only be taken into account when received at Sonae Holding's head office by registered post, with acknowledgement of receipt addressed to the Chairman of the Board of the Shareholders' General Meeting. The voting ballots should be signed by the holder of the shares or by his legal representative. In the case of an individual, it should be accompanied by an authenticated copy of identity card. In the case of a corporate entity, the signature should be authenticated certifying that the signatory is duly authorized and mandated for that purpose. It is the responsibility of the Chairman of the Board of the Shareholders' General Meeting, or the person replacing him, to verify compliance with postal voting requirements. Postal votes are not accepted and are treated as null and void, should the postal vote not fulfil such requirements.
Sonae Holding makes available a template of the ballot for postal voting on its website.
Postal voting ballots must be received at least three days before the Shareholders' General Meeting at Sonae Holding's head office by means of registered mail and must be addressed to the Chairman of the Board of the Shareholders' General Meeting.
The right to vote electronically is not yet available.
The Shareholders' General Meeting approves the compensation policy of the members of the statutory governing bodies and of the people discharging managerial responsibilities ("dirigentes" – under the terms of article 248 B, paragraph 3, of the Portuguese Securities Code), including setting out the qualitative components and the criteria for its quantitative elements.
The Shareholders' Remuneration Committee, elected by the Shareholders' General Meeting, establishes individual remuneration, under the compensation policy in force.
The compensation of the Shareholders' Remuneration Committee members is determined directly by Shareholders' General Meeting.
There are no defensive measures in place.
There are no agreements entered into by Sonae Holding, which contain ownership clauses with the purpose of creating defensive measures to Sonae Holding's change of control.
The majority of the share capital of Sonae Holding is attributable to one sole shareholder.
The shareholders' agreement between Sonae and Grosvenor Group Limited (Grosvenor), regarding Sonae Sierra, SGPS, SA, confers on Grosvenor the possibility of terminating the agreement, in the case of a change of control of Sonae Holding, but only in the specific and
exclusive sense of the control of Sonae Holding ceasing to be directly or indirectly attributable to its present major shareholder or any other family members.
This clause has identical terms of application in the case of a change of control in Grosvenor.
1.15. Termination agreements
There are no agreements in place establishing any compensation for the benefit of the Board members' or of people discharging managerial responsibilities ("dirigentes" - under the terms of article 248 B, paragraph 3, of the Portuguese Securities Code) upon termination of their functions.
On 3 May 2007, the Shareholders' General Meeting approved, under the amended terms of the Portuguese Company Law, a new corporate governance structure with a management body (the Board of Directors) and two statutory auditing bodies: the Statutory Audit Board and the Statutory External Auditor.
This new corporate governance structure as not been considered to restrict the normal functioning of the management and auditing bodies. The Statutory Audit Board exercised its supervisory powers, having received all the support required from the Board, through its Board and Audit Finance Committee, to allow it to draw up its annual report on the supervision of Sonae Holding and to issue an opinion on Sonae Holding's annual report, accounts and the proposals presented by management.
The Statutory Audit Board also exercised its powers and duties in relation to the Statutory External Auditor, having proposed their appointment at the abovementioned Shareholders' General Meeting.
Sonae Holding's corporate governance structure clearly sets out the roles, duties and responsibilities of its different Statutory and Non-Statutory Governing Bodies.
Under Sonae Holding's Articles of Association, the Board of Directors may be composed of an odd or even number of members with a minimum of 3 and a maximum of 11, elected at a Shareholders' General Meeting. The Board of Directors shall elect its Chairman.
Board of Directors
| On 3 March 2008, Luíz Felipe Palmeira Lampreia resigned as Non-executive Director of Sonae Holding (with effect from 30 | Belmiro Mendes de Azevedo……………………………. Álvaro Cuervo Garcia……………………… Michel Marie Bon………………………………………… José Neves Adelino……………………………………… Duarte Paulo Teixeira de Azevedo…………………… Álvaro Carmona e Costa Portela……………………… Ângelo Gabriel Ribeirinho dos Santos Paupério…… Nuno Manuel Moniz Trigoso Jordão…………… Note: |
Chairman – Non-Executive Independent Non-Executive Independent Non-Executive Independent Non-Executive Executive – CEO Executive Executive Executive |
|---|---|---|
| April 2008). |
The qualifications, experience and responsibilities of the members of the Board of Directors are disclosed in section 2.10 of the Corporate Governance Report, and shares held by them, either directly or through connected persons in Sonae Group (hereinafter also referred to as Sonae) companies are disclosed in an Appendix to this Report, as required by article 447 of the Portuguese Company Law.
Under Sonae Holding's Articles of Association, the Statutory Audit Board may consist of an odd or even number of members, with a minimum of 3 and a maximum of 5 elected by the Shareholders' General Meeting. The Statutory Audit Board additionally includes 1 substitute member, should the Board be composed of 3 members, or 2 substitute members, should the Board be composed of more than 3 members. All members are independent. Decisions are taken by simple majority and the Chairman has a casting vote.
The Statutory Audit Board members were elected at Sonae Holding's 2007 Annual Shareholders' General Meeting and its current mandate covers the period 2007 to 2010.
| Daniel Bessa Fernandes Coelho…….Chairman Arlindo Dias Duarte Silva |
Statutory Audit Board | |
|---|---|---|
| Óscar José Alçada da Quinta…………Substitute | Jorge Manuel Felizes Morgado |
Composition
The Statutory External Auditor is Deloitte & Associados, SROC, S. A.
The Statutory External Auditor was elected by the Shareholders' General Meeting on the basis of a proposal from the Statutory Audit Board.
The Shareholders' Remuneration Committee is composed of 3 members appointed by the Shareholders' General Meeting, under a four year mandate, currently from 2007 to 2010.
Shareholders' Remuneration Committee
Belmiro Mendes de Azevedo Artur Eduardo Brochado dos Santos Silva Bruno Walter Lehmann
The Company Secretary is Luzia Gomes Ferreira, who may be substituted in her absence by Anabela Nogueira de Matos.
The Executive Committee is selected from the members of the Board of Directors. Sonae's CEO and the CEO's of the Group's main business units are members of the Executive Committee. The current membership is as follows:
| Executive Committee |
|---|
Duarte Paulo Teixeira de Azevedo……..... Sonae's CEO Álvaro Carmona e Costa Portela ………... CEO Sonae Sierra Ângelo Gabriel dos Santos Paupério …… CEO Sonaecom Nuno Manuel Moniz Trigoso Jordão …..... CEO Sonae Distribuição
BAFC consists of three members who are appointed by and from among the members of the Board. All of them are independent Non-Executive Directors.
Board Audit and Finance Committee
Michel Marie Bon ……………………Chairman - Independent Non-Executive Director Álvaro Cuervo Garcia ……………….Independent Non-Executive Director José Manuel Neves Adelino………..Independent Non-Executive Director
Note:
On 3 March 2008, Luíz Felipe Palmeira Lampreia resigned as a member of this committee.
BNRC includes the Chairman of the Board of Directors, and one Independent Non-Executive Director, also appointed from among the members of the Board, as follows:
Board Nomination and Remuneration Committee
Belmiro Mendes de Azevedo……Chairman of the Board of Directors-Non-Executive Michel Marie Bon ………………………... Independent Non-Executive
Note:
On 3 March 2008, Luíz Felipe Palmeira Lampreia resigned as a member of this committee.
The Board and Corporate Governance Officer is David Graham Shenton Bain.
2.3. Corporate Structure Organisation – Roles and Competencies
Role
The Board of Directors is responsible for ensuring the management of Sonae Holding's business, monitoring risks, managing conflicts of interests and developing the organization's goals and strategy. Sonae Holding's Articles of Association permit the Board to delegate day to day company business, duties and responsibilities, as considered appropriate, to an Executive Committee.
Role
The Executive Committee may deliberate on matters that relate to general management and not on matters that are exclusively of the competence of the Board of Directors. The Executive Committee is conferred the powers and responsibility to manage and execute day to day operations except:
(i) to appoint the Chairman of the Board;
(ii) to co-opt a substitute for a member of the Board;
To ensure that the Board of Directors is kept well informed by the Executive Committee, all significant decisions taken by the Executive Committee are systematically extracted from the minutes of their meetings and are reported, in writing, to the Board of Directors. The Executive Committee supplies, in a timely manner, all the information requested by other Board members. Their minutes are also made available to the Chairman of the Board of Directors and the Chairman of the Statutory Audit Board.
The Executive Committee team meets once every month and additionally whenever the CEO or a majority of its members convenes a meeting.
The Statutory Audit Board is responsible for, among others:
Role
Role
BAFC operates under Terms of Reference approved by the Board of Directors and is responsible for monitoring and supervising financial reporting processes, reviewing accounting policies and for monitoring audit and risk management activities on behalf of the Board, and additionally for overseeing corporate governance within Sonae Holding. The BAFC also liaises with the Statutory Audit Board and is available to support them, if required, in completing their work. The BAFC meets directly with the Statutory External Auditor and the Internal Audit Team. In particular, the duties of the BAFC are:
BAFC reports to the Board of Directors in relation to the work carried out, results obtained and issues identified, and minutes of all BAFC meetings are drawn up and distributed to other Board Members, thus ensuring the effectiveness of the committee.
BNRC operates under Terms of Reference approved by the Board of Directors, and is responsible for identifying candidates for appointment to the Board of Directors or Senior Management positions within Sonae and for supervising the preparation of proposals on remuneration and other compensation on behalf of the Board of Directors. The BNRC reports in writing to the Board, whenever necessary, and liaises with Sonae's Shareholders' Remuneration Committee to obtain their approval, on behalf of shareholders, for the remuneration and other compensation of the Board of Directors and other Statutory Governing Bodies. The BNRC may receive assistance from external entities, which are required to ensure absolute confidentiality in relation to all the information obtained.
BCGO reports to the Board of Directors as a whole, through the Chairman, and also, when appropriate, through the senior independent Non-Executive Director.
The main duties of the BCGO are:
Sonae Holding's Company Secretary is responsible for, among others:
The current organisation of Sonae Holding's corporate centre is designed to adapt its role and competencies to complement the various businesses in the best manner possible and, ultimately, create value. Also, it aims to optimise the efficiency of the Group, through promoting the sharing of relevant skills, know-how, resources and functions among the sub-holdings.
Its value proposal rests upon the following main activities: (i) collaborating with the sub-holdings in their definition of strategy and strategic goals; (ii) allocating capital between current businesses and to new business opportunities;(iii) leveraging the Group's global size and set of competencies; (iv) managing top human resources; (v) managing the Sonae values and
institutional brand; (vi) managing institutional relations proactively to influence the Sonae's business environment. The corporate centre is also responsible for providing services to its various sub-holdings, which are centralised for reasons of efficiency and effectiveness, such as Tax and Financing. There are other tasks that directly relate to the holding company, for example compliance with capital market requirements, legal, financial and fiscal obligations, as well as decision making as a shareholder in Sonae Group sub-holdings and various instrumental companies.
A description of this Officer's role and responsibilities is covered in the previous section.
Main responsibilities:
Main responsibilities:
(vi) Supervise the administrative processes and controls for the corporate centre and manage the service agreements covering the administrative processes outsourced to the service centre of Sonae Distribuição.
Main responsibilities:
Main responsibilities:
Main responsibilities:
Main responsibilities:
The Audit Committee was formed in 2000, to assist the Executive Committee in defining policies, reviewing and co-ordinating the activities of Risk Management, Internal Audit, and to establish internal control processes and systems. The Audit Committee, which meets quarterly, is chaired by Paulo Azevedo (CEO of Sonae), and includes the Sonae Holding's portfolio manager and the CFOs and internal audit managers of the Sonae's sub-holdings.
Supporting this Committee is a Risk Management Consultation Group, which ensures, on a regular basis, consistency between the objectives by the Audit Committee and their implementation.
The Risk Management Consultation Group meets quarterly and is chaired by Ângelo Paupério (member of the Executive Committee), including Sonae Holding's portfolio manager, the Board
members and the Risk Managers responsible for this role at the holding company and at each of the Sonae sub-holdings.
The Finance Committee is chaired by Paulo Azevedo (CEO of Sonae), and includes the CFOs and the directors responsible for corporate finance from each of Sonae's sub-holding as well as the functional managers of Sonae, who are relevant to the subjects on each meeting's agenda. The committee meets monthly to review and co-ordinate financial risk management policies, banking relationships and other matters related to corporate finance.
Risk Management is embedded on Sonae's culture and is one of its Corporate Governance practices, being present in all management processes and a responsibility of all employees of Sonae, at all levels of the organisation.
The objective of risk management is the creation of value by managing and controlling uncertainties and threats that can affect the business objectives and the going concern of Sonae's businesses. Risk Management, together with Environmental Management and Social Responsibility, are pillars of sustainable development, in the sense that better understanding and more effective management of risks contribute to the sustainable development of businesses.
Risk management is integrated into Sonae's entire planning process, as a structured and disciplined approach that aligns strategy, processes, people, technologies and knowledge. Its goal is to identify, evaluate and manage the uncertainties and threats that Sonae's sub-holdings face in the pursuit of their business objectives and value creation.
Sonae's management and monitoring of its main risks is achieved through different approaches, including:
The risk management process is supported by a consistent and systematic methodology, based on the international standard2 that includes the following:
(i) Identifying systematically the risks that affect the organisation (common language); defining and grouping risks (dictionary and matrix of risks);
2 Enterprise Risk Management – Integrated Framework issued by COSO (Committee of Sponsoring Organizations of the Treadway Commission).
Risk Management is the responsibility of all managers and employees of Sonae Group companies, at all levels of the organisation, and is supported by the Internal Audit and Risk Management departments both in the holding and sub-holdings, through especially dedicated teams, which report directly to their respective Boards of Directors.
The Internal Audit and Risk Management department's mission is to help companies reach their objectives via a systematic and structured approach to developing and evaluating the effectiveness of management and control of business processes and information systems risks, namely:
The Management Planning and Control department promotes and supports the integration of risk management into the management and planning control process of companies.
Financial and accounting information reliability and integrity risks are also evaluated and reported upon by the External Audit activity.
By end December 2008, the Internal Audit and Risk Management functions had 41 full time employees, carrying out their work in all countries where the Sonae Group operates.
The Board of Directors has appointed a Board Audit and Finance Committee, comprised of three Non-Executive and Independent Directors, to monitor Audit and Risk Management activities.
As far as development of the Risk Management and Internal Audit function is concerned, in 2008, Sonae continued to support employee training for those who voluntarily put themselves forward for international certification programmes promoted by the IIA (The Institute of Internal Auditors) - Certified Internal Auditor (CIA) and Certification in Control Self Assessment (CCSA) – and other certifications, such as Certified Information System Auditor (CISA), Certified Information System Security Professional (CISSP), BS ISO/IEC 27001: 2005 Information Security Management (ISMS), Certified Information Security Management (CISM), Associated Business Continuity Professional (ABCP), BS 25999 Business Continuity Management (BCM)t and Project Management Professional (PMP).
There are twenty four members of the Internal Audit and Risk Management teams of Sonae who have certifications, six of whom are CIA accredited, seven CCSA, four CISA, two ISMS and one CISM, CISSP, ABCP, BCM, and PMP. Sonae is one of the organisations with more certified employees in internal audit and risk management in Portugal. In 2009, Sonae will continue to
support this important training programme, and the international development and qualification of its internal audit and risk management staff, in line with international best practices.
In accordance with methodologies defined and implemented in previous years, risk management procedures were integrated into business management planning and control procedures from the strategic review phase right through to operational planning, so that risk management actions were included in functional and business unit plans and monitored throughout the year.
Preventive and safety audits were conducted in different locations of the business units. In the main business units, tests and simulations were made to emergency and preventive systems and plans, usually in the presence of civil protection services, security forces and fire brigades. The development and implementation of security standards, and related monitoring and selfassessment procedures (Control Risk Self Assessment), also continued. In relation to terrorism risks, preventive and emergency programs were launched and specialist training sessions were given to security managers and staff.
Turning to people safety risks (staff, subcontractors, customers and visitors), work continued on the PERSONÆ Project of Sonae Sierra and the projects and Health & Safety functions of other sub-holdings, to develop integrated actions and attitudes towards safety, with special emphasis on changing individual behaviour.
In relation to the PERSONÆ Project, following the preparatory and diagnostic phases completed in 2003, implementation of this project began at Sonae Sierra in 2004, in partnership with a leading international consulting firm in this field, part of a group recognized as being one of the most safety conscious and socially responsible in the world. The programme combines the implementation of best management practices in Health, Safety and Social Responsibility with the development of internal capabilities through training and knowledge sharing. An essential part of the methodology is to integrate responsible attitudes and behaviour into the culture of Sonae Holding. The programme involves all operations world wide and all businesses of Sonae Sierra from project development through to the management of shopping and leisure centres, including investment and construction. The project lasted for four years, and represents, in consulting and training alone, an investment of 5 million euro. Having ended in Setember 2008, the project has involved more than 70,000 people according to our estimation and the aim is to care for the safety of millions of visitors, as per the figure of more than four hundred million visits per year to Sonae Sierra's shopping centres. The results and key performance indicators of the project have had a very positive trend: from June 2005 to October 2008, the total number of hours performed per month on safety preventive observations had increased from 56 to 1.059 and the number of non conformities per hour of observation had decreased 68%. Staff days of absenteeism due to work accidents have decreased 98% since 2005. The PERSONÆ Project has won two international awards: the Eco Prize 2006 in Brazil for Enterprise Social Responsibility Practices and the 2007 DuPont Safety Award in the category of Visible Management Commitment. The project's progress had been monitored by the other sub-holdings of the Group with a view to taking advantage of synergies and adapting the management model to other Group companies. Subsequently to the PERSONÆ Project, Sonae Sierra has achieved the certification by TÜV Rheinland of its Safety and Health Corporate Management System (covering all its activities) according to OHSAS 18001.
In Retail, it was developed a project to define customer physical safety standards, as a basis for action plans to prevent and mitigate customer safety risks.
Sonae signed the World Safety Declaration at the end of 2005, making a worldwide commitment by its businesses towards safety at work. Sonae was one of the founder members together with major worldwide corporations.
In relevant businesses, projects and programmes continued in order to guarantee continuity of operations, through defining, revising and implementing procedures and processes to prepare
for crisis and catastrophic scenarios, particularly through developing emergency, contingency and recovery plans.
A specific project was developed and continued in 2008, regarding risks that are common to the different businesses of Sonae. This project was promoted at the Holding level and at each of its main businesses, with the objective of preparing and testing emergency and contingency plans to respond to the threat of a pandemic flu. Actions were developed to identify critical processes and people in each business, assess the impacts of the pandemic flu and define action plans. Contacts were made with Government health divisions and other health authorities, to share information and knowledge regarding national contingency plans and other cooperation actions. In order to support and access protocols, procedures and other relevant information and knowledge, specialised consultancy work was contracted from an international health and medical services company.
In Telecommunications, based on business impact analysis and risk assessment of telco business (mobile and wireline), a business continuity focus was set, and strategies were developed to set the risk at the levels defined by management. A detailed impact analysis model considering system and network platforms was developed to estimate value at risk in main technical sites.
In the area of environmental risks, several environmental certifications have been obtained, audits continued and improvement actions were implemented as part of the Environmental Management Systems of the Group's sub-holdings.
Sonae Sierra's Environmental Management System (EMS) covers these risks in all activities of Sonae Holding, including procurement, construction and operation of Shopping Centres. In 2008, besides having had the corporate EMS re-certified according to ISO 14001 by Lloyds Register Quality Assurance, 39 shopping centres (from a total of 50) have individually already achieved the same certification (18 of which in 2008) and 17 construction works (6 in 2008) have achieved individual ISO 14001 certification for the construction phase.
Risks associated with critical business processes and major change projects, especially new investments and information system changes, were analysed and monitored as part of Risk Management work as well as Internal Audit activity.
As far insurable risks are concerned, the objective of rationalising the financial transfer of these types of risk continued, either by searching to establish a sound insurance capital structure for the value at risk, based on the constant changes in the businesses involved, or by reaching greater critical mass to take on more risk internally. Insurance coverage and retention levels have also been optimised in accordance with the needs of each business, ensuring internally effective insurance management worldwide, using Brokers Link, the Group's insurance brokerage network, and Sonae Re the Group's captive re-insurer.
In Retail, and as a result of the project and organisational actions begun in previous years, a programme of food safety audits was implemented and consolidated in stores, e-commerce, warehouses and production centres. This audit programme has the goal of monitoring food safety risks in a systematic way, and also complying with legal regulations and the internal control system for food safety. Since the program was launched in 2003, the average number of findings per audit has decreased 42%, and, more importantly, the average number of critical findings has decreased 72%.
Sonae is exposed to a variety of financial risks including interest rate risk, transaction and translation foreign currency exchange rate risk, liquidity risk, counterparty and credit risk related with its operating business. Due to the diverse nature of the different Sonae's businesses, exposure to those risks may vary from business to business, and thus for some risks there are no Sonae's wide risk management policies, but rather, when appropriate, individual and adapted risk policies for each sub-holding. Sonae is also exposed to debt and equity markets fluctuations. During 2008, and in order to minimize potential adverse effects of the volatility of
financial markets, besides individual policies to manage each identified financial risk and controls mechanisms to identify and quantify such exposures, Sonae sub-holdings have also used derivative instruments to hedge certain exposures related to their operating business. Financial risk policies are approved by each Board at business level and exposures are identified and monitored by each sub-holding Financial & Treasury Department. Exposures are also monitored by the Finance Committee activity (see above 2.3.3.2), where a consolidated exposure analysis is reviewed and reported on a monthly basis and guidelines for risk management policies are defined and regularly reviewed. Sonae's attitude to financial risks is conservative and cautious, and when derivative instruments are used to hedge certain exposures related to its operating business, the Group follows a policy of not entering into derivatives or other financial instrument arrangements that are unrelated to its operating business and have speculative purposes.
The people involved in the financial analysis process are included in the internal list of insiders and particularly aware of their obligations, as well as of the penalties arising from the misuse of inside information.
The internal rules applicable to the disclosure of financial information aim to assure its broad immediate disclosure and prevent the market's asymmetric access to the information.
2.5. Powers of the Board of Directors for share capital increases
The Articles of Association provide (article 6, paragraph 3) that the share capital can be increased through new entries in cash up to five thousand million Euro, in one or more stages, by resolution of the Boards of Directors, which will determine, in accordance with the law, the conditions of subscription and the categories of shares to be issued, based on those already existing at the time.
This power, according to Portuguese Company Law, terminates at the end of a five year period starting from the shareholders' resolution taken at the Shareholders' General Meeting held on 6 April 2006.
2.6. Rules and Regulations of the Statutory Governing Bodies
Sonae Holding is committed to comply with best practices in Corporate Governance. To that end, it has developed a clearly defined set of rules, duties and responsibilities for its different governing bodies and for their respective decision making processes. This has led to increased transparency and improved internal control.
The Terms of Reference of the Board of Directors and Statutory Audit Board are available on Sonae Holding's website www.sonae.pt.
2.7. Nomination and substitution rules for the management and audit bodies
The members of the Board of Directors are elected for each four-year mandate by shareholders' proposal according to Sonae Holding's Articles of Association and in compliance with the Law, at the Shareholder's General Meeting.
The election of one member of the Board of Directors will take place individually among persons listed in proposals subscribed by groups of shareholders, provided that such groups of shareholders hold shares that represent more than twenty and less than ten percent of the share capital.
The same shareholder cannot subscribe to more than one proposal, and each proposal must contain the identification of at least two persons eligible for each of the positions to be filled. If proposals are presented by more than one group of shareholders, voting will be based on all of these proposals.
Sonae Holding's Articles of Association also establish that the Board of Directors may co-opt a substitute in case of death, resignation or temporary or permanent incapacity or unavailability of any member, subject to ratification by the shareholders at the next Shareholders' General Meeting.
Additionally, if a Director does not participate in any two meetings without providing a justification for these absences, which is accepted by the Board of Directors, such a Director shall then be deemed permanently unavailable.
A Director, who has been elected according to rules abovementioned in the second paragraph of this section, is deem permanently unavailable, a substitute will be elected to the Board of Directors by shareholders at a Shareholders' General Meeting.
The members of the Statutory Audit Board shall be elected by the Shareholders' General Meeting, for a four-year mandate.
If the Shareholders' General Meeting does not designate who of the members shall be the Chairman, the latter will be appointed by the members of the Statutory Audit Board.
If the Chairman leaves office prior to the end of the mandate for which he was designated or elected, the other members must choose one of them to exercise the functions until the end of the respective mandate.
The members of the Statutory Audit Board who are temporarily unavailable or have ceased functions shall be replaced by the substitute.
Substitutes who replace members whose functions have ceased shall remain in office until the first Annual General Meeting, when the vacancies shall be filled.
If it is not possible to fill a vacancy left by a member, due to a lack of elected substitutes, the vacant positions, both of members and of substitutes, shall be filled by means of a new election.
If the Shareholders' General Meeting should fail to elect the members of the Statutory Audit Board, the management of Sonae Holding must do so and any shareholder may petition the courts for the appointment to be made.
The Statutory External Auditor is elected by the shareholders at a Shareholders' General Meeting by proposal of the Statutory Audit Board.
Failure of the competent corporate body to appoint the Statutory External Auditor within the period fixed by law must be brought to the attention of the Portuguese Institute of Statutory Auditors within 15 days, by any shareholder or member of the corporate bodies. Within 15 days of that communication, the Order of Statutory Auditors must officially appoint a statutory auditor to Sonae Holding. At the next Shareholders' General Meeting this appointment shall be ratified or another statutory auditor to complete the respective term of office should be elected.
2.8. Number of meetings held
The Board of Directors meets at least four times a year, as required by Sonae Holding's Articles of Association, and whenever the Chairman or two Board members call a meeting. During 2008 there were 5 Board meetings. The quorum for any Board Meeting requires that the majority of Board Members are present or represented by proxy and decisions are taken by a majority of votes cast. During 2008, the attendance rate at Board meetings was 100%. Minutes are recorded in the respective minutes book. The Board of Directors normally receives information on subjects on the agenda of meetings at least 7 days beforehand, and receives supporting documents for meetings at least 2 working days in advance.
The Executive Committee currently meets at least once every month and, whenever the CEO or a majority of its members calls a meeting. There were 15 meetings of the Executive Committee in 2008 and the attendance rate was 100%. The quorum for the Executive Committee meeting requires that a majority of members are present or represented by proxy. Decisions are approved by simple majority, the CEO having a casting vote.
BAFC meets at least five times a year and whenever the Chairman, the Board of Directors, the Executive Committee or, exceptionally, the Statutory External Auditor believe a meeting is necessary. Between meetings and since 4Q07, the follow up and monitoring of projects has periodically been carried out by conference call. During 2008, the Committee met 5 times with an attendance rate of 100%.
BNRC meets at least once a year and, whenever the Chairman or the Board of Directors deem necessary. There was one formal BNRC meeting during 2008 and the attendance record was 100%. Between formal meetings, the BNRC members keep in touch by electronic means.
Statutory Audit Board meets at least 4 times a year. During 2008, the Board met 5 times with an attendance rate of 100%.
This Committee meets at least once a year. There was 1 meeting during 2008 and the attendance record was 100%.
Sonae Holding's Board of Directors
| Belmiro Mendes de Azevedo……………………………. | Chairman – Non-Executive |
|---|---|
| Álvaro Cuervo Garcia……………………… | Independent Non-Executive |
| Michel Marie Bon………………………………………… | Independent Non-Executive |
| José Neves Adelino……………………………………… | Independent Non-Executive |
| Duarte Paulo Teixeira de Azevedo…………………… | Executive – CEO |
| Álvaro Carmona e Costa Portela……………………… | Executive |
| Ângelo Gabriel Ribeirinho dos Santos Paupério…… | Executive |
| Nuno Manuel Moniz Trigoso Jordão…………… | Executive |
Note:
On 3 March 2008, Luíz Felipe Palmeira Lampreia resigned as Non-executive Director of Sonae Holding (with effect from 30 April 2008).
| Duarte Paulo Teixeira de Azevedo…… | CEO Sonae |
|---|---|
| Álvaro Carmona e Costa Portela …………………………. | CEO Sonae Sierra |
| Ângelo Gabriel Ribeirinho dos Santos Paupério ………. | CEO Sonaecom |
| Nuno Manuel Moniz Trigoso Jordão …………………… | CEO Sonae Distribuição |
Michel Marie Bon …………………… Chairman – Independent Non-Executive Alvaro Cuervo Garcia …………….… Independent Non-Executive José Manuel Neves Adelino……….. Independent Non-Executive
Note:
On 3 March 2008, Luíz Felipe Palmeira Lampreia resigned as member of this committee.
Board Nomination and Remuneration Committee
Belmiro Mendes de Azevedo…….................Chairman -Non-Executive Michel Marie Bon ………………………... Independent Non-Executive
Note:
On 3 March 2008, Luíz Felipe Palmeira Lampreia resigned as member of this committee.
The Board of Directors has a clear balance between the number of Executive Directors and the number of Non-Executive Directors. Currently, the Board of Directors is composed of eight members, including Executive and Non-Executive members. Out of the four Non-Executive Directors, three are considered independent, in accordance with the independence criteria established by article 414, nr. 5 of the Portuguese Company Law as referred to in CMVM Regulation nr. 1/2007 for Corporate Governance. The three Independent Non-Executive Directors also meet the requirements for assessing that no incompatibility exists under the terms of article 414-A, nr. 1, of the Portuguese Company Law, as required by the abovementioned CMVM Regulation, with the sole exception of Michel Marie Bon, who exercises management and auditing roles in more than five companies. Nevertheless, this fact does not affect his overall independence.
The Board mandates are for four years, with the possibility of re-election. The current Board mandate covers the period 2007 to 2010. Current members of the Board of Directors have been appointed as follows:
| Appointment to the Board of Directors | ||
|---|---|---|
| Appointed for the first time on | End of mandate | |
| Belmiro Mendes Azevedo | 1989 | 2010 |
| José Neves Adelino | 2007 | 2010 |
| Álvaro Cuervo Garcia | 2004 | 2010 |
| Michel Marie Bon | 2004 | 2010 |
| Duarte Paulo Teixeira de Azevedo | 2000 | 2010 |
| Álvaro Carmona e Costa Portela | 1999 | 2010 |
| Ângelo Gabriel Ribeirinho Paupério | 2000 | 2010 |
| Nuno Manuel Moniz Trigoso Jordão | 1999 | 2010 |
17 February 1938
| Education | |
|---|---|
| 1963 | Graduate in Chemical Engineering - Universidade do Porto |
| 1973 | PMD (Programme for Management Development) - Harvard Business School |
| 1985 | Financial Management Programme - Stanford University |
| 1987 | Strategic Management - Wharton University |
| Professional Experience | |
| 1963-1964 | Technical Career in textile chemical industries |
| 1965-1967 | Managing Director of Sonae |
| 1967-1984 | President of Sonae Group of companies |
| 1985-1988 | CEO of Sonae Indústria e Investimentos, SA |
| 1989-1999 | Chairman and CEO of Sonae Investimentos, SGPS, SA |
| 1997 | Member of the European Union Hong-Kong Business Cooperation Committee |
| 1999-2007 | Chairman and CEO of Sonae SGPS, SA |
| 2000 | Member of the International Advisory Board of Allianz AG |
| 2002 | Member of the Management Board of Cotec – Portugal |
| 2005 | Member of the Harvard Business School European Advisory Board |
| 2005 | Chairman of Manufacture Portugal Forum |
| 2008 | Chairman of EGP – University of Oporto Business School |
| Date of Birth | |
|---|---|
| 19 March 1954 | |
| Education | |
| 1976 | Graduate in Finance, Universidade Técnica de Lisboa |
| 1981 | DBA, Finance, Kent State University |
| 1995 | Agregado, Faculdade de Economia, Universidade Nova de Lisboa |
| Professional Experience | |
| 1978-1981 | Teaching Fellow, Kent State University |
| 1981-1986 | Member of the Directive Council, Faculdade de Economia, Universidade Nova de Lisboa |
| 1981-1986 | Member of the Board, BPA |
| 1981-1995 | Professor, Faculdade de Economia, Universidade Nova de Lisboa |
| 1986-1989 | Visiting Professor, Universidade Católica Portuguesa |
| 1987-1989 | Visiting Professor, Bentley College |
| 1988 | Visiting Professor, ISEE |
| 1990-1996 | Dean, MBA Program and Executive Education, Faculdade de Economia, Universidade Nova de |
| Lisboa | |
|---|---|
| 1994-2002 | Member of the Directive Board of Fundo de Garantia de Depósitos |
| 1999-2002 | Dean, Faculdade de Economia, Universidade Nova de Lisboa |
| 1999-2004 | Member of the Global Advisory Board of Sonae SGPS, SA |
| 2003-2006 | Member of the Board, Chairman of the Audit Committee of EDP |
| 2003-2006 | Strategy Advisory Board of PT |
| 2003-2007 | Chairman of the Shareholders' Meeting of PT PRO |
| 2003-2007 | Member of the Remuneration Committee of Sonae SGPS, SA |
| 2004-2007 | Member of the Investment Committee of PT Previsão |
Date of Birth
| 30 May 1942 | |
|---|---|
| Education | |
| 1971 | PhD in Economics - Madrid University |
| 1973 | M.S. in Statistics - Madrid University |
| 1975 | M.S. in Industrial Psychology - Madrid University |
| Professional Experience | |
| 1975 | Professor of Business Economics at Universidad Complutense Madrid |
| 1997-2006 | Member of the Academic Council of the Real Colegio Complutense at Harvard University |
| Since 1997 | Member of the Board of Directors of ACS, SA |
| Since 2003 | Member of the Board of Directors of Sonae Indústria, SGPS, SA |
| 2004 | Editor in Chief of Universia Business Review |
| 2006 | Member of the Board of Directors of Bolsas y Mercados Españoles |
| 2007 | Associate Editor Globalization, Competitiveness and Governability |
| Member of the scientific and advisory committee of several journals | |
| Author of several books and numerous articles published in Spanish and foreign journals |
| Date of Birth | |
|---|---|
| 5 July 1943 | |
| Education | |
| 1966 | Graduate in Business Administration - ESSEC |
| 1971 | Graduate at École Nationale d'Administration |
| 1986 | Stanford Executive Program – Stanford University |
| Professional Experience | |
| 1971-1975 | Inspecteur des Finances at the French Ministry of Finance and Budget |
| 1975-1985 | Chief Credit Officer, and later Deputy CEO of Caisse Nationale de Crédit Agricole (Bank) |
| 1985-1992 | Deputy CEO, later CEO and Chairman of Carrefour (Retail) |
| 1993-1995 | Head of the Agence Nationale Pour l'Emploi (French State agency for employment) |
| 1995-2002 | Chairman and CEO of France Telecom |
| 2003-2005 | Chairman of Institut Pasteur |
| 1971-1975 | Director of Esmertec (High Technologies) |
| 1975-1985 | Senior Advisor to Permira (Investment Fund) |
| 1985-1992 | Senior Advisor to Roland Berger (Strategy Consulting) |
| 1998-2002 | Co-chairman of the French American Business Council |
| Since 1984 | Director of Institut Pierre Mendès France |
| Since 1988 | Director of the French American Foundation |
| Since 1994 | Founder and Director of Transparency International (France) |
| Since 2003 | Director of International Domenican Foundation |
| Since 2004 | Director of Esmertec |
| Since 2004 | Senior Advisor to Permira |
|---|---|
| Since 2006 | Senior Advisor to Roland Berger |
| Since 2008 | Chairman of Fondation Nationale pour l'Enseignement de la Gestion des Entreprises (FNEGE) |
| 31 December 1965 |
|---|
| Graduate in Chemical Engineering – École Polytechnique Fédérale de Lausanne |
| Master of Business Administration – EGP (before designed by ISSE – Business School da Universidade do Porto) |
| Executive Retailing Program – Babson College |
| Strategic Uses of Information Technology Program – Stanford Business School |
| IMD – Breakthrough Program for Senior Executives - Lausanne |
| Professional Experience |
| Analyst and Project manager of new investments at Sonae Tecnologias de Informação |
| Organizational Development project manager and New business Commercial Director at Sonae Indústria (Wood Based Panels) |
| Director of Strategic Planning and Control and Project Leader – Group restructuring at Sonae Investimentos, SGPS, SA |
| Executive Board Director of Merchandising, IT and Marketing of Modelo Continente Hipermercados (Retail) |
| CEO of Optimus (Mobile Operator). |
| CEO of Sonaecom, SGPS, SA |
| President of Apritel - Association of Telecommunication Operators |
| Chairman of the Statutory Audit Board at Público, SA |
| Co-author of the book "Reformar Portugal" |
| Chairman of the Statutory Audit Board at Glunz, AG |
| Chairman of the Board of Tafisa, SA |
| CEO of Sonae, SGPS, SA |
| Date of Birth | |
|---|---|
| 4 July 1951 | |
| Education | |
| 1974 | Graduate in Mechanical Engineering - Universidade do Porto |
| 1983 | Master of Business Administration - MBA (Universidade Nova de Lisboa) |
| 1997 | AMP / ISMP - Harvard Business School |
| Professional Experience | |
| 1972-1976 | Director at Laboratórios BIAL (Pharmaceutical Industry) |
| 1974-1977 | Lecturer at Department of Mechanics - Universidade do Porto |
| 1976-1979 | Chairman and CEO of Laboratórios BIAL (Pharmaceutical Industry) |
| 1979-1985 | Executive Director of Finance, Planning, Exports at COPAM - Companhia Portuguesa de Amidos, SA (Maize derivatives industry) and affiliated companies |
| 1985-1986 | Deputy Managing Director and later Managing Director of Módis (Logistics and Retail Procurement at Sonae Distribuição) |
| 1986-1991 | Managing Director, later CEO and later Chairman and CEO of Sonae Distribuição, SGPS, SA |
| 1996-2001 | Member at ICSC Europe Jury Award |
| 1999-2002 | Co-founder and Non Executive Director of EPRA- European Public Real Estate Association |
| 2005-2008 | Trustee of the International Council of Shopping Centres |
14 September 1959
| 1982 | Graduate in Civil Engineering |
|---|---|
| 1988/1989 | Master of Business Administration |
| Professional Experience | |
| 1982-1984 | Structural Design Project Manager at Tecnopor (Civil Engineering) |
| 1984-1989 | Manager at EDP (Energy) |
| 1989-1991 | Leader of the Television Project Team at Sonae Tecnologias de Informação |
| 1991-1994 | Director of Strategic Planning and Control at Sonae Investimentos, SGPS, SA |
| 1994-1996 | Director in several of Sonae Distribuição, SGPS, SA's affiliates (Retail) |
| 1996-2007 | CFO of Sonae Distribuição, SGPS, SA and Director in Modelo Continente, SGPS, SA and several of its affiliates (Retail) |
| 1996-2007 | Executive Vice President and CFO of Sonae, SGPS, SA, SA, CEO of Sonae Capital, SGPS, SA and Chairman of Sonae, SGPS, SA's Finance Committee |
| Since 2007 | CEO of Sonaecom SGPS, SA, Executive Director of Sonae, SGPS, SA, Director of Sonae Sierra,SGPS, SA, Director of Sonae Distribuição SGPS, SA |
| Date of Birth | |
|---|---|
| 27 April 1956 | |
| Education | |
| 1978 | Graduate in Economics ISCTE (Universidade de Lisboa) |
| Professional Experience | |
| 1980-1986 | Pingo Doce Supermercados, SA – Career in Store Operations |
| 1986- 1987 | Hipermercados Continente, SA - Hypermarket Manager |
| 1988-1989 | Hipermercados Continente, SA - General Manager |
| Since 1990 | Executive Board Member of Sonae Distribuição, SGPS, SA |
| Since 1991 | CEO of Sonae Distribuição, SGPS, SA |
| Since 1999 | Executive Director of Sonae, SGPS, SA |
Shares held by the members of the Board of Directors are disclosed in an Appendix to the Management Report, as required by article 447 of the Portuguese Company Law. The Appendix also includes the relevant information in relation to transactions performed in the last semester of 2008, as per the terms of article 14, paragraph 6, of CMVM Regulation nr. 5/2008.
2.11. Offices held by the members of the Board of Directors
Offices held in other companies within Sonae:
Full time Professor of Finance, Faculdade de Economia, Universidade Nova de Lisboa
Visiting Professor, Bentley College
Member of the Statutory Audit Board at Banco BPI
Member of Investment Committee of Portugal VC Initiative (EIF)
None
Member of the Board of Directors of Sonae Indústria SGPS, SA
Member of the Board of Directors of ACS, SA
Editor in Chief of Universia Business Review
Member of the Board of Directors of Bolsas y Mercados Españoles
Associate Editor Globalization, Competitiveness and Governability
Member of the scientific and advisory committee of several journals
Author of several books and numerous articles published in Spanish and foreign journals
None
| Presidente do Conselho de Administração da Les Pélicans | |
|---|---|
| Director of Provimi | |
Director of Compagnie Européenne de Téléphonie
Director of Institut Catholique de Paris
Director of Lafarge (Cement)
Director of Sonepar (Electrical supply retail)
Chairman of the Supervisory Board of Editions du Cerf (Book Publisher)
Director of Esmertec (High Technologies)
Senior Advisor to Close Brothers
Senior Advisor to Permira (Investment Fund)
Senior Advisor to Roland Berger (Strategy Consulting)
Chairman of the Supervisory Board of Devoteam (Information Technologies)
Non-voting Director of Asterop
Director of Institut Pierre Mendès France
Director of the French American Foundation
Founder and Director of Transparency International (France)
Director of International Domenican Foundation
Chairman of Fondation Nationale pour l'Enseignement de la Gestion des Entreprises (FNEGE)
| Offices held in other companies within Sonae: |
|---|
| Chairman of Sonae Distribuição, SGPS, S.A. |
| Chairman of Sonaecom, SGPS, S.A. |
| Chairman of Sonae Sierra, SGPS, S.A. |
| Chairman of MDS, SGPS, SA |
| Offices held in other companies outside Sonae: |
| Executive Director of Efanor Investimentos, SGPS, S.A. |
| Executive Director of Imparfin, SGPS, S.A. |
| Executive Director of Migracom, SGPS, S.A. |
| Vice-Chairman of Sonae Indústria, SGPS, SA |
| Member of APGEI (Business/University Association of Engineering and Management) |
| Founding member of EGP – Porto Business School |
| Member of the Advisory Board "Compromisso Portugal" |
Member of the European Round Table of Industrialists
CEO of Sonae Sierra, SGPS, SA
Non Executive Director of Sonae Distribuição, SGPS, S.A.
Chairman of the Board of Directors of companies owned by Sonae Sierra, SGPS, SA (these companies are listed in th Notes to the Consolidated Financial Statements).
Trustee of European Shopping Centre Trust
Member of Eurohypo International Advisory Board
Director of CADE – Companhia Agrícola de Desenvolvimento SA
CEO of Sonaecom, SGPS, SA
Chairman of BE ARTIS – Concepção, Construção e Gestão de Redes de Comunicações, SA
Non Executive Director of Cooper Gay (Holdings) Limited
Director of MDS – Corretor de Seguros, SA
Director of Optimus Artis- Concepção, Construção e Gestão de Redes de Comunicações, SA
Chairman of Público - Comunicação Social, SA
Director of MDS SGPS, SA
Non-executive Director of Sonae Distribuição, SGPS,SA
Executive Director of Sonae Investments, BV
Non-executive Director of Sonae Sierra, SGPS, SA
Chairman of Sonae Telecom, SGPS, SA
Chairman of Sonaecom - Serviços de Comunicações, SA
Executive Director of Sonaecom - Sistemas de Informação, SGPS, SA
Executive Director of Sontel BV
Chairman of WeDo Consulting - Sistemas de Informação, SA
Board member of APGEI (Business/University Association of Engineering and Management)
Director of Sonae Financial Participations BV
Executive Director of Lapidar, SGPS, SA
Lecturer of Corporate Governance (EGP - Porto University)
Sole Director of Enxomil, Sociedade Imobiliária, SA
Offices held in other companies within Sonae:
CEO of Sonae Distribuição, SGPS, SA
Chairman of the Board of Directors of most companies controlled by or majority owned by Sonae Distribuição, SGPS, SA (these companies are listed in the Notes to the Consolidated Financial Statements).
None
The Statutory Audit Board members were elected at the Shareholders' Annual General Meeting held in 2007 and their current mandate covers the period 2007 to 2010.
Statutory Audit Board
Daniel Bessa Fernandes Coelho…….Chairman Arlindo Dias Duarte Silva Jorge Manuel Felizes Morgado Óscar José Alçada da Quinta…………Substitute
All of the members of the Statutory Audit Board are independent under the terms of articles 414, paragraph 5, and article 414-A, paragraph 1, both of the Portuguese Company Law.
2.13. Qualifications and experience of the members of the Statutory Audit Board
| Daniel Bessa Fernandes Coelho | |
|---|---|
| Date of Birth | |
| 6 May 1948 | |
| Education | |
| 1970 | Graduate in Economics – University of Porto |
| 1986 | Phd in Economics – Universidade Técnica de Lisboa |
| Profissional Experience | |
| Since 1970 | Teacher at the University of Porto |
| 1970-1999 | Teacher at Faculty of Economics |
| 1978-1979 | Chairman of The Board of Faculty of Economics of University of Porto |
| Since 1983 | Freelance Economist |
| Since 1988 | Author of "Processo Inflacionário Português 1945-1980", and of numerous articles published in several magazines such as Análise Social, Cadernos de Ciências Sociais, Cadernos de Economia, Estudos de Economia, Indústria . Revista de Empresários e Negócios, Pensamiento Iberoamericano – Revista de Economia Política, Praxis e Revista Crítica de Ciências Sociais |
| 1988-2000 | Teacher at ISEE – Instituto Superior de Estudos Empresariais |
| 1989-1990 | Chairman of Comissão Instaladora of Escola Superior de Tecnologia e Gestão do Instituto Politécnico de Viana do Castelo |
| 1989-1992 | Teacher at Faculty of Engineering |
| 1990-1995 | Vice-Dean at the University of Porto |
| 1992-1995 | Spokesman of the Socialist Party for the economic and financial issues |
| 1995 | Elected Deputy at the National Assembly |
| 1995-1996 | Minister of Economy in the Portuguese Government |
| 1996-2000 | Executive Director at AURN – Associação das Universidades da Região Norte |
| 1996-2006 | Non-Executive Director at CELBI – Celulose Beira Industrial |
| 1997-1999 | Non-Executive Director at INPARSA – Indústrias e Participações, SGPS, SA |
| 1997-2000 | Executive Director of Finibanco, SA |
| 1997-2007 | Chairman of the Statutory Audit Board at SPGM – Investment Company |
| 1999-2002 | Chairman of the Shareholder's General Meeting at APDL –Management of Douro and Leixões Ports |
| Since 2000 | Teacher at the EGP – Escola de Gestão do Porto (School of Administration of Porto) |
| 2000-2008 | Dean of the EGP – Escola de Gestão do Porto |
| 2001-2003 | Advisory member of the Consulting council of Electric and Telephone Conducters Industries F. Cunha Barros, SA |
| 2003-2004 | Coordinator of the technical preparation of the Program next to the Ministries of Economy and of the Social Security and of Work of the Portuguese Government for Recovery of Depressed Areas and Sectors |
| Date of Birth | |||
|---|---|---|---|
| 27 October 1936 | |||
| Education | |||
| 1963 | Graduate in Economics - Universidade do Porto | ||
| Professional Experience |
2008-2009 Dean of the EGP – University of Porto Business School
| 1960-1963 | Teacher at the Commerce and Industry School |
|---|---|
| 1968-1971 | Military Service at Angola (interruption of the banking professional activity) |
| 1976-1979 | Vice-Director of BPA Bank in the Commercial Department of Branches |
| Since 1979 | Statutory Auditor certified by the Portuguese Institute of Statutory Auditors, having exercised his activity both individually as well as a member of statutory audit' firms |
| Since 1979 | Statutory External Auditor, member of the Supervisory Board and Sole Auditor in several companies such as Banco Universo, União Portuguesa de Bancos, Orbitur – Intercâmbio de Turismo, ATPS – SGPS, SA, MDS – Corretor de Seguros, SA, Imoareia – Sociedade Imobiliária, SA, and Contacto – SGPS, SA. |
| 1989-1992 | Member of the General Council of the Portuguese Institute of Statutory Auditors |
| 1992-1995 | Member of the Governing Council of the Portuguese Institute of Statutory Auditors |
| 1995-1997 | Vice-President of the Governing Council of the Portuguese Institute of Statutory Auditors |
| Date of Birth | |
|---|---|
| 6 June 1955 | |
| Education | |
| Graduate in Management – ISEG – Universidade Técnica de Lisboa | |
| MBA in Finance – IEDE Madrid | |
| MBA in Management and Information Systems – Faculdade de Economia e Gestão – Universidade Católica |
|
| Certified Statutory Auditor nr. 775 | |
| Professional Experience | |
| 1980-1989 | Assistant and Manager at Coopers & Lybrand |
| 1989-1991 | Responsible for Internal Audit and Management Control at Coelima Group |
| 1991-2004 | Partner at Deloitte – member of the Statutory Audit Board and External Auditor of several companies; responsible for consultancy in the northern Portuguese region and for corporate finance in Portugal, since 2001 |
| Since 2004 | External Auditor of several national and international companies, and partner of Horwarth Parsus – Consultoria e Gestão, Lda |
| Teacher of the MBA course at the European University | |
| Consultant to several companies such as Bolsa de Valores, Grupo Somelos, Hedva (Czech Republic), BAI (Angola, Vaz Pinheiro Group, Siemens, Corticeira Amorim |
| Offices held in other companies within Sonae: |
|---|
| None |
| Offices held in other companies outside Sonae: |
| Executive Director of Finibanco Holding, SGPS, SA |
| Non-Executive Director of Efacec Capital, SGPS, SA |
| Chairman of Statutory Audit Board at Galp Energia, SGPS, SA |
| Chairman of Statutory Audit Board at Bial – Portela e Companhia, SA |
| Executive Director of Foundation Bial |
| Chairman of Statutory Audit Board of IGFCSS – Instituto de Gestão de Fundos de Capitalização da Segurança Social |
| President of Gabinete de Estudos da Câmara dos Técnicos Oficiais de Contas |
| Non-Executive Director of AICEP – Agência para o Investimento e Comércio Externo de Portugal, E.P.E. |
Member of the Statutory Audit Board at Sonaecom – SGPS, SA
Member of the Statutory Audit Board at Sonae Distribuição – SGPS, SA
External auditor at DMJB – Consultoria de Gestão, SA
External auditor at Orbirio – Imobiliário e Empreendimentos Turísticos, SA
External auditor at Loisir – Equipamentos de Diversão e Ocupação de Tempos Livres, SA
External auditor at Sintigraf II – Tintas Gráficas, SA
Member of the Statutory Audit Board at Rochinvest – Investimentos Imobiliários e Turísticos, SA
Member of the Statutory Audit Board at ALADI – Associação Lavrense de Apoio ao Diminuído Intelectual
Member of the Statutory Audit Board at Centro Social e Paroquial Padre Ângelo Ferreira Pinto
Member of the Statutory Audit Board at Associação de Apoio Social de Perafita
Member of the Statutory Audit Board at Associação Cultural do Senhor do Padrão
Member of the Statutory Audit Board at Liga dos Amigos do Hospital Pedro Hispano
Offices held in other companies within Sonae:
| Member of the Statutory Audit Board at Sonae Sierra, SGPS, SA |
|---|
| Offices held in other companies outside Sonae: |
| Member of the Statutory Audit Board at Sonae Indústria, SGPS,SA |
| Member of the Statutory Audit Board at Sonae Capital, SGPS,SA |
| External Auditor at Vadeca Equipamentos, S.A. |
| External auditor at GRIN - Gestão de Resíduos Urb.e Ind., S.A. |
| External auditor at Vadeca Imobiliária, S.A. |
| External auditor at Sucitesa Portugal, S.A. |
| External auditor at Vadeca Org. e Gestão, S.A. |
| External auditor at Vadeca Serviços - Limpeza Industrial, S.A. |
| External auditor at Vadeca Jardins, S.A. |
| External auditor at Vadeca Ambiente-Preservação e Controlo, S.A. |
| External auditor at Vadeca Química - Higiene Profissional, S.A. |
| External auditor at Vadeca Manuteção - Serviços integrados, S.A. |
| External auditor at Protesegurança, S.A. |
| External auditor at Fénix Security Group, S.A. |
| External auditor at J.R.Costa - Gestão Global Negócios, S.A. |
| External auditor at Vinidecanter - Distribuição de Produtos Alimentares, S.A. |
| External auditor at Vinhos & Coisas, Holding, S.G.P.S., S.A. |
| External auditor at E3C - Comunicação e Eventos, S.A. |
| External auditor at Timeloft, S.A. |
| External auditor at ValorInveste - Soc. Invest. Imob., S.A. |
| External auditor at Jofabo - Contrucão e Imobiliária, S.A. |
| External auditor at Polibrás - Polimentos e Abrasivos, S.A. |
| External auditor at Know it - Soluções Formação Tecnologia, S.A. |
| External auditor at J. Medeiros, S.G.P.S., S.A. |
| External auditor at Tratobem - Administ., CMP, VND, IMOV. ,S.A. |
| External auditor at Hidroeléctrica S.Pedro, S.A. |
| External auditor at Hidroeléctrica S. Nicolau, S.A. |
| External auditor at JIZ - Arquitectura de Interiores e Pub., S.A. |
| External auditor at Cortwoo - Marketing, SA |
| External auditor at Mindegames - Sociedade de Comunicação, Produções Audiovisuais e Futebol, SA |
| External auditor at FeedWater - Tubos, SA |
| External auditor at SkyWorld, SA |
| External auditor at Vincos Válvulas, SA |
| External auditor at Blue Share, S.A. |
| External auditor at VNG - Gestão, Consultoria e Gestão, S.A. |
| External auditor at PM. IQS - Projecto, Gestão e Supervisão, S.A. |
| External auditor at Mendiguren Y Zarraua, Lda ( Ex-Destam) |
| External auditor at Imoguedes - Imobiliária e Engenharia, S.A. |
| External auditor at Indivest - Investimentos, S.G.P.S., S.A. |
| External auditor at Construções Fernando Guedes II, S.A. |
| External auditor at Silvil, S.A. |
| External auditor at Silvil, S.G.P.S., S.A. |
| External auditor at Praianorte - Hotelaria e Turismo, S.A. |
| External auditor at Companhia das Pastas - Empreendimentos e Investimentos Hoteleiros,, S.A. |
| External auditor at PREC - Projectos de Engenharia e Construções, S.A. |
| External auditor at PlanoPharma - Gestão de Farmacias, S.A. |
The remuneration of the members of the Statutory Audit Board is made up of a fixed amount based on Sonae Holding's economic and financial dimension and market comparables.
| Remuneration of the Statutory Audit Board | ||
|---|---|---|
| Million euros | 2007 (1) Total Fixed Remuneration |
2008 Total Fixed Remuneration |
| Individual breakdown | ||
| Chairman | 0,012 | 0,013 |
| Average of the remaining 2 members | 0,011 | 0,011 |
| Total | 0,033 | 0,034 |
Sonae's remuneration policy aims to accurately assess each individual's activity, performance and contribution to the organization's success, and to align Executive Directors' and employees' interests with those of shareholders.
The remuneration policy for all Executive Directors and employees includes two basic components:
In addition, a discretionary third component may be awarded to Executive Directors and senior managers, in April of the following year, in the form of deferred compensation, as a Medium Term Performance Bonus under Sonae's Deferred Performance Bonus Plan.
Annual remuneration and other elements of the compensation package are defined as a function of each Executive Director's and employee's level of responsibility and are reviewed annually. Each Executive Director and employee is classified under a "Group Level" grid, with 9 Management Levels, designed using Hay's international model for classification of job functions to allow easier market comparisons as well as to promote internal equity.
The annual performance bonus is aimed at rewarding the achievement of certain pre-defined annual objectives, which are linked to both Business and Personal Key Performance Indicators ("KPIs").
The target annual performance bonus amount is based on a percentage of the Executive Director's and employee's fixed remuneration, which ranges between 33% and 75%, depending on their Management Level. Business KPIs (which include economic and financial indicators based on approved budgets, share price performance, individual business unit performance as well as the performance of the Group as a whole) drive 70% of the annual performance bonus and are normally objective indicators. The remaining 30% of the annual performance bonus is based on fulfilment of Personal KPIs, which are a mix of objective and subjective indicators.
Annual performance bonus paid is based on the actual performance achieved or assessed and can represent anything from 0% to 160% of the target performance bonus for Business KPIs and 0% to 120% of the target performance bonus for Personal KPIs. Combining both components, the broadest range that can be paid to any individual is therefore 0% to 148% of their target annual performance bonus.
The compensation policy for the Board of Directors was approved at the Shareholders' General Meeting held on 3 May 2007 and reconfirmed at the Shareholders' General Meeting held on 21 April 2008, and it is aimed at remunerating them in a fair, effective and competitive manner, taking into consideration the individual responsibilities and performance of each Director, both at Company level and at subsidiary company level, when applicable.
Sonae Holding's Shareholders' Remuneration Committee is responsible for the approval of the remuneration and other compensation of the Board of Directors, including both Executive and Non-Executive Directors. The composition and functioning of the Shareholders' Remuneration Committee is described in the next section of this Corporate Governance Report.
Remuneration and other compensation proposals for Sonae Holding's Executive Directors are based on:
The Executive Directors' remuneration and other compensation include Fixed Remuneration and an Annual Performance Bonus, and they also benefit from compensation under Sonae Holding's Deferred Performance Bonus Plan. The Annual Performance Bonus is indexed to a group of financial indicators that best align the interests of Executive Directors with those of Sonae Holding and its shareholders. The Medium Term Performance Bonus Plan is an equitybased plan that vests on the third anniversary of the award date, which increases or decreases during the vesting period depending on share price performance, dividends paid and changes in Sonae Holding's share capital. A detailed description of these remuneration and other compensation components, which follow the same policy and methodology as for other Sonae's senior management, can be found in section 3.10 below.
The Chairman of the Board of Directors only receives fixed remuneration and this is decided exclusively by the independent members of the Shareholders' Remuneration Committee (See explanation in section 0.3, with reference to CMVM Recommendation II.5.2).
For each Non-Executive Director, fixed remuneration assumes an agreed commitment of time, including preparation and attendance of at least five Board Meetings each year (approximately 15% of the remuneration is paid as meeting attendance fees). Meeting attendance fees are payable for each meeting actually attended by each Non-Executive Director as follows: Board meetings: 930 euros, BAFC meetings: 640 euros and BNRC meeting: 390 euros. The Chairman of the Board only receives attendance fees for Board meetings.
Additionally, an annual responsibility allowance is payable to all Directors, ranging from between 1900 euros and 3000 euros.
Sonae Holding's Shareholders' Remuneration Committee is composed of 3 members appointed by the Shareholders' General Meeting, under a four year mandate, currently from 2007 to 2010:
| Shareholders' Remuneration Committee |
|---|
| Belmiro Mendes de Azevedo |
Artur Eduardo Brochado dos Santos Silva Bruno Walter Lehmann
The Committee is responsible for approving the remuneration and other compensation of members of Sonae Holding's Board of Directors and other Statutory Governing Bodies, on behalf of the shareholders, following the remuneration policy approved by the Shareholders' General Meeting.
The members serving on the Shareholders' Remuneration Committee have the necessary professional qualifications and experience to carry out their responsibilities effectively and rigorously. Belmiro Mendes de Azevedo abstains from discussing and deciding his own remuneration, to avoid the potential conflict of interest (see 0.3 above, with reference to CMVM Recommendation II.5.2).
Belmiro Mendes de Azevedo is related by bloodline to Sonae Holding's CEO, Paulo Azevedo.
For an overall understanding of the remuneration criteria being applied, this section should be read together with 2.16 e 3.10.
During 2007 and 2008, members of the Board of Directors were paid or attributed the following remuneration, including fixed remuneration and performance bonuses, by Sonae Holding or by its sub-holdings:
| Directors' Remuneration – Fixed Remuneration and Performance Bonuses | ||||||||
|---|---|---|---|---|---|---|---|---|
| Million euros | 2007 | 2008 | ||||||
| Fixed Remuneration |
Annual Performance Bonus |
Medium Term Performance Bonus |
Total | Fixed Remuneration |
Annual Performance Bonus |
Medium Term Performance Bonus |
Total | |
| Individual breakdown | ||||||||
| Chairman | 0,43 | 0,43 | 0,44 | 0,44 | ||||
| CEO | 0,43 | 0,37 | 0,37 | 1,17 | 0,47 | 0,30 | 0,29 | 1,06 |
| Average of the remaining | ||||||||
| 3 Executive Directors (1) | 0,37 | 0,30 | 0,31 | 0,98 | 0,41 | 0,24 | 0,23 | 0,88 |
| Average of the remaining | ||||||||
| 4 Non-Executive Directors (2) | 0,04 | 0,04 | 0,04 | 0,04 | ||||
| Aggregate | ||||||||
| Executive Directors | 1,54 | 1,28 | 1,31 | 4,13 | 1,70 | 1,01 | 0,98 | 3,69 |
| Non-Executive Directors | 0,60 | 0,60 | 0,56 | 0,56 | ||||
| Total | 2,14 | 1,28 | 1,31 | 4,73 | 2,26 | 1,01 | 0,98 | 4,25 |
IMPORTANT NOTES:
Fixed remuneration = fixed remuneration effectively paid
Performance bonuses = attributed remuneration for the year, in line with business KPIs (including annual and medium term performance bonuses)
(1) Maximum individual remuneration in 2008 represented 115,6% of Average and Minimum 76,8% of Average; (2) 3 Non-Executive Directors since 3rd March 2008; Maximum Individual Remuneration in 2008 represented 103% of Average and Minimum 96% of Average.
The table above includes the fixed remuneration paid and the annual and medium term performance bonuses attributed. The annual performance bonus is paid in the year following its attribution. The medium term performance bonus will be adjusted according to share price performance, changes in Sonae Holding's share capital and dividends paid, and it will paid in the third year after the award date.
In 2008, the total bonuses effectively paid to the Executive Directors were 1,98 million euros and the average was 0,5 million euros (in 2007, 3,11 million euros and 0,78 million euros, respectively, including anticipated payments from the Deferred Performance Bonus Plans to the CEO of 1,08 million euros and to one Executive Director of 1,24 million euros, which relate the changes in their executive roles within Sonae, as from 3 May 2007 and are non-recurrent). Due to the anticipated payments of medium term performance bonuses in 2007, there was no such bonus payments to the CEO and one Executive Director in 2008.
It should be noted that a part of the remuneration and other compensation shown above is also disclosed in the Reports on Corporate Governance of affiliated companies when Sonae Holding's Board members are also members of the Board of Directors of those companies. The remuneration of the Executive Directors, excluding the CEO, by sub-holdings represents 94,7% of their total of remuneration.
No compensation has been awarded to resigning Board members. Sonae Holding does not have any pension or early retirement schemes for Board members and there are not relevant non-monetary benefits.
Sonae Holding's Executive Directors have been awarded compensation under the Plan. Sonae Holding's Non-Executive Directors do not participate in the Plan.
There are no performance conditions attaching to the Plan's awards other than future share price performance, as these awards are based upon an individual's Annual Performance Bonus for which KPIs have already been satisfied.
The shares awarded to Executive Directors as part of the Plan that vested, were exercised or remain unvested during 2008, are summarised below.
Executive Directors Deferred Performance Bonus Plans Plans outstanding during 2008:
| Vesting period | At 31 December 2008 | |||
|---|---|---|---|---|
| From | To | Number of participants |
Million Euros |
|
| 2004 Plan | March 2005 | March 2008 | ||
| 2005 Plan | March 2006 | March 2009 | 2 | 0,38 |
| 2006 Plan | March 2007 | March 2010 | 2 | 0,35 |
| 2007 Plan | March 2008 | March 2011 | 4 | 0,60 |
| Movements during 2008: | ||||
| Aggregated number of plans |
Million Euros |
|||
| Outstanding at 31.12.2007: | 6 | 2,52 | ||
| Movements in the year: | ||||
| Awarded | 4 | 1,27 | ||
| Vested | (2) | (0,85) | ||
| Adjustments (1) | (1,62) |
(1) Changes in the number of shares due to dividend payments and changes in the value due to shares price changes .
Outstanding at 31.12.2008: 8 1,33
In case of loss of office during a Board mandate, it is Sonae's policy to pay whatever compensation is legally required, or to negotiate, in each situation, a value considered to be fair and appropriate by the parties involved.
Sonae's values and principles are widely spread and deeply rooted in its culture, and form the basis of its actions respecting the principles of absolute respect and awareness for the rules of good conduct in the management of conflict of interests and duties of diligence and confidentiality in our dealings with third parties. The Sonae Holding's values and principles can be consulted on our website - www.sonae.pt.
The Board of Directors approved in 2009, a Code of Conduct which, in accordance with Sonae's principles and values, establishes rules of conduct to be complied with, by our Directors and employees in the exercise of their functions.
The Code of Conduct is available on Sonae Holding's website – www.sonae.pt.
The Board has also approved internal regulations covering conflicts of interest, business gifts and related party transactions.
Details of Sonae Holding's liabilities arising from the Deferred Performance Bonus Plan, are also given in note 30 to the Consolidated Financial Statements.
Sonae Holding has a policy and process for communicating internal irregularities, which sets out procedures to efficiently and fairly respond to alleged irregularities reported, including:
Any irregularities reported directly to the Statutory Audit Board are analysed by its Chairman.
Sonae Holding's whistle blowing policy is available on its website - www.sonae.pt.
Sonae Holding has available, through its website (www.sonae.pt), to employees and to the general public, direct access to its Ombudsman, who reports directly to the Chairman of the Board of Directors. This has proven to be an effective means of facilitating the reporting of complaints, to make sure that independence and freedom of opinion are guaranteed and that all issues are treated equally and fairly.
The Ombudsman received throughout 2008, 3,425 complaints, mostly from customers (99% of total complaints received), compared to 1,821 complaints in 2007. Average response time was 21 days, compared to 13 days in 2007.
Sonae Holding's share capital is of two thousand million euros, fully subscribed and paid up, divided into two thousand million ordinary shares, each with a nominal value of one euro.
At end 2008, and based on notifications made, shares held by companies owning more than 2% of the share capital of Sonae Holding, were the following:
| Qualified shareholdings | |||||
|---|---|---|---|---|---|
| Shareholder | Number of shares | % Share capital | |||
| Efanor Investimentos | 1,061,514,990 | 53.08% | |||
| Banco BPI (1) | 178,039,855 | 8.90% | |||
| Fundação Berardo (2) | 49,849,514 | 2.49% | |||
| (1) Shareholding owned according to the announcement made to the market on 16 November 2007; (2) Shareholding owned according to the announcement made to the market on 14 February 2006. |
Sonae does not have any shareholders holding any special rights.
Sonae Holding's shares do not have any restrictions on the transfer of shares or in the ownership of shares.
The Board of Directors has no knowledge of any special rights or agreements in which shareholders of Sonae Holding are involved.
3.6. Rules applicable to the amendment of Company's articles of association
The amendment of Sonae Holding's articles of association follows the terms of the Portuguese Company Law, requiring a majority of two thirds of the issued votes for such resolution to be approved.
For the General Meeting to function, Sonae Holding's articles of association require a minimum of 50% of the issued share capital to be present or represented at the meeting.
Sonae does not have any control mechanism for employees participating in the share capital.
3.8. Share price performance
Sonae Holding's shares are primarily quoted on the Portuguese stock exchange, Euronext Lisbon, and have been listed in several indexes, including the PSI 20, in which it has a weighting of 1.8%, and Euronext 150, with a weighting of 0.74%. The table below shows the key indicators of Sonae Holding's share performance.
Sonae Holding's shares reference information
| 2005 | 2006 | 2007 | |
|---|---|---|---|
| ISIN code | PTSON0AM0001 | ||
| Bloomerg code | SON PL | ||
| Reuters code | SONP.IN | ||
| Share Capital | 2,000,000,000 2,000,000,000 2,000,000,000 | ||
| Number of shares outstanding | 1,866,581,428 2,000,000,000 2,000,000,000 | ||
| Closing price last trading day | |||
| of year | 1.510 | 1.980 | 0.437 |
| year high | 1.520 | 2.170 | 1.750 |
| year low | 1.11 | 1.5 | 0.39 |
| Annual trading volume (number of shares) | 1,976,490,725 3,781,046,099 3.320.632.327 | ||
| Average trading volume per day (number of shares) | 7,812,216 | 15,004,151 | 12.971.220 |
| Market Capitalization 31 December | 3,020,000,000 3,960,000,000 | 874,000,000 |
Sonae Holding's shares ended the year quoted at 0.44 euros, reflecting a nominal loss of 75.4% during the year, which compares with a general stock market loss of 48.7%, as measured by the Portuguese Stock Market index PSI 20.
The year was marked by deteriorating macro-economic conditions, with the negative impacts of the financial crisis denting consumer and business confidence in Portugal, and by sharp contractions of the global credit and real estate markets, leading to failures in the international financial system and to significant losses in the equity markets.
The following graph highlights the trend of the share price during 2008.
Sonae's share price and trading volume
During the year, events with an impact on Sonae Holding's share price were the following:
Following approval by shareholders at Annual General Meetings, the dividends distributed by Sonae for the past three financial years are as shown in the table below.
| Company's dividend distribution | ||||||
|---|---|---|---|---|---|---|
| 2005(1) | 2006(1) | 2007(1) | ||||
| Gross dividend per share (euros) | 0.025 | 0.03 | 0.03 | |||
| Dividend distributed (thousand euros) | 46,651 | 55,997 | 60,000 | |||
| Dividend yield (%)(2) | 2,1% | 2,0% | 1,5% | |||
| Payout ratio (%)(3) | 9,1% | 23,1% | 21,1% | |||
| (1) Year when the dividend is distributed; (2) Dividend yield = Dividend distributed / closing price as at 31 December; | ||||||
| (3) Payout ratio = Dividend distributed / consolidated net profits attributable to the equity holders of Sonae. |
In view of the net results for the financial year 2008, the Board of Directors will propose to the Shareholders' Annual General Meeting a gross dividend of 0.03 euro per share. This dividend is
equal to a dividend yield of 6.9% on the closing price as at 31 December, and to a payout ratio of 75% of consolidated net profits attributable to equity holders of Sonae.
For future years, and in accordance with growth and performance expectations, Sonae Holding plans to gradually increase the dividend per share to be distributed, despite the increased investment plan for growth over the coming years.
The Shareholders' Remuneration Committee has approved a Deferred Performance Bonus Plan, a discretionary deferred compensation plan, which is equity based, and has a three year deferral period between the award date and the vesting date. This plan is aimed at enhancing loyalty and increasing Executive Directors' and employees' awareness of the importance of their performance to the overall success of Sonae, as reflected by changes in Sonae Holding's share price.
The decision to award a Deferred Performance Bonus under the Deferred Performance Bonus Plan for any performance year is taken by the Board Nomination and Remuneration Committee and the Shareholders' Remuneration Committee for the Executive Directors and by the Executive Committee for the remaining participants. The values awarded are derived from the Annual performance bonuses actually paid for the same "performance year".
All Executive Directors and senior managers are eligible to participate in the Deferred Performance Bonus Plan, provided that their entry date is before 31 December of the performance year. Deferred Performance Bonuses are awarded in April each year, in respect of performance during the previous financial year.
The number of shares to be attributed under the Plan, is calculated by dividing the value of the Deferred Performance Bonus awarded by a share price calculated at the award date. The share price used is based on the lower of the average of the daily closing share prices of the last 30 trading sessions before the Annual General Meeting and the closing share price on the first trading session after this meeting. The number of shares initially attributed is adjusted during the 3 year deferral period of the Plan to take account of changes in Sonae Holding's share capital and of dividends paid to align the Plan with Total Shareholder Return. Each Plan vests on the third anniversary of its award date. Sonae Holding retains the right to pay the equivalent value in cash at the vesting date rather than transfer actual shares at no cost.
The right to any deferred compensation ceases, should the participant leave Sonae. On retirement, any deferred compensation plans not yet vested are maintained until they actually vest. In the case of death or permanent injury of the participant, deferred compensation plans are marked to market and paid to the rightful heirs or to the participant.
The value awarded is determined by applying the following percentages to the Annual performance bonuses paid in respect of the last financial year, according to Sonae's Management Levels:
| Sonae management levels and annual performance bonus | ||||||
|---|---|---|---|---|---|---|
| Company's Management Levels ('Grupos Funcionais')(1) | Percentage of Annual performance bonus |
|||||
| GF3 | Up to 100% | |||||
| GF2 | Up to 100% | |||||
| GF1 | Up to 100% |
(1) Sonae's Management Levels ('Grupos Funcionais' or 'GF') are attributed according to Hay's international model for the classification of corporate functions. Sonae has defined internally that Managers with levels equal to or higher than GF3 may be Executive Committee members of Sonae companies.
Sonae Holding did not have business dealings with any member of the Board of Directors or of the other Statutory Governing Bodies. The only transactions with the Statutory External Auditor
were those related to their official duties and fees were paid as described in paragraph 3.13 below.
Transactions with companies which are controlled, including wholly-owned, or which control Sonae Holding, or with shareholders with qualified shareholdings, as well as with entities directly or indirectly controlled by the latter, were made on an arms' length basis and related to normal business activity of the respective companies, and as such do not need further disclosure.
The Investor Relations department is responsible for managing Sonae's relationship with the financial community – current and potential investors, analysts and market authorities – with the goal of enhancing their knowledge and understanding of Sonae by providing relevant, timely and reliable information.
In strict compliance with law and regulations, Sonae Holding informs expeditiously its shareholders and the market of all relevant facts about its activities, avoiding delays between their occurrence and disclosure. Sonae Holding has fulfilled this commitment to the market over the years.
The department regularly prepares presentations to the financial community and communications covering quarterly, half year and annual results, as well as issues announcements to the market whenever necessary, to disclose or clarify any relevant event that could influence the share price. In addition, on request, it provides clarification about Sonae Holding's activities, by answering questions sent by email or by taking phone calls.
Information is made publicly available on the Internet at the Portuguese Securities Market Commission site (www.cmvm.pt) and on Sonae Holding's own website (www.sonae.pt). The site provides not only the required information, as stipulated in article 4 of the CMVM nr. 1/2007, but also general information about Sonae, in addition to other information considered relevant, including:
To further enhance the effective communication with the capital market and guarantee the quality of information provided, the Investor Relations department organizes road shows covering the most important financial centres of Europe and United States, and participates in various conferences. Also, a wide variety of investors and analysts have the opportunity to talk to senior management in one-on-one meetings or conference calls.
Any interested party may access the Investor Relations department through the following contacts:
Patrícia Mendes Pinheiro Investor Relations Manager Tel: (+351) 22 010 4794 Fax: (+351) 22 948 77 22 Email: [email protected]/ [email protected] Address: Lugar do Espido Via Norte 4471-909 Maia Portugal Site: www.sonae.pt
Luzia Leonor Borges e Gomes Ferreira Legal Representative for Relations with Capital Markets Tel: (+351) 22 010 4794 Fax: (+351) 22 948 77 22 Email: [email protected] Address: Lugar do Espido Via Norte 4471-909 Maia Portugal
Sonae Holding believes that the procedures described above ensure permanent contact with the market and respect the principles of equal treatment of all shareholders and equal access to information for investors.
Sonae Holding's Statutory External Audit firm is Deloitte and the amount of fees invoiced to Sonae Holding, including joint ventures, affiliated and associated companies for 2008 and 2007 was as follows:
| 1,39 | 33% | 1,54 | 38% |
|---|---|---|---|
| 1,08 | 26% | 0,74 | 18% |
| 0,51 | 12% | 0,34 | 8% |
| 1,21 | 29% | 1,43 | 36% |
| 4,19 | 100% | 4,05 | 100% |
| 1,71 | 41% | 1,29 | 32% |
| 2007 | 2008 |
The details above exclude fees invoiced to companies which were sold during the respective year and, in 2007, includes 9 months of fees invoiced to the Sonae Capital Group of companies.
Audit fees increased by 10.8% in 2008, essentially as a result of business expansion. Compliance & Assurance Service fees and Tax Consultancy Services fees decreased during the year due to less due diligence work. Other Service fees included, in 2008, general consultancy services provided to several subsidiaries of Sonae Distribuição (13.8% of total fees) and Sonae Sierra (3.9% of total fees), tax incentive project fees (2.2% of total fees), human capital consultancy fees (2.7% of total fees) sustainability consultation fees (1.6% of total fees), fixed assets inventory and labelling fees (2.5% of total fees) and training regarding internal control and closing of the books process (3.6% of total fees). This category of fees increased in 2008 as, given their extensive knowledge of the Sonae and their competitive cost quotes, Deloitte was considered to be the best option to support major one-off projects. In 2009 general consultancy fees charged by Deloitte will decrease significantly in relation to 2008 levels.
Tax consultancy services and other services are provided by different teams from those who are involved in audit work, thereby reducing the risk to auditor independence. Furthermore, Sonae's Risk Management Policy monitors the non-audit services requested from the Statutory External Auditor and their respective network of companies, in order to ensure that auditor independence is not compromised. Total annual fees paid in Portugal by the Sonae to the Deloitte Group in 2008 represented approximately 2% of their total global fees in Portugal.
Deloitte's quality system controls and monitors potential conflicts of interest with Sonae as well as risks to auditor independence. In addition, an 'Independence Letter' is obtained from Deloitte in 2008, confirming that they meet international guidelines on auditor independence, in accordance with the IFAC (International Federation of Accountants) rules.
The signatories individually declare that, to their knowledge, the Management Report, the Consolidated and Individual Financial Statements and other accounting documents required by law or regulation were prepared meeting the standards of the applicable International Financial Reporting Standards, giving a truthful (fairly) and appropriate image, in all material respects, of the assets and liabilities, financial position and the consolidated and individual results of the issuer and that the Management Report faithfully describes the business evolution and position of the issuer and of the companies included in the consolidation perimeter and contains a description of the major risks and uncertainties that they face.
Maia, 17 de Março de 2009
Belmiro Mendes de Azevedo President of the Board of Directors Duarte Paulo Teixeira de Azevedo President of the Executive Committee
Disclosure of shares and other securities held by members of the Board of Directors and by people discharging managerial responsibilities, as well as by people closely connected with them (article 248 B of the Portuguese Securities Code), and disclosure of the respective transactions during the year involving such shares and other securities.
Appendix to the Report of the Board of Directors as of 31 December 2008 required by article 447 of the Portuguese Company Law and of article 14, paragraph 7 of CMVM Regulation nr. 05/2008
| Additions | Reductions | Balance as of 31.12.2008 |
||||
|---|---|---|---|---|---|---|
| Date | Quantity | Aver. Price € | Quantity | Aver. Price € | Quantity | |
| Belmiro Mendes de Azevedo () (*) Efanor Investimentos, SGPS, SA (1) Sonaecom, SGPS, SA |
49,999,996 75,537 |
|||||
| Álvaro Carmona e Costa Portela (*) Sonae, SGPS, SA |
125,934 | |||||
| Purchase | 11.06.2008 | 100,000 | 0.91 | |||
| Sonaecom, SGPS, SA | 5,000 | |||||
| Ângelo Gabriel Ribeirinho dos Santos Paupério (*) Sonae, SGPS, SA |
250,000 | |||||
| Purchase | 11.01.2008 | 245,436 | 1.30 | |||
| Sonaecom, SGPS, SA Purchase |
11.01.2008 | 59,930 | 2.89 | 225,000 | ||
| Purchase | 14.01.2008 | 61,000 | 3.00 | |||
| Purchase | 15.01.2008 | 44,000 | 2.87 | |||
| Duarte Paulo Teixeira de Azevedo () () (****) Efanor Investimentos, SGPS, SA (1) |
1 | |||||
| Migracom, SGPS, SA (3) | 1,969,996 | |||||
| Capital increase Sonae, SGPS, SA |
27.11.2008 | 1,900,000 | 1.00 | 3,293 (a) | ||
| Michel Marie Bon (*) | ||||||
| Sonae, SGPS, SA | 100,363 | |||||
| Purchase Purchase |
17.01.2008 28.05.2008 |
4,600 7,250 |
1.30 1.04 |
|||
| Purchase | 22.07.2008 | 7,250 | 0.77 | |||
| Purchase | 09.10.2008 | 15,000 | 0.45 | |||
| Maria Margarida Carvalhais Teixeira de Azevedo () (**) Efanor Investimentos, SGPS, SA (1) |
1 | |||||
| Sonae, SGPS, SA | 14,901 | |||||
| Maria Cláudia Teixeira de Azevedo () (***) Efanor Investimentos, SGPS, SA (1) Linhacom, SGPS, SA (5) Sonaecom, SGPS, SA |
1 99,996 0 |
|||||
| Shares attributed under a Share Based | ||||||
| Compensation Plan Sale |
10.03.2008 31.03.2008 |
10,963 | 0.00 | 10,963 | 2.18 | |
| Nuno Teixeira de Azevedo () (***) Efanor Investimentos, SGPS, SA (1) |
1 | |||||
| Sonae, SGPS, SA | 10,500 (a) | |||||
| Sale | 25.10.2008 | 3,820 | 0.44 | |||
| David Graham Shenton Bain (***) | ||||||
| Sonae, SGPS, SA | 20,000 | |||||
| Purchase | 16.06.2008 | 16,482 | 0.91 | |||
| Additions | Reductions | Balance as of 31.12.2008 |
||||
| Date | Quantity | Aver. Price € | Quantity | Aver. Price € | Quantity | |
| (1) Efanor Investimentos, SGPS, SA Sonae, SGPS, SA |
659,650,000 | |||||
| Purchase Pareuro, BV (2) |
19.09.2008 | 845,576 | 0.60 | 2,000,000 | ||
| Capital increase Sonaecom, SGPS, SA |
21.01.2008 | 1,980,000 | 151.51 | 1,000 | ||
| (2) Pareuro, BV Sonae, SGPS, SA |
400,000,000 | |||||
| (3) Migracom, SGPS, SA Sonae, SGPS, SA |
1,485,000 | |||||
| Purchase | 17.01.2008 | 193,500 | 1.29 | |||
| Purchase Sonaecom, SGPS, SA Imparfin, SGPS, SA (4) |
18.01.2008 | 1,500 | 1.24 | 387,342 150,000 |
||
| (4) Imparfin, SGPS, SA Sonae, SGPS, SA |
4,105,280 | |||||
| 03.01.2008 | 7 | 1.92 | ||||
| 03.01.2008 | 3 | 1.923 | 351,296 | |||
| Purchase (5) Linhacom, SGPS, SA Sonae, SGPS, SA Purchase Sonaecom, SGPS, SA Purchase |
31.03.2008 | 10,963 | 2.18 | 36,183 |
(*) Member of the Board of Directors of Sonae, SGPS, SA
(**) Member of the Board of Directors of Efanor Investimentos SGPS, SA (directly and indirectly dominant company) (1)
(***) Person discharging managerial responsibilites at Efanor Investimentos SGPS, SA (directly and indirectly dominant company) (1)
(****) People closely connected with the President of the Board of Directors of Sonae Holding, Belmiro de Azevedo
(*****) Member of the Board of Directors of Imparfin, SGPS, SA (4)
(a) Shares held by underage descendents under his/her charge
Note: The Independent Non-executive member of the Board of Directors, José Manuel Neves Adelino, is a member of the Statutory Audit Board of Banco BPI, SA, which holds 178.039.855 shares representing of 8,092 % of Company's share capital.
Number of shares held by shareholders owning more than 10%, 33% and 50% of the company's share capital.
Appendix to the Report of the Board of Directors as of 31 December 2008 required by article 448 of the Portuguese Company Law
Number of shares held as of 31.12.2008
Efanor Invetimentos, SGPS, SA Sonae, SGPS, SA 659,650,000 Pareuro, BV 2,000,000
Pareuro, BV Sonae, SGPS, SA 400,000,000
Shares held and voting rights of companies owning more than 2% of the share capital of the company.
As required by article 8 nr.1 b) of Securities Market Regulation Board (CMVM) regulation 05/2008, the following shareholders held more than 2% of the company's share capital.
| Shareholder | Nr. Of shares | % Share Capital |
% of Voting Rights |
|---|---|---|---|
| Efanor Investimentos, SGPS, S.A. | |||
| Directly | 659,650,000 | 32.983% | 32.983% |
| By Pareuro, BV (controlled by Efanor) | 400,000,000 | 20.000% | 20.000% |
| By Maria Margarida CarvalhaisTeixeira de Azevedo (Director of Efanor) | 14,901 | 0.001% | 0.001% |
| By Duarte Paulo Teixeira de Azevedo (Director of Efanor and held by descendent) | 3,293 | 0.000% | 0.000% |
| By Nuno Miguel Teixeira de Azevedo (Director of Efanor and held by descendent) | 10,500 | 0.001% | 0.001% |
| By Migracom, SGPS, SA (company controlled by Efanor's Director, Duarte Paulo Teixeira de Azevedo) | 1,485,000 | 0.074% | 0.074% |
| By Linhacom, SGPS, SA (company controlled by Efanor's Director Maria Cláudia Teixeira de Azevedo) | 351,296 | 0.018% | 0.018% |
| Total attributable to Efanor Investimentos, SGPS, SA | 1,061,514,990 | 53.076% | 53.076% |
| Banco BPI, S.A. | 132,851,868 | 6.643% | 6.643% |
| Banco Português de Investimento, S.A. | 365,199 | 0.018% | 0.018% |
| Fundos de Pensões do Banco BPI | 40,071,372 | 2.004% | 2.004% |
| BPI Vida - Companhia de Seguros de Vida, S.A. | 4,751,416 | 0.238% | 0.238% |
| Total attributable to Banco BPI, SA | 178,039,855 | 8.902% | 8.902% |
| Fundação Berardo, Instituição Particular de Solidariedade Social | 49,849,514 | 2.492% | 2.492% |
| Total attributable to Fundação Berardo, Instituição Particular de Solidariedade Social | 49,849,514 | 2.492% | 2.492% |
(Amounts expressed in euro)
| ASSETS | Notes | 31.December.2008 | 31.December.2007 Pro-forma (Note 1) |
31.December.2007 (Note 1) |
|---|---|---|---|---|
| NON-CURRENT ASSETS: | ||||
| Tangible assets | 11 | 2,507,943,036 | 2,220,156,165 | 2,220,156,165 |
| Intangible assets | 12 | 440,299,161 | 346,245,644 | 346,245,644 |
| Investment properties | 13 | 1,683,441,521 | 1,658,780,561 | 1,868,656,061 |
| Investment properties in progress | 13 | 158,561,052 | 192,199,770 | 193,472,865 |
| Goodwill Associated investments |
14 7 |
697,267,362 142,663,495 |
675,666,021 108,820,548 |
697,390,378 73,548,640 |
| Other investments | 8, 10 and 15 | 12,978,175 | 12,055,157 | 12,055,157 |
| Deferred tax assets | 22 | 206,954,689 | 148,332,178 | 149,323,388 |
| Other non-current assets | 10 and 16 | 21,283,515 | 87,163,054 | 74,616,749 |
| Total Non-Current Assets | 5,871,392,006 | 5,449,419,098 | 5,635,465,047 | |
| CURRENT ASSETS: | ||||
| Stocks | 17 | 560,433,179 | 468,692,074 | 468,692,074 |
| Trade account receivables | 10 and 18 | 215,062,609 | 229,162,692 | 229,073,319 |
| Other debtors | 10 and 19 | 145,992,505 | 153,889,107 | 153,721,689 |
| Taxes recoverable | 20 | 89,597,166 | 86,175,201 | 86,514,614 |
| Other current assets | 21 | 165,902,105 | 124,601,045 | 121,639,586 |
| Investments | 10 and 15 | 63,556,763 | 60,069,924 | 60,069,924 |
| Cash and cash equivalents | 10 and 23 | 184,360,904 | 284,403,557 | 286,401,453 |
| Total Current Assets | 1,424,905,231 | 1,406,993,600 | 1,406,112,659 | |
| Assets available for sale | 9,893,174 | 6,006,580 | 6,006,580 | |
| TOTAL ASSETS | 7,306,190,411 | 6,862,419,278 | 7,047,584,286 | |
| EQUITY AND LIABILITIES | - | |||
| - | ||||
| EQUITY: Share capital |
24 | 2,000,000,000 | 2,000,000,000 | 2,000,000,000 |
| Own shares | 24 | (138,568,275) | (138,568,275) | (138,568,275) |
| Legal reserve | 161,705,974 | 160,880,817 | 160,880,817 | |
| Reserves and retained earnings | (952,178,592) | (1,176,780,741) | (1,136,695,832) | |
| Profit/(Loss) for the year attributable to the equity holders of Sonae | 80,035,669 | 275,002,806 | 284,044,038 | |
| Equity attributable to the equity holders of Sonae | 1,150,994,776 | 1,120,534,607 | 1,169,660,748 | |
| Equity attributable to minority interests | 25 | 411,549,101 | 447,919,160 | 448,365,507 |
| TOTAL EQUITY | 1,562,543,877 | 1,568,453,767 | 1,618,026,255 | |
| LIABILITIES: | ||||
| NON-CURRENT LIABILITIES: | ||||
| Loans | 10 and 26 | 1,281,262,524 | 965,261,310 | 1,059,691,078 |
| Bonds | 10 and 26 | 1,684,214,319 | 1,744,850,709 | 1,744,850,709 |
| Obligation under finance leases | 10, 26 and 27 | 28,701,579 | 23,470,674 | 23,470,674 |
| Other loans | 10 and 26 | 22,274,691 | 1,100,962 | 1,104,529 |
| Other non-current liabilities | 10 and 29 | 155,464,158 | 312,460,606 | 313,023,126 |
| Deferred tax liabilities | 22 | 330,908,680 | 319,019,994 | 348,408,863 |
| Provisions | 34 | 57,086,975 | 109,305,995 | 109,305,995 |
| Total Non-Current Liabilities | 3,559,912,926 | 3,475,470,250 | 3,599,854,974 | |
| CURRENT LIABILITIES: | ||||
| Loans | 10 and 26 | 258,905,967 | 127,017,024 | 129,207,708 |
| Bonds Obligation under finance leases |
10 and 26 10, 26 and 27 |
99,930,567 5,829,172 |
- 8,709,711 |
- 8,709,711 |
| Other loans | 10 and 26 | 5,405,466 | 399,692 | 399,692 |
| Trade creditors | 10 and 31 | 1,050,238,562 | 989,635,548 | 989,303,378 |
| Other creditors | 10 and 32 | 233,899,872 | 214,272,313 | 216,288,864 |
| Taxes and contributions payable | 20 | 71,507,795 | 61,578,945 | 62,131,632 |
| Other current liabilities | 33 | 455,647,053 | 414,330,071 | 421,110,115 |
| Provisions | 34 | 2,369,154 | 2,551,957 | 2,551,957 |
| Total Current Liabilities | 2,183,733,608 | 1,818,495,261 | 1,829,703,057 | |
| TOTAL LIABILITIES | 5,743,646,534 | 5,293,965,511 | 5,429,558,031 | |
| TOTAL EQUITY AND LIABILITIES | 7,306,190,411 | 6,862,419,278 | 7,047,584,286 | |
The accompanying notes are part of these financial statements.
| 31.December.2007 | ||||||
|---|---|---|---|---|---|---|
| 31.December.2008 | Pro-forma | 31.December.2007 | ||||
| Notes | (Note 1) | |||||
| Operational income | ||||||
| Sales | 37 | 4,168,562,332 | 3,309,905,249 | 3,428,309,136 | ||
| Services rendered | 37 | 1,184,541,613 | 1,107,395,651 | 1,199,416,024 | ||
| Value created on investment properties | 38 | (115,805,475) | 156,888,961 | 152,408,590 | ||
| Other operational income | 39 | 455,789,170 | 338,174,373 | 437,050,529 | ||
| Total operational income | 5,693,087,640 | 4,912,364,234 | 5,217,184,279 | |||
| Operational expenses | ||||||
| Cost of goods sold and materials consumed | 17 | (3,303,986,732) | (2,622,631,645) | (2,694,275,192) | ||
| Changes in stocks of finished goods and work in progress | - | - | 39,844,864 | |||
| External supplies and services | 40 | (1,177,241,538) | (1,010,795,232) | (1,200,261,988) | ||
| Staff costs | 41 | (612,404,391) | (508,780,328) | (569,810,726) | ||
| Depreciation and amortisation Depreciation and |
11 and 12 11 and |
(273 819 162) (273,819,162) |
(228 197 614) (228,197,614) |
(234 952 130) (234,952,130) |
||
| Provisions and impairment losses | 34 | (35,512,894) | (15,294,230) | (17,460,444) | ||
| Other operational expenses | 42 | (114,990,028) | (76,523,833) | (83,771,465) | ||
| Total operational expenses | (5,517,954,745) | (4,462,222,882) | (4,760,687,081) | |||
| Operational profit/(loss) | 175,132,895 | 450,141,352 | 456,497,198 | |||
| Financial expense | 43 | (216,811,915) | (166,868,363) | (172,979,430) | ||
| Financial income | 43 | 43,101,223 | 52,739,539 | 48,786,301 | ||
| Net financial expenses | 43 | (173,710,692) | (114,128,824) | (124,193,129) | ||
| Share of results of associated undertakings | 7 | 8,952,847 | 5,552,394 | 2,704,264 | ||
| Investment income | 44 | 16,056,782 | 41,835,524 | 48,481,037 | ||
| Profit/(Loss) before taxation | 26,431,832 | 383,400,446 | 383,489,370 | |||
| Taxation | 45 | 12,646,440 | (28,371,183) | (26,775,288) | ||
| Profit/(Loss) after taxation | 46 | 39,078,272 | 355,029,263 | 356,714,082 | ||
| Attributable to: | ||||||
| Equity holders of Sonae | 80,035,669 | 275,002,806 | 284,044,038 | |||
| Minority interests | 25 | (40,957,397) | 80,026,457 | 72,670,044 | ||
| Profit/(Loss) per share | - | - | ||||
| Basic | 48 | 0.042864 | 0.147310 | 0.152154 | ||
| Diluted | 48 | 0.042864 | 0.147310 | 0.152154 | ||
The accompanying notes are part of these financial statements.
FOR THE THREE MONTHS ENDED 31 DECEMBER 2008 AND 2007 (Translation of consolidated financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails)
(Amounts expressed in euro)
| 4th Quarter ended 31 December 2008 Unaudited |
4th Quarter ended 31 December 2007 Pro-forma Unaudited |
4th Quarter ended 31 December 2007 Unaudited |
|
|---|---|---|---|
| Operational income | |||
| Sales | 1,224,164,092 | 977,631,377 | 977,745,386 |
| Services rendered | 295,520,414 | 305,361,616 | 306,292,987 |
| Value created on investment properties | (72,717,918) | 36,875,578 | 29,811,558 |
| Other operational income | 135,102,425 | 104,016,015 | 103,016,304 |
| Total operational income | 1,582,069,013 | 1,423,884,586 | 1,416,866,235 |
| Operational expenses | |||
| Cost of goods sold and materials consumed | (944,780,224) | (761,912,266) | (761,889,908) |
| Changes in stocks of finished goods and work in progress | - | - | - |
| External supplies and services External supplies and |
(302,990,345) | (292,347,952) | (291,894,915) |
| Staff costs | (168,231,021) | (138,501,791) | (138,506,274) |
| Depreciation and amortisation | (71,945,919) | (61,397,808) | (61,397,807) |
| Provisions and impairment losses | (19,140,909) | 140,805 | 140,805 |
| Other operational expenses | (50,543,285) | (25,943,916) | (25,937,538) |
| Total operational expenses | (1,557,631,703) | (1,279,962,928) | (1,279,485,637) |
| Operational profit/(loss) | 24,437,310 | 143,921,658 | 137,380,598 |
| Finanacial expense | (67,122,503) | (45,159,146) | (46,198,763) |
| Financial income | 13,024,900 | 16,742,688 | 17,269,459 |
| Net financial expenses | (54,097,603) | (28,416,458) | (28,929,304) |
| Share of results of associated undertakings | 8,776,695 | 2,836,668 | 2,539,953 |
| Investment income | 5,797,628 | 6,488,515 | 6,687,217 |
| Profit/(Loss) before taxation | (15,085,970) | 124,830,383 | 117,678,464 |
| Taxation | 16,017,574 | 18,760,653 | 21,821,660 |
| Profit/(Loss) after taxation | 931,604 | 143,591,036 | 139,500,124 |
| Profit/(Loss) for the year | 931,604 | 143,591,036 | 139,500,124 |
| Attributable to: | - | ||
| Equity holders of Sonae | 26,936,411 | 112,762,760 | 113,426,942 |
| Minority interests | (26,004,807) | 30,828,276 | 26,073,182 |
| Profit/(Loss) per share | |||
| Basic | 0.014426 | 0.060397 | 0.060753 |
| Diluted | 0.014426 | 0.060397 | 0.060753 |
The accompanying notes are part of these financial statements.
(Amounts expressed in euro)
| Attr ibut able to E quit y Ho lder s of So nae |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Res erve |
d Re tain ed E s an |
arni ngs |
||||||||||
| Note | Sha re Cap ital |
Ow n Sha res |
Leg al Res erve |
Hed ging Res erve |
Cur renc y Tra nsla tion Res erve |
Inve stm ents Fair Va lue Res erve |
Oth er R ese rves and Re tain ed Earn ings |
Tota l |
Net Pro fit/(L ) oss |
Tota l |
Mino rity Inte rest s (No te 2 5) |
Tota l Equ ity |
| Bala t 1 J 200 7 nce as a anu ary |
2,00 0,00 0,00 0 |
(142 ,961 ,431 ) |
157 ,623 ,915 |
2,02 3,18 8 |
18,9 15,4 42 |
65,9 21,4 80 |
(1,0 50,7 03,1 66) |
(963 ,843 ,056 ) |
241 ,822 ,233 |
1,29 2,64 1,66 1 |
402 ,058 ,314 |
1,69 4,69 9,97 5 |
| App iatio n of fit o f 20 06: ropr pro Tran sfer to l l res d re tain ed e arni ega erve s an ngs Divi den ds d istri bute d |
- - |
- - |
3,25 6,90 2 - |
- - |
- - |
- - |
238 ,565 ,331 (55 ,997 ,443 ) |
238 ,565 ,331 (55 ,997 ,443 ) |
(24 1,82 2,23 3) - |
- (55 ,997 ,443 ) |
- (21 ,887 ,082 ) |
- (77 ,884 ,525 ) |
| Cha s in nge rese rves Cha s in fair valu e of fina ncia l ins trum ents nge |
- | - | - | 2,42 6,63 3 |
- | - | - | 2,42 6,63 3 |
- | 2,42 6,63 3 |
- | 2,42 6,63 3 |
| Tran sfer ults of fa ir va lue of h edg ing inst s to ents res g g rum Cha s in the peri od nge |
- - |
- - |
- - |
- - |
- 6,56 6,53 2 |
- 3,61 7,75 9 |
- - |
- 10,1 84,2 91 |
- - |
- 10,1 84,2 91 |
- 1,24 2,41 6 |
- 11,4 26,7 07 |
| Tran sfer s to ults 42 res Sale s of affi lliate d un dert akin gs |
- - |
- | - | - | - | (14 ,035 ,569 ) |
- | (14 ,035 ,569 ) |
- | (14 ,035 ,569 ) |
(2,5 34,2 25) (2,1 71,9 88) |
(16 ,569 ,794 ) (2,1 71,9 88) |
| Aqu isitio n of affi lliate d un dert akin gs Spin -off of S e Ca pita l ona |
- - |
- - |
- - |
- - |
- - |
- - (55 ,503 ,670 ) |
- - (302 ,366 ,820 ) |
- - (357 ,870 ,490 ) |
- - |
- - (357 ,870 ,490 ) |
(18 ,131 ,866 ) 9,31 0,39 6 |
(18 ,131 ,866 ) (348 ,560 ,094 ) |
| Oth han er c ges Con solid ated Pro the twe lve |
- | - 4,39 3,15 6 |
- - |
- - |
- - |
- | 3,87 4,47 1 |
3,87 4,47 1 |
- - |
8,26 7,62 7 |
7,80 9,49 8 |
16,0 77,1 25 |
| fit/(L ) for ths oss mon end ed 3 1 De ber 200 7 cem |
- | - | - | - | - | - | - | - | 284 ,044 ,038 |
284 ,044 ,038 |
72,6 70,0 44 |
356 ,714 ,082 |
| Bala t 31 De ber 200 7 (N ote 1) nce as a cem |
2,00 0,00 0,00 0 |
(138 ,568 ,275 ) |
160 ,880 ,817 |
4,44 9,82 1 |
25,4 81,9 74 |
- | (1,1 66,6 27,6 27) |
(1,1 36,6 95,8 32) |
284 ,044 ,038 |
1,16 9,66 0,74 8 |
448 ,365 ,507 |
1,61 8,02 6,25 5 |
| Bala t 1 J 200 8 (N ote 1) nce as a anu ary App iatio n of fit o f 20 07: ropr pro |
2,00 0,00 0,00 0 |
(138 ,568 ,275 ) |
160 ,880 ,817 |
4,44 9,82 1 |
25,4 81,9 74 |
- | (1,1 66,6 27,6 27) |
(1,1 36,6 95,8 32) |
284 ,044 ,038 |
1,16 9,66 0,74 8 |
448 ,365 ,507 |
1,61 8,02 6,25 5 |
| Tran sfer to l l res d re tain ed e arni ega erve s an ngs Divi den ds d istri bute d |
- - |
- - |
825 ,157 - |
- - |
- - |
- - |
283 ,218 ,881 (56 ,016 ,000 ) |
283 ,218 ,881 (56 ,016 ,000 ) |
(284 ,044 ,038 ) - |
- (56 ,016 ,000 ) |
- (2,4 75,0 31) |
- (58 ,491 ,031 ) |
| Cha s in nge rese rves Cha s in fair valu e of fina ncia l ins trum ents nge |
- | - | - | (15 ,682 ,811 ) |
- | - | - | (15 ,682 ,811 ) |
- | (15 ,682 ,811 ) |
(7,7 61,7 89) |
(23 ,444 ,600 ) |
| Tran sfer s to ults of fa ir va lue of h edg ing inst ents res rum Cha s in the peri od nge |
- - |
- - |
- - |
- - |
- (29 ,733 ,295 ) |
- (1,9 76,3 46) |
- - |
- (31 ,709 ,641 ) |
- - |
- (31 ,709 ,641 ) |
- - |
- (31 ,709 ,641 ) |
| Tran sfer s to ults 42 res Adju stm ents of S e Ca pita l rig ht s hare late d to the spi n-of f ona s re |
- - |
- - |
- - |
- - |
- - |
- - |
- 7,30 4,00 0 |
- 7,30 4,00 0 |
- - |
- 7,30 4,00 0 |
- - |
- 7,30 4,00 0 |
| Aqu isitio nd s ales of s hare s of affi liate d un dert akin ns a gs Cap ital incr ese as |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
(20 ,508 ,575 ) 36,6 04,1 40 |
(20 ,508 ,575 ) 36,6 04,1 40 |
| Oth han er c ges Con solid ated Pro fit/(L ) for the lve ths twe oss mon end ed 31 Dec emb er 2 008 |
- - |
- - |
- - |
- - |
- - |
- - |
(2,5 97,1 89) - |
(2,5 97,1 89) - |
- 80,0 35,6 69 |
(2,5 97,1 89) 80,0 35,6 69 |
(1,7 17,7 54) (40, 957 ,397 ) |
(4,3 14,9 43) 39,0 78,2 72 |
| Bala t 31 De ber 200 8 nce as a cem |
2,00 0,00 0,00 0 |
(138 ,568 ,275 ) |
161 ,705 ,974 |
(11 ,232 ,990 ) |
(4,2 51,3 21) |
(1,9 76,3 46) |
(934 ,717 ,935 ) |
(952 ,178 ,592 ) |
80,0 35,6 69 |
1,15 0,99 4,77 6 |
411 ,549 ,101 |
1,56 2,54 3,87 7 |
The accompanying notes are part of these financial statements.
31.December.2007
| 31.December.2008 | Pro-forma (Note 1) |
31.December.2007 | ||
|---|---|---|---|---|
| OPERATING ACTIVITIES | Notes | |||
| Cash receipts from trade debtors Cash paid to trade creditors |
5,303,693,940 (4,208,396,201) (605,764,104) |
4,391,331,892 (3,357,637,695) (511,331,175) |
4,602,045,255 (3,479,623,863) (572,536,584) |
|
| Cash paid to employees Cash flow generated by operations |
489,533,635 | 522,363,022 | 549,884,808 | |
| Income taxes (paid) / received Other cash receipts and (payments) relating to operating activities |
(16,616,170) (6,692,573) |
(21,925,634) (7,035,201) |
(30,292,373) (1,930,279) |
|
| Net cash flow from operating activities (1) | 466,224,892 | 493,402,187 | 517,662,156 | |
| INVESTMENT ACTIVITIES | ||||
| Cash receipts arising from: Investments Tangible assets and investment properties Intangible assets Interest and similar income Interest and similar Loans granted Dividends Others |
49 | 123,090,637 25,714,084 6,209,293 27 913 003 27,913,003 8,612,239 554,007 - |
216,550,292 40,643,285 346,965 44 562 072 44,562,072 126,781,107 593,039 1,774,706 |
221,792,514 33,788,683 342,512 39 443 989 39,443,989 288,022,566 1,818,802 2,385,790 |
| 192,093,263 | 431,251,466 | 587,594,856 | ||
| Cash Payments arising from: Investments Tangible assets and investment properties Intangible assets Loans granted Others |
49 | (76,986,407) (592,118,629) (51,595,045) (39,149,825) (6,810,325) (766,660,231) |
(878,508,390) (596,647,830) (53,120,170) (13,395,624) (7,950,003) (1,549,622,017) |
(916,902,643) (688,526,511) (53,223,488) (17,385,832) (8,068,600) (1,684,107,074) |
| Net cash used in investment activities (2) | (574,566,968) | (1,118,370,551) | (1,096,512,218) | |
| FINANCING ACTIVITIES | ||||
| Cash receipts arising from: Loans obtained Capital increases, additional paid in capital and share premiums Sale of own shares Others |
7,124,370,355 1,608,000 - - |
6,894,452,156 182,783 273,398,877 212,500 |
7,107,957,625 1,183,454 273,398,877 212,500 |
|
| Cash Payments arising from: | 7,125,978,355 | 7,168,246,316 | 7,382,752,456 | |
| Loans obtained Interest and similar charges Reimbursement of capital and paid in capital Dividends Others |
(6,669,559,059) (193,401,577) (632,564) (62,326,616) (220,898,528) (7,146,818,344) |
(6,678,179,850) (150,861,111) (4,693) (78,435,064) (3,251,496) (6,910,732,214) |
(6,904,004,556) (158,974,453) (4,693) (78,435,064) (3,282,123) (7,144,700,889) |
|
| Net cash used in financing activities (3) | (20,839,989) | 257,514,102 | 238,051,567 | |
| Net increase in cash and cash equivalents (4) = (1) + (2) + (3) Effect of foreign exchange rate Cash and cash equivalents at the beginning of the period |
23 | (129,182,065) 3,477,519 275,625,572 |
(367,454,262) (166,281) 640,915,658 |
(340,798,495) 79,489 648,811,274 |
| Cash and cash equivalents demerged | 32,307,718 | |||
| Cash and cash equivalents at the end of the period | 23 | 142,965,988 | 273,627,677 | 275,625,572 |
The accompanying notes are part of these financial statements.
(Amounts expressed in euro)
SONAE, SGPS, SA ("Sonae Holding"), has its head-office at Lugar do Espido, Via Norte, Apartado 1011, 4470-909 Maia, Portugal, and is the parent company of a group of companies, as detailed in Notes 5 to 8 the Sonae Group ("Sonae"). The Group's operations and business segments are described in Note 51 and in the management report.
The consolidated financial statements for the year ended 31 December 2008 are not directly comparable with the financial statements for the twelve months period ended as at 31 December 2007 due to the spin-off of Sonae Capital business (with accounting effects from 1 October 2007) and due to the disposal of a shareholding position in Sierra Portugal Fund (SPF) on July 2008, reducing the percentage of capital held to 42% thus starting to be included by the use of the equity method. As a result of the SPF disposal, the consolidated income statements includes line-by-line contribution of the first six months of the year and the net profit of the second half of the year was recorded in the caption "Share of results of associated undertakings".
The pro-forma consolidated balance sheet as at 31 December 2007 includes the above mentioned change.
The pro-forma consolidated income statement and the pro-forma consolidated statement of cash flows as at 31 December 2007 include the above mentioned changes as if they had occured on the 1 January 2007 (spin-off of Sonae Capital) and on 30 June 2007 (disposal of the investment fund) so that those income and cash flow statement are directly comparable to 2008 consolidated financial statements.
The subsidiary Continente Hipermercados S A (corresponding to the portfolio ex Carrefour) was acquired by the end of 2007 (Note 9) not having as noticed Hipermercados, S.A. ex-Carrefour)having, noticed, concluded at that time the fair value imputation and the respective goodwill allocation. Such process was finished during 2008, hence a retrospective alocation of fair vaLue related to the referred Business Combination as required by IFRS 3 – Business Combinations was performed. Consequently the consolidated Balance Sheet at 31 December 2007 and the Consolidated Statements of Change in Equity for the year ended 31 December 2007, have been restated to consider already the new figures. The explanation of the changes made is presented in Note 9 in detail.
The principal accounting policies adopted in preparing the accompanying consolidated financial statements are as follows:
The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, issued by the International Accounting Standards Board ("IASB"), and interpretations issued by the Internationa Financial Reporting Interpretations Committee ("IFRIC") or by the previous Standing Interpretations Committee ("SIC"), as adopted by the European Union as at the consolidated financial statements issuance date.
Interim consolidated financial statements are presented quarterly in accordance with IAS 34 - Interim Financial Reporting.
The accompanying consolidated financial statements have been prepared from the books and accounting records of the Company, subsidiaries and joint ventures on a going concern basis and under the historical cost convention, except for financial instruments and investment properties which are stated at fair value.
Up to the financial statements approval date, the following Standards and Interpretations, some of which have became effective during the year 2008, have been endorsed by European Union:
| Effective date | |
|---|---|
| With mandatory application in 2008 | |
| IAS 39/IFRS 7 - Amendments: Reclassification of Financial Instruments | 01/07/2008 |
| IFRIC 14/IAS 19 - The Limit on Defined Benefit Asset, Minimum Funding | 01/01/2008 |
| Requirements and their Interaction | |
| With mandatory application after 2008 | |
| IFRS 8 – Operating Segments | 01/01/2009 |
| IFRS 2 - Amendments: Share-based Payment | 01/01/2009 |
| IAS 1 - Amendments: Fist-time Adoption of International Financial Reporting Standards | 01/01/2009 |
| IAS 23 - Amendments: Borrowing Costs | 01/01/2009 |
| IAS 32/IAS 1 - Amendments: Puttable Financial Instruments and | 01/01/2009 |
| Obligations Arising on Liquidation | |
| Amendments to International Financial Reporting Standards (2007) | 01/01/2009 |
| IFRS 1/IAS 27 - Cost of an Investment in a Subsidiary, Jointly Controlled | 01/01/2009 |
| Entity or Associate | |
| IFRIC 13 - Customer Loyalty Programmes | 01/07/2008 |
The adoption of these Standards has not led to any relevant changes to the consolidated financial statements.
With the exception of IAS 40 - Investment Property amendment included on the Annual Improvements 2007, which Sonae decided to early adopt prospectively since 2008, the remaining endorsed standards were not adopted in 2008, as its application is not mandatory for 2008 (Note 4).
It is not expected to arise material impacts to the consolidated statements of Sonae from the application of the above mentioned standards, with the exception of presentation and disclosure improvements as a result of the application of IAS 1 amendments and IFRS 8.
As at this date, the following standards and interpretations have already been issued by the IASB /IFRIC but have not yet been endorsed by the European Union:
| Effective Date | |
|---|---|
| Amendments to IFRS 3 – Business Combinations | 01/07/2009 |
| Amendments to IFRS 1 – First-time Adoption of International Financial Reporting Standards | 01/07/2009 |
| Amendments to IAS 27 - Consolidated and Separate Financial Statements | 01/07/2009 |
| Amendments to IAS 39 – Qualifying hedging instruments. | 01/07/2009 |
| Amendments to IAS 39 – Reclassification of Financial Assets | 01/07/2009 |
| Amendments to IFRS 7 – Financial Instruments: Disclosures | 01/01/2009 |
| IFRIC 12 - Service Concession Arrangements | 01/01/2009 |
| IFRIC 15 – Agreements for the Construction of Real Estate | 01/01/2009 |
| IFRIC 16 – Hedges of a Net Investments in a Foreign Operation | 01/10/2008 |
| IFRIC 17 – Distributions of Non-cash Assets to Owners | 01/07/2009 |
| IFRIC 18 – Transfer of Assets from Customers | 01/07/2009 |
The future application of the standards mentioned above, which have not been yet endorsed by de European Union , is not expected to produce material impacts to the consolidated financial statements, except for the IFRS 3 Revision with will produce significant changes in what goodwill computation is concerned.
The main accounting policies adopted by Sonae are as follows:
Investments in companies in which the Sonae owns, directly or indirectly, more than 50% of the voting rights at Shareholders' General Meetings or is able to establish financial and operational policies so as to benefit from its activities (definition of control normally used by Sonae), are included in the consolidated financial statements using the full consolidation method. Equity and net profit attributable to minority shareholders are shown separately, under the caption Minority interests, in the consolidated balance sheet and in the consolidated income statement, respectively. Companies included in the consolidated financial statements are listed in Note 5.
When losses attributable to minority interests exceed the minority interest in the equity of the Group, the excess, and any further losses attributable to minority interests, are charged against the equity holders of Sonae except to the extent that minority shareholders have a binding obligation and are able to cover such losses. If the Group subsequently reports profits, such profits are allocated to the equity holders of Sonae until the minority's share of losses previously absorbed by the equity holders of Sonae has been recovered.
Assets and liabilities of each Sonae company are measured at their fair value at the date of acquisition. Any excess of the cost of acquisition over the Sonae's interest in the fair value of the identifiable net assets acquired is recognised as goodwill (Note 2.2.d)). Any excess of the Sonae's share in the fair value of the identifiable net assets acquired over cost, is recognised as income in profit or loss for the period of acquisition, after reassessment of the estimated fair value. Minority interests include their proportion of the fair value of net identifiable assets and liabilities recognised on acquisition of Sonae companies.
The results of Group companies acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Adjustments to the financial statements of Sonae companies are performed, whenever necessary, in order to adapt accounting policies to those used by Sonae. All intra-group transactions, balances, income and expenses and distributed dividends are eliminated on consolidation.
Whenever Sonae has, in substance, control over other entities created for a specific purpose, even if no share capital interest is directly held in those entities, these are consolidated by the full consolidation method. Such entities, when applicable, are disclosed in Note 5.
Investments in jointly controlled companies are included in the accompanying consolidated financial statements in accordance with the proportionate consolidation method as from the date joint control is acquired. In accordance with this method, the Group includes in the accompanying consolidated financial statements its share of assets, liabilities, income and expenses of these companies, on a line-by-line basis.
Any excess of the cost of acquisition over the Group's interest in the fair value of identifiable net assets acquired is recognised as goodwill (Note 2.2.d)). Any excess of the Group's share in the fair value of net assets acquired over cost is recognised as income in profit or loss for the period of acquisition after reassessment of the estimated fair value of the net assets acquired in the caption "Other operational income".
Sonae's share of inter-company balances, transactions and dividends distributed are eliminated.
Investments in jointly controlled companies are classified as such based on shareholders' agreements that establish joint control.
Companies included in the accompanying consolidated financial statements in accordance with the proportionate method are listed in Note 6.
Investments in associated companies (companies where Sonae exercises significant influence but does not establish financial and operational policies – usually corresponding to holdings between 20% and 50% in a company's share capital) are accounted for in accordance with the equity method.
Under the equity method, investments are recorded at cost, adjusted by the amount corresponding to Sonae's share of changes in equity (including net profit) of associated companies and to dividends received.
Any excess of the cost of acquisition over Sonae's share in the fair value of the identifiable net assets acquired is recognised as goodwill (Note 2.2.d)), which is included in the caption Investment in associated companies. Any excess of Sonae's share in the fair value of the identifiable net assets acquired over cost is recognised as income in the profit or loss for the period of acquisition, after reassessment of the estimated fair value of the net assets acquired under the caption Share of profit of associates.
An assessment of investments in associated companies is performed when there is an indication that the asset might be impaired. Any impairment loss is recorded in the income statement. Impairment losses recorded in prior years that are no longer justifiable, are reversed.
When Sonae's share of losses exceeds the carrying amount of the investment, the investment is reported at nil value and recognition of losses is discontinued, unless Sonae is committed beyond the value of its investment.
The Sonae's share in unrealized gains arising from transactions with associated companies is eliminated. Unrealized losses are eliminated, but only to the extent that there is no evidence of impairment of the asset transferred.
Investments in associated companies are disclosed in Note 7.
The excess of the cost of acquisition of investments in subsidiaries, jointly controlled and associated companies over Sonae's share in the fair value of the assets and liabilities of those companies at the date of acquisition is shown as Goodwill (Note 14) or as Investments in associated companies (Note 7). The excess of the cost of acquisition of investments in foreign companies over the fair value of their identifiable assets and liabilities at the date of acquisition is calculated using the functional currency of each of those companies. Translation to the Group's functional currency (Euro) is made using the closing exchange rate. Exchange rate differences arising from this translation are recorded and disclosed in "Other reserves and retained earnings".
Goodwill is not amortised, but it is subject to impairment tests on an annual basis. Net recoverable amount is determined based on business plans used by Sonae management or on valuation reports issued by independent entities Impairment losses recognized in the period are recorded in the income statement under the entities. caption Provisions and impairment losses.
Impairment losses related with goodwill will not be reversed unless in the case of goodwill related with associated companies.
Any excess of Sonae's share in the fair value of identifiable assets and liabilities in group, jointly controlled and associated companies over cost, is recognised as income in the profit or loss for the period, at the date of acquisition, after reassessment of the fair value of the identifiable assets and liabilities acquired.
Goodwill arising from acquisitions made prior to the date of transition to IFRS (1 January 2004) is stated using the carrying amounts, net of accumulated amortisation, calculated in accordance with generally accepted accounting principles in Portugal, adjusted for intangible assets which do not meet IFRS criteria, and is subject to impairment tests. Impacts of these adjustments were recorded in Retained earnings, in accordance with IFRS 1. Goodwill arising from foreign companies was recalculated retrospectively using the functional currency of each such company. Exchange rate differences generated in the translation were also recorded against Retained earnings (IFRS 1).
Assets and liabilities denominated in foreign currencies in the financial statements of foreign companies are translated to euro using exchange rates at the balance sheet date. Profit and loss and cash flows are converted to euro using the average exchange rate for the period. Exchange rate differences originated after 1 January 2004 are recorded as equity under Translation reserves in Reserves and retained earnings. Exchange rate differences that were originated prior to 1 January 2004 (date of transition to IFRS) were written-off through Retained earnings.
Goodwill and fair value adjustments arising from the acquisition of foreign companies are recorded as assets and liabilities of those companies and translated to euro using exchange rates at the balance sheet date.
Whenever a foreign company is sold, accumulated exchange rate differences are recorded in the income statement as a gain or loss on the disposal, in the caption Investment income.
Exchange rates used on translation of foreign group, jointly controlled and associated companies are listed below:
| 31.December.2008 | 31.December.2007 | |||
|---|---|---|---|---|
| End of period | Average of period | End of period | Average of period | |
| US Dollar | 0.71855 | 0.68350 | 0.67930 | 0.73080 |
| Swiss Franc | 0.67340 | 0.63044 | 0.60434 | 0.60884 |
| Pound Sterling | 1.04987 | 1.25890 | 1.36361 | 1.46209 |
| Romanian New Leu | 0.24860 | 0.27178 | 0.27718 | 0.30017 |
| Brazilian Real | 0.30830 | 0.37657 | 0.38516 | 0.37577 |
| Polish Zloty | 0.24076 | 0.28570 | 0.27828 | 0.26445 |
Source: Bloomberg
Tangible assets acquired up to 1 January 2004 (transition date to IFRS) are recorded at acquisition or production cost, or revalued acquisition cost, in accordance with generally accepted accounting principles in Portugal until that date, net of depreciation and accumulated impairment losses.
Tangible assets acquired after that date are recorded at acquisition cost, net of depreciation and accumulated impairment losses.
Depreciation is calculated on a straight line basis, as from the date the asset is first used, over the expected useful life for each class of assets.
Impairment losses detected on tangible assets are recorded in the year estimated against the income statement caption "Provisions and impairment losses".
The depreciation rates used correspond to the following estimated useful lives:
| Years | |
|---|---|
| Buildings | 10 to 50 |
| Plant and machinery | 10 to 20 |
| Vehicles | 4 to 5 |
| Tools | 4 to 8 |
| Fixture and fittings | 3 to 10 |
| Other tangible assets | 4 to 8 |
Maintenance and repair costs relating to tangible assets are recorded directly as expenses in the year they are incurred.
Tangible assets in progress represent fixed assets still under construction/development and are stated at acquisition cost net of impairment losses. These assets are depreciated from the date they are completed or become ready for use.
Gains or losses on sale or disposal of tangible assets are calculated as the difference between the selling price and the carrying amount of the asset at the date of its sale/disposal. These are recorded in the income statement under either Other operational income or Other operational expenses.
Investment properties consist of shopping centre buildings and other constructions that are held to earn rental income or for capital appreciation or both, rather than for use in the production or supply of goods or services or for administrative purposes or for sale in the ordinary course of business for use in the production or supply of goods or services or for administrative purposes or for sale in the ordinary course of business.
The investment properties which do not fulfil the conditions to reliably measure their fair value, are recorded at their historical or production cost, net from eventual impairment losses. Taking in concern that such investment properties are essentially fixed assets that are being qualified as investments properties in the future, they are separately classified in the caption Investments Properties in Progress on the Consolidated Balance Sheet.
The investment property in progress considered investment property, within the scope of IAS 40, when they fufil the conditions to reliably measure their fair value.
It is considered that an Investment property in progress fulfill the conditions for its fair value to be reliably measured, when a there is a high probability that the project will be concluded in a short period. This probability is high when the following events are simultaneously accomplished:
Investment properties are recorded at their fair value based on half-yearly valuations performed by an independent valuer. Changes in fair values of investment properties are accounted for in the period in which they occur, in the income statement under the caption Value created on Investment Properties.
The assets of Sonae which qualify as investment properties are recognized as such when they start being used or, in the case of the investment properties in progress, when their development is considered irreversible, as mentioned in the above conditions. Until the moment the asset is qualified as investment property, the same asset is booked at historical or production cost under the caption "Investment Property in progress" in the same way as a tangible asset (Note 2.3). Since that moment, the investment properties in progress are recorded at their fair value. The difference between cost (of acquisition or production) and the fair value at that date is accounted for in the consolidated income statement at the caption "Variation in fair value of investment properties".
Costs incurred with investment properties in use, such as maintenance, repairs, insurance and property taxes, are recognised in the income statement for the period to which they refer. Costs incurred with refurbishments/improvement which will generate estimated additional future economic benefits are capitalized under Investment Properties.
Intangible assets are stated at acquisition cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognised if it is probable that future economic benefits will flow from them, if they are controlled by Sonae and if their cost can be reliably measured.
Expenditure on research associated with new technical know-how is recognised as an expense recorded in the income statement when it is incurred.
Expenditure on development is recognised as an intangible asset if Sonae demonstrates the technical feasibility and its intention to complete the asset, its ability to sell or use it and the probability that the asset will generate future economic benefits. Expenditure on development which does not fulfil these conditions is recorded as an expense in the period in which it is incurred.
Internal costs associated with maintenance and development of software are recorded as an expense in the period in which they are incurred. Only costs directly attributable to projects for which the generation of future economic benefits is probable are capitalised as intangible assets.
The expenses incurred with the acquisition of client portfolio's (attributed value relating to the allocation of the purchasing price in business activity concentration) are stated as intangible assets and amortized on a straight line bases, during the average estimated period of portfolio's client retention.
Amortisation is calculated on a straight line basis, as from the date the asset is first used, over the expected useful life which usually is between 3 and 6 years, except for property occupation rights which are amortised over the duration of the contract which establishes these rights. It is recorded in the caption of "Amortizations and depreciations".
Amortisation is calculated on a straight line basis, as from the date the asset is first used, over the expected useful life which usually is between 3 and 6 years, except for property occupation rights and mobile and fixed operator licenses.
Mobile and fixed operator licenses are amortised over the duration of the contract which establishes these rights.
The property occupation rights, specially from Shopping centres segment, are being amortised on a straight line basis during the right´s estimated utilization time period (time periods vary between 10 and 15 years).
Brands and patents with defined useful lives are recorded at their historical cost and are amortised on straight line basis during the estimated useful life. Brands and patents with undefined useful lives are not amortised, but are subject to impairment tests on an annual basis or when there are impairment indicators.
Lease contracts are classified as (i) a finance lease if the risks and rewards incidental to ownership lie with the lessee and (ii) as an operating lease if the risks and rewards incidental to ownership do not lie with the lessee.
Whether a lease is classified as a finance or an operating lease depends on the substance of the transaction rather than the form of the contract.
Tangible assets acquired through finance lease contracts are recorded as assets and corresponding obligations as liabilities in the balance sheet. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability, at their fair value or if lower, at the minimum present value payment to do until the end of the contract. Both the finance charge and the depreciation expense for depreciable assets are taken to the income statement in the period in which they are incurred. period in which they are incurred.Most of the cases where the Group is the lessor arise from contracts with shopping centre tenants. These contracts are usually for a period of six years and
Lease payments under operating lease contracts are recognised as an expense on a straight line basis over the lease term.
establish the payment by the tenant of a monthly fixed rent - invoiced in advance –, a variable rent, invoiced if the monthly sales of the tenant are higher than the limit established in the contract and the payment of the tenant's share in the shopping centre operational expenses. The contract with the tenant may also establish the payment of an entrance fee in the shopping centre (key money income) and some discounts (usually in the first three years of the contract) to the fixed rent. These contracts can be renewed or cancelled by any of the parties involved (the company or the tenant). If the cancellation is made by the tenant it must pay a cancellation fee to the company established in the contract. In the case of being proposed a renovation by the lessor, Sonae should pay a compensation (indemnization) to the shopkeeper.
These contracts are classified as operating leases. Rents (fixed and variable) and common charges are recognised as income in the period to which they refer. Costs as well as entrance fees (key money) and cancellation fees arising from operating leases are recorded as expenses or income in the period in which they are incurred or earned. This is consistent with the method adopted by independent valuers who determine the fair value of investment properties to which the leasing contracts refer.
Government grants are recorded at fair value when there is reasonable assurance that they will be received and that Sonae will comply with the conditions attaching to them.
Grants received as compensation for expenses, namely grants for personnel training, are recognised as income in the same period as the relevant expense.
Grants related to depreciable assets are disclosed as Other non-current liabilities and are recognised as income on a straight line basis over the expected useful lives of those underlying assets.
Assets are assessed for impairment at each balance sheet date whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the income statement under Provisions and impairment losses.
The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash-generating unit to which the asset belongs.
Reversal of impairment losses recognised in prior years is only recorded when it is concluded that the impairment losses recognised for the asset no longer exist or have decreased. This analysis is performed whenever there is an indication that the impairment loss previously recognised has been reversed. The reversal is recorded in the income statement as Operational income. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognised to the extent it does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for that asset in prior years.
Borrowing costs are usually recognised as an expense in the period in which they are incurred.
Borrowing costs directly attributable to the acquisition, construction or production of tangible and intangible assets, real estate projects classified as inventories or investment properties are capitalised as part of the cost of the qualifying asset. Borrowing costs are capitalised from the beginning of preparation of the activities to construct or develop the asset up to the time the production or construction is complete or when asset development is interrupted. Any income earned on funds temporarily invested pending their expenditure on the qualifying asset, is deducted from the borrowing costs that qualify for capitalisation.
Consumer goods and raw materials are stated at the lower of cost deducted from discounts obtained and net realisable value. Cost is determined on a weighted average basis.
Differences between cost and net realisable value, if negative, are shown as operating expenses under the caption "Cost of goods sold and materials consumed" or Changes in stocks of finished goods and work in progress, depending on whether they refer to consumer goods and raw materials or finished goods and work in progress.
Provisions are recognised when, and only when, Sonae has an obligation (legal or constructive) resulting from a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of that obligation. Provisions are reviewed and adjusted at the balance sheet date to reflect the best estimate as of that date.
Restructuring provisions are recorded by Sonae whenever a formal and detailed restructuring plan exists and that plan has been communicated to the parties involved.
Sonae classifies the financial instruments in the categories presented and conciliated with the Consolidated Balance Sheet disclosed in Note 10.
Investments are classified into the following categories:
Held to maturity investments are classified as non-current assets unless they mature within 12 months of the balance sheet date. Investments classified as held to maturity have defined maturities and Sonae has the intention and ability to hold them until the maturity date.
The investments measured at the fair value through profit or loss include the investments held for trading that Sonae acquires with the purpose of trading in the short term. They are classified in the consolidated balance sheet as current investments.
Sonae classifies as available-for-sale investments those that are neither included as investments measured at fair value through profit or loss neither as investments held to maturity. This assets are classified as non-current assets, except if the sale is expected to occur within 12 months from the date of classification.
All purchases and sales of investments are recognised on the trade date, independently of the settlement date.
Investments are initially measured at cost, which is the fair value of the consideration paid for them, including transaction costs.
Available-for-sale investments and investments measured at fair value through profit or loss are subsequently carried at fair value, without any deduction for transaction costs which may be incurred on sale, by reference to their quoted market price at the balance sheet date. Investments in equity instruments that do not have a quoted market price and whose fair value cannot be reliably measured, are stated at cost, less impairment losses.
Gains or losses arising from a change in fair value of available-for-sale investments are recognised directly in equity, under Fair value reserve, included in Reserves and retained earnings until the investment is sold or otherwise disposed of, or until it is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is transferred to net profit or loss for the period.
Changes in the fair value of investments measured at fair value through profit or loss are included in the consolidated income statement for the period under financial expenses or gains.
Held to maturity investments are carried at amortised cost using the effective interest rate, net of capital reimbursements and interest income received.
Loans and non current accounts receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
These financial investments arise when Sonae provides money, goods or services directly to a debtor with no intention of trading the receivable.
Loans and receivables are recorded as current assets, except when its maturity is greater than 12 months from the balance sheet date, when they are classified as non-current assets. Loans and receivables are included in the captions presented in Note 10.
c) Trade accounts receivable and other accounts receivables
Trade accounts receivables and other accounts receivable are recorded at their nominal value and presented in the consolidated balance sheet net of eventual impairment losses, recognised under the allowance account Impairment losses on accounts receivable , in order to reflect its net realisable value. These captions, when classified as current, do not include interests because the effect of discounting would be immaterial.
Impairment is recognised if there is objective and measurable evidence that, as a result of one or more events that occurred, the balance will not be fully received. Therefore, each Sonae company takes into consideration market information that indicates:
When it's not possible to assess the impairment for every single financial asset, the impairment is assessed on a collective basis, namely in the Telecommunications segment. Objective evidence of impairment of a portfolio of receivables could include Sonae's past experience of collecting payments, an increase in the number of delayed payments in the portfolio, as well as observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate. If the receipt of the full amount is expected to be within one year the discount is considered null as it is immaterial.
The non-current assets (or disposal group) are recorded as held for sale if it is expected that the book value will be recovered through the sale and not through the use in the operations. This condition is achieved only if the sale is highly probable and the asset (or disposal group) is available for the immediate sale in the actual conditions. Additionally, there must be in progress actions that should allow to conclude the sale within 12 months counting from the classification´s date in this caption. The non-current assets (or disposal group) recorded as held for sale are booked at the lower amount of the historical cost or the fair value deducted f t t b i ti d ft b i l ifi d h ld f l from costs, not being amortized after being classified as held for sale.
Financial liabilities and equity instruments are classified and accounted for based on their contractual substance, independently from the legal form they assume.
Equity instruments are contracts that evidence a residual interest in the assets of Sonae after deducting all of its liabilities. Equity instruments issued by Sonae are recorded at the proceeds received, net of direct issue costs.
Loans are recorded as liabilities at their nominal value, net of up-front fees and commissions related to the issuance of those instruments. Financial expenses are calculated based on the effective interest rate and are recorded in the income statement on an accruals basis, in accordance with the accounting policy defined in Note 2.9. The portion of the effective interest charge relating to up-front fees and commissions, if not paid in the period, is added to the book value of the loan.
Accounts payable are stated at their nominal value, as they do not bear interests and the effect of discounting is considered immaterial.
Sonae uses derivatives in the management of its financial risks to hedge such risks and/or in order to optimise the funding costs.
Derivatives classified as cash flow hedge instruments are used by the Sonae mainly to hedge interest and exchange rate risks on loans obtained. Conditions established for these cash flow hedge instruments are identical to those of the corresponding loans in terms of base rates, calculation rules, rate setting dates and repayment schedules of the loans and for these reasons they qualify as perfect hedges. The inefficiencies, if any, are accounted under financial expenses or gains in the consolidated income statement.
Sonae's criteria for classifying a derivative instrument as a cash flow hedge instrument include:
Cash flow hedge instruments used by the Sonae to hedge the exposure to changes in interest and exchange rates of its loans are initially accounted for at cost, which corresponds to its fair value, and subsequently adjusted to their corresponding fair value. Changes in fair value of these cash flow hedge instruments are recorded in equity under the caption Hedging reserves, and then recognised in the income statement over the same period in which the hedged instrument affects profit or loss.
Hedge accounting of derivative instruments is discontinued when the instrument matures or is sold. Whenever a derivative instrument can no longer be qualified as a hedging instrument, the fair value differences recorded in equity under the caption Hedging reserve, are transferred to profit or loss of the period or to the carrying amount of the asset that resulted from the hedged forecast transaction. Subsequent changes in fair value are recorded in the income statement.
Sonae also uses financial instruments with the purpose of cash flow hedging that essentially respect the exchange rate hedging ("forwards") of loans and commercial operations that, however, do not configure perfect hedging relations, and so, do not receive hedge accounting treatment, but allow the reduction, in a very significant way, of the loan and receivable/payable balance exchange variability effect, nominated in foreign currency.
Sonae also uses financial instruments with the purpose of cash flow hedging that essentially respect the exchange rate hedging ("forwards") of loans and commercial operations that, however, do not configure perfect hedging relations, and so, do not receive hedge accounting treatment, but allow the reduction, in a very significant way, of the loan and receivable/payable balance exchange volatility, nominated in foreign currency.
Derivatives, despite being entered into with the above mentioned aims (mainly exchange forwards and derivatives in the form of or including interest rate options), do not qualify for hedge accounting, thus are initially recorded by their cost, which corresponds to its fair value, and are subsequently measured at fair value through profit and loss. The derivatives fair value is estimated internally by the use of specific software.
When embedded derivatives exist, they are accounted for as separate derivatives when the risks and the characteristics are not closely related to economic risks and characteristics of the host instruments, and this is not stated at fair value through profit or loss.
Sonae may agree to become part of a derivative transaction in order to fair value hedge some interest rate exposure. In these cases, derivatives are recorded at fair value through profit or loss and the effective portion of the hedging relationship is adjusted in the carrying amount of the hedged instrument, if not stated at fair value (namely loans recorded at amortised cost), through profit or loss.
Own shares are recorded at acquisition cost as a reduction to equity. Gains or losses arising from sales of own shares are recorded in Reserves and retained earnings.
Cash and cash equivalents include cash on hand, cash at banks, term deposits and other treasury applications which mature in less than three months and are subject to insignificant risk of change in value.
In the consolidated statement of cash flows, cash and cash equivalents also include bank overdrafts, which are included in the balance sheet caption Borrowings.
All the amounts included in this caption can be reimbursed at demand as there are no pledges or guarantees over these assets.
Share-based payments result from Deferred Performance Bonus Plans that are referenced to Sonae share price and/or that of its publicly listed affiliated companies (Sonae Sierra uses the "Net Asset Value" as a reference) and vest within a period of 3 years after being granted.
Share-based payment liabilities are measured at fair value on the date they are granted (normally in March of each year) and are subsequently remeasured at the end of each reporting period, based on the number of shares or share options granted and the corresponding fair value at the closing date. The fair value of share options is estimated based on the "Black-Scholes" model. These obligations are stated as Staff costs and Other liabilities, and are recorded on a straight-line basis, between the date the shares are granted and their vesting date, taking into consideration the time elapsed between these dates, when the Sonae has the choice to settle the transaction in cash. In the case of equity-settled share-based payment transactions, these obligations are stated as Staff costs and Reserves and are recorded on a straight line basis between the date the shares are granted and their vesting date, in the proportion of time passed between both dates, being the fair value fixed at each balance sheet date.
Contingent liabilities are not recorded in the consolidated financial statements. Instead they are disclosed in the notes to the financial statements, unless the probability of a cash outflow is remote, in which case, no disclosure is made.
Contingent assets are not recorded in the consolidated financial statements but disclosed when future economic benefits are probable.
The tax charge for the year is determined based on the taxable income of companies included on consolidation and considers deferred taxation.
Current income tax is determined based on the taxable income of companies included on consolidation, in accordance with the tax rules in force in the respective country of incorporation.
Deferred taxes are calculated using the balance sheet liability method, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are calculated and annually remeasured using the tax rates that have been enacted or substantively enacted and therefore are expected to apply in the periods when the temporary differences are expected to reverse.
Deferred tax assets are recognised only when it is probable that sufficient taxable profits will be available against which the deferred tax assets can be used, or when taxable temporary differences are recognised and expected to reverse in the same period. At each balance sheet date a review is made of the deferred tax assets recognised, which are reduced whenever their future use is no longer probable.
Deferred tax assets and liabilities are recorded in the income statement, except if they relate to items directly recorded in equity. In these cases the corresponding deferred tax is recorded in equity.
Revenue from the sale of goods is recognised in the income statement when the risks and benefits have been transferred to the buyer and the amount of the revenue can be measured reasonably. Sales are recognised net of sales taxes and discounts and other expenses arising from the sale, and are measured as the fair value of the amount received or receivable.
Revenue from services rendered is recognised in the income statement taking into consideration the stage of completion of the transaction at the balance sheet date and include fixed and variable rents billed to shopkeepers, recoverable common expenses from shopkeepers and exploration revenue from car parks.
Revenue from admission rights and store transfer taxes are recognised in the consolidated income statement under Other operational expenses and under Services rendered, respectively, when billed to the tenant. Costs from discounts given over the rent and compensations are recognised in the consolidated income statement under Services Rendered and Other operational expenses, respectively.
With regards to services rendered by travel agencies, revenue is recognized with the issuance of invoice. At balance sheet date, adjustments are made under Other current assets and Other current liabilities in order to accrue for revenue of the services already rendered but whose billing had not occurred yet, as well as for the associated subcontract expenditures.
Revenue from Telecommunications services is recognised in the period in which it occurs. Such services are invoiced on a monthly basis. Revenues not yet invoiced, from the last invoicing cycle to the end of the month, are estimated and recorded based on actual traffic. Differences between the estimated and actual amounts, which are usually not material, are recorded in the following period.
The income related to pre-paid cards is recognised whenever the minutes are used. At the end of each period the minutes still to be used are estimated and the amount of income associated with those minutes is deferred.
The deferral of revenue related with the customer loyalty programmes by the attribution of points or discounts in future purchases, in the Retail and Telecommunications segments, are quantified having in account the probability of their exercise and are deducted to the revenue at the moment of his generation. The corresponding liability is presented in the caption "Other creditors".
Dividends are recognised as income in the year they are attributed to the shareholders.
Income and expenses are recorded in the year to which they relate, independently of the date of the corresponding payment or receipt. Income and expenses for which their real amount is not known are estimated.
Other current assets and Other current liabilities include income and expenses of the reporting year which will only be invoiced in the future. Those captions also include receipts and payments that have already occurred but will only correspond to income or expenses of future years, when they will be recognised in the income statement.
Transactions in currencies other than the Euro, are translated to Euro using the exchange rate as at the transaction date.
At each balance sheet date, all monetary assets and liabilities expressed in foreign currencies are translated to the functional currency of each foreign company at the exchange rates as at that date. All non-monetary assets and liabilities recorded at fair value and stated in foreign currencies are converted to the functional currency of each company, using the exchange rate at the date the fair value was determined.
Exchange gains and losses arising from differences between historical exchange rates and those prevailing at the date of collection, payment or the date of the balance sheet, are recorded as income or expenses of the period, except for those related to non-monetary assets or liabilities, for which adjustments to fair value are directly recorded under equity.
When Sonae wants to reduce currency exposure, it negotiates hedging currency derivatives (Note 2.12.h)).
Events after the balance sheet date that provide additional information about conditions that existed at the balance sheet date (adjusting events), are reflected in the consolidated financial statements. Events after the balance sheet date that are non-adjusting events are disclosed in the notes when material.
The most significant accounting estimates reflected in the consolidated income statements include:
Estimates used are based on the best information available during the preparation of consolidated financial statements and are based on best knowledge of past and present events. Although future events are neither controlled by the Sonae nor foreseeable, some could occur and have impact on the estimates. Changes to the estimates used by the management that occur after the date of these consolidated financial statements, will be recognised in net income, in accordance with IAS 8, using a prospective methodology.
The main estimates and assumptions in relation to future events included in the preparation of consolidated financial statements are disclosed in the correspondent notes.
In order to optimise insurance costs, Sonae, through a wholly owned subsidiary, enters into reinsurance operations over non-life insurance contracts entered into by subsidiaries and related of the Efanor Group.
The Sonae branch office acts like an intermediate in the assurance operations as a way to optimise insurance coverage and retention levels in accordance with the needs of each business, ensuring effective insurance management worldwide. The retained risk is immaterial when compared with the risks transferred.
Premiums written on non-life insurance contracts and associated acquisition costs are recognised as income and cost on a pro-rata basis over the term of the related risk periods, through changes in the provision for unearned premiums.
The provision for unearned premiums (Note 34) reflects the portion of non-life insurance premiums written attributable to future years, namely the portion corresponding to the period between the balance sheet date and the end of the period to which the premium refers. It is calculated, for each contract in force.
The Provision for claims (Note 34) reflects the estimated amounts payable for claims, including claims that have been incurred but not reported and future administrative costs to be incurred on the settlement of claims under management. Provisions for claims recorded by Sonae are not discounted.
Reinsurer's share of technical provisions (Assets - Note 16) are determined by applying the above described criteria for direct insurance, taking into account the percentages ceded, in addition to other clauses existing in the treaties in force.
At each balance sheet date, Sonae assess the existence of evidence of impairment on assets originated by insurance or reinsurance contracts.
All business and geographic segments of Sonae are identified annually.
Information regarding business and geographic segments identified is included in Note 51.
Portuguese commercial legislation requires that at least 5% of annual net profit must be appropriated to a legal reserve, until such reserve reaches at least 20% of the share capital. This reserve is not distributable, except in the case of liquidation of the Company, but it may be used to absorb losses, after all the other reserves are exhausted or to increase the share capital exhausted, or to increase the share capital.
The Hedging reserve reflects the changes in fair value of "cash flow" hedging derivates that are considered as effective (Note 2.12.h)) and is not distributable or used to absorb losses.
The currency translation reserve corresponds to exchange differences relating to the translation from the functional currencies of the Sonae's foreign subsidiaries and joint ventures into Euro, in accordance with the accounting policy described in Note 2.17.
This reserve arises on the revaluation of available-for-sale financial assets as mentioned in Note 2.12.a).
The ultimate purpose of financial risk management is to support Sonae in the achievement of its strategy by reducing unwanted financial risk and volatility and mitigate any negative impacts in the profit or loss statement arising from such risks. Sonae's attitude towards financial risk management is conservative and cautious. Derivatives are used to hedge certain exposures related to its operating business and, as a rule, Sonae does not enter into derivatives or other financial instruments that are unrelated to its operating business or for speculative purposes.
Due to it's diversified nature Sonae is exposed to a variety of financial risks, consequently each Sub-holding is responsible for, where applicable, for setting its own financial risk management policies, to monitor their own exposure and to implement their approved policies. Therefore for some risks there are not Sonae global risk management policies, but rather, where appropriate, customised risk management policies at Sub-Holding level. Financial risk management policies are approved by each Executive Committee and exposures are identified and monitored by each Sub-Holding Finance Department. Exposures are also monitored by the Finance Committee as mentioned in the Corporate Governance Report.
The Finance Committee co-ordinates and reviews, amongst other responsibilities, global financial risk management policies. It is the Finance Departments responsibility to review and measure, group and company's financial risk exposure for reporting purposes. Sonae SGPS Finance department is also responsible for assisting each Sub-holding in managing their own currency, interest rate, liquidity and refinancing risks trough the Corporate Dealing Desk. Exposures are recorded in a main Treasury Management System (TMS). Risk control and reporting is carried out both at Sub-Holding level on a daily basis and on a Consolidated basis for the monthly Finance Committee meeting.
Credit risk is defined as the probability of a counterparty defaulting on its contractual obligations resulting in a financial loss. It is shown in two main ways:
The credit risk in what Financial Instruments is concerned arises mainly from holding cash and cash equivalents instruments, deposits with banks and financial institutions or resulting from derivative financial instruments entered into in the normal course of its hedging activities or from its lending activities to subsidiaries. In order to reduce the probability of counterpart default Sonae SGPS transactions (short term investments and derivatives) are only contracted in accordance with the following principles:
Given the above mentioned policies and the minimum credit ratings Sonae does not expect any material failure in contractual obligation from its external counterparties nevertheless exposure to each counterparty resulting from financial instruments and the credit rating of potential counterparties is regularly monitored by the Sub-holding Finance Department and any departure is promptly reported to the respective Executive Committee/Board of Directors and to the Sonae Finance Committee.
In this case due to each business characteristics and consequently of different credit risk typology, each sub-holding determines the most appropriate policy, as described above. However the policies follow the same wide principles of: prudence, conservatism, and the implementation of control mechanisms.
The credit risk in the scope of its current operational activity is controlled through a system of gathering financial and qualitative information from independent entities that supply risk information, in order to allow the assessment of credit risk from debtors. Credit risk is mainly originated by sales to other retail operators and by the rendering of travel agencies services or by advances made to or discounts billed to suppliers.
The credit risk results essentially of the risk of credit of the tenants of the commercial centres managed by Sub-Holding and of the other debtors. Shopping Centre storekeepers credit risk monitoring is made by the adequate assessment of risk before the storekeepers are accepted and by the establishment of conservative credit limits for each storekeeper credit limits for each storekeeper.
The Sub-holding exposure to credit risk is mainly associated with the accounts receivable related to current operational activities. The credit risk management purpose is to guarantee that the amounts owed by debtors are effectively collected within the periods negotiated without impacting the financial health of the Subholding. Sonaecom uses credit rating agencies and has specific departments responsible for risk control, collections and management of processes in litigation, which all contribute to the mitigation of credit risk.
Sonae Holding is a company without any relevant commercial or trade activity, other than the normal activities of a portfolio manager. As such, it is only exposed, on a regular basis, to credit risk resulting from its investing activities (holding cash and cash equivalents instruments, deposits with banks and financial institutions or resulting from derivative financial instruments entered into in the normal course of its hedging activities) in accordance with the principles mentioned in point 3.2.1..
Additionally Sonae SGPS may sometimes also be exposed to credit risk as a result of it's portfolio manager activities (buying or selling investments), but in those exceptional situations risk reducing mechanisms and actions are implemented on a case by case basis under the supervision of the Executive Committee (requesting bank guarantee, escrow accounts, obtaining collaterals, amongst others).
The amount related to customers, other debtors and other assets presented in Financial Statements, which are net of impairment losses represent Sonae exposure to credit risk.
Sonae needs to raise external funds to finance its activities and investing plans. It holds a diversified loan portfolio, essentially made of long term bonds, long term project finance, mutuals, structured facilities, but which also includes a variety of other short-term financing facilities in the form of commercial paper and credit lines. As at 31 December 2008 the total gross debt was 3.387 million euro (2.967 million euro as at 31 December 2007 and 2.871 million euro in the pro forma financial statements).
The purpose of liquidity risk management is to ensure, at all times, that Sonae has the financial capacity to fulfil its commitments as they become due and to carry on its business activities and strategy. Given the dynamic nature of its activities, Sonae needs a flexible financial structure and therefore uses a combination of:
-
The maturity table of each major class of liabilities is presented in Notes 26, 27, 30, 31 and 32, based on the undiscounted cash flows of financial liabilities based on the earliest date on which Sonae can be required to pay ("worst case scenario").
A liquidity reserve in form of credit lines with its relationship banks is maintained by Sonae, to ensure the ability to meet its commitments without having to refinance itself in unfavourable terms. Loans maturing in 2009 where 370 million euro (138 million euro maturing in 2008) and as at 31 December 2008 Sonae had undrawn committed credit facilities of 605 million euro (766 million euro in 2007) cancellable within a previous notice of less than one year and 259 million euro (495 million euro in 2007) cancellable with a previous notice of no less than 360 days.
Additionally, has at 31 December 2008, cash and cash equivalents and current investments were also held amounting to 248 million euro (346 million euro as at 31 December 2007). Consequentially, Sonae SGPS expects to meet all its obligations by means of its operating cash flows and proceeds from ifs financial assets as well as from drawing existing available credit lines, if needed.
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As each Sub-holding operates in different markets and in different business environments, there is no single policy applicable for the entire Sonae, but rather policies adjusted to each Sub-holding exposure existing as described below. As previously mentioned, the Group exposure is regularly monitored by the Finance Committee, at a group level, and at each Sub-holding level. Although there is no wide risk management interest rate policy, in what concerns the derivatives negotiation, there are principles that should be followed by each group companies and that are referred below:
Group exposure to the interest rate arises mainly from long term loans which bear interests at Euribor plus spread.
Sonae Distribuição purpose is to limit cash-flows and results volatility considering the profile of its operational activity by using an appropriate mix of fixed and variable interest rate debt. Sonae Group policy allows the use of interest rate derivatives to decrease the exposure at Euribor fluctuations but not for trading purposes.
Sonae Sierra's revenue and cash-flows are marginally influenced by the interest taxes fluctuations.
In relation to long-term borrowings and in order to hedge the volatility of long term interest rates, Sonae Sierra uses, whenever appropriate, cash flow hedge instruments in the form of swaps or zero cost collars, which represents perfect hedges of those long-term borrowings. In certain long-term borrowings Sonae Sierra choose also to have a fixed interest rate in the first years of the agreement and study afterwards the possibility to negotiate interest rate swaps or zero cost collars for the remaining period.
Sonaecom's total indebtedness is indexed to variable rates, accordingly debt servicing costs are likely to be volatile. The impact of this volatility on the Group's income and shareholders' equity is mitigated by the effect of the following factors (i) relatively low level of financial leverage; (ii) possibility of using interest rate hedging derivative instruments, as explained below; (iii) possible correlation between the market interest rate levels and economic growth, the latter having a positive effect on other lines of the Group's consolidated results (particularly operational), thus partially offsetting the increased financial costs ("natural hedge");
and (iv) the availability of consolidated liquidity or cash, also remunerated at variable rates.
Sonaecom only uses derivatives or similar transactions to hedge those interest rate risks considered as significant. Sonaecom respects the same principles as adopted by the Group Sonae in determining and using instruments to hedge interest rate risk.
As all Sonaecom's borrowings (Note 51) bear interest at variable rates, interest rate swaps and other derivatives are used to hedge future changes in cash flow relating to interest payments. Interest rate swaps have the financial effect of converting the respective borrowings from floating rates to fixed rates. Under the interest rate swaps, the Company agrees with third parties (banks) to exchange, in pre-determined periods, the difference between the amount of interest calculated at the fixed contract rate and the floating rate at the time of re-fixing, by reference to the respective agreed notional amounts.
The Board of Directors of Sonaecom approves the terms and conditions of the funding with a significant impact on the Sonaecom based on an analysis of the debt structure, the inherent risks and the different options in the market, particularly as regards the type of interest rate (fixed / variable ). Under this policy, the Executive Committee is responsible for decisions regarding the contracting of occasional interest rate hedging derivative financial instruments, through monitoring the conditions and alternatives existing in the market.
Sonae Holding is exposed to cash flow interest rate risk in respect of items in the balance sheet (Loans and Short Term Investments) and to fair value interest rate risk as a result of interest rate derivatives (swaps, FRA's and options). All Sonae SGPS debt bears variable interest rates, and interest rate derivatives may be entered into to convert part of the variable rate debt into fixed rate (usually through interest rate swaps or Forward Rate agreements), or to limit the maximum rate payable (usually through zero cost collars or the purchased caps).
Sonae Holding, mitigates interest rate risk by adjusting the proportion of its debt that bears fixed interest to that which bears floating interest although without a fixed goal or percentage to achieve since hedging interest rate risk usually has an opportunity cost associated. Therefore a more flexible approach is considered preferable to a more strict traditional approach. Part of the risk is also mitigated by the fact that Sonae Holding grants loans to its subsidiaries as part its usual activities and thus there may be some degree of natural hedging on an company basis, since if interest rates increase the additional interest paid would be partially offset by additional interest received.
Sonae Holding hedging activities do not constitute a profit-making activity and derivatives are deemed to be entered into without any speculation purpose. Strict rules are observed in relation to any derivative transaction entered into.
The interest rate sensitivity analysis is based on the following assumptions:
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Under these assumptions, if interest rates of euro denominated financial instruments had been 75 basis points higher/lower, the consolidated net profit before tax of Sonae for the year ended 31 December 2008 would decrease/increase by approximately 10 and 7 million euro, respectively (14 million euro decrease/increase at 31 December 2007). The impact in equity (including minorities interests) would be a decrease/increase of, approximately, 16 million euro (decrease/increase by approximately 10 million euro in 2007).
Sonae operates at an international level, having subsidiaries that operate in different jurisdictions, and so it is exposed to foreign exchange rate risk. As each Subholding operates in different markets and in different business environments, there is no standard policy for Sonae, but rather individual policies which are stated below. Sonae's currency exposures are divided into transaction exposures (foreign exchange exposures relating to contracted cash flows and balance sheet items where changes in exchange rates will have an impact on earnings and cash flows) and translation exposure (equity in foreign subsidiaries). Although there is not global management exchange rate risk policy in what concerns hiring derivatives to managing exchange interest risk, it also applies to all group companies, with the necessary adaptations, the principles referred at 3.4.1..
The impact on the financial statements of changes in exchange rate is immaterial, as the most part of the transactions are denominated in Euro. Sonae Distribuição is only exposed to foreign exchange risk due to inventories imports made and denominated in US Dollars.
The exchange risk management purpose is to provide a stable decision platform when deciding and negotiating the purchases of inventories establishing fixed exchange rates. The hedging accompanies all the purchase process, since procurement up to the formal agreement of purchase.
The exchange risk exposure is monitored through the purchase of forwards with the goal of minimising the negative impacts of volatility in exposure level as a consequence of changes of the amounts of imports denominated in other currencies rather than euro.
The main activity of each company is developed inside its country of origin and consequently the majority of the company transactions are maintained in its functional currency. The policy to hedge this specific risk is to avoid, if possible, the contracting of services in foreign currency.
In the particular case of Brazil, Sonae Sierra assumed in 2006 a commitment with its partner DDR to increase, within a 3 year period, the equity of the Brazilian operation by R\$ 600 million (each partner undertaking to cover 50%). In order to hedge the foreign exchange risk that is implicit in this commitment, Sonae Sierra negotiated, in early 2007, a number of "non-deliverable forward" contracts for future acquisition of Brazilian Real.
The investment undertaking with DDR only establishes the total amount and the timeframe for it to occur. The uncertainty about the dates when investment is to occur makes it difficult to measure at inception the degree of efficiency of the instruments. This led the instruments not to qualify for hedge accounting. As a consequence, the gains or losses or any changes in its fair value, are booked directly in Profit or Loss.
The Sub-Holding operates internationally, having subsidiaries that operate in Brazil, United Kingdom, Ireland, Poland, United States of America and Australia and so it is exposed to foreign exchange rate risk.
Foreign exchange risk management seeks to minimise the volatility of investments and transactions made in foreign currency and contributes to reduce the sensitivity of Sonaecom results to changes in foreign exchange rates.
Whenever possible, the Sonaecom uses natural hedges to manage exposure, by offsetting credits granted and credits received expressed in the same currency. When such procedure is not possible, the Sonaecom adopt derivatives financial hedging instruments.
Sonaecom exposure to exchange rate risk results mainly from the fact that some of its subsidiaries report in currencies other than the Euro, the risk relating to the operations being insignificant.
Due to the nature of holding company Sonae Holding has very limited transaction exposure to foreign exchange risk Normally when such exposures arise company, Holding, risk. Normally, foreign exchange risk management seeks to minimize the volatility of such transactions made in foreign currency and to reduce the impact on the Profit and loss of exchange rate fluctuations. When significant material exposures occur with a high degree of certainty, Sonae Holding hedges such exposures mainly through forward exchange rate contracts. For uncertain exposures, options may be considered, subject to previous approval from the company's Executive Committee.
As at 31 December 2008 and 2007 the assets and liabilities denominated in a currency different from the subsidiary functional currency where the following (amounts in Euro):
| Assets | Liabilities | ||||
|---|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 | 31.December.2008 | 31.December.2007 | ||
| Euro | - | 12,287 | 127,595 | 1,699 | |
| Brazilian Real | 13,746,578 | 3,405,325 | 1,972,126 | 11,886,482 | |
| British Pound | 592,721 | - | 3,549,021 | 4,407,486 | |
| US Dollar | 6,499,470 | 1,178,545 | 7,556,866 | 3,574,320 | |
| Other Currencies | 113,439 | 61,351 | 20,169 | - |
The amounts presented above, only include assets and liabilities expressed in different currency than the functional currency used by the affiliated or jointly controlled company. Therefore it does not represent any risk of financial statements translation. Considering the exposure above, which is considered immaterial, no sensitivity analysis is disclosed.
Sonae is exposed to equity price risk arising from equity investments, held for strategic rather than for trading purposes as the group does not actively trade these investments, which are disclosed in Note 8.
In 2007, Sonae entered into a Total Return Swap (TRS) with Sonae Holding shares as underlying. As explained in note 24 the Total Return Swap precluded the derecognition of those own shares, and as such a change in the Sonae share price will have an impact on the cash flows by means of TRS cash settlements. If Sonae price had been 1% higher/lower, it would have 0.7 million euro additional receivings/payments ( at 31 December 2007 the impact would be 2.9 million euro).
Besides the share based deferred performance bonuses granted to its directors and eligible employees, referred in note 30, the exposure to shares price risk is not actively managed, since it is in the essence of a portfolio manager to take exposure to the market value of its listed assets.
As mentioned in Note 2.1 – Basis of preparation, Sonae has earlier adopted the ammendment to IAS 40 – Investment Properties.
This change is part of International Financial Accounting Standards Amendments 2007 - standard which proceeds to the chaging of several IFRS - and that has as consequence the changing of the investment properties in progress treatment, starting to being included within the scope of IAS 40 – Investment Properties, when previously accounted under IAS 16 – Tangible Fixed Assets. Regarding IAS 40 - Investment Properties ammendments, investment properties in progress, would be, when fulfiling the conditions to measure reliably their fair value, measured by its fair value against consolidated income statement.
The impact of the adoption of the amended IAS 40 - Investments Properties by Joint Ventures from Shopping Centers segment, prospectively applied after the reporting year started at 1st January 2008, has increased the Assets, Liabilities and Equity approximately by 6,300,00 Euro, 2,100,000 Euro and 4,200,000 Euro, respectively. The increase on Equity, includes, besides exchange rate translation impact recorded in the caption Conversion Reserves and resulting of the application of the accounting standard by foreign entities, an increase in the profit for the year of, approximately, 5,000,000 Euro.
Group companies included in the consolidated financial statements, their head offices and percentage of share capital held by the Group as at 31 December 2008 and 2007 are as follows:
| Percentage of capital held | |||||||
|---|---|---|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 | ||||||
| COMPANY | Head Office | Direct | Total | Direct | Total | ||
| Sonae - SGPS, S.A. | Maia | HOLDING | HOLDING | HOLDING | HOLDING | ||
| Retail | |||||||
| 1) Arat Immuebles, SA | a) | Madrid (Spain) | 100.00% | 100.00% | - | - | |
| 1) Azulino Imobiliária, SA | a) | Maia | 100.00% | 100.00% | - | - | |
| Bertimóvel - Sociedade Imobiliária, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Best Offer - Prestação de Informações por Internet, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Bikini, Portal de Mulheres, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Canasta - Empreendimentos Imobiliários, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Carnes do Continente - Industria e Distribuição Carnes, SA | a) | Santarém | 100.00% | 100.00% | 100.00% | 100.00% | |
| Chão Verde - Sociedade de Gestão Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Citorres - Sociedade Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Contibomba - Comércio e Distribuição de Combustiveis, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Contimobe - Imobiliária de Castelo Paiva, SA | a) | Castelo de Paiva | 100.00% | 100.00% | 100.00% | 100.00% | |
| Continente Hipermercados, SA | a) | Lisbon | 100.00% | 100.00% | 99.86% | 99.86% | |
| Cumulativa - Sociedade Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Difusão - Sociedade Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Efanor - Design e Serviços, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Efanor - Indústria de Fios, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| 9) Equador & Mendes - Agência de Viagens e Turismo Lda 9)Equador & Mendes Agência de Viagens e Turismo, Lda |
a) a) |
Lisbon Lisbon |
70 00% 70.00% |
70 00% 70.00% |
67 50% 67.50% |
67 50% 67.50% |
|
| Estevão Neves - Hipermercados da Madeira, SA | a) | Madeira | 100.00% | 100.00% | 100.00% | 100.00% | |
| 2) Farmácia Selecção, SA | a) | Matosinhos | 100.00% | 100.00% | - | - | |
| Fozimo - Sociedade Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Fozmassimo - Sociedade Imobiliária, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Fundo de Investimento Imobiliário Imosonae Dois | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Fundo Fechado de Investimento Imobiliário Efisa Imobiliário | a) | Lisbon | 100.00% | 100.00% | 100.00% | 100.00% | |
| Global S - Hipermercado, Lda | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| IGI - Investimento Imobiliário, SA | a) | Porto | 100.00% | 100.00% | 100.00% | 100.00% | |
| Igimo - Sociedade Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Iginha - Sociedade Imobiliária, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Imoconti - Sociedade Imobiliária, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Imoestrutura - Sociedade Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Imomuro - Sociedade Imobiliária, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Imoresultado - Sociedade Imobiliaria, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Imosistema - Sociedade Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Infofield - Informática, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Inventory - Acessórios de Casa, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Marcas MC, zRT | a) | Budapest | 100.00% | 100.00% | 100.00% | 100.00% | |
| MJLF - Empreendimentos Imobiliários, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Modalfa - Comércio e Serviços, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Modelo - Distribuição de Materiais de Construção, SA | b) | Maia | 50.00% | 50.00% | 50.00% | 50.00% | |
| Modelo Continente - Operações de Retalho SGPS, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Modelo Continente Hipermercados,SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Modelo Continente Seguros - Sociedade Mediação, SA | a) | Porto | 100.00% | 100.00% | 100.00% | 100.00% | |
| Modelo Hiper Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Modelo Hipermercados Trading, SA | a) | Madrid (Spain) | 100.00% | 100.00% | 100.00% | 100.00% | |
| Modelo.com - Vendas p/Correspond., SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| NA - Comércio de Artigos de Desporto, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| NA - Equipamentos para o Lar, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| 9) Nova Equador Internacional,Agência de Viagens e Turismo, Lda |
a) | Lisbon | 52.50% | 52.50% | 67.50% | 67.50% | |
| 9) Nova Equador P.C.O. e Eventos, Sociedade Unipessoal, Lda |
a) | Lisbon | 52.50% | 52.50% | 67.50% | 67.50% | |
| Peixes do Continente - Indústria e Distribuição de Peixes, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Pharmacontinente - Saúde e Higiene, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Predicomercial - Promoção Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Selifa - Empreendimentos Imobiliários, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sempre à Mão - Sociedade Imobiliária, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sesagest - Proj.Gestão Imobiliária, SA | a) | Porto | 100.00% | 100.00% | 100.00% | 100.00% | |
| 3) SM Empreendimentos Imobiliários, Ltda | a) | Porto Alegre (Brazil) | 100.00% | 100.00% | 100.00% | 100.00% | |
| Socijofra - Sociedade Imobiliária, SA | a) | Gondomar | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sociloures - Sociedade Imobiliária, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Soflorin, BV | a) | Amsterdam (The | 100.00% | 100.00% | 100.00% | 100.00% | |
| Netherlands) | |||||||
| Solaris Supermercados, SA | a) | Viana do Castelo | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sonae Capital Brasil, Lda | a) | São Paulo (Brazil) | 100.00% | 100.00% | 100.00% | 100.00% |
| Sonae Distribuição, SGPS, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
|---|---|---|---|---|---|---|---|
| Sonae Investimentos America Latina Participações, Ltda | a) | São Paulo (Brazil) | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sonae Retalho España - Servicios Generales, SA | a) | Madrid (Spain) | 100.00% | 100.00% | 100.00% | 100.00% | |
| 4) Sonaecor - Comércio Y Distribución, SA | a) | Madrid (Spain) | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sondis Imobiliária, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sontária - Empreendimentos Imobiliários, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Amsterdam (The | |||||||
| Sonvecap, BV | a) | Netherlands) | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sport Zone - Comércio de Artigos de Desporto, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sport Zone Espanã - Comercio de Articulos de Deporte, SA | a) | Madrid (Spain) | 100.00% | 100.00% | 100.00% | 100.00% | |
| 9) Star - Viagens e Turismo, SA | Lisbon | 70.00% | 70.00% | 90.00% | 90.00% | ||
| Tlantic Portugal - Sistemas de Informação, SA | a) | Maia | 100.00% | 100.00% | - | - | |
| Tlantic Sistemas de Informação, Ltda | a) | Porto Alegre (Brazil) | 100.00% | 100.00% | 100.00% | 100.00% | |
| Todos os Dias - Com. Ret. Expl. C. Comer., SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Valor N, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| Worten - Equipamento para o Lar, SA | a) | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% | |
| 1) Worten España Distribución, S.L. | a) | Madrid (Spain) | 100.00% | 100.00% | - | - | |
| Telecommunications | |||||||
| 5) | Be Artis - Concepção, Construção e Gestão de Redes de | a) | Maia | 100.00% | 53.95% | 100.00% | 50.52% |
| Comunicações, SA | |||||||
| 6) Be Towering - Explor. Torres Telecom, SA | a) | Maia | 100.00% | 53.95% | 100.00% | 50.52% | |
| Cape Asia Pac Pty Limited | a) | Australia | 100.00% | 53.95% | 100.00% | 50.52% | |
| Cape Poland Sp.Z.o.o. | a) | Posnan (Poland) | 100.00% | 53.95% | 100.00% | 50.52% | |
| Cape Tecnologies (U.K) Limitied | a) | Cardiff (U.K.) | 100.00% | 53.95% | 100.00% | 50.52% | |
| Cape Tecnologies Americas, Inc. | a) | Delaware (USA) | 100.00% | 53.95% | 100.00% | 50.52% | |
| Cape Tecnologies Limitied | a) | Dublin (Ireland) | 100.00% | 53.95% | 100.00% | 50.52% | |
| Digitmarket - Sistemas de Informação, SA | a) | Maia | 75.10% | 40.52% | 75.10% | 37.94% | |
| M3G - Edições Digitais, SA | a) | Lisbon | 100.00% | 53.95% | 100.00% | 50.52% | |
| 10) Magma - Operação de Titularização de Créditos | c) | Portugal | 100.00% | 53.95% | - | - | |
| Mainroad Serviços em Tecnologias de Informação, SA | a) | Maia | 100.00% | 53.95% | 100.00% | 50.52% | |
| Miauger - Org. Gestão Leilões El., SA | a) | Maia | 100.00% | 53.95% | 100.00% | 50.52% | |
| Per-Mar - Sociedade de Construções, SA | a) | Maia | 100.00% | 53.95% | 100.00% | 50.52% | |
| Praesidium Services Limited | a) | Berkshire (U.K.) | 100.00% | 53.95% | 100.00% | 50.52% | |
| Praesidium Tecnologies Limited | a) | Berkshire (U.K.) | 100.00% | 53.95% | 100.00% | 50.52% | |
| Público - Comunicação Social, SA | a) | Porto | 100.00% | 53.95% | 100.00% | 50.52% | |
| Saphety Level - Trusted Services, SA | a) | Maia | 86.99% | 46.93% | 100.00% | 50.52% | |
| Sonae Telecom, SGPS, SA | a) | Maia | 100.00% | 53.95% | 100.00% | 50.52% | |
| Sonaecom - Serviços de Comunicação, SA | a) | Maia | 100.00% | 53.95% | 100.00% | 50.52% | |
| Sonaecom - Sistemas de Informação, SGPS, SA | a) | Maia | 100.00% | 53.95% | 100.00% | 50.52% | |
| Sonaecom BV | a) | Amsterdam (The | 100.00% | 53.95% | 100.00% | 50.52% | |
| Netherlands) | |||||||
| Sonaecom, SGPS, SA | a) | Maia | 53.95% | 53.95% | 50.52% | 50.52% | |
| Sonaetelecom, BV | a) | Amsterdam (The Netherlands) |
100.00% | 53.95% | 100.00% | 50.52% | |
| Tecnológica Telecomunicações Ltda | a) | Rio de Janeiro (Brazil) | 99.99% | 53.89% | 99.99% | 50.47% | |
| Telemilénio - Telecomunicações Soc.Unipessoal, Lda | a) | Lisbon | 100.00% | 53.95% | 100.00% | 50.52% | |
| We Do Brasil - Soluções Informáticas, Ltda | a) | Rio de Janeiro (Brazil) | 99.91% | 53.90% | 99.91% | 50.47% | |
| We Do Consulting - Sistemas de Informação, SA | a) | Maia | 100.00% | 53.95% | 100.00% | 50.42% | |
| 8) We Do Technologies (UK) Limited | a) | Berkshire (U.K.) | 100.00% | 53.95% | 100.00% | 50.52% | |
| 2) We Do Technologies BV | a) | Amsterdam (The | 100.00% | 53.95% | - | - | |
| Netherlands) | |||||||
| 2) We Do Technologies Egypt Limited | a) | Cairo | 100.00% | 53.95% | - | - | |
| 2) We Do Technologies Mexico Limited | a) | Mexico City | 100.00% | 53.95% | - | - | |
| Others | |||||||
| Libra Serviços, Lda | a) | Funchal | 100.00% | 100.00% | 100.00% | 100.00% | |
| MDS - Corretor de Seguros, SA | a) | Porto | 100.00% | 100.00% | 100.00% | 100.00% | |
| 7) MDS, SGPS, SA | a) | Maia | 100.00% | 100.00% | 100.00% | 100.00% | |
| Sonae Investments, BV | a) | Amsterdam (The Netherlands) |
100.00% | 100.00% | 100.00% | 100.00% | |
| Sonae RE, SA | a) | Luxembourg | 100.00% | 100.00% | 100.00% | 100.00% | |
| 2) Sonaecenter Serviços, SA | a) | Maia | 100.00% | 100.00% | - | - | |
| Sonaegest-Soc.Gest.Fundos Investimentos, SA | a) | Maia | 80.00% | 70.00% | 80.00% | 70.00% | |
| Amsterdam (The | |||||||
| Sontel, BV | a) | Netherlands) | 100.00% | 100.00% | 100.00% | 100.00% | |
1) Company acquired in the period;
2) Company created in the period;
3) Company merged into Sonae Capital Brasil, Lda
4) Ex- Worten Espanã, SA;
5) Ex - Optimus Artis - Concepção, Construção e Gestão de Redes de Comunicações, SA;
6) Ex - Optimus Towering - Explor. Torres Telecom, SA;
7) Ex - Resolução, SGPS, SA;
8) Ex - Praesidium Holdings Limited;
9) Due to the sale of 60% of share capital of Star Viagens e Turismo, S.A., to the jointly controlled entity Raso SGPS, S.A., (Note 6), the company and all its subsidiaries were consolidated by the proportionate method.
10) On 30 December 2008, the group subsidiary Sonaecom - Serviços de Comunicação, S.A., carried out a future credit securitization operation amounting to 100 million Euro ( 98,569,400 Euro, net of initial costs) under which it ceded future credits to be generated by a portfolio of existing "Corporate" customer contracts, under the regime established in the Decree-Law nº 453/99, of 5 November. This operation was coordinated by Deutsche Bank, having the future credits been assigned to TAGUS – Sociedade de Titularização de Créditos, S.A. ("TAGUS"), which, for this purpose, issued securitized bonds designated "Magma No. 1 Securitization Notes", which were fully subscribed by the holding company.Taking into consideration SIC 12 – Consolidation: Special Purpose Entities, the operation was consolidated in these financial statements.
a) Majority of voting rights;
b) Management control.
c) Control obtained in accordance with SIC 12 - Consolidation - Special Purpose Entities.
These group companies are consolidated using the full consolidation method as described in Note 2.2.a).
Jointly controlled companies included in the consolidated financial statements, their head offices and the percentage of share capital held by the Group as at 31 December 2008 and 2007 are as follows:
| Percentage of capital held | |||||
|---|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 | ||||
| COMPANY | Head office | Direct | Total | Direct | Total |
| Shopping Centres | |||||
| 3DO Holding GmbH | Dusseldorf (Germany) | 100.00% | 50.00% | 100.00% | 50.00% |
| 3DO Shopping Centre GmbH | Dusseldorf (Germany) | 100.00% | 50.00% | 100.00% | 50.00% |
| 3shoppings - Holding, SGPS, SA | Maia | 100.00% | 25.05% | 100.00% | 25.05% |
| 4) 8ª Avenida Centro Comercial, SA | Maia | 100.00% | 25.15% | 100.00% | 50.00% |
| Aegean Park Constructions Real Estate and Development, SA | Athens (Greece) | 100.00% | 25.00% | 100.00% | 25.00% |
| Airone - Shopping Centre, Srl | Milan (Italy) | 100.00% | 25.05% | 100.00% | 25.05% |
| ALEXA Administration GmbH | Berlin (Germany) | 100.00% | 25.00% | 100.00% | 25.00% |
| ALEXA Holding GmbH | Dusseldorf (Germany) | 50.00% | 25.00% | 50.00% | 25.00% |
| ALEXA Shopping Centre GmbH | Dusseldorf (Germany) | 100.00% | 25.00% | 100.00% | 25.00% |
| 6) ALEXA Side GmbH & Co. KG | Berlin (Germany) | - | - | 100.00% | 25.00% |
| Algarveshopping - Centro Comercial, SA | Maia | 100.00% | 25.05% | 100.00% | 25.05% |
| 5) Arrábidashopping - Centro Comercial, SA | Maia Amsterdam (The |
50.00% | 12.53% | 100.00% | 37.53% |
| Avenida M-40, BV | Netherlands) | 100.00% | 25.05% | 100.00% | 25.05% |
| Avenida M-40, SA | Madrid (Spain) | 100.00% | 25.05% | 100.00% | 25.05% |
| Cascaishopping - Centro Comercial, SA | Maia | 50.00% | 12.53% | 50.00% | 12.53% |
| Cascaishopping Holding I, SGPS, SA | Maia | 100.00% | 25.05% | 100.00% | 25.05% |
| Centro Colombo - Centro Comercial, SA | Maia | 100.00% | 12.53% | 100.00% | 12.53% |
| Centro Vasco da Gama - Centro Comercial, SA | Maia | 50.00% | 12.53% | 50.00% | 12.53% |
| Clérigoshopping - Gestão do Centro Comercial, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% |
| Coimbrashopping - Centro Comercial, SA | Maia The Hague (The |
100.00% | 25.05% | 100.00% | 25.05% |
| Colombo Towers Holding, BV | The Hague Netherlands) Amsterdam (The |
50.00% | 25.00% | 50.00% | 25.00% |
| 2) Craiova Mall BV | Netherlands) | 100.00% | 50.00% | - | - |
| Dortmund Tower GmbH | Dusseldorf (Germany) | 100.00% | 50.00% | 100.00% | 50.00% |
| Dos Mares - Shopping Centre, BV | Amsterdam (The Netherlands) |
100.00% | 25.05% | 100.00% | 25.05% |
| Dos Mares - Shopping Centre, SA | Madrid (Spain) | 100.00% | 25.05% | 100.00% | 25.05% |
| El Rosal Shopping, SA | Madrid (Spain) | 70.00% | 35.00% | 70.00% | 35.00% |
| Estação Viana - Centro Comercial, SA | Viana do Castelo | 100.00% | 25.05% | 100.00% | 25.05% |
| Freccia Rossa - Shopping Centre, Srl | Milan (Italy) | 50.00% | 25.00% | 50.00% | 25.00% |
| Fundo Investimento Imob. Shopping Parque D. Pedro Shopping, SA | São Paulo (Brazil) | 100.00% | 24.36% | 100.00% | 24.33% |
| 5) Gaiashopping I - Centro Comercial, SA | Maia | 50.00% | 12.53% | 100.00% | 37.53% |
| 5) Gaiashopping II - Centro Comercial, SA | Maia | 100.00% | 12.53% | 100.00% | 37.53% |
| Gli Orsi - Shopping Centre, Srl | Milan (Italy) | 100.00% | 50.00% | 100.00% | 50.00% |
| 3) Gli Orsi 1 Shopping Centre, Srl | Milan (Italy) | 100.00% | 50.00% | - | - |
| Guimarãeshopping - Centro Comercial, SA | Maia | 100.00% | 25.05% | 100.00% | 25.05% |
| Iberian Assets, SA | Madrid (Spain) | 49.78% | 12.48% | 49.78% | 12.48% |
| Inparsa - Gestão de Galeria Comerc., SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% |
| Ioannina Development of Shopping Centres, SA KLC Holdings XII, SA |
Athens (Greece) Luxemburg |
100.00% 100.00% |
50.00% 50.00% |
100.00% 100.00% |
50.00% 50.00% |
| La Farga - Shopping Centre, SL | Madrid (Spain) | 100.00% | 12.48% | 100.00% | 12.48% |
| Larissa Development of Shopping Centres, SA | Athens (Greece) | 100.00% | 25.00% | 100.00% | 25.00% |
| Le Terrazze - Shopping Centre, Srl | Milan (Italy) | 50.00% | 25.00% | 50.00% | 25.00% |
| Lembo Services Ltd | Cyprus | 100.00% | 50.00% | 100.00% | 50.00% |
| Loop 5 - Shopping Centre Gmbh | Dusseldorf (Germany) | 50.00% | 25.00% | 50.00% | 25.00% |
| 4) Loureshopping - Centro Comercial, SA | Maia | 50.00% | 12.58% | 50.00% | 25.00% |
| Luz del Tajo - Centro Comercial, SA | Madrid (Spain) | 100.00% | 25.05% | 100.00% | 25.05% |
| Luz del Tajo, BV | Amsterdam (The | 100.00% | 25.05% | 100.00% | 25.05% |
| Madeirashopping - Centro Comercial, SA | Netherlands) Funchal |
50.00% | 12.53% | 50.00% | 12.53% |
| Maiashopping - Centro Comercial, SA | Maia | 100.00% | 25.05% | 100.00% | 25.05% |
| MC Property Management, SA | Athens (Greece) | 75.00% | 18.75% | 75.00% | 18.75% |
| Münster Arkaden, BV | Amsterdam (The | 100.00% | 25.05% | 100.00% | 25.05% |
| Netherlands) Amsterdam (The |
|||||
| Norte Shopping Retail and Leisure Centre, BV | Netherlands) | 50.00% | 12.53% | 50.00% | 12.53% |
| Norteshopping - Centro Comercial, SA | Maia | 100.00% | 12.53% | 100.00% | 12.53% |
| 4) Oeste Retail Park - Gestão de Galerias Comerciais, SA | Maia | 50.00% | 12.58% | 50.00% | 25.00% |
| 1) Pantheon Plaza 1, SA | Athens (Greece) | 100.00% | 25.00% | 100.00% | 25.00% |
| 1) Pantheon Plaza 2, SA | Athens (Greece) | 100.00% | 25.00% | 100.00% | 25.00% |
| 1) Pantheon Plaza 3, SA | Athens (Greece) Amsterdam (The |
100.00% | 25.00% | 100.00% | 25.00% |
| Pantheon Plaza BV | Netherlands) | 50.00% | 25.00% | 50.00% | 25.00% |
| Paracentro - Gestão de Galerias Comerciais, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% |
| Park Avenue Developement of Shopping Centers, SA | Athens (Greece) | 100.00% | 25.00% | 100.00% | 25.00% |
| Parque Atlântico Shopping - Centro Comercial SA | Ponta Delgada (Azores) | 50.00% | 12.53% | 50.00% | 12.53% |
| Parque D. Pedro 1, BV Sarl | Luxembourg | 100.00% | 25.00% | 100.00% | 25.00% |
| Parque D. Pedro 2, BV Sarl | Luxembourg | 100.00% | 25.00% | 100.00% | 25.00% |
| Pátio Penha Shopping, Ltda | São Paulo (Brazil) | 99.99% | 23.76% | 99.99% | 23.69% | |
|---|---|---|---|---|---|---|
| Pátio São Bernardo Shopping Ltda | São Paulo (Brazil) | 100.00% | 23.76% | 100.00% | 23.69% | |
| Pátio Sertório Shopping Ltda | São Paulo (Brazil) | 100.00% | 23.76% | 100.00% | 23.69% | |
| Pátio Uberlândia Shopping Ltda | São Paulo (Brazil) | 100.00% | 23.76% | 100.00% | 23.69% | |
| Plaza Eboli - Centro Comercial, SA | Madrid (Spain) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Plaza Eboli, BV | Amsterdam (The Netherlands) |
100.00% | 50.00% | 100.00% | 50.00% | |
| Plaza Mayor Holding, SGPS, SA | Maia | 100.00% | 25.05% | 100.00% | 25.05% | |
| Amsterdam (The | ||||||
| Plaza Mayor Parque de Ócio, BV | Netherlands) | 100.00% | 25.05% | 100.00% | 25.05% | |
| Plaza Mayor Parque de Ócio, SA | Madrid (Spain) | 100.00% | 25.05% | 100.00% | 25.05% | |
| Plaza Mayor Shopping, BV | Amsterdam (The Netherlands) |
100.00% | 50.00% | 100.00% | 50.00% | |
| Plaza Mayor Shopping, SA | Madrid (Spain) | 75.00% | 37.50% | 75.00% | 37.50% | |
| 2) Ploi Mall BV | Amsterdam (The | 100.00% | 50.00% | - | - | |
| Netherlands) | ||||||
| Pridelease Investments, Ltd | Cascais | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project 4, Srl | Milan (Italy) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project SC 1, BV | Amsterdam (The Netherlands) |
50.00% | 25.00% | 50.00% | 25.00% | |
| Project SC 2, BV | Amsterdam (The | 100.00% | 50.00% | 100.00% | 50.00% | |
| Netherlands) | ||||||
| Project Sierra 1 - Shopping Centre, GmbH | Viena (Áustria) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra 2, BV | Amsterdam (The Netherlands) |
100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra 5, BV | Amsterdam (The | 100.00% | 50.00% | 100.00% | 50.00% | |
| Netherlands) Amsterdam (The |
||||||
| Project Sierra 6, BV | Netherlands) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra 7 BV | Amsterdam (The Netherlands) |
100.00% | 50.00% | 100.00% | 50.00% | |
| 2) Project Sierra 8 BV | Amsterdam (The | 100.00% | 50.00% | - | - | |
| Netherlands) | ||||||
| 2) Project Sierra 9 BV | Amsterdam (The Netherlands) |
100.00% | 50.00% | - | - | |
| 2) Project Sierra 10 BV | Amsterdam (The | 100.00% | 50.00% | - | - | |
| Netherlands) Amsterdam (The |
||||||
| Project Sierra Brazil 1, BV | Netherlands) | 100.00% | 50.00% | 100.00% | 50.00% | |
| 3) | ) 12 Project Sierra Four SA | Bucharest ( ) Romania) |
100.00% | 50.00% | - | - |
| Project Sierra Germany 2 (two), Shopping Centre GmbH | Dusseldorf (Germany) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Germany 3 (three), Shopping Centre, GmbH | Dusseldorf (Germany) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Germany 4 (four), Shopping Centre, GmbH | Dusseldorf (Germany) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Amesterdam (The | ||||||
| Project Sierra Germany Shopping Centre 1 BV | Netherlands) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Germany Shopping Centre 2 BV | Amesterdam (The Netherlands) |
100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Holding Portugal V, SGPS, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Italy 1 - Shopping Centre, Srl | Milan (Italy) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Italy 2 - Development of Shopping Centres, Srl | Milan (Italy) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Italy 3 - Shopping Centre, Srl | Milan (Italy) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Italy 5 - Development of Shopping Centrs Sarl | Milan (Italy) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra One Srl | Bucharest (Romania) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Portugal I - C.Comercial, SA | Maia | 50.00% | 25.00% | 50.00% | 25.00% | |
| Project Sierra Portugal II - Centro Comercial, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Portugal IV - Centro Comercial, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Portugal V - Centro Comercial, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Portugal VI - Centro Comercial, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Portugal VII - Centro Comercial, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Portugal VIII - Centro Comercial, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Spain 1, BV | Amsterdam (The | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Spain 2 - Centro Comerial, SA | Netherlands) Madrid (Spain) |
100.00% | 50.00% | 100.00% | 50.00% | |
| Amsterdam (The | ||||||
| Project Sierra Spain 2, BV | Netherlands) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Spain 3 - Centro Comercial, SA | Madrid (Spain) | 50.00% | 25.00% | 50.00% | 25.00% | |
| Project Sierra Spain 3, BV | Amsterdam (The | 100.00% | 50.00% | 100.00% | 50.00% | |
| 2) Project Sierra Spain 6 - Centro Comercial, SA | Netherlands) Madrid (Spain) |
100.00% | 50.00% | - | - | |
| Amsterdam (The | ||||||
| 2) Project Sierra Spain 6, BV | Netherlands) | 100.00% | 50.00% | - | - | |
| 2) Project Sierra Spain 7 - Centro Comercial, SA | Madrid (Spain) | 100.00% | 50.00% | - | - | |
| 2) Project Sierra Spain 7, BV | Amsterdam (The | 100.00% | 50.00% | - | - | |
| Netherlands) | ||||||
| Project Sierra Srl | Bucharest (Romania) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Three Srl | Bucharest (Romania) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Project Sierra Two Srl | Bucharest (Romania) | 100.00% | 50.00% | 100.00% | 50.00% | |
| 4) Rio Sul - Centro Comercial, SA | Lisbon | 25.00% | 12.58% | 50.00% | 25.00% | |
| River Plaza BV | Amsterdam (The | 100.00% | 50.00% | 100.00% | 50.00% | |
| River Plaza Mall, Srl | Netherlands) Bucharest (Romania) |
100.00% | 50.00% | 100.00% | 50.00% | |
| S.C. Microcom Doi Srl | Bucharest (Romania) | 100.00% | 50.00% | 100.00% | 50.00% | |
| SC Aegean, BV | Amsterdam (The Netherlands) |
50.00% | 25.00% | 50.00% | 25.00% | |
| SC Mediterranean Cosmos, BV | Amsterdam (The | 50.00% | 12.53% | 50.00% | 25.00% | |
| Netherlands) | ||||||
| 4) Serra Shopping - Centro Comercial, S.A. | Covilhã Amsterdam (The |
25.00% | 12.58% | 50.00% | 25.00% | |
| Shopping Centre Colombo Holding, BV | Netherlands) | 50.00% | 12.53% | 50.00% | 12.53% | |
| Shopping Centre Parque Principado, BV | Amsterdam (The Netherlands) |
100.00% | 25.05% | 100.00% | 25.05% | |
| Sierra Asset Management - Gestão de Activos, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Brazil 1, BV | Amsterdam (The Netherlands) |
100.00% | 25.00% | 100.00% | 25.00% | |
|---|---|---|---|---|---|---|
| Sierra Charagionis Developement of Shopping Centers, SA | Athens (Greece) | 50.00% | 25.00% | 50.00% | 25.00% | |
| Sierra Charagionis Property Management, SA | Athens (Greece) | 50.00% | 25.00% | 50.00% | 25.00% | |
| Sierra Corporate Services - Apoio à Gestão, SA | Lisbon | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Corporate Services Holland, BV | Amsterdam (The Netherlands) |
100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Development of Shopping Centres Greece, SA | Athens (Greece) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Developments - Serviços de Promoção Imobiliária, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Developments Germany GmbH | Dusseldorf (Germany) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Developments Germany Holding, BV | Amsterdam (The Netherlands) |
100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Developments Holding, BV | Amsterdam (The Netherlands) |
100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Developments Iberia 1, Promoção Imobiliária, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Developments Italy, Srl | Milan (Italy) | 100.00% | 50.00% | 100.00% | 50.00% | |
| 2) 7) Sierra Developments Romania SRL | Bucharest (Romania) | 100.00% | 50.00% | - | - | |
| Sierra Developments Spain - Promociones de Centros Comerciales, SL | Madrid (Spain) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Developments, SGPS, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Enplanta, Ltda | São Paulo (Brazil) | 100.00% | 23.76% | 100.00% | 23.69% | |
| Sierra European Retail Real Estate Assets Holdings, BV | Amsterdam (The Netherlands) |
50.10% | 25.05% | 50.10% | 25.05% | |
| Sierra GP, Limited | Guernsey (U.K.) | 100.00% | 49.99% | 100.00% | 49.99% | |
| Sierra Investimentos Brasil Ltda | São Paulo (Brazil) | 100.00% | 23.76% | 100.00% | 23.69% | |
| Sierra Investments (Holland) 1, BV | Amsterdam (The | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Investments (Holland) 2, BV | Netherlands) Amsterdam (The |
100.00% | 50.00% | 100.00% | 50.00% | |
| Netherlands) Amsterdam (The |
||||||
| Sierra Investments Holding, BV | Netherlands) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Investments SGPS, SA | Maia Amsterdam (The |
100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Italy Holding, BV | Netherlands) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Management Germany, GmbH | Dusseldorf (Germany) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Management II - Gestão de Centros Comerciais, SA | Lisbon | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Management Italy, Srl | Milan (Italy) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Management New Tech.Bus. - Serv.Comu.CC, SA | Lisbon | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Management Portugal - Gestão de Centros Comerciais, SA | Lisbon | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Management Spain - Gestión de Centros Comerciales, SA | Madrid (Spain) | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Management, SGPS, SA | Maia | 100.00% | 50.00% | 100.00% | 50.00% | |
| Sierra Property Management Greece, SA Sierra Property Management Greece, |
Athens (Greece) | 100.00% | 50.00% | 100.00% | 50.00% | |
| 10) Sierra Property Management, Srl | Bucharest (Romania) | 100.00% | 50.00% | 100.00% | 50.00% | |
| 4) Sol Retail Park - Gestão de Galerias Comerciais, SA | Maia | 25.00% | 12.58% | 50.00% | 25.00% | |
| Sonae Sierra Brasil, SA Sonae Sierra Brazil, BV Sarl |
São Paulo (Brazil) Luxembourg |
94,54% 50.00% |
23.76% 25.00% |
94,54% 50.00% |
23.69% 25.00% |
|
| Sonae Sierra, SGPS, SA | Maia | 50.00% | 50.00% | 50.00% | 50.00% | |
| 9) SPF - Sierra Portugal | Luxembourg | 100.00% | 50.00% | 100.00% | 50.00% | |
| 4) 8) SPF - Sierra Portugal Real Estate | Luxembourg | 42.00% | 25.15% | 100.00% | 50.00% | |
| SRP - Parque Comercial de Setúbal, SA | Maia | 50.00% | 25.00% | 50.00% | 25.00% | |
| Torre Ocidente - Imobiliária, SA | Maia | 50.00% | 12.50% | 50.00% | 12.50% | |
| Torre Oriente - Imobiliária, SA | Maia | 50.00% | 12.50% | 50.00% | 12.50% | |
| Unishopping Administradora, Ltda | São Paulo (Brazil) | 100.00% | 23.76% | 100.00% | 23.69% | |
| Unishopping Consultoria Imobiliária, Ltda | São Paulo (Brazil) | 99.98% | 23.76% | 99.98% | 23.69% | |
| Valecenter, Srl | Milan (Italy) | 100.00% | 25.05% | 100.00% | 25.05% | |
| Via Catarina - Centro Comercial, SA | Maia | 50.00% | 12.53% | 50.00% | 12.53% | |
| Weiterstadt Shopping BV | Amsterdam (The | 100.00% | 50.00% | 100.00% | 50.00% | |
| Zubiarte Inversiones Inmobiliarias, SA | Netherlands) Madrid (Spain) |
49.83% | 12.48% | 49.83% | 12.48% | |
| Telecommunications | ||||||
| 13) Unipress - Centro Gráfico, Lda | Vila Nova de Gaia | 50.00% | 26.97% | - | - | |
| Vipu ACE | Lisbon | 50.00% | 26.97% | 50.00% | 25.26% | |
| Retail | ||||||
| 11) Equador & Mendes - Agência de Viagens e Turismo, Lda | Lisbon | 50.00% | 50.00% | 67.50% | 67.50% | |
| 3) Geotur - Viagens e Turismo, SA | Lisbon | 50.00% | 50.00% | - | - | |
| 3) Marcas do Mundo - Viagens e turismo, Sociedade Unipessoal, Lda | Lisbon | 50.00% | 50.00% | - | - | |
| 3) Movimentos Viagens - Viagens e Turismo, Sociedade Unipessoal, Lda | Lisbon | 50.00% | 50.00% | - | - | |
| 11) Nova Equador Internacional,Agência de Viagens e Turismo, Lda | Lisbon | 50.00% | 50.00% | 67.50% | 67.50% | |
| 11) Nova Equador P.C.O. e Eventos, Sociedade Unipessoal, Lda | Lisbon | 50.00% | 50.00% | 67.50% | 67.50% | |
| 2) Raso SGPS, SA | Lisbon | 50.00% | 50.00% | - | - | |
| 11) Star - Viagens e Turismo, SA | Lisbon | 50.00% | 50.00% | 90.00% | 90.00% | |
| 3) Viagens y Turismo de Geotur España, S.L. | Madrid (Spain) | 50.00% | 50.00% | - | - |
1) Companies merged into Larissa Development of Shopping Centres, SA;
2) Companies created in the period;
3) Company acquired in the period;
4) Due to the sale of 8,3% of the share capital of the investment fund - Sierra Portugal Real Estate (SPF) as at 28 July, the percentage of capital held by the group has reduced to 42%, being accounted from that date by the Equity method.
5) 50 % of the share capital in this subsidiaries was indirectly sold, as they were controlled by the investment fund referred in 4) above, maintaining the proportionate consolidation method of the remaining 50%.
6) Company merged into ALEXA Shopping Centre GMBH as at 1 January 2008;
7) Ex - Sierra Developments Services Srl;
8) Ex - SPF - Sierra Portugal Fund, Sarl;
9) Ex - Sierra Asset Management Luxembourg, Sarl;
10) Ex - Sierra Management Romania, Srl;
11) Companies that started being consolidated by the proportionate method (Note 5, 10))
12) Ex - SRP Development SA;
13) Additional acquisition as at December 2008, that allowed the subsidiary to be consolidated by the proportionate method.
These entities are consolidated using the proportionate consolidation method, as referred to in Note 2.2.b).
Aggregate amounts, excluding intragroup eliminations, corresponding to the percentage of capital held in these jointly controlled companies included in the financial statements for the period, using the proportional consolidation method, can be summarised as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.Deccember.2007 | |
|---|---|---|---|
| 4,590,187,152 | |||
| 512,569,665 | 511,541,306 | 515,149,354 | |
| 1,749,706,883 | 1,853,540,870 | 1,996,914,291 | |
| 561,933,408 | 606,278,983 | 618,951,030 | |
| 184,557,267 | 435,039,881 | 444,471,226 | |
| 296,759,268 | 291,334,159 | 296,380,772 | |
| 4,540,862,267 | 4,292,172,389 |
Additionally, the information related with Shopping Centres in Note 51 corresponds to the contribute to the consolidated financial statements of the companies referred above which are consolidated in accordance with proportionate method.
Associated companies, their head offices and the percentage of share capital held as at 31 December 2008 and 2007 are as follows:
| Percentage of capital held | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 | Book Value | |||||||
| COMPANY | Head Office | Direct | Total | Direct | Total | 31.December.2008 | 31.December.2007 pro forma |
31.December.2007 | |
| Retail | |||||||||
| Fundo de Investimento Imobiliário Fechado Imosede |
Maia | 49.00% | 49.00% | 42.16% | 42.16% | 62,813,335 | 34,010,917 | 34,010,917 | |
| 1) | Mundo Vip - Operadores Turísticos SA Mundo Vip - Operadores Turísticos, |
Lisbon | 33 33% 33.33% |
33 33% 33.33% |
33 33% 33.33% |
33 33% 33.33% |
- | 2 924 947 2,924,947 |
2 924 947 2,924,947 |
| Sempre a Postos - Produtos Alimentares e Utilidades, Lda |
Lisbon | 25.00% | 25.00% | 25.00% | 25.00% | 1,142,245 | 943,957 | 943,957 | |
| Shopping Centres | |||||||||
| 2) 3) 8ª Avenida Centro Comercial, SA | Maia | 100.00% | 21.00% | 100.00% | 50.00% | - | - | - | |
| 2) 3) | Arrábidashopping - Centro Comercial, SA | Maia | 50.00% | 10.50% | 100.00% | 37.53% | - | - | - |
| Campo Limpo Lda | S. Paulo (Brazil) | 20.00% | 4.70% | 20.00% | 4.70% | 1,136,276 | 1,248,144 | 1,248,144 | |
| 2) 3) | Gaiashopping I - Centro Comercial, SA | Maia | 50.00% | 10.50% | 100.00% | 37.53% | - | - | - |
| 2) 3) | Gaiashopping II - Centro Comercial, SA | Maia | 100.00% | 21.00% | 100.00% | 37.53% | - | - | - |
| 2) 3) | Loureshopping - Centro Comercial, SA | Maia | 100.00% | 21.00% | 100.00% | 25.00% | - | - | - |
| Mediterranean Cosmos Shop. Centre Investments, SA |
Athens (Greece) | 39.90% | 5.00% | 39.90% | 9.98% | 3,557,098 | 10,749,437 | 10,749,437 | |
| 2) 3) | Oeste Retail Park - Gestão de G.Comer., SA |
Maia | 50.00% | 10.50% | 50.00% | 25.00% | - | - | - |
| 2) 3) Rio Sul - Centro Comercial, SA | Lisbon | 50.00% | 10.50% | 50.00% | 25.00% | - | - | - | |
| 2) 3) | Serra Shopping - Centro Comercial, S.A. | Covilhã | 50.00% | 10.50% | 50.00% | 25.00% | - | - | - |
| SIC Indoor - Gest. Suportes Publicitários, | Oeiras | 35.00% | 17.50% | 35.00% | 17.50% | - | - | - | |
| 2) 3) | SASol Retail Park - Gestão de G. Comerc., | Maia | 50.00% | 10.50% | 50.00% | 25.00% | - | - | - |
| 2) 4) | SA SPF - Sierra Portugal Real Estate, Sarl |
Luxemburg | 42.00% | 21.00% | 100.00% | 50.00% | 38,597,922 | 35,271,908 | - |
| Telecommunications | |||||||||
| 6) Net Mall SGPS, SA | Maia | 39.51% | 21.39% | 39.51% | 19.96% | - | - | - | |
| SIRS - Sociedade Independente de Radiodifusão Sonora, SA |
Porto | 45.00% | 24.37% | 45.00% | 22.73% | - | 168,690 | 168,690 | |
| 5) Unipress - Centro Gráfico, Lda | Vila Nova de Gaia | 40.00% | 21.66% | 40.00% | 20.21% | - | 463,429 | 463,429 | |
| Others | |||||||||
| Cooper Gay (Holding) Limited | U.K. | 32.12% | 32.12% | 13.68% | 13.68% | 33,863,022 | 20,061,065 | 20,061,065 | |
| Lazam Corretora, Ltda | Brazil | 45.00% | 45.00% | 45.00% | 45.00% | 1,553,597 | 2,978,054 | 2,978,054 | |
| Total | 142,663,495 | 108,820,548 | 73,548,640 |
1) Associated company sold in 2009, and classified as Available for sale;
2) Due to the sale of 8,3% of the share capital of the investment fund - Sierra Portugal Real Estate (SPF) as at 28 July, the percentage of capital held by the group has reduced to 42%, being accounted from that date by the Equity method;
3) Nill balances result from the aplication of the Equity Method to Sierra Portugal Real Estate Consolidated accounts;
4) Ex - SPF - Sierra Portugal Fund, Sarl; 5) Additional acquisition as at December 2008, that allowed the subsidiary to be consolidatet by the proportionate method;
6) Associated company incorporated in the period;
Nil balances shown, with exception of the ones mentioned at (3), result from the reduction to acquisition cost of amounts determined by the equity method.
Associated companies are consolidated using the equity method, as referred to in Note 2.2.c).
As at 31 December 2008 and 2007, aggregated values of main financial indicators of associated companies are as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | |
|---|---|---|---|
| Total Assets | 1,144,530,713 | 1,212,715,301 | 780,046,272 |
| Total Liabilities | 758,543,421 | 852,936,331 | 546,507,394 |
| Income | 312,438,219 | 365,300,560 | 290,802,785 |
| Expenses | 287,264,367 | 292,750,160 | 259,565,597 |
During the periods ended 31 December 2008 and 2007, movements in Investments in associated companies, are made up as follows:
| 31.December.2008 | 31.December.2007 | |||||||
|---|---|---|---|---|---|---|---|---|
| Proportion on equity | Goodwill | Total of investment | Proportion on equity | Goodwill | Total of investment |
|||
| Investments in associated companies | ||||||||
| Initial balance as at January,1 | 51,468,671 | 22,079,969 | 73,548,640 | 28,632,906 | 2,958,551 | 31,591,457 | ||
| Transfers to goodwill | - | - | - | (4,497,548) | 4,497,548 | - | ||
| Acquisitions during the period | - | - | - | 25,457,579 | - | 25,457,579 | ||
| Disposals during the period | (2,567,481) | - | (2,567,481) | (1,377,211) | - | (1,377,211) | ||
| Capital increase in associated companies | 33,095,032 | - | 33,095,032 | - | - | - | ||
| Capital reduction in associated companies | (4,167,889) | - | (4,167,889) | - | - | - | ||
| Change of the consolidation method | 37,315,321 | 8,384,445 | 45,699,766 | - | - | - | ||
| Goodwill recognised during the period | (13,701,796) | 13,701,796 | - | (18,050,891) | 18,050,891 | - | ||
| Equity method | - | |||||||
| Effect in net income | 8,952,847 | - | 8,952,847 | 2,704,264 | - | 2,704,264 | ||
| Effect in equity | (4,338,872) | (4,151,833) | (8,490,705) | (3,501,384) | - | (3,501,384) | ||
| Investments impairment in associated companies | (168,690) | (1,765,850) | (1,934,540) | - | - | - | ||
| Demerger | - | - | - | (12,421,826) | (3,427,021) | (15,848,847) | ||
| Transfers | (484,318) | (987,857) | (1,472,175) | 34,522,782 | - | 34,522,782 | ||
| Investments in associated companies | 105,402,825 | 37,260,670 | 142,663,495 | 51,468,671 | 22,079,969 | 73,548,640 |
Transfers, as at 31 December 2007, include 34,536,577 euro regarding to the investment in Fundo de Investimento Imobiliário Imosede that after demerger became an associate, as its only owned by 42.16%, and therefore started to be included in accordance with equity method.
The amount disclosed above related with consolidation method change relate to the sale of the companies that constitute Sierra Portugal Fund, identified in Note 2) above above, and corresponds to the historical value of its assets as at 1st July 2008, reference date to the consolidation method change.
Group companies, jointly controlled companies and associated companies excluded from consolidation, their head offices, percentage of share capital held and book value as at 31 December 2008 and 2007 are as follows:
| Percentage of capital held | |||||||
|---|---|---|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 | Book Value | |||||
| COMPANY | Head Office | Direct | Total | Direct | Total | 31.December.2008 | 31.December.2007 |
| Retail | |||||||
| Dispar - Distrib. de Participações, SGPS, SA | Lisbon | 7.14% | 7.14% | 7.14% | 7.14% | 4,988 | 4,988 |
| Insco - Insular de Hipermerc., SA | Ponta Delgada | 10.00% | 10.00% | 10.00% | 10.00% | 748,197 | 748,197 |
| Puravida - Viagens e Turismo, Lda | Lisbon | 50.00% | 50.00% | - | - | 1,584,193 | - |
| Shopping Centres | |||||||
| Ercasa Cogeneracion SA | Grancasa (Spain) | 10.00% | 1,25% | 10.00% | 1,25% | 23,949 | 23,949 |
| Telecommunications | |||||||
| Altitude, SGPS, SA | Lisbon | 11.54% | 6.23% | 11.54% | 5.83% | 1,000,000 | 1,000,000 |
| Lusa - Agên. de Noticias de Portugal, SA | Lisbon | 1.38% | 0.88% | 1.38% | 0.70% | 197,344 | 197,344 |
| Other investments | 9,419,504 | 10,080,679 | |||||
| Total (Note 15) | 12,978,175 | 12,055,157 |
At 31 December 2008, this caption includes 7,304,000 euro related to the recorded asset corresponding to the increase in value of Sonae Capital, S.A. shares attributed to Sonae Holding, and not derecognized as explained in Note 24. As at 31 December 2007, other investments includes 8,151,301 euro related with the advance payment made for the acquisition of an investment property named Ploiesti which was concluded during the first half of 2008.
The subsidiary Continente Hipermercados S.A. (ex-Carrefour Portugal) was acquired by the end of 2007, and therefore no fair value allocation to the acquired assets was made at that date. This process was concluded over the twelve months period ended 31 December 2008, reported to 31 December 2007, and is reflected in the new referencials shown in accordance with the International Financial Reporting Standards ("IFRS").
| Acquisition Date | ||||
|---|---|---|---|---|
| Book | Adjustments to Fair | Fair | Published on | |
| Value | Value | Value | 31.12.2007 | |
| Acquired net assets | ||||
| Tangible and intangible assets | 272,281,660 | 59,195,368 | 331,477,028 | 267,013,229 |
| Inventories | 34,475,424 | (13,211,126) | 21,264,298 | 34,475,424 |
| Other current assets | 5,788,904 | - | 5,788,904 | 5,788,904 |
| Cash and cash equivalents | 1,347,294 | - | 1,347,294 | 1,347,294 |
| Deferred tax | 449,449 | 924,902 | 1,374,351 | 1,845,583 |
| Loans | (83,038,919) | - | (83,038,919) | (83,038,919) |
| Other liabilities | (150,218,081) | (7,188,346) | (157,406,427) | (150,218,081) |
| 81,085,731 | 39,720,798 | 120,806,529 | 77,213,434 | |
| Goodwill (Note 14) | 39,675,995 | 464,661,539 | 504,847,714 | |
| Minority interests (Note 25) | 44,803 | (149,196) | (104,393) | |
| Acquisition price | 39,720,798 | 585,318,872 | 581,956,755 | |
| Total consideration paid (including acquisition costs) | 611,200,000 | 611,200,000 | ||
| Amounts receivable as result of the price adjustment | (30,113,103) | (30,414,000) | ||
| Costs that arise from acquisition | 4,231,975 | 1,170,755 | ||
| 585,318,872 | 581,956,755 | |||
| Net cash outflow arising from acquisition | ||||
| Payments made | 611,200,000 | 611,200,000 | ||
| Costs that arose from acquisition | 4,231,975 | 1,170,755 | ||
| Cash and cash equivalents acquired | (1,347,294) | (1,347,294) | ||
| Amount received as a result of a price adjustment | (30,113,103) | - | ||
| 583 971 578 | 611 023 461 |
583,971,578611,023,4619.2 Acquisitions In the consolidated statements of cash flows for the twelve months period endend 31 December 2008, the caption " Cash receipts related to Investments" includes the price adjustment in the amount of 30.113.103 euros.
Main acquisitons of Companies over the twelve month period ended 31 December 2008 are as follows:
| Percentage of Capital Held | |||
|---|---|---|---|
| At acquisition date | |||
| COMPANY | Head Office | Direct | Total |
| Retail | |||
| Arat Immuebles, SA | Madrid (Spain) | 100.00% | 100.00% |
| Azulino Imobiliária, SA | Maia | 100.00% | 100.00% |
| Worten España Distribución, S.L. | Madrid (Spain) | 100.00% | 100.00% |
| Geotur - Viagens e Turismo, SA | Lisbon | 50.00% | 50.00% |
| Marcas do Mundo - Viagens e turismo, Sociedade Unipessoal, Lda | Lisbon | 50.00% | 50.00% |
| Movimentos Viagens - Viagens e Turismo, Sociedade Unipessoal, Lda | Lisbon | 50.00% | 50.00% |
| Viagens y Turismo de Geotur España, S.L. | Madrid (Spain) | 50.00% | 50.00% |
| Shopping Centres | |||
| Gli Orsi 1 Shopping Centre, Srl | Milan (Italy) | 100.00% | 50.00% |
| Project Sierra Four SA | Bucharest (Romania) | 100.00% | 50.00% |
| Telecommunications | |||
| Unipress - Centro Gráfico, Lda | Vila Nova de Gaia | 50.00% | 26.97% |
Acquisitions mentioned above, had the following impact on the consolidated financial statements for the period ended 31 December 2008:
| 31.December.2008 | ||||||
|---|---|---|---|---|---|---|
| Retail Non food retail brands |
Travel and Real Estate |
Shopping Centres | Telecommunications | Total | Total | |
| Acquired net assets | ||||||
| Investment properties (Note 13) | - | - | 69,120,094 | - | 69,120,094 | 68,565,658 |
| Advance made in 2007 and recorded in Investment Properties | - | (23,397,730) | (23,397,730) | (23,397,730) | ||
| in Progress Total Investment properties acquired (Note 13) |
- | - | 45,722,364 | - | 45,722,364 | 45,167,928 |
| Tangible and intangible assets (Notes 11 and 12) | 41,638,634 | 5,481,479 | 2,747 | 3,867,252 | 50,990,112 | 48,485,940 |
| Inventories | 6,626,869 | - | - | 36,108 | 6,662,977 | 6,626,869 |
| Deferred tax assets | 16,544,051 | - | - | - | 16,544,051 | 16,620,706 |
| Other assets | 5,200,831 | 15,350,153 | 8,953 | 547,362 | 21,107,299 | 22,058,349 |
| Cash and cash equivalents | 1,256,349 | 66,389 | 815,751 | 7,451 | 2,145,940 | 2,371,849 |
| Loans | (18,484,665) | (1,118,443) | - | (213,855) | (19,816,963) | (20,635,139) |
| Deferred tax liabilities | (6,394,977) | (241,781) | (5,757,474) | - | (12,394,232) | (13,594,193) |
| Other liabilities | (29,562,939) | (17,228,789) | (8,609,155) | (3,708,906) | (59,109,789) | (46,235,632) |
| 16,824,153 | 2,309,008 | 32,183,186 | 535,412 | 51,851,759 | 60,866,677 | |
| Goodwill (Note 14 and 39) | (9,864,000) | 10,217,518 | 3,710,007 | 125,773 | 4,189,298 | |
| - | ||||||
| Acquisition price | 6,960,153 | 12,526,526 | 35,893,193 | 661,185 | 56,041,057 | |
| - | ||||||
| Payments made accounted as investments | 6,960,153 | 12,526,526 | - | 661,185 | 20,147,864 | |
| Payments made accounted as Investment Properties | - | - | 35,893,193 | - | 35,893,193 | |
| 6,960,153 | 12,526,526 | 35,893,193 | 661,185 | 56,041,057 | ||
| Net cash outflow arising from acquisition | ||||||
| Cash consideration paid | 6,960,153 | 12,526,526 | 35,893,193 | 661,185 | 56,041,057 | |
| Cash and cash equivalents acquired | (1,256,349) | (66,389) | (815,751) | (7,451) | (2,145,940) | |
| 5,703,804 | 12,460,137 | 35,077,442 | 653,734 | 53,895,117 |
Additionally the impacts of the above acquisitions on the income statement can be described as follows:
| 31.December.2008 | |||||||
|---|---|---|---|---|---|---|---|
| Retail Non food retail Travel and Real brands Estate |
Shopping Centres | Total | |||||
| Operational income | 24,737,503 | 12,929,251 | 10,455,499 | 48,122,253 | |||
| Operational costs | -27,541,089 | -13,104,536 | -9,985,104 | -50,630,729 | |||
| Financial net income | -389,875 | -31,480 | 6,147 | -415,208 | |||
| Earnings before taxes | -3,193,461 | -206,765 | 476,542 | -2,923,684 | |||
| Taxes | 4,867,821 | 23,051 | -3,046,348 | 1,844,524 | |||
| Net income | 1,674,360 | -183,714 | -2,569,806 | -1,079,160 |
Had the above acquisitions been reported to 1 January 2008, operational income would have increased by 131,725,247 euros.
Main disposals of companies over the twelve month period ended 31 December 2008 are as follows:
| Percentage of capital held | ||||
|---|---|---|---|---|
| At disposal date | ||||
| COMPANY | Head Office | Direct | Total | |
| Retalho | ||||
| Equador & Mendes - Agência de Viagens e Turismo, Lda | Lisbon | 50.00% | 50.00% | |
| Nova Equador Internacional,Agência de Viagens e Turismo, Lda | Lisbon | 50.00% | 50.00% | |
| Nova Equador P.C.O. e Eventos, Sociedade Unipessoal, Lda | Lisbon | 50.00% | 50.00% | |
| Star - Viagens e Turismo, SA | Lisbon | 50.00% | 50.00% | |
| Shopping Centres | ||||
| 8ª Avenida Centro Comercial, SA | Maia | 100.00% | 25.15% | |
| Arrábidashopping - Centro Comercial, SA | Maia | 50.00% | 25.10% | |
| Gaiashopping I - Centro Comercial, SA | Maia | 50.00% | 25.10% | |
| Gaiashopping II - Centro Comercial, SA | Maia | 100.00% | 25.10% | |
| Loureshopping - Centro Comercial, SA | Maia | 50.00% | 12.58% | |
| Oeste Retail Park - Gestão de G.Comer., SA | Maia | 50.00% | 12.58% | |
| Rio Sul - Centro Comercial, SA | Lisbon | 50.00% | 12.58% | |
| Serra Shopping - Centro Comercial, S.A. | Covilhã | 50.00% | 12.58% | |
| Sol Retail Park - Gestão de G. Comerc., SA | Maia | 50.00% | 12.58% | |
| SPF - Sierra Portugal Real Estate, Sarl | Luxembourg | 100.00% | 25.15% |
During the twelve month period ended 31 December 2008, occurred the sale of approximately 58% of the financial participation in the Investment fund - Sierra Portugal Fund (SPF), that reduced the participation to 42%, therefore these subsidiaries only contributed with six months for the Sonae Holding consolidated Income Statement, and from the 1st July started to be consolidated by the equity method.
The net assets of disposal affiliated companies at the disposal date and 31 December 2007 are as follows:
| Disposal date | |||||
|---|---|---|---|---|---|
| Retail | Shopping Centres | Total | Total | ||
| Travel | |||||
| Disposal net assets | |||||
| Investment properties (Note 13) | - | 212,961,916 | 212,961,916 | 211,148,595 | |
| Other assets | 12,781,166 | 5,286,458 | 18,067,624 | 23,683,140 | |
| Cash and cash equivalents | 122,787 | 4,122,097 | 4,244,884 | 2,978,446 | |
| Loans | (1,393,754) | (95,971,259) | (97,365,013) | (95,650,988) | |
| Deferred Tax | 39,616 | (29,672,993) | (29,633,377) | (29,389,537) | |
| Other liabilities | (8,670,541) | (8,953,069) | (17,623,610) | (45,355,523) | |
| 2,879,274 | 87,773,150 | 90,652,424 | 67,414,133 | ||
| Minority interests (Note 25) | (113,888) | (5,256,178) | (5,370,066) | (5,256,177) | |
| Goodwill (Note 14) | 5,133,479 | 11,230,265 | 16,363,744 | 11,866,534 | |
| Assets accounted as Available for Sale | (3,216,984) | - | (3,216,984) | - | |
| Assets accounted by the equity method (Note 7) |
- | (37,315,321) | (37,315,321) | - | |
| 4,681,881 | 56,431,916 | 61,113,797 | 74,024,490 | ||
| Gain/(Loss) in disposal | 4,674,685 | 10,708,784 | 15,383,469 | ||
| Disposal price | 9,356,566 | 67,140,700 | 76,497,266 | ||
| Amounts received | 9,356,566 | 67,140,700 | 76,497,266 | ||
| Amounts to be received | - | - | - | ||
| 9,356,566 | 67,140,700 | 76,497,266 | |||
| Net cash inflow arising from disposals | |||||
| Cash consideration received | 9,356,566 | 67,140,700 | 76,497,266 | ||
| Cash and cash equivalents disposed of | (122,787) | (4,122,097) | (4,244,884) | ||
| 9,233,779 | 63,018,603 | 72,252,382 |
The impacts of these disposals on the consolidated income statement are as follows:
| 31.December.2007 | ||||
|---|---|---|---|---|
| Retail | Shopping Centres | Total | Total | |
| Travel | ||||
| Turnover | 47,078,789 | 6,453,943 | 53,532,732 | 74,297,474 |
| Other operational income | 3,301,891 | (833,443) | 2,468,448 | 29,939,887 |
| Other operational expenses | (49,090,008) | (647,082) | (49,737,090) | (64,940,768) |
| Net financial expenses | (98,214) | (2,736,850) | (2,835,064) | (6,415,879) |
| Profit/(Loss) before taxation | 1,192,458 | 2,236,568 | 3,429,026 | 32,880,714 |
| Income tax | (355,210) | (766,716) | (1,121,926) | (8,601,504) |
| Net Profit/(Loss) | 837,248 | 1,469,852 | 2,307,100 | 24,279,210 |
The financial instruments classification according to policies disclosed in note 2.12, is as follows:
| Note | Assets at fair value through profit or loss (Note 28) |
Loans and accounts receivable |
Available for sale | Hedging derivatives (Note 28) |
Sub-total | Assets not within scope of IFRS 7 |
Total | |
|---|---|---|---|---|---|---|---|---|
| As at 31 December 2008 | ||||||||
| Non-current assets | ||||||||
| Other investments | 8 and 15 | - | - | 12,978,175 | - | 12,978,175 | - | 12,978,175 |
| Other non-current assets | 16 | - | 12,394,378 | - | 75,002 | 12,469,380 | 8,814,135 | 21,283,515 |
| - | 12,394,378 | 12,978,175 | 75,002 | 25,447,555 | 8,814,135 | 34,261,690 | ||
| Current assets | ||||||||
| Trade receivables | 18 | - | 215,062,609 | - | - | 215,062,609 | - | 215,062,609 |
| Other debtors | 19 | - | 145,992,505 | - | - | 145,992,505 | - | 145,992,505 |
| Investments | 15 | 72,483 | 60,956,604 | - | 2,527,676 | 63,556,763 | - | 63,556,763 |
| Cash and cash equivalents | 23 | - | 184,360,904 | - | - | 184,360,904 | - | 184,360,904 |
| 72,483 | 606,372,622 | - | 2,527,676 | 608,972,781 | - | 608,972,781 | ||
| 72,483 | 618,767,000 | 12,978,175 | 2,602,678 | 634,420,336 | 8,814,135 | 643,234,471 | ||
| As at 31 December 2007 | ||||||||
| Non-current assets | ||||||||
| Other investments | 8 and 15 | - | - | 12,055,157 | - | 12,055,157 | - | 12,055,157 |
| Other non-current assets | 16 | - | 13,158,533 | - | 7,346,945 | 20,505,478 | 54,111,271 | 74,616,749 |
| - | 13,158,533 | 12,055,157 | 7,346,945 | 32,560,635 | 54,111,271 | 86,671,906 | ||
| Current assets | ||||||||
| Trade receivables | 18 | - | 229,073,319 | - | - | 229,073,319 | - | 229,073,319 |
| Other debtors | 19 | - | 153,721,689 | - | - | 153,721,689 | - | 153,721,689 |
| Investments | 15 | 2,151,335 | 56,093,108 | - | 1,825,481 | 60,069,924 | - | 60,069,924 |
| Cash and cash equivalents | 23 | - | 286,401,453 | - | - | 286,401,453 | - | 286,401,453 |
| 2,151,335 | 725,289,569 | - | 1,825,481 | 729,266,385 | - | 729,266,385 | ||
| 2,151,335 | 738,448,102 | 12,055,157 | 9,172,426 | 761,827,020 | 54,111,271 | 815,938,291 |
| Note | Liabilities at fair value through profit or loss (Note 28) |
Hedging derivatives (Note 28) |
Financial liabilities recorded at amortised cost |
Sub-total | Liabilities not within scope of IFRS 7 |
Total | |
|---|---|---|---|---|---|---|---|
| As at 31 December 2008 | |||||||
| Non-current liabilities | |||||||
| Bank loans | 26 | - | - | 1,281,262,524 | 1,281,262,524 | - | 1,281,262,524 |
| Bonds | 26 | - | - | 1,684,214,319 | 1,684,214,319 | - | 1,684,214,319 |
| Obligations under finance leases |
26 | - | - | 28,701,579 | 28,701,579 | - | 28,701,579 |
| Other loans | 26 | - | 21,646,496 | 628,195 | 22,274,691 | - | 22,274,691 |
| Other non-current liabilities | 29 | - | - | 96,875,210 | 96,875,210 | 58,588,948 | 155,464,158 |
| - | 21,646,496 | 3,091,681,827 | 3,113,328,323 | 58,588,948 | 3,171,917,271 | ||
| Current liabilities | |||||||
| Bank loans | 26 | - | - | 258,905,967 | 258,905,967 | - | 258,905,967 |
| Bonds | 26 | - | - | 99,930,567 | 99,930,567 | - | 99,930,567 |
| Obligations under finance leases |
26 | - | - | 5,829,172 | 5,829,172 | - | 5,829,172 |
| Other loans | 26 | 475,849 | 4,894,131 | 35,486 | 5,405,466 | - | 5,405,466 |
| Trade creditors | 31 | - | - | 1,050,238,562 | 1,050,238,562 | - | 1,050,238,562 |
| Other creditors | 32 | - | - | 233,899,872 | 233,899,872 | - | 233,899,872 |
| 475,849 | 4,894,131 | 1,648,839,626 | 1,654,209,606 | - | 1,654,209,606 | ||
| 475,849 | 26,540,627 | 4,740,521,453 | 4,767,537,929 | 58,588,948 | 4,826,126,877 | ||
| As at 31 December 2007 | |||||||
| Non-current liabilities | |||||||
| Bank loans | 26 | - | - | 1,059,691,078 | 1,059,691,078 | - | 1,059,691,078 |
| Bonds | 26 | - | - | 1,744,850,709 | 1,744,850,709 | - | 1,744,850,709 |
| Obligations under finance leases |
26 | - | - | 23,470,674 | 23,470,674 | - | 23,470,674 |
| Other loans | 26 | - | 828,199 | 276,330 | 1,104,529 | - | 1,104,529 |
| Other non-current liabilities | 29 | - | - | 310,865,774 | 310,865,774 | 2,157,352 | 313,023,126 |
| - | 828,199 | 3,139,154,565 | 3,139,982,764 | 2,157,352 | 3,142,140,116 | ||
| Current liabilities | |||||||
| Bank loans | 26 | - | - | 129,207,708 | 129,207,708 | - | 129,207,708 |
| Bonds | 26 | - | - | - | - | - | - |
| Obligations under finance leases |
26 | - | - | 8,709,711 | 8,709,711 | - | 8,709,711 |
| Other loans | 26 | 363,463 | - | 36,229 | 399,692 | - | 399,692 |
| Trade creditors | 31 | - | - | 989,303,378 | 989,303,378 | - | 989,303,378 |
| Other creditors | 32 | - | - | 216,288,864 | 216,288,864 | - | 216,288,864 |
| 363,463 | - | 1,343,545,890 | 1,343,909,353 | - | 1,343,909,353 | ||
| 363,463 | 828,199 | 4,482,700,455 | 4,483,892,117 | 2,157,352 | 4,486,049,469 |
As at 31 December 2008 and 2007, the financial instruments at fair value through profit/loss are only the ones that do not qualify as hedging derivatives (Note 28).
During the periods ended 31 December 2008 and 2007, movements in Tangible assets as well as depreciation and accumulated impairment losses, are made up as follows:
| Tangible assets | |||||||
|---|---|---|---|---|---|---|---|
| Tangible | Total | ||||||
| Land and | Plant and | Fixtures and | assets | Tangible | |||
| Buildings | Machinery | Vehicles | Fittings | Others | in progress | Assets | |
| Gross cost: | |||||||
| Opening balance as at 1 January 2007 | 1,541,496,347 | 1,352,497,051 | 22,316,803 | 246,633,859 | 25,656,665 | 125,240,759 | 3,313,841,484 |
| Capital expenditure | 31,455,794 | 14,943,970 | 446,956 | 7,094,378 | 192,485 | 380,147,801 | 434,281,384 |
| Acquisitions of subsidiaries | 236,609,142 | 45,114,178 | 1,655,762 | 8,236,973 | 18,401,874 | 57,582,766 | 367,600,695 |
| Disposals | (24,002,562) | (38,334,429) | (965,536) | (10,922,160) | (465,407) | (1,897,140) | (76,587,234) |
| Disposals of subsidiaries | (60,776,673) | (75,000,371) | (4,767,997) | (3,202,678) | (6,829,635) | (5,133,454) | (155,710,808) |
| Demerger | (249,126,397) | (59,110,795) | (1,854,826) | (8,514,595) | (4,350,908) | (69,615,773) | (392,573,294) |
| Exchange rate effect | 353,265 | 91,110 | 8,849 | 46,877 | 2,930 | 9,189 | 512,220 |
| Transfers | 73,784,970 | 194,131,579 | 1,108,495 | 11,071,281 | 3,443,707 | (309,840,797) | (26,300,765) |
| Opening balance as at 1 January 2008 | 1,549,793,886 | 1,434,332,293 | 17,948,506 | 250,443,935 | 36,051,711 | 176,493,351 | 3,465,063,682 |
| Fair Value Allocation (Note 9) | 54,111,446 | 21,825,730 | (165,822) | (1,478,767) | (3,879,838) | (11,258,515) | 59,154,234 |
| Opening balance as at 1 January 2008 | 1,603,905,332 | 1,456,158,023 | 17,782,684 | 248,965,168 | 32,171,873 | 165,234,836 | 3,524,217,916 |
| Capital expenditure | 16,264,040 | 6,464,011 | 208,858 | 15,312,439 | 2,534,963 | 455,447,110 | 496,231,421 |
| Acquisitions of subsidiaries | 43,991,035 | 15,769,030 | 335,931 | 2,063,407 | 306,838 | 1,090,768 | 63,557,009 |
| Disposals | (19,832,796) | (61,558,448) | (796,515) | (15,556,162) | (1,418,448) | (2,362,161) | (101,524,530) |
| Disposals of subsidiaries | (348,113) | (825,536) | (620) | (1,086,418) | (131,074) | (144,083) | (2,535,844) |
| Exchange rate effect | (73,196) | (268,412) | (27,999) | (208,081) | (173) | - | (577,861) |
| Transfers | 98,584,185 | 198,540,292 | 2,221,279 | 14,213,870 | 4,401,250 | (335,318,433) | (17,357,557) |
| Closing balance as at 31 December 2008 | 1,742,490,487 | 1,614,278,960 | 19,723,618 | 263,704,223 | 37,865,229 | 283,948,037 | 3,962,010,554 |
| Accumulated depreciation | |||||||
| and impairment losses | |||||||
| Opening balance as at 1 January 2007 | 299,267,901 | 726,645,865 | 18,214,743 | 174,380,590 | 19,449,419 | 1,307,069 | 1,239,265,587 |
| Depreciation and Impairment losses | 33,564,031 | 126,774,614 | 1,362,173 | 24,778,838 | 2,463,039 | 1,700 | 188,944,395 |
| Acquisitions of subsidiaries Acquisitions of subsidiaries |
50 515 179 50,515,179 |
21 030 452 21,030,452 |
1 097 436 1,097,436 |
6 165 821 6,165,821 |
14 072 536 14,072,536 |
- | 92 881 424 92,881,424 |
| Disposals | (7,796,830) | (16,574,094) | (743,986) | (9,083,622) | (434,950) | - | (34,633,482) |
| Disposals of subsidiaries | (30,714,710) | (57,640,868) | (4,670,013) | (2,831,829) | (6,662,325) | (2,214,305) | (104,734,050) |
| Demerger | (34,411,598) | (25,108,894) | (1,335,506) | (6,450,388) | (3,007,297) | (9,138) | (70,322,821) |
| Exchange rate effect | 13,174 | 19,674 | 2,139 | 7,624 | 5,742 | - | 48,353 |
| Transfers | (512,459) | (534,032) | (13,092) | (476,146) | (34,436) | 914,674 | (655,491) |
| Opening balance as at 1 January 2008 | 309,924,688 | 774,612,717 | 13,913,894 | 186,490,888 | 25,851,728 | - | 1,310,793,915 |
| Fair Value Allocation (Note 9) | (17,599,079) | 15,488,517 | (156,772) | (1,241,006) | (3,223,824) | - | (6,732,164) |
| Opening balance as at 1 January 2008 | 292,325,609 | 790,101,234 | 13,757,122 | 185,249,882 | 22,627,904 | - | 1,304,061,751 |
| Depreciation and Impairment losses | 35,151,938 | 144,352,824 | 1,628,180 | 31,095,643 | 5,219,204 | - | 217,447,789 |
| Acquisitions of subsidiaries | 2,747,299 | 8,502,660 | 224,023 | 1,274,273 | 213,158 | - | 12,961,413 |
| Disposals | (6,376,485) | (54,062,247) | (680,753) | (14,758,363) | (1,313,171) | - | (77,191,019) |
| Disposals of subsidiaries | (177,254) | (228,724) | (620) | (704,909) | (62,731) | - | (1,174,238) |
| Exchange rate effect | (39,116) | (101,719) | (9,368) | (97,581) | (20) | - | (247,804) |
| Transfers | (3,097,892) | 1,374,419 | (4,050) | (45,360) | (17,491) | - | (1,790,374) |
| Closing balance as at 31 December 2008 | 320,534,099 | 889,938,447 | 14,914,534 | 202,013,585 | 26,666,853 | - | 1,454,067,518 |
| Carrying amount | |||||||
| As at 31 de December de 2007 | 1,311,579,723 | 666,056,789 | 4,025,562 | 63,715,286 | 9,543,969 | 165,234,836 | 2,220,156,165 |
| As at 31 de December de 2008 | 1,421,956,388 | 724,340,513 | 4,809,084 | 61,690,638 | 11,198,376 | 283,948,037 | 2,507,943,036 |
Major amounts included in the caption Tangible assets in progress, refer to the following projects:
| 31 December 2008 | 31 December 2007 | |
|---|---|---|
| Refurbishment and expansion of stores in the retail segment located in Portugal |
146,344,713 | 122,900,793 |
| Projects of "Modelo" and "Continente" stores for which advance payments were made |
45,435,160 | - |
| Deployment of mobile network | 62,159,389 | 32,044,146 |
| Deployment of fixed network | 19,471,996 | 2,594,034 |
| Others | 10,536,779 | 7,695,863 |
| 283,948,037 | 165,234,836 |
During the period ended 31 December 2008 and 2007, movements in Intangible assets as well as amortisation and accumulated impairment losses, are made up as follows:
| Intangible assets | |||||||
|---|---|---|---|---|---|---|---|
| Intangible | Total | ||||||
| Patents and other | assets | Intangible | |||||
| similar rights | Software | Others | in progress | Assets | |||
| Gross cost: | |||||||
| Opening balance as at 1 January 2007 | 235,905,652 | 291,477,306 | 20,097,773 | 21,733,405 | 569,214,136 | ||
| Capital expenditure | 23,346,237 | 878,227 | 57,589 | 35,268,412 | 59,550,465 | ||
| Acquisitions of subsidiaries (Note 9) | 14,988,405 | 3,790,266 | - | - | 18,778,671 | ||
| Disposals | (10,736) | (384,344) | (44,893) | (596,788) | (1,036,761) | ||
| Disposals of subsidiaries (Note 9) | (2,475,585) | - | (642,754) | - | (3,118,339) | ||
| Demerger (Note 9) | (670,663) | (2,408,360) | (36,583) | (74,922) | (3,190,528) | ||
| Exchange rate effect | 126 | 14,489 | - | - | 14,615 | ||
| Transfers | 3,834,357 | 27,731,803 | 3,448 | (34,852,920) | (3,283,312) | ||
| Opening balance as at 1 January 2008 | 274,917,793 | 321,099,387 | 19,434,580 | 21,477,187 | 636,928,947 | ||
| Fair Value Allocation (Note 8) | - | - | - | (1,422,500) | (1,422,500) | ||
| Opening balance as at 1 January 2008 | 274,917,793 | 321,099,387 | 19,434,580 | 20,054,687 | 635,506,447 | ||
| Capital expenditure | 99,281,740 | 2,813,484 | 168,961 | 42,743,396 | 145,007,581 | ||
| Acquisitions of subsidiaries (Note 9) | 922,565 | 998,542 | 5,456,647 | - | 7,377,754 | ||
| Disposals | (188,864) | (14,813,905) | (352,472) | (913,753) | (16,268,994) | ||
| Disposals of subsidiaries (Note 9) | (364,185) | (1,282,959) | (1,067,256) | (327,837) | (3,042,237) | ||
| Exchange rate effect | (425) | (579,689) | - | (4,828) | (584,942) | ||
| Transfers | 8,077,244 | 30,202,203 | (2,568) | (29,929,545) | 8,347,334 | ||
| Closing balance as at 31 December 2008 | 382,645,868 | 338,437,063 | 23,637,892 | 31,622,120 | 776,342,943 | ||
| Accumulated depreciation | |||||||
| and impairment losses | |||||||
| Opening balance as at 1 January 2007 | 38,004,148 | 194,376,368 | 15,316,135 | - | 247,696,651 | ||
| Depreciation of the period | 18,358,081 | 26,651,222 | 837,492 | - | 45,846,795 | ||
| Acquisitions of subsidiaries (Note 9) Acquisitions of subsidiaries (Note 9) |
180 217 180,217 |
685 611 685,611 |
- | - | 865 828 865,828 |
||
| Disposals | (435) | (430,835) | (44,892) | - | (476,162) | ||
| Disposals of subsidiaries (Note 9) | (1,941,697) | - | (631,064) | - | (2,572,761) | ||
| Demerger (Note 9) | (372,234) | (1,954,226) | (36,281) | - | (2,362,741) | ||
| Exchange rate effect | - | 12,055 | - | - | 12,055 | ||
| Transfers | 232,007 | 18,539 | 592 | - | 251,138 | ||
| Opening balance as at 1 January 2008 | 54,460,087 | 219,358,734 | 15,441,982 | - | 289,260,803 | ||
| Depreciation of the period | 23,054,285 | 32,606,424 | 710,664 | - | 56,371,373 | ||
| Acquisitions of subsidiaries (Note 9) | 697,432 | 881,559 | 5,404,247 | - | 6,983,238 | ||
| Disposals | (66,143) | (14,777,300) | (352,472) | - | (15,195,915) | ||
| Disposals of subsidiaries (Note 9) | (89,895) | (768,135) | (839,027) | - | (1,697,057) | ||
| Exchange rate effect | - | (181,275) | - | - | (181,275) | ||
| Transfers | 499,504 | 115 | 2,996 | - | 502,615 | ||
| Closing balance as at 31 December 2008 | 78,555,270 | 237,120,122 | 20,368,390 | - | 336,043,782 | ||
| Carrying amount | |||||||
| As at 31 de December de 2007 | 220,457,706 | 101,740,653 | 3,992,598 | 20,054,687 | 346,245,644 | ||
| As at 31 de December de 2008 | 304,090,598 | 101,316,941 | 3,269,502 | 31,622,120 | 440,299,161 |
Intangible assets in progress, as at 31 December 2008, were mainly composed of software projects and software development.
At 31 December 2008 and 2007, the Group has recorded under the caption Patents and other similar rights the amounts of 197,381,992 euro and 111,732,870 euro, respectively, which correspond to the investment net of depreciations made in the development of the UMTS network, including: (i) Euro 66,006,338 euro (amount of 72,006,914 euro in 2007) related with the license; (ii) 22,055,138 euro (amount of 24,060,150 euro in 2007) related to the agreement signed in 2002 between Oni Way and the other three mobile telecommunication operators in Portugal with UMTS licenses; (iii) 6,773,799 euro (amount of 7,389,598 euro in 2007) related with a contribution to the Information Society Fund, established in 2007, under an agreement entered into between the Ministry of Public Works, Transport and Communications ("Ministério das Obras Públicas, Transportes e Comunicações") and the three mobile telecommunication operators in Portugal; and (iv) 96,907,100 euro (2,123,896 euros in 2007) related with the "Iniciativas E" program, the last two commitments assumed by the Group in the Information Society Fund (Note 52).
Additionally, this heading also includes the fair value attributed to a group of brands with indefinite useful lives, among which the "Continente" brand, 75,000,000 euro (the same amount as at December 2007).
The movement in Investment Properties during the years ended 31 December 2008 and 2007 was as follows:
| Investment Properties | |||||||
|---|---|---|---|---|---|---|---|
| In Operation | Fit Out | In progress | Total | ||||
| Opening balance as at 1 January 2007 | 1,342,997,969 | 3,939,876 | 173,273,414 | 1,520,211,259 | |||
| Increases | 123,853,779 | 908,200 | 162,919,282 | 287,681,261 | |||
| Increases through concentration of business activities (Note 9) | 21,061,308 | - | 26,273,602 | 47,334,910 | |||
| Write-offs | - | (325,000) | (2,298,036) | (2,623,036) | |||
| Reimbursements of Fit - Out | - | (1,107,546) | - | (1,107,546) | |||
| Transfers | - | - | (2,227,323) | (2,227,323) | |||
| Transfers from investment properties in progress: | |||||||
| Construction and other costs | 165,884,673 | - | (165,884,673) | - | |||
| Adjustment to fair value (Note 38) | 28,272,805 | - | - | 28,272,805 | |||
| Change in fair value of investment properties in operation (Note 38): | |||||||
| - Gains | 137,338,742 | 543,463 | - | 137,882,205 | |||
| - Losses | (13,440,220) | (306,200) | - | (13,746,420) | |||
| Changes in consolidation percentage in Joint Ventures | 57,031,875 | (268,500) | 418,829 | 57,182,204 | |||
| Disposal of joint ventures | (3,991,500) | - | - | (3,991,500) | |||
| Other | - | 637,217 | 870,767 | 1,507,984 | |||
| Exchange rate effect | 5,625,120 | - | 127,003 | 5,752,123 | |||
| Opening balance as at 1 January 2008 | 1,864,634,551 | 4,021,510 | 193,472,865 | 2,062,128,926 | |||
| Increases | 21,738,803 | 275,000 | 105,772,145 | 127,785,948 | |||
| Write-offs | - | - | (26,518,956) | (26,518,956) | |||
| Reimbursements of Fit - Out | - | (398,689) | - | (398,689) | |||
| Transfers | 419,822 | 870,740 | (8,045,901) | (6,755,339) | |||
| Transfers from investment properties in progress: | |||||||
| Construction and other costs | 149,979,571 | 700,000 | (151,855,403) | (1,175,832) | |||
| Adjustment to fair value (Note 38) | 18,716,720 | (64,750) | 7,579,782 | 26,231,752 | |||
| Change in fair value of investment properties in operation (Note 38): | |||||||
| - Gains | 16,724,908 | 61,052 | - | 16,785,960 | |||
| - Losses Losses |
(158 127 074) (158,127,074) |
(696 113) (696,113) |
- | (158 823 187) (158,823,187) |
|||
| Business Combinations | - | - | 45,722,364 | 45,722,364 | |||
| Disposal of joint ventures | (211,934,750) | (1,003,250) | (23,916) | (212,961,916) | |||
| Other | |||||||
| Exchange rate effect | (22,476,530) | - | (7,541,928) | (30,018,458) | |||
| Closing balance as at 31 December 2008 | 1,679,676,021 | 3,765,500 | 158,561,052 | 1,842,002,573 |
Fit out contracts correspond to agreements with tenants, under which the Group pays part of the expenses incurred with the fit out of stores and the tenant assumes the responsibility to reimburse the amount invested to the Group over the period of the lease. The accounting treatment of fit outs is similar to the one used for other investment properties.
In 2008, the amount reported as business combinations of activities of 45,655,096 Euro relates to the effect of the consolidation of the subsidiaries Ploiesti (16,130,717 euro) and Gli Orsi ( 29,524,379 euro). This last amount is reduced by the advance payment made in 2007 and that is already included in the opening balance (23,397,730 euro) - Note 9.
The global crisis led to a reassessment of the risk profile of the emerging markets like Romania and, consequently, to an upwards shift in the local market yields. As a consequence in the year ended in 31 December 2008 an impairment loss was recorded in the investment properties in progress "Ploiesti" and "Craiova", in the amount of 10,988,975 euro and 15,529,981 euro (Note 42).
It was transferred from Investment Properties in progress to Assets held for sale the amount of 5,782,500 euro related to the Alexa Tower, property of the company Alexa Shoping Center, GmbH. The Alexa Tower was classified as held for sale, because its future sale is highly probable.
The Increases in 2007 in the investment properties in operation include the acquisition of the shopping centre Münster Arkaden by the company Münster Arkaden BV (Ex-Project Sierra 3 BV) in Germany, for the amount of 85,614,382 euro.
As at 31 December 2008 and 2007, Investment properties in operation, including fit-outs, correspond to the fair value of the Group's share of shopping centres, which can be detailed as follows:
| 31.December.2008 | 31.December.2007 | |||||||
|---|---|---|---|---|---|---|---|---|
| 10 years "discount rate" |
Yields | Amount | 10 anos "discount rate" |
Yields | Pro Forma Amount | Published Amount | ||
| Portugal | 7,30% e 9,75% | 5,40% e 7,50% | 790,389,750 | 7,15% e 9,25% | 4,90% e 7,00% | 828,427,137 | 1,038,302,637 | |
| Spain | 8,70% e 12,35% | 5,70% e 9,35% | 413,726,365 | 7,70% e 9,60% | 5,00% e 6,90% | 454,290,823 | 454,290,823 | |
| Italy | 8,00% e 8,70% | 5,80% e 7,70% | 183,216,750 | 8,00% e 8,15% | 5,50% e 6,15% | 84,255,000 | 84,255,000 | |
| Germany | 6.50% | 5,75% e 6,00% | 163,875,827 | 5.50% | 5.50% | 172,792,000 | 172,792,000 | |
| Brazil | 13,45% e 14,95% | 8,25% e 9,75% | 91,665,330 | 12,50% e 13,50% | 8,50% e 10,50% | 97,664,101 | 97,664,101 | |
| Greece | 10.75% | 7.00% | 21,796,500 | - | - | - | - | |
| Romania | 9.75% | 8.00% | 18,770,999 | 8.50% | 6,75% | 21,351,500 | 21,351,500 | |
| 1,683,441,521 | 1,658,780,561 | 1,868,656,061 |
The fair value of fit out contracts was determined by valuations as at December 2008 and 2007, performed by an independent specialized entity. The methodology used to compute the fair value of the fit out contracts consisted in determining the discounted estimated cash flows of each one of the fit out contracts, using a discounted marked rate, similar to the one used in determining the fair value of the investment property to which each fit out contract relates.
The valuation of these investment properties was made in accordance with the Practice Statements of the RICS Appraisal and Valuation Manual published by The Royal Institution of Chartered Surveyors ("Red Book"), located in the United Kingdom.
The methodology used to compute the market value of the investment properties consists in preparing 10 year projections of income and expenses of each shopping mall which are then discounted to the balance sheet date using a discount market rate. The residual amount at the end of year 10 is computed by applying a return rate ("Exit yield" or "cap rate") on the projected net income of year 11. The market values so obtained are then tested by calculating and analysing the capitalisation yield that is implicit in those values – corresponding to the yield shown in the list above. Projections are intended to reflect the actual best estimate of the valuators regarding future revenues and costs of each shopping mall. Both the return rate and discount rate are defined in accordance to the real estate local and institutional market conditions, being the reasonability of the market value thus obtained tested in terms of initial gain.
In the valuation of investment properties some assumptions, that in accordance with the Red Book are considered to be special, were additionally considered, namely in the case of recently inaugurated shopping malls, in which the possible costs still to be incurred were not considered, as the accompanying financial statements already include a provision for them.
The open market value of the investment properties under development as at the reporting date is calculated by subtracting from the open market value at opening, calculated using the methodology described above, the investment necessary to finish the project and weighted by a risk factor defined by the valuer.
As at 31 December 2008 and 2007, Investment properties can be detailed as follows:
| 31.December.2008 | 31.December.2007 pro forma |
31.December.2007 | |
|---|---|---|---|
| Investment Properties at cost | |||
| Portugal: | |||
| Alverca | 3,005,342 | 2,995,036 | 2,995,036 |
| Centro Bordalo | 1,430,192 | 1,192,538 | 1,192,538 |
| Cacém Shopping | 1,084,960 | 1,036,919 | 1,036,919 |
| Setubal Retail Park | 733,266 | 786,164 | 786,164 |
| Parque de Famalicão | 627,500 | 627,500 | 627,500 |
| Arrábidashopping - expansão | - | 1,187,506 | 2,375,011 |
| Others | 104,310 | 870,733 | 956,323 |
| Germany: | |||
| Alexa | - | 7,320,992 | 7,320,992 |
| Others | 350,458 | - | - |
| Brazil: | |||
| Goiânia Shopping | 2,332,966 | - | - |
| Uberlândia Shopping | 1,416,375 | 1,530,607 | 1,530,607 |
| Pátio Boavista | 646,176 | - | - |
| Boulevard Londrina Shopping | 112,582 | ||
| Spain: | |||
| Project Sierra Spain 2 | 9,724,204 | ||
| Pulianas Shopping | 6,393,375 | 5,746,847 | 5,746,847 |
| Project Sierra Spain 6 | 3,201,064 | - | - |
| Dos Mares - expansão | 1,404,902 | 1,404,902 | 1,404,902 |
| Plaza Mayor Shopping | - | 17,733,934 | 17,733,934 |
| Greece: | |||
| Ioannina | 12,425,240 | 10,395,799 | 10,395,799 |
| Aegean Park | 4,881,606 | 4,845,206 | 4,845,206 |
| Galatsi Shopping | 4,077,148 | 3,159,277 | 3,159,277 |
| Pantheon Plaza | 882,672 | 13,855,607 | 13,855,607 |
| Italy: | |||
| Caldogno | 4,662,500 | 4,138,655 | 4,138,655 |
| Le Terraze | 3,817,792 | 1,891,179 | 1,891,179 |
| Pavia | 3,755,236 | 3,641,489 | 3,641,489 |
| Freccia Rossa | - | 32,263,488 | 32,263,488 |
| Gli Orsi | - | 23,397,730 | 23,397,730 |
| Others | 6,457 | - | - |
| Romania | |||
| Craiova Shopping | 12,345,625 | 20,479,875 | 20,479,875 |
| Ploiesti Shopping | 6,726,158 | - | - |
| 86,148,106 | 160,501,983 | 161,775,078 | |
| Investment Properties at fair value: | |||
| Portugal: | |||
| Leiria Shopping | 5,705,415 | 264,231 | 264,231 |
| Torres Oriente e Ocidente | 3,310,285 | 192,426 | 192,426 |
| Brazil: | |||
| Manauara Shopping | 17,942,521 | 5,628,846 | 5,628,846 |
| Germany: | |||
| Loop 5 | 45,454,725 | 25,612,284 | 25,612,284 |
| 72,412,946 | 31,697,787 | 31,697,787 | |
| 158,561,052 | 192,199,770 | 193,472,865 |
Investment properties in progress include borrowing expenses incurred during the construction period. As of 31 December 2008 and 2007, total borrowing expenses capitalised amounted to Euro 8,543,570 and Euro 8,882,433, respectively.
During the years ended on 31 December 2008 and 2007, the income (fixed rents - net of possible discounts- variable rents, common spaces rents, key income and transfer fees) and the corresponding direct operating expenses (property tax, insurance expense, maintenance expense, management fee and asset management fee and other direct operating expenses), relating the investment properties of the Group, had the following detail:
| Rents | Operational direct expenses | ||||||
|---|---|---|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | ||
| Portugal | 59,498,236 | 53,962,730 | 61,187,041 | 3,048,116 | 5,232,462 | 6,279,195 | |
| Spain | 28,001,533 | 23,915,559 | 23,915,559 | 2,073,938 | 1,790,833 | 1,790,833 | |
| Brazil | 9,888,944 | 8,530,373 | 8,530,373 | 280,120 | 226,833 | 226,833 | |
| Germany | 8,831,179 | 3,809,647 | 3,809,647 | 370,613 | 1,643,312 | 1,643,312 | |
| Italy | 7,806,619 | 3,319,279 | 3,319,279 | 1,182,306 | (97,032) | (97,032) | |
| Romania | 1,519,603 | 1,028,683 | 1,028,683 | 160,022 | 71,217 | 71,217 | |
| Greece | 775,489 | - | - | 105,051 | - | - | |
| 116,321,601 | 94,566,270 | 101,790,580 | 7,220,165 | 8,867,625 | 9,914,358 |
At 31 December 2008 the following investment properties had been given in guarantee of bank loans:
| Airone | Leiria |
|---|---|
| Alexa | Loop 5 |
| Algarveshopping | Luz del Tajo |
| Alverca | Madeirashopping |
| Arrabidashopping | Maiashopping |
| Avenida M40 | Max Center |
| Cascaishopping | Munster Arkaden |
| Centro Colombo | Norteshopping |
| Centro Vasco da Gama | Parque Atlântico |
| Coimbrashopping | Parque Principado |
| Dos Mares | Plaza Éboli |
| El Rosal | Plaza Mayor |
| Estação Viana Estação Viana |
Plaza Mayor Shopping Plaza Mayor Shopping |
| Freccia Rossa | River Plaza Mall |
| Gaiashopping | Torre Ocidente |
| Gli Orsi | Torre Oriente |
| Grancasa | Valecenter |
| Guimarãeshopping | Valle Real |
| La Farga | Viacatarina |
| Airone | Zubiarte |
At 31 December 2008 and 2007 there were no material contractual obligations to purchase, construct or develop investment properties or for repairs or maintenance, other than those referred to above.
Goodwill is allocated to each one of the business segments and within to each one of the homogeneous groups of cash generating units, as follows:
| - Retail | Goodwill is allocated to each one of the segment business concepts (Continente, Modelo, Worten, Sport Zone, among others) explored by Retail, being after allocated to each one business concept stores of the segment; |
|---|---|
| - Shopping Centers | Goodwill was alocated to each of the own investment properties and to the management and development of investment properties business; |
| - Telecommunications | Goodwill is allocated by each business segment type (telecommunications, Multimedia and Information Systems). |
| - Sonae Holding and others |
This segment's Goodwill is mainly related with the insurance business. Goodwill from this business segment is related to the insurance clients portfolio, which was acquired previously to the adoption of IFRS, therefore explaining the non recognition as an Intangible asset. |
At 31 December 2008 and 2007, the caption "Goodwill" was as follows:
| 31.December.2008 | 31.December.2007 Pro-forma |
31.December.2007 Restated (Note 9) |
|
|---|---|---|---|
| Retail | 583,919,974 | 573,038,417 | 573,038,417 |
| Shopping Centers | 58,703,923 | 59,261,402 | 80,985,759 |
| telecommunications | 44,091,691 | 32,086,988 | 32,086,988 |
| Sonae Holding and others | 10,551,773 | 11,279,214 | 11,279,214 |
| 697,267,362 | 675,666,021 | 697,390,378 |
During the years ended 31 December 2008 and 2007, movements in goodwill, as well as in the corresponding impairment losses, are as follows:
| 31.December.2008 | 31.December.2007 Pro-forma |
31.December.2007 Restated (Note 9) |
||
|---|---|---|---|---|
| Gross value: | ||||
| Opening balance restated | 707,303,376 | 198,609,930 | 264,411,899 | |
| New companies | 14,053,298 | 491,656,968 | 491,656,968 | |
| Increases | 18,714,449 | 30,035,581 | 30,035,581 | |
| Decreases (Note 9) | (16,363,744) | (34,723,460) | (12,999,103) | |
| Transfers | (8,384,445) | - | - | |
| Disposals | (6,310,351) | |||
| Demerger | - | - | (65,801,969) | |
| Closing balance | 709,012,583 | 685,579,019 | 707,303,376 | |
| Accumulated impairment losses: | ||||
| Opening balance | 9,912,998 | 7,545,972 | 13,569,244 | |
| Increases | 8,142,574 | 2,367,026 | 3,659,303 | |
| Disposals | (6,310,351) | - | - | |
| Transfers | - | - | (7,315,549) | |
| Closing balance | 11,745,221 | 9,912,998 | 9,912,998 | |
| Net Value: | 697,267,362 | 675,666,021 | 697,390,378 |
The caption "Transfers" relates to the 42% goodwill of Sierra Portugal Fund (SPF) transfered to the caption "Investments in associated companies" measured in accordance with the equity method.
During the period, the increases in the percentages by investments acquisitions, mainly at Sonaecom and Star Viagens( previously to the partial sale to Raso, SGPS, SA) had generated a total goodwill of 17,034,137 euro (20,174,492 euros at 31 December 2007).
Sonae does annual impairment tests of Goodwill and whenever there are indicators of Goodwill impairment. During the reporting periods ended at 31 December 2008 and 2007, Sonae has tested the goodwill impairment, having, has a result of that analysis, recognized impairment losses as follows:
| 31.December.2008 | 31.December.2007 Pro-forma |
|
|---|---|---|
| Retail | 1,039,423 | 1,301,947 |
| Shopping Centers | 6,375,724 | 1,065,079 |
| telecommunications | - | - |
| Sonae Holding and others | 727,427 | - |
| 8,142,574 | 2,367,026 |
The recoverable value of cash units generators is determined based on its value in use, which is calculated taking into consideration the last approved plans which are prepared using cash flow projections for periods of 5 years.
The main assumptions used in mentioned business plans are detailed as follows for each one of the Sonae business.
For this purpose the segment uses the internal valuation results of its business concepts, using annual planning methologies, supported in business plans that considers cash flow projections for each unit which depend on detailed assumptions based properly supported. These plans take in consideration the impact of the main actions that will be carried out by each business concept as well as a study of the resources allocation of the company.
The case scenarios are elaborated with an average capital cost of 7 to 10% depending on the market and business concept. Perpetuity growth rate was considered to be between 0 and 1%.
The goodwill related with the Shopping Center segment is allocated to each one of the companies that owns investment properties . The impairment tests of goodwill are based on the Net Asset value (NAV), at the balance sheet date, of the financial investments.
"Net Asset Value" is measured by the investment property valuation at market values (Open Market Value), not including the deferred taxes over the gains obtained. The assumptions related with investment properties valuation are detailed in Note 13.
For this purpose the segment uses the internal valuation results of its business areas, using annual planning methologies, supported in business plans that consider cash flow projections for each unit which depend on detailed assumptions based on historical performance of each business.
The discount rates used were based on the estimated weighted average cost of capital, which depends of the business segment of each subsidiary, as indicated in the table below. In perpetuity, the Group considered a growth rate of circa 3%.
The discount rates used are:
| - Telecommunications | 7.90% |
|---|---|
| - Multimedia | 9.60% |
| - Information Systems | 9.30% |
Goodwill was exclusively allocated to business insurance clients portfolio. IAs consequence, the impairment analysis is made using the estimated profitability of the mentioned portfolio, being the main assumptions as follows:
| Insurance | |
|---|---|
| Sales Increase rate during the projected period | 1% |
| Perpetuity growth rate | 1% |
| Discount rate used | 9% |
As at 31 December 2008 and 2007, this caption is made up as follows:
| 31.December.2008 | 31.December.2007 | |||
|---|---|---|---|---|
| Non current | Current | Non current | Current | |
| Investments in group companies, jointly controlled companies or associated companies excluded from consolidation |
||||
| Opening balance as at 1 January | 9,376,193 | - | 12,671,340 | - |
| Acquisitions in the period | 458,596 | - | 28,993,045 | - |
| Ch i lid ti i t Changes in consolidation perimeter |
1 598 800 1,598,800 |
- | - | - |
| Disposals in the period | - | - | (2,319,119) | - |
| Demerger | - | - | (10,102,005) | - |
| Transfers | (8,420,952) | - | (19,867,068) | - |
| Closing balance as at 31 December | 3,012,637 | - | 9,376,193 | - |
| Accumulated impairment losses | - | - | - | - |
| 3,012,637 | - | 9,376,193 | - | |
| Other Investments | ||||
| Fair value (net of impairment losses) as at 1 January | 2,678,964 | 56,093,108 | 229,462,747 | 33,212,402 |
| Acquisitions in the period | 19,750 | 6,029,043 | 11,439,982 | 6,444,627 |
| Disposals in the period | (25,000) | (1,165,547) | (127,532,224) | (16,063,792) |
| Increase/(Decrease) in fair value | 7,304,000 | - | 3,617,759 | - |
| Demerger | - | - | (105,964,814) | (499) |
| Transfers | (12,176) | - | (8,344,486) | 32,500,370 |
| Fair value (net of impairment losses) as at 31 December | 9,965,538 | 60,956,604 | 2,678,964 | 56,093,108 |
| Other Investments (Note 8) | 12,978,175 | 60,956,604 | 12,055,157 | 56,093,108 |
| Derivative financial instruments (Note 28) | ||||
| Fair value as at 1 January | - | 3,976,816 | - | 49,458 |
| Acquisitions in the year | - | 72,494 | - | 471,075 |
| Disposals in the year | - | (296,968) | - | (49,458) |
| Increase/(Decrease) in fair value | - | (1,152,183) | - | 3,505,741 |
| Fair value as at 31 December | - | 2,600,159 | - | 3,976,816 |
| 12,978,175 | 63,556,763 | 12,055,157 | 60,069,924 |
The financial investments in group companies, jointly controlled companies or associated companies excluded from consolidation are recorded at the acquisition cost net of impairment losses. It is Sonae understanding that no reliable fair value estimate could be made as there is no market data available for these investments. The heading of Investments available for sale includes 2,661,538 euro (2,678,934 euro in 31 December 2007) of investments recorded at the cost net of impairment losses for the same reasons.
The investments available for sale are net impairment losses (Note 34) amounting 13,157 euro (26,314 euro in 31 December 2007).
Under the caption other financial investments is recorded an amount of 56,042,299 Euro (56,093,108 Euro as of 31 December 2007) related to deposited amounts on an Escrow Account which are invested in investment funds with superior rating and guarantee contractual liabilities assumed by Sonae which may arise from the sale of Sonae Distribuição Brasil, S.A. and for which provisions were recorded (Note 34).
As at 31 December 2008 and 2007, Other non-current assets are detailed as follows:
| 31.December.2008 | 31.December.2007 | |||||
|---|---|---|---|---|---|---|
| Accumulated | Accumulated | |||||
| impairment | Carrying | impairment | Carrying | |||
| Gross Value | losses (Note 34) | Amount | Gross Value | losses (Note 34) | Amount | |
| Loans granted to related parties | ||||||
| Mundo Vip - Operadores Turísticos, SA | - | - | - | 1,000,000 | - | 1,000,000 |
| Cooper Gay (Holding) Limited | - | - | - | 1,943,295 | - | 1,943,295 |
| Others | 294,089 | (160,125) | 133,964 | 346,654 | (170,125) | 176,529 |
| 294,089 | (160,125) | 133,964 | 3,289,949 | (170,125) | 3,119,824 | |
| Trade accounts receivable and other debtors | ||||||
| Legal deposits | 634,470 | - | 634,470 | 792,644 | - | 792,644 |
| Cautions | 1,638,456 | - | 1,638,456 | - | - | - |
| Lisbon Town Council | 3,888,477 | - | 3,888,477 | 3,888,477 | - | 3,888,477 |
| Malaga Town Council | 512,108 | - | 512,108 | 512,108 | - | 512,108 |
| Rent deposits from tenants | 3,740,456 | - | 3,740,456 | 4,394,235 | - | 4,394,235 |
| Others | 1,977,893 | (131,446) | 1,846,447 | 582,691 | (131,446) | 451,245 |
| 12,391,860 | (131,446) | 12,260,414 | 10,170,155 | (131,446) | 10,038,709 | |
| Non-Current derivatives | 75,002 | - | 75,002 | 7,346,945 | - | 7,346,945 |
| Total financial instruments (Note 10) | 12,760,951 | (291,571) | 12,469,380 | 20,807,049 | (301,571) | 20,505,478 |
| Reinsurer's' share of technical provisions | 8,763,158 | - | 8,763,158 | 54,060,294 | - | 54,060,294 |
| - | ||||||
| Other non-current assets | 50,977 | - | 50,977 | 50,977 | - | 50,977 |
| 21,575,086 | (291,571) | 21,283,515 | 74,918,320 | (301,571) | 74,616,749 |
The difference between the disclosed values in the balance sheet as at 31 December 2007 and 2007 Pro-forma arises from the loans granted to the companies of Sierra PTF Fund, that are no longer eliminated as they are consolidated by the use of the equity method.
Loans granted to related parties earn interest at usual market rates and do not have a defined maturity. The fair value of these loans is estimated to be similar to its carrying amount carrying amount.
The amount of 3,888,477 euro due by Lisbon Town Council, relates to works developed by a jointly controlled company of Shopping Centres segment developed on behalf of Lisbon Town Council ("CML") in accordance with protocols signed in the end of 2001. On the other hand, the caption "Other non current liabilities", as at 31 December 2008 and 2007 includes the amount of 1,621,687 euro relating to works developed by CML on behalf of the joint controlled company and licenses. A legal action against CML was presented in 2001, claiming the totality of the improvements made by Colombo on account of CML and corresponding interests and other expenses incurred. The Group believes that the legal action will be favourable to the Group and consequently did not record any impairment loss to face eventual losses on this account receivable.
The amount of 3,740,456 euro (4,394,235 as at December 2007) relates to the deposit in official entities of rents deposits received from tenants of shopping centres located in Spain. The rent deposits received from tenants are classified under "Other non current payables" and "Other payables".
The Reinsurer's' share of technical provisions refer to non-life insurance ceded to reinsurance companies by a captive subsidiary. The provision can be detailed as follows: Provision for unearned premiums 3,597,343 euro (4,125,167 as at December 2007) and Provisions for outstanding claims 5,156,815 euro (49,935,127 euro as at December 2007). The disclosed change is related to a indemnity received for an insurance claim in an industrial unit. A similar change occured in the caption Reinsurer's share of technical provisions (Note 34).
As at 31 December 2008 and 2007, Inventories are as follows:
| 31.December.2008 | 31.December.2007 Restated |
|
|---|---|---|
| Raw materials and consumables | 1,659,166 | 1,839,957 |
| Goods for resale | 588,557,727 | 491,611,548 |
| 590,216,893 | 493,451,505 | |
| Accumulated impairment losses on Inventories (Note 34) | (29,783,714) | (24,759,431) |
| 560,433,179 | 468,692,074 |
Cost of goods sold as at 31 December 2008, 2007 and 2007 pro forma amounted to 3,303,986,732 euro, 2,622,631,645 euro and 2,699,275,192 , respectively, and may be detailed as follows:
| 31.December.2008 | 31.December.2007 Pro-forma |
31.December.2007 | |
|---|---|---|---|
| Opening balance | 506,662,632 | 373,454,249 | 432,628,646 |
| Exchange rate effect | - | - | 14,638 |
| Changes in consolidation perimeter | 6,626,869 | (12,053,833) | (71,929,832) |
| Purchases | 3,383,129,620 | 2,762,565,375 | 2,826,485,789 |
| Adjustments | (6,415,488) | 1,032,804 | 7,979,995 |
| Closing balance | 590,216,893 | 506,662,632 | 506,662,632 |
| 3,299,786,740 | 2,618,335,963 | 2,688,516,604 | |
| Impairment losses (Note 34) | 10,856,498 | 6,529,667 | 7,995,583 |
| Reversal of impairment losses | (6,656,506) | (2,233,985) | (2,236,995) |
| 3,303,986,732 | 2,622,631,645 | 2,694,275,192 |
As at 31 December 2008 and 2007, Trade accounts receivable are detailed as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Trade accounts receivable | ||
| Retail | 44,338,911 | 44,010,326 |
| Shopping Centres | 24,227,509 | 19,258,503 |
| Telecommunications | 241,908,462 | 250,319,916 |
| Sonae Holding and others | 1,274,202 | 1,469,914 |
| 311,749,084 | 315,058,659 | |
| Accumulated impairment losses on Trade Debtors (Note 34) | (96,686,475) | (85,985,340) |
| 215,062,609 | 229,073,319 | |
The Group's exposition to credit risk is attributed to accounts receivable relating the operating activity of the Group. The amounts presented on the face of the balance sheet are net of impairment losses, which were estimated based on Sonae's past experience and on the assessment of present economic conditions. As a result, amounts disclosed in Trade Debtors are considered to reflect their fair value.
As at 31 December 2008 there is no indication that the debtors of trade accounts receivable not due will not fulfil their obligations on normal conditions, thus no impairment loss was recognised.
As at 31 of December of 2008 and 2007 pro-forma, the ageing of the trade receivables are as follows:
| Trade Receivables | |||||
|---|---|---|---|---|---|
| 31.December.2008 | Retail | Shopping Centres | Telecommunications | Others | Total |
| Not due | 14,200,180 | 3,458,036 | 65,648,380 | 142,316 | 83,448,912 |
| Due but not impaired | |||||
| 0 - 30 days | 4,049,297 | 4,754,801 | 18,043,737 | 320,517 | 27,168,352 |
| 30 - 90 days | 8,892,515 | 4,492,848 | 9,460,068 | 202,746 | 23,048,177 |
| + 90 days | 3,908,106 | 2,666,326 | 53,902,941 | 608,624 | 61,085,997 |
| Total | 16,849,918 | 11,913,975 | 81,406,746 | 1,131,887 | 111,302,526 |
| Due and impaired Due and impaired |
|||||
| 0 - 90 days | 207,531 | 603,977 | 5,444,803 | - | 6,256,311 |
| 90 - 180 days | 394,979 | 473,947 | 4,667,974 | - | 5,536,900 |
| 180 - 360 days | 610,004 | 3,082,340 | 4,371,782 | - | 8,064,126 |
| + 360 days | 12,076,299 | 4,695,234 | 80,368,776 | 97,140,309 | |
| Total | 13,288,813 | 8,855,498 | 94,853,335 | - | 116,997,646 |
| 44,338,911 | 24,227,509 | 241,908,461 | 1,274,203 | 311,749,084 | |
| Trade Receivables | |||||
| 31.December.2007 | Retail | Shopping Centres | Telecommunications | Others | Total |
| Not due | 19,713,291 | 3,763,856 | 63,892,834 | 439,719 | 87,809,700 |
| Due but not impaired | |||||
| 0 - 30 days | 2,160,452 | 2,747,637 | 19,066,313 | 797,671 | 24,772,073 |
| 30 - 90 days | 4,670,595 | 2,543,334 | 7,179,137 | - | 14,393,066 |
| + 90 days | 4,290,098 | 2,734,109 | 39,393,392 | 204,425 | 46,622,024 |
| Total | 11,121,145 | 8,025,080 | 65,638,842 | 1,002,096 | 85,787,163 |
| Due and impaired | |||||
| 0 - 90 days | 77,339 | 402,179 | 35,983,219 | - | 36,462,737 |
| 90 - 180 days | 204,254 | 333,372 | 8,845,605 | - | 9,383,231 |
| 180 - 360 days | 660,725 | 1,409,557 | 5,997,673 | - | 8,067,955 |
| + 360 days | 12,233,572 | 5,324,459 | 69,961,743 | 28,099 | 87,547,873 |
| Total | 13,175,890 | 7,469,567 | 120,788,240 | 28,099 | 141,461,796 |
| 44,010,326 | 19,258,503 | 250,319,916 | 1,469,914 | 315,058,659 |
In determining the recoverability of a trade receivable, Sonae considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large. Accordingly, it is considered that the risk of not recovering the trade receivable is not higher than the allowance for doubtful debts.
Sonae considers that the maximum exposition to the credit risk is the amount presented in the consolidate balance sheet.
As at 31 December 2008 and 2007, Other debtors are as follows:
| Other Debtors | |||
|---|---|---|---|
| 31.December.2008 | 31.December.2007 | ||
| Granted loans to related companies | 4,269,936 | 21,962 | |
| Other debtors | |||
| Trade creditors - debtor balances | 65,799,273 | 46,822,333 | |
| Accounts receivable from the disposal of fixed assets | 9,484,451 | 790,575 | |
| Accounts receivable on the disposal of investments | - | 4,328,720 | |
| Amount receivable regarding price adjustments of acquired subsidiaries (Note 9) |
- | 30,414,000 | |
| Advances for the acquisiton of a real estate project | 7,500,000 | - | |
| Advances to suppliers | 12,458,873 | 22,236,065 | |
| Special regime for payment of tax and social security debts | 14,576,051 | 14,576,053 | |
| VAT recoverable on retail estate assets | 7,461,293 | 4,776,482 | |
| Advances to agents | 2,271,495 | 1,704,814 | |
| Reinsurance Operations | 4,051,296 | 9,072,963 | |
| Cash Settled Equity Swap (Note 24) | 3,452,800 | - | |
| Others | 27,563,745 | 28,228,230 | |
| 154,619,277 | 162,950,235 | ||
| Accumulated Impairment losses in receivable accounts (Note 34) | (12,896,708) | (9,250,508) | |
| Total of Financial Instruments (Note 10) | 145,992,505 | 153,721,689 |
The amount disclosed as 'Special regime for payment of tax and social security debts' corresponds to taxes which were disputed and subject to reimbursement claims. The Board of Directors is confident of the arguments presented by Sonae and expects court decisions to be in favour of the Group. As a result, reimbursement of these taxes is expected.
The amounts disclosed as 'Trade creditors - debtor balances' relates with commercial discounts billed to suppliers to be net settled with future purchases - mainly in the Retail segment.
Granted loans to related companies earn interests at market rates and do not have defined maturity but are deemed to be received within 12 months.
At 31 D b 2008 d 2007 th i f th d bt f ll At as 31 December 2008 and 2007, the ageing of other debtors are as follows:
| Other Debtors | ||||
|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 | |||
| Not due | 39,499,120 | 65,841,332 | ||
| Due but not impaired | ||||
| 0 - 30 days | 43,946,973 | 31,830,886 | ||
| 30 - 90 days | 31,183,504 | 41,067,108 | ||
| + 90 days | 25,284,060 | 14,324,487 | ||
| Total | 100,414,537 | 87,222,481 | ||
| Due and impaired | ||||
| 0 - 90 days | 1,755,989 | 155,165 | ||
| 90 - 180 days | 360,306 | - | ||
| 180 - 360 days | 2,336,907 | 1,439,166 | ||
| + 360 days | 10,252,416 | 8,292,089 | ||
| Total | 14,705,618 | 9,886,420 | ||
| 154,619,275 | 162,950,233 |
As at 31 December 2008 there is no indication that the debtors not due will not fulfil their obligations on normal conditions, thus no impairment loss was recognized.
The carrying amount of other debtors is estimated to be approximately its fair value.
As at 31 December 2008 and 2007, Taxes recoverable and taxes and contributions payable are made up as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Tax recoverable | ||
| Income taxation | 20,949,102 | 22,799,822 |
| VAT | 67,366,251 | 61,866,750 |
| Other taxes | 1,281,813 | 1,848,042 |
| 89,597,166 | 86,514,614 | |
| Taxes and contributions payable | ||
| Income taxation | 12,207,801 | 10,707,432 |
| VAT | 40,807,861 | 32,980,618 |
| Staff income taxes withheld | 3,383,806 | 5,247,310 |
| Social security contributions | 11,981,403 | 10,183,661 |
| Other taxes | 3,126,924 | 3,012,611 |
| 71,507,795 | 62,131,632 |
As at 31 December 2008 and 2007, Other current assets are made up as follows:
| 31.December.2008 | 31.December.2007 | ||
|---|---|---|---|
| Invoices to be issued | 64,755,143 | 70,459,857 | |
| "Initiatives E" program (Note 52) | 39,317,881 | 5,423,001 | |
| Commercial Discounts | 19,482,183 | 5,887,081 | |
| Commissions to be received | 1,269,874 | 6,260,720 | |
| Prepayments - Rents | 4,206,320 | 3,833,921 | |
| Prepayments of external supplies and services | 16,404,435 | 15,178,385 | |
| Other current assets | 20,466,269 | 14,596,621 | |
| 165,902,105 | 121,639,586 |
Deferred tax assets and liabilities as at 31 December 2008 and 2007 are as follows, split between the different types of temporary differences:
| Deferred tax assets | Deferred tax liabilities | |||||
|---|---|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 pro forma |
31.December.2007 Restated (Note 8) |
31.December.2008 | 31.December.2007 pro forma |
31.December.2007 Restated (Note 8) |
|
| Difference between fair value and acquisition cost | 4,565,926 | 6,418,931 | 6,418,931 | 273,169,996 | 282,250,690 | 310,542,376 |
| Harmonisation adjustments | 33,376 | 81,897 | 81,897 | 34,974,182 | 24,978,921 | 24,978,921 |
| Provisions and impairment losses not accepted for tax purposes | 15,593,155 | 12,900,045 | 12,900,045 | - | - | |
| Write off of tangible and intangible assets | 64,320,965 | 60,114,242 | 60,114,242 | - | - | |
| Write off of deferred costs | 43,052,099 | 41,026,618 | 41,026,618 | 1,500,154 | 1,373,690 | 2,097,786 |
| Valuation of hedging derivatives | 5,484,534 | 296,245 | 296,245 | 496,557 | 2,444,642 | 2,614,826 |
| Temporary differences arising from the securitization of receivable operation |
16,100,000 | |||||
| Amortization of Goodwill for tax purposes | - | - | - | 6,980,016 | - | - |
| Non taxed exchange differences | - | - | - | 5,326,355 | - | - |
| Revaluation of tangible assets | - | - | - | 2,281,496 | 2,523,410 | 2,523,410 |
| Tax losses carried forward Tax losses carried |
54 525 172 54,525,172 |
27 342 272 27,342,272 |
28 333 480 28,333,480 |
- | - | |
| Reinvested capital gains/(losses) | - | - | - | 2,939,833 | 3,428,201 | 3,428,201 |
| Others | 3,279,462 | 151,928 | 151,930 | 3,240,091 | 2,020,440 | 2,223,343 |
| 206,954,689 | 148,332,178 | 149,323,388 | 330,908,680 | 319,019,994 | 348,408,863 |
During the periods ended 31 December 2008 and 2007, movements in Deferred tax assets and liabilities are as follows:
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 Restated (Note 8) |
31.December.2008 | 31.December.2007 Restated (Note 8) |
|
| Opening balance | 149,323,388 | 102,767,409 | 348,408,863 | 272,056,372 |
| Effects in net income: | ||||
| Difference between fair value and acquisition cost | (5,044,606) | 64,940 | (14,246,452) | 47,330,262 |
| Amortisation and Depreciation harmonisation adjustments | (1,686,181) | (108,562) | 9,869,360 | 1,624,367 |
| Provisions and impairment losses not accepted for tax purposes | 3,169,630 | (210,845) | (70,763) | 1,539,073 |
| Write-off of tangible and intangible assets | 4,242,447 | 34,581,204 | 798,102 | 15,971 |
| Write-off of deferred costs | 2,027,199 | 10,086,856 | 192,768 | 124,250 |
| Valuation of hedging derivatives | 51,602 | 43,746 | (550,893) | 556,997 |
| Revaluation of tangible assets | - | - | (236,149) | (115,936) |
| Tax losses carried forward | 16,718,637 | (2,199,567) | - | - |
| Temporary differences arising from the securitization of receivable operation |
16,100,000 | - | - | - |
| Amortization of Goodwill for tax purposes | - | - | 6,980,016 | |
| Non taxed exchange differences | - | - | 6,462,069 | |
| Reinvested capital gains/(losses) | - | 69,424 | (136,246) | (1,118,666) |
| Changes in tax rates | - | (161,371) | 107 | (3,562,523) |
| Others | 2,637,139 | (722,023) | 681,509 | (1,855,821) |
| 38,215,867 | 41,443,802 | 9,743,428 | 44,537,974 | |
| Effects in equity: | ||||
| Difference between fair value and acquisition cost | - | - | - | |
| Valuation of hedging derivatives | 5,715,366 | 146,433 | (757,317) | 952,980 |
| Exchange rate effect | (1,110,020) | 215,595 | (5,786,745) | 483,861 |
| Fair value allocation on the acquition of subsidiaries (including tax losses carried forward) |
- | 15,113,852 | - | 2,052,911 |
| Demerger of Sonae Capital | - | (10,643,996) | (5,846,228) | |
| Change in tax rate | - | - | (181) | (81,553) |
| Others | (6,326) | (96,036) | 311,384 | 2,390,588 |
| 4,599,020 | 4,735,848 | (6,232,859) | (47,441) | |
| Changes in the percentages of jointly controlled companies | - | 17,710,201 | ||
| Acquisitions of subsidiaries | 26,105 | 826,670 | 5,308,016 | |
| Disposals of subsidiaries | (1,868,508) | (450,341) | (30,792,483) | (5,345,210) |
| Allocation of fair value on companies acquisitions | 16,658,818 | - | 9,781,731 | 14,188,951 |
| Closing balance | 206,954,690 | 149,323,388 | 330,908,680 | 348,408,863 |
In Portugal, with the approval of the Local Finances Law, the municipal tax surcharge will change from 2007 onwards to a maximum of 1.5% over Taxable Profit. In the past this tax amounted to 10% of income tax. In Spain, with the change to Corporate Income Tax Law, corporate income tax rate changed from 35% in 2006 to 32.5% in 2007 and will change to 30% in 2008.
As a consequence, Portuguese and Spanish affiliated and joint controlled companies updated their calculations of deferred tax assets and liabilities using these new income tax rates. The effect of these changes has been recorded in the consolidated income statement under the caption Income tax or in the consolidated statement of changes in equity under the caption Hedging reserve in the case of deferred taxes arising from derivatives.
The recognition of deferred tax amounting to approximately Euro 16.1 million in Telecommunications segment follows the securitization of future receivables completed in December 2008 . As a result of this operation, and in accordance with the provisions of Decree law 219/2001 of 4 August, the amount of Euro 100 million from this operation was added for purposes of determining the taxable income for the year 2008, thereby generating a temporary difference between accounting and taxable amounts, having been registered deferred tax assets to the extent that its use was, with reasonable safety, likely. Until the maturity of the operation, a gradual reversion of the corresponding deferred tax assets shall occur, by deduction, in the determination of the taxable income of each year, of the revenue associated to the securitized receivables.
During 2008, deferred tax assets amounting 18,240,000 Euro were recorded related to tax losses carried forward from the subsidiary Worten España, S.A. (acquired in 2008 - Note 9) generated in the current and in past years (11,829,000 Euro were previous to the acquisition, and therefore had impact in the calculated negative goodwill). The deferred tax losses calculation is supported by the Company business plan that estimate its use in a period from 5 to 8 years (the last in a more conservative perspective).
At 31 December 2008 and 2007, the movement in temporary differences between the accounting and tax value of fixed assets resulted primarily from the sale of technological equipment of Sonaecom – Serviços de Comunicações to Be Artis. Although the results obtained in these accounting transactions have been reversed, in the consolidated financial statements, a difference between the accounting and tax value of those assets was generated.
During 2008, the fair value allocation to the acquisition of Continente Hipermercados S.A. (Note 9) was completed. In this process, and supported by Sonae's business plan, besides the tax impact created by the valuation of acquired assets and liabilities, Sonae recorded deferred tax assets (7,363,727 Euro) arising from tax losses carried forward amounting 29,454,907 Euro. The values of 2007 and 2007 Pro-Forma were reexpressed to include that effect.
As at 31 December 2008 and 2007, the tax rate used to calculate the deferred tax assets arising from tax losses carried forward was 25%. For the deferred tax assets arising from temporary differences, the considered rate was 26,5%.
As at 31 December 2008 and 2007, and in accordance with the tax statements presented by companies that recorded deferred tax assets arising from tax losses carried forward and using exchange rates effective at that time, tax losses carried forward can be summarised as follows:
| 31.December.2008 | 31.December.2007 pro forma | |||||
|---|---|---|---|---|---|---|
| Tax losses carried forward |
Deferred tax assets | Time limit | Tax losses carried forward |
Deferred tax assets | Time limit | |
| With limited time use | ||||||
| Generated in 2002 | - | - | 2008 | 12,815,616 | 3,203,904 | 2008 |
| Generated in 2003 | 1,077,065 | 269,266 | 2009 | 10,854,057 | 2,713,514 | 2009 |
| Generated in 2004 | 2,658,095 | 664,524 | 2010 | 2,660,633 | 665,158 | 2010 |
| Generated in 2005 | 1,508,454 | 377,114 | 2011 | 8,373,556 | 2,093,389 | 2011 |
| Generated in 2006 | 1,138,251 | 284,562 | 2012 | 2,788,070 | 697,017 | 2012 |
| Generated in 2007 | 23,759,138 | 5,939,785 | 2013 | 31,244,289 | 7,811,073 | 2013 |
| Generated in 2008 | 4,651,622 | 1,162,908 | 2014 | - | - | |
| 34,792,625 | 8,698,159 | 68,736,221 | 17,184,055 | |||
| Without limited time use | 10,346,392 | 3,126,514 | 6,783,431 | 1,922,301 | ||
| With a time limit different from the above mentioned Arising from discontinued operations |
142,929,494 | 42,700,499 | 27,620,047 | 8,235,914 | ||
| 153,275,886 | 45,827,013 | 34,403,478 | 10,158,215 | |||
| 188,068,511 | 54,525,172 | 103,139,699 | 27,342,270 | |||
As at 31 December 2008 and 2007, deferred tax assets resulting from tax losses carried forward were re-assessed against each company's business plans, which are regularly updated, and available tax planning opportunities. Deferred tax assets have only been recorded to the extent that future taxable profits will arise which may be offset against available tax losses or against deductible temporary differences.
As at 31 December 2008, there were tax losses carried forward, amounting to 761,693,530 euro (983,795,169 euro in 2007) for which no deferred tax assets were recognized due to uncertainties of their future use. These may be summarised as follows:
| 31.December.2008 | 31.December.2007 pro forma | |||||
|---|---|---|---|---|---|---|
| Tax losses carried forward |
Deferred tax credit | Time limit | Tax losses carried forward |
Deferred tax credit | Time limit | |
| With limited time use | ||||||
| Generated in 2002 | - | - | 2008 | 433,259,735 | 108,315,185 | 2008 |
| Generated in 2003 | 7,840,316 | 1,960,080 | 2009 | 41,896,110 | 10,474,030 | 2009 |
| Generated in 2004 | 7,284,015 | 1,821,004 | 2010 | 23,869,128 | 5,967,282 | 2010 |
| Generated in 2005 | 31,838,954 | 7,959,738 | 2011 | 88,713,548 | 22,178,386 | 2011 |
| Generated in 2006 | 69,678,529 | 17,419,632 | 2012 | 68,204,804 | 17,051,201 | 2012 |
| Generated in 2007 | 79,771,355 | 19,942,840 | 2013 | 74,094,509 | 18,623,626 | 2013 |
| Generated in 2008 | 17,458,087 | 4,364,521 | 2014 | |||
| 213,871,256 | 53,467,815 | 730,037,834 | 182,609,710 | |||
| Without limited time use | 31,496,303 | 8,383,429 | 34,124,969 | 10,101,615 | ||
| With a time limit different from the above mentioned | 516,325,971 | 149,725,560 | 219,632,366 | 63,700,019 | ||
| 761,693,530 | 211,576,804 | 983,795,169 | 256,411,344 |
As at 31 December 2008 and 2007, Cash and cash equivalents are as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | |
|---|---|---|---|
| Cash at hand | 6,243,465 | 6,482,418 | 6,482,624 |
| Bank deposits | 140,335,695 | 190,639,339 | 190,688,029 |
| Treasury applications | 37,781,744 | 87,281,800 | 89,230,800 |
| Cash and cash equivalents on the balance sheet | 184,360,904 | 284,403,557 | 286,401,453 |
| Bank overdrafts (Note 26) | (41,394,916) | (10,775,880) | (10,775,881) |
| Cash and cash equivalents on the statement of cash flows | 142,965,988 | 273,627,677 | 275,625,572 |
Bank overdrafts are disclosed in the balance sheet under Current bank loans.
As at 31 December 2008, the share capital, which is fully subscribed and paid for, is made up of 2,000,000,000 ordinary shares, which do not have the right to a fixed dividend, with a nominal value of 1 euro each.
On 15 November 2008, Sonae Holding sold, 132,856,072 Sonae Holding shares directly owned by the Company. The shares were sold in a market operation at the unit price of 2.06 euro per share and resulted on a cash inflow (net of brokerage commissions) of 273,398,877 euro.
On the same date, Sonae Investments, BV, wholly owned by Sonae Holding entered into a derivative financial instrument - Cash Settled Equity Swap - over a total of 132,800,000 Sonae Holding shares, representative of 6.64% of its capital.
This transaction has a maximum maturity of three years and a strictly financial liquidation, without any duty or right for the Company or any of its associated companies in the purchase of these shares. This transaction allows Sonae to totally maintain the economic exposure to the sold shares.
In this context, although legally all the rights and obligations inherent to these shares have been transferred to the buyer, Sonae Holding did not derecognize their own shares, recording a liability in the caption Other non-current liabilities (Note 29). According to the interpretation made by Sonae of the IAS 39, applied by analogy to own equity instruments, the derecognition of own shares is not allowed as the group maintains the risks and rewards arising on the instruments sold. qy , g g p g
Consequently, Sonae maintains the deduction from Equity amounting to the acquisition cost of the 132,800,000 shares (138,568,275 euro), and has accounted for the consideration received for the above mentioned sale of own shares in the caption Other non-current liabilities (273,568,000 euro).
Due to the detach of Sonae Capital SGPS, SA demerger rights attributable to the 132,800,000 Sonae SGPS, SA shares subject to the above mentioned agreement, the Group recognized an asset measured at its' fait value . This asset as not been derecognized as the Group also entered into a Cash Settled Equity Swap over the Sonae Capital SGPS, SA shares, and therefore a liability was recognized. Consequently, and in relation with this operation the full liability amount can be detailed as follows: market value of Sonae SGPS, SA shares amounting to 58,149,108 Euro and market value of Sonae Capital SGPS, SA shares amounting to 7,304,000 euro.
These liabilities are adjusted at the end of each month by the effect in Sonae Holding or Sonae Capital, SGPS, S.A. share price, as applicable, being recognized an asset/liability in order to present the right/obligation related to the cash settlement of the operation that resets monthly (Notes 19, 29 and 32).
Additionally, the costs related to the "floating amount" based on Euribor 1 month are recorded in the income statement.
The receivable amount arising on dividends distributed by the Company is credited to Equity in order to offset the charge of the distribution. The dividends attributable to the Sonae SGPS, SA amounted to 3,984,000 on 31 December 2008 and were credited to Equity.
The number of shares taken into consideration to calculate earnings per share includes the shares referred to above as a deduction to the shares issued by the Company (Note 48).
At 31 December 2008, the following entities held more than 20% of the subscribed share capital:
Entity %
Efanor Investimentos, SGPS, SA and subsidiaries 52.98
The capital structure is analysed in the Management Report section titled "Sonae Performance in 2008 - consolidated balance sheet".
Movements in minority interests during the period ended 31 December 2008 and 2007 are as follows:
| 31.December.2008 | 31.December.2007 Restated (Note 8) |
|
|---|---|---|
| Opening balance as at 1 January | 448,365,507 | 402,058,314 |
| Dividends | (2,475,031) | (21,887,082) |
| Exchange rate effect | (890,857) | 373,748 |
| Acquisitions of subsidiaries | - | (9,632,960) |
| Disposals of subsidiaries | (5,370,066) | (2,171,988) |
| Demerger of Sonae Capital | - | 9,310,396 |
| Increase of capital and premium on subsidiaries | 36,604,140 | - |
| Increased shareholding by acquisitions | (11,887,804) | (8,454,103) |
| Decreased shareholding by disposals | (3,299,989) | - |
| Changes in hedge and fair value reserves | (7,761,789) | 868,668 |
| Others | (777,613) | 5,230,470 |
| Profit for the period attributable to minority interests | (40,957,397) | 72,670,044 |
| Closing balance as at 31 December 2008 | 411,549,101 | 448,365,507 |
As at 31 December 2008 and 2007, Borrowings are made up as follows:
| 31.December.2008 | 31.December.2007 | |||||
|---|---|---|---|---|---|---|
| Outstanding amount | Outstanding amount | |||||
| Amount limit | Current | Non current | Amount limit | Current | Non current | |
| Bank loans | ||||||
| Sonae, SGPS, SA - commercial paper | 350,000,000 | 138,200,000 | - | 350,000,000 | - | - |
| Sonae Distribuição, SGPS, S.A. - commercial paper | 563,000,000 | 20,000,000 | 230,000,000 | 163,000,000 | - | - |
| a)b) Sonae Sierra affiliated companies | 471,190,318 | 26,844,447 | 382,135,505 | 498,624,959 | 16,476,410 | 417,635,936 |
| a)b)c) Sonae Sierra affiliated companies | 430,867,643 | 7,153,557 | 415,653,220 | 452,885,624 | 5,971,751 | 401,044,158 |
| a) Sonae Sierra affiliated companies a) Sonae Sierra affiliated companies |
41 097 065 41,097,065 |
13 670 597 13,670,597 |
22 516 460 22,516,460 |
- - |
- - |
- - |
| Sonaecom SGPS, SA commercial paper | 320,000,000 | - | 231,000,000 | 320,000,000 | - | 225,000,000 |
| Sonaecom SGPS, SA | 15,000,000 | 4,873,000 | - | 15,000,000 | - | - |
| Continente Hipermercados SA - commercial paper | 80,000,000 | - | - | 80,000,000 | 80,000,000 | - |
| Others | 7,572,291 | 6,977,246 | 16,660,838 | 22,532,079 | ||
| 218,313,892 | 1,288,282,431 | 119,108,998 | 1,066,212,172 | |||
| Bank overdrafts (Note 23) | 41,394,916 | - | 10,775,880 | - | ||
| Up-front fees beard with the issuance of borrowings | (802,841) | (7,019,907) | (677,170) | (6,521,094) | ||
| Bank loans | 258,905,967 | 1,281,262,524 | 129,207,708 | 1,059,691,078 | ||
| Bonds | ||||||
| Bonds Sonae / 05 | - | 100,000,000 | - | 100,000,000 | ||
| Bonds Sonae 2006/2011 | - | 250,000,000 | - | 250,000,000 | ||
| Bonds Sonae 2007/2014 | 150,000,000 | 150,000,000 | ||||
| Bonds Modelo Continente / 2003 | - | 82,000,000 | - | 82,000,000 | ||
| Bonds Modelo Continente / 2004 | 100,000,000 | - | - | 100,000,000 | ||
| Bonds Modelo Continente / 2005 / 2010 | - | 64,925,000 | - | 64,925,000 | ||
| Bonds Modelo Continente / 2005 / 2012 | - | 150,000,000 | - | 150,000,000 | ||
| Bonds Modelo Continente / 2007 / 2012 | - | 200,000,000 | - | 200,000,000 | ||
| Bonds Sonae Distribuição / 2007 / 2015 | - | 200,000,000 | - | 200,000,000 | ||
| Bonds Sonae Distribuição / 2007 / 2016 | - | 310,000,000 | - | 310,000,000 | ||
| Bonds Sonaecom / 2005 | - | 150,000,000 | - | 150,000,000 | ||
| Obrigações Sonae Sierra 2008/2013 | - | 37,500,000 | - | - | ||
| Up-front fees beared with the issuance of borrowings | (69,433) | (10,210,681) | (12,074,291) | |||
| Bonds | 99,930,567 | 1,684,214,319 | - | 1,744,850,709 | ||
| Other loans | 35,486 | 628,195 | 36,229 | 276,330 | ||
| Derivative instruments (Note 28) | 5,369,980 | 21,646,496 | 363,463 | 828,199 | ||
| Other loans | 5,405,466 | 22,274,691 | 399,692 | 1,104,529 | ||
| Obligations under finance leases (Note 27) | 5,829,172 | 28,701,579 | 8,709,711 | 23,470,674 | ||
| 370,071,172 | 3,016,453,112 | 138,317,111 | 2,829,116,990 |
a) These amounts are proportionate considering the percentage held by Sonae;
b) These loans are guaranteed by mortgages of investment properties held by these affiliated companies;
c) These loans are guaranteed by a pledge of shares held in the those affiliated companies;
Interest rate of the bonds are equal to Euribor 6 months plus a spread between 0.25% and 1.15%.
Bank loans bear interests at market rates based on Euribor for each interest payment term, therefore the fair value of bank loans is estimated to be similar to their market value.
The difference totalling 96,624,019 euro between the financial statements as at 31 December 2007 and the financial statements pro-forma in the same date result from the exclusion of Sierra PTF Fund that started to be consolidated by the use of equity method.
The derivative instruments are recorded at fair value (Note 28).
The face value loans maturities and interests are as follows:
| 31.December.2008 | 31.December.2007 | ||||
|---|---|---|---|---|---|
| Capital | Interests | Capital | Interests | ||
| N+1 a) | 365,573,466 | 160,445,963 | 138,630,818 | 150,432,366 | |
| N+2 | 218,420,062 | 139,770,421 | 123,716,946 | 145,535,905 | |
| N+3 | 359,930,980 | 127,575,596 | 226,053,892 | 140,591,920 | |
| N+4 | 537,232,284 | 105,852,723 | 357,710,073 | 126,995,930 | |
| N+5 | 506,240,050 | 82,086,426 | 528,494,772 | 109,507,295 | |
| After N+5 | 1,390,213,829 | 154,813,311 | 1,610,908,493 | 249,664,994 | |
| 3,377,610,671 | 770,544,440 | 2,985,514,994 | 922,728,410 |
a) Includes amounts drawn under commercial paper programmes.
As of 31 December 2008 and 2007, the available credit facilities are as follows:
| 31.December.2008 | 31.December.2007 | ||||
|---|---|---|---|---|---|
| Commitments of less than one year |
Commitments of more than one year |
Commitments of less than one year |
Commitments of more than one year |
||
| Unused credit facilities amounts | |||||
| Retail | 341,684,549 | 170,000,000 | 317,737,441 | 400,000,000 | |
| Shopping Centres | 53,781,154 | - | 88,870,955 | - | |
| Telecommunications | 14,978,667 | 89,000,000 | 9,611,398 | 95,000,000 | |
| Sonae Holding and others | 194,783,894 | - | 350,032,958 | - | |
| 605,228,264 | 259,000,000 | 766,252,752 | 495,000,000 | ||
| Agreed credit facilities amounts | |||||
| Retail | 371,370,074 | 400,000,000 | 401,572,344 | 400,000,000 | |
| Shopping Centres | 70,309,185 | - | 98,126,784 | - | |
| Telecommunications | 19,851,688 | 320,000,000 | 9,611,398 | 320,000,000 | |
| Sonae Holding and others | 340,067,000 | - | 350,032,958 | - | |
| 801 597 947 801,597,947 |
720 000 000 720,000,000 |
859 343 484 859,343,484 |
720 000 000 720,000,000 |
As at 31 December 2008 and 2007, Obligations under finance leases are as follows:
| Obligations under finance leases | Minimum finance lease payments | Present value of minimum finance lease payments |
||
|---|---|---|---|---|
| Amounts under finance leases: | 31.December.2008 | 31.December.2007 | 31.December.2008 | 31.December.2007 |
| N+1 | 7,405,130 | 10,066,259 | 5,829,172 | 8,709,711 |
| N+2 | 6,425,872 | 5,669,793 | 5,145,609 | 4,634,081 |
| N+3 | 3,474,514 | 4,536,491 | 2,407,047 | 3,674,007 |
| N+4 | 3,046,952 | 1,904,989 | 2,094,646 | 1,159,838 |
| N+5 | 2,658,765 | 1,885,669 | 1,796,321 | 1,196,417 |
| After N+5 | 21,298,915 | 16,674,909 | 17,257,956 | 12,806,331 |
| 44,310,148 | 40,738,110 | 34,530,751 | 32,180,385 | |
| Interests | (9,779,397) | (8,557,725) | ||
| 34,530,751 | 32,180,385 | |||
| Current obligations under finance leases | 5,829,172 | 8,709,711 | ||
| Non-current obligations under finance leases | 28,701,579 | 23,470,674 |
Finance leases are contracted at market interest rates, have defined useful lives and include an option for the acquisition of the related assets at the end of the period of the contract (except for medium and long term agreements with suppliers of fibre optic network capacity).
The medium and long term agreements made with the suppliers of the fibre optic network capacity, under which Sonae has the right to use that network, which is considered as a specific asset, are recorded as finance leases in accordance with IAS 17 – "Leases" and IFRIC 4 – "Determining whether an arrangement contains a Lease". These contacts have a maturity between 15 and 20 years.
As at 31 December 2008 and 2007, the fair value of finance leases is close to its accounting value.
Obligations under finance leases are guaranteed by related assets.
As at 31 December 2008 and 2007., accounting net value of assets acquired under finance leases can be detailed as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Assets acquired under finance leases | ||
| Lands and buildings | 31,389,745 | 19,649,684 |
| Plant and machinery | 18,583,456 | 19,740,577 |
| Vehicles | 89,349 | - |
| Tools | - | - |
| Fixture and Fittings | 4,974,377 | 5,617,268 |
| Total tangible assets | 55,036,927 | 45,007,529 |
| Investment properties | 2,261,077 | - |
| 57,298,004 | 45,007,529 |
As of 31 December 2008, the acquisition cost of Tangible assets amounted to 73,474,043 euro (54,747,561 euro at 31 December 2007).
The Group uses exchange rate derivatives, essentially to hedge future cash flows.
The Group contracted several exchange rate forwards and options in order to manage its exchange rate exposure.
As at 31 December 2008, the fair value of exchange rate derivatives wich haven't been considered hedging instruments, calculated based on present market value of equivalent financial instruments of exchange rate, is of 475,848 euro included in liabilities (281,123 euro as of 31 December 2007) and 72,494 euro on the caption Current investments (2,151,335 euro as at 31 December 2007).
From the total amount registered in Assets, 2,149,364 euro refers to derivative transactions (Non Deliverable Forwards - "NDF") entered into during 2007 in order to hedge the exchange rate exposure as consequence of the share purchase agreement with the Sonae Sierra partner in Brazil (DDR), to reinvest the amount of 300,000,000 Brazilian Real until the end of 2009. The notional of the NDF amounts to 230,039,050 Brazilian Real.
The computation of the fair value of these financial instruments was made taking into consideration the present value at balance sheet date of the forward settlement amount of the relevant NDF contract. The settlement amount considered in the valuation, is equal to the reference currency notional amount (foreign currency) multiplied by the difference between the contracted forward exchange rate and the forward exchange market rate to the settlement date as at the valuation date.
Losses in the period arising from changes in the fair value of instruments that do not qualify for hedging accounting treatment were recorded directly in the income statement in the caption Net financial expenses.
As at 31 December 2008, derivatives used by the Group refer essentially to swaps and interest rate options ("cash flow hedges"). These were negotiated to hedge the interest rate risk of loans amounting to 1.510.850.147 euro (1,302,514,561 euro as at 31 December 2007). The fair value of these derivatives amounts to -19.091.434 euro (8,344,227 euro as at 31 December 2007), and is disclosed as assets amounting to 2.602.678 euro (9,172,426 euro as at 31 December 2007) and as liabilities 21.694.112 euro (828.199 euro as at 31 de December de 2007). As at 31 December 2007, 82,340 euro relates to derivatives on loans which no longer qualify as h d i d i ti lth h ti i t h d i t t i k A t 31 D b 2006 ll d i ti id d h d i d i ti hedging derivatives, although continuing to hedge interest risks. As at 31 December 2006 all derivatives were considered hedging derivatives.
During 2008, and for the purpose of hedging interest rate risk, cancelable swaps (which have an interest rate lower than the market rate of a an identical term swap as it includes a written put option), were negotiated. The counterparties have the right to cancel the derivatives at interest exchange date, after the payment of the first coupon, which occur half-yearly. From the cancelation no cash flow occurs . Since the derivative includes a written put option, it does not qualify for hedge accounting. Therefore the change in fair value was recorded in the consolidated income statement.
The derivatives were valuated considering the estimated future cash-flows, assuming the exercise of the cancellation options by the counterparties when the forward interest rates are higher than the established fixed interest rate. Sonae intends to keep these derivatives until their expiration date, therefore, this valuation is considered to be the most appropriate to estimate the future cash flows.
These interest rate derivatives are valued at fair value, at the balance sheet date, based on valuations performed by the Group using specific software and on external valuations when this software does not deal with specific instruments. The fair value of swaps was calculated, as at the balance sheet date, based on the discounted cash flow of the difference between the fixed interest rate of the fixed leg and the indexed variable interest rate inherent to the variable leg. The calculation of the fair value of options was based on the "Black-Scholes" and similar models.
The hedging principles generally used by the group when negotiating these financial derivatives are defined in note 3.4.1.
As at 31 December 2008 no contracts existed related to interest rate and exchange rate derivatives.
The fair value of derivatives is detailed as follows:
| Assets | Liabilities | |||
|---|---|---|---|---|
| 31.December.2008 | 31.December.2007 | 31.December.2008 | 31.December.2007 | |
| Derivatives not qualified as hedging | ||||
| Exchange rate | 72,494 | 2,151,335 | 475,849 | 281,123 |
| Interest rate | - | - | 4,846,515 | 82,340 |
| Hedging derivatives | ||||
| Exchange rate | - | - | - | - |
| Interest rate | 2,602,678 | 9,172,426 | 21,694,112 | 828,199 |
| Interest and exchange rate | - | - | - | - |
| Other derivatives | - | - | - | - |
| 2,675,172 | 11,323,761 | 27,016,476 | 1,191,662 |
As at 31 December 2008 and 2007 Other non-current liabilities are made up as follows:
| 31.December.2008 | ||
|---|---|---|
| Shareholders loans | 17,409,765 | 24,107,894 |
| Fixed assets suppliers | 3,041,799 | 11,597,003 |
| Other non-current liabilities | 76,423,646 | 275,160,877 |
| Financial instruments | 96,875,210 | 310,865,774 |
| "E-Iniciatives" Programme (Note 52) | 56,772,000 | - |
| Accruals and deferrals | 1,816,948 | 2,157,352 |
| Other non-current liabilities | 155,464,158 | 313,023,126 |
The caption Shareholder loans relates to loans in affiliated undertakings in the Retail Shopping Centres segment. These liabilities have a defined vesting date and bear interest at variable market rates.
The caption Other non-current liabilities includes the amount of 65,453,108 euro (263,059,508 as at 31 December 2007) related to the fair value of the derivative on Sonae Holding and Sonae Capital SGPS, SA, shares referred to in Note 24.
The Board of Directors believes that the fair value of Other non-current liabilities is similar to its carrying amount.
In 2008 and in previous years, Sonae granted deferred performance bonuses to its directors and eligible employees. These are either based on shares to be acquired at nil cost, three years after they were attributed to the employee, or based on share options with the exercise price equal to the share price at the grant date, to be exercised three years later. In both cases, the acquisition can be exercised during the period commencing on the third anniversary of the grant date and the end of that year. The company has the choice to settle in cash instead of shares. The option can only be exercised if the employee still works for the Sonae on the vesting date.
As at 31 December 2008 and 2007, the market value of total liabilities arising from share-based payments, which have not yet vested, may be summarised as follows:
| Year of Year of |
Vesting Vesting |
Number of Number of |
Fair value Fair |
||
|---|---|---|---|---|---|
| grant | year | participants | 31.December.2008 | 31.December.2007 | |
| Shares | |||||
| 2005 | 2008 | 67 | - | 8,956,701 | |
| 2006 | 2009 | 441 | 2,981,061 | 7,472,751 | |
| 2007 | 2010 | 472 | 3,102,734 | 7,856,374 | |
| 2008 | 2011 | 492 | 3,357,478 | - | |
| Total | 9,441,273 | 24,285,826 |
As at 31 December 2008 and 2007 the financial statements include the following amounts corresponding to the period elapsed between the date of granting and those dates for each deferred bonus plan, which has not yet vested:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Staff costs | (1,112,886) | 12,906,145 |
| Recorded in previous years | 8,226,971 | 4,368,199 |
| 7,114,085 | 17,274,344 | |
| Other liabilities | 7,114,085 | 17,274,344 |
As at 31 December 2008 and 2007, Trade creditors are as follows:
| Payable to | ||||
|---|---|---|---|---|
| 31.December.2008 | up to 90 days | 90 to 180 days | More than 180 days | |
| Trade creditors - current account | ||||
| Retail | 672,266,957 | 669,178,107 | 1,795,762 | 1,293,088 |
| Shopping Centres | 13,678,175 | 11,995,539 | 730,527 | 952,109 |
| Telecommunications | 130,010,572 | 130,010,572 | - | - |
| Holding and others | 1,164,136 | 940,654 | 52,158 | 171,324 |
| 817,119,840 | 812,124,872 | 2,578,447 | 2,416,521 | |
| Trade creditors - Invoice Accruals | 233,118,722 | 230,822,879 | 912,987 | 1,382,856 |
| 1,050,238,562 | 1,042,947,751 | 3,491,434 | 3,799,377 | |
| Payable to | ||||
| 31.December.2007 Restated |
up to 90 days | 90 to 180 days | More than 180 days | |
| Trade creditors - current account | ||||
| Retail | 579,039,741 | 577,201,678 | 1,811,064 | 26,999 |
| Shopping Centres | 10,159,274 | 8,562,715 | 577,159 | 1,019,400 |
| Telecommunications | 138,110,738 | 138,110,738 | - | - |
| Holding and others | 620,362 | 563,390 | 10,349 | 46,623 |
| 727,930,115 | 724,438,521 | 2,398,572 | 1,093,022 | |
| Trade creditors, Invoice Accruals | 261,373,263 | 260,183,378 | 1,189,885 | - |
| 989,303,378 | 984,621,899 | 3,588,457 | 1,093,022 |
As at 31 December 2008 and 2007, this caption relates only to trade payables due in the normal course of Group companies activities. The Board of Directors believes that the fair market value of these payables is approximately its book value.
As at 31 December 2008 and 2007, Other creditors are as follows:
| Payable to | ||||
|---|---|---|---|---|
| 31.December.2008 | up to 90 days | 90 to 180 days | More than 180 days | |
| Fixed asset suppliers | 155,062,698 | 139,841,612 | 3,267,122 | 11,953,964 |
| Other debts | 71,581,443 | 41,733,907 | 10,124,094 | 19,723,441 |
| 226,644,141 | 181,575,519 | 13,391,216 | 31,677,405 | |
| Related undertakings | 7,255,731 | |||
| 233,899,872 | ||||
| 31.December.2007 | Payable to | |||
| Restated | up to 90 days | 90 to 180 days | More than 180 days | |
| Fixed asset suppliers | 102,556,372 | 95,985,917 | 2,517,800 | 4,052,655 |
| Other debts | 83,116,092 | 67,113,555 | 3,940,295 | 12,062,242 |
| 185,672,464 | 163,099,472 | 6,458,095 | 16,114,897 | |
| Related undertakings | 30,616,400 | |||
| 216,288,864 |
11,135,042 euro (12,263,128 euro as at 31 December 2007) of attributed discounts not yet used related to loyalty card "Cartão Cliente";
8,235,402 euro (6,085,151 euro as of 31 December 2007) related to means of payments owned by clients, as vouchers, gift cards and discount tickets.
As at 31 December 2008 and 2007, this caption includes payables amounts to other creditors and fixed assets suppliers that do not bear interest. The Board of Directors believes that the fair value of these payables is approximately its book value Directors believes that the fair value of these payables is approximately its book value.
As at 31 December 2008 and 2007, Other current liabilities are made up as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | |
|---|---|---|---|
| Property investments accruals | 17,195,145 | 23,892,172 | 27,231,695 |
| Accrual for tangible assets | 52,666,464 | 23,507,992 | 23,507,992 |
| Holiday pay and bonuses | 116,989,003 | 103,767,265 | 103,767,265 |
| Interest payable | 39,631,328 | 33,293,669 | 33,975,996 |
| Invoices to be issued (a) | 52,237,364 | 67,830,234 | 67,830,234 |
| Commissions | 7,352,747 | 7,922,541 | 7,922,541 |
| Marketing expenses | 14,265,989 | 27,152,426 | 27,152,426 |
| Information society | 25,702,090 | - | - |
| Other external supplies and services | 49,814,557 | 49,556,488 | 49,632,490 |
| Accrued income - trade debtors (a) | 40,552,618 | 29,528,642 | 29,509,612 |
| Deferred income - rents | 4,931,720 | 4,293,106 | 5,260,081 |
| Subsidies | 63,298 | 424,961 | 424,961 |
| Others | 34,244,730 | 43,160,575 | 44,894,822 |
| 455,647,053 | 414,330,071 | 421,110,115 |
a) Essentially from Telecommunications segment
Movements in Provisions and impairment losses over the period ended 31 December 2008 and 2007 are as follows:
| Changes | |||||||
|---|---|---|---|---|---|---|---|
| Balance as at | Allocation of | in consolidation | Balance as at | ||||
| Caption | 31.December.2007 | Fair Value | Balance as at 31 December 2007 |
Increase | Decrease | perimeter | 31.December.2008 |
| Accumulated impairment losses on investments (Note 15) | 26,314 | - | 26,314 | - | - | (13,157) | 13,157 |
| Accumulated impairment losses on other non-current assets (Note 16) |
301,571 | - | 301,571 | - | (10,000) | - | 291,571 |
| Accumulated impairment losses on trade account receivables (Note 18) |
85,985,340 | - | 85,985,340 | 23,115,177 | (12,226,277) | (187,765) | 96,686,475 |
| Accumulated impairment losses on other debtors (Note 19) | 9,250,508 | - | 9,250,508 | 3,884,296 | (866,539) | 628,443 | 12,896,708 |
| Accumulated impairment losses on inventories (Note 17) | 24,759,431 | - | 24,759,431 | 11,512,101 | (7,312,110) | 824,292 | 29,783,714 |
| Non-current provisions | 107,984,226 | 1,321,769 | 109,305,995 | 5,344,758 | (60,739,295) | 3,175,517 | 57,086,975 |
| Current provisions | 2,295,457 | 256,500 | 2,551,957 | - | (113,252) | (69,551) | 2,369,154 |
| 230,602,847 | 1,578,269 | 232,181,116 | 43,856,332 | (81,267,473) | 4,357,779 | 199,127,754 |
| Changes | ||||||
|---|---|---|---|---|---|---|
| Balance as at | in consolidation | Balance as at | ||||
| Caption | 1.January.2007 | Increase | Decrease | Demerger | perimeter | 31.December.2007 |
| Accumulated impairment losses on investments (Note 15) | 11,817,808 | 20,663,277 | (3,659,227) | (28,720,051) | (75,493) | 26,314 |
| Accumulated impairment losses on other non-current assets (Note 16) |
991,815 | 170,125 | (69,529) | (790,840) | - | 301,571 |
| Accumulated impairment losses on trade account receivables (Note 18) |
87,481,138 | 9,438,959 | (10,366,016) | (7,589,772) | 7,021,031 | 85,985,340 |
| Accumulated impairment losses on other debtors (Note 19) | 10,634,714 | 21,741,496 | (452,344) | (23,532,708) | 859,350 | 9,250,508 |
| Accumulated impairment losses on inventories (Note 17) | 25,098,215 | 7,995,583 | (2,242,798) | (7,350,716) | 1,259,147 | 24,759,431 |
| Non-current provisions | 63,234,735 | 10,885,777 | (13,124,031) | (20,494,949) | 67,482,694 | 107,984,226 |
| Current provisions | 2,464,091 | 33,595 | (1,210,260) | (1,321,793) | 2,329,824 | 2,295,457 |
| 201,722,516 | 70,928,812 | (31,124,205) | (89,800,829) | 78,876,553 | 230,602,847 |
Changes in consolidation perimeter, in provisions and impairment losses, during 2008 and 2007 are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Disposal of companies | (1,047,849) | (3,643,177) |
| Acquisition of companies | 5,405,628 | 20,969,918 |
| Consolidation of Sonae RE | - | 61,137,164 |
| Others | - | 412,648 |
| 4,357,779 | 78,876,553 |
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Provisions and impairment losses | 35,512,894 | 17,460,444 |
| Impairment losses not included in this note | ||
| Goodwill (Note 14) | (8,142,574) | (3,659,303) |
| Investment Properties | (1,820,992) | |
| Tangible assets (Note 11) | - | (160,940) |
| Provisions for losses in investments (b) | - | 23,333,402 |
| Account receivables, Impairment Losses | 1,428,904 | - |
| Provisions for an account receivable related to the sale of investments (b) | - | 19,794,479 |
| Provisions for dismantling telecommunication sites (a) | 2,091,500 | 3,857,160 |
| Provision for inventories impairments | ||
| Recorded in cost of goods sold (Note 17) | 10,856,498 | 7,995,583 |
| Others | 3,930,102 | 2,307,987 |
| 43,856,332 | 70,928,812 |
(a) These costs are capitalised in tangible assets and are amortised according to the corresponding assets useful life;
(b) As at 31 December 2007, these amounts were recorded in the income statement as a deduction on the capital gain arising on the sale of investments.
As at 31 December 2008 and 2007, the provisions detail is as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Technical provisions on reinsurance | 12,008,857 | 61,137,164 |
| Expenses to be incurred with the sale of the Brazilian subsidiaries |
6,016,688 | 14,628,032 |
| Dismantling telecommunications sites | 20,591,640 | 18,888,140 |
| Judicial claims | 17,942,992 | 2,749,949 |
| Others | 2,895,952 | 12,876,398 |
| 59,456,129 | 110,279,683 |
Amounts included in "Technical provisions on reinsurance" relate to a group captive company that operates in the non-life re-insurance industry. The provision amount can be detailed as follows: 4,799,050 euro (5,650,956 euro as at 31 December 2007) related to provisions for non-acquired insurance premiums and 7,209,807 euro (55,486,208 euro as at 31 December 2007) related to provisions for claims outstanding. The amount to be recovered from the reinsurance companies is recorded in the caption Reinsurer's share of technical provisions (Note 16).
Impairment losses are deducted from the book value of the corresponding asset.
As at 31 December 2008 and 2007, major Contingent liabilities were guarantees given are as follows::
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Guarantees given: | ||
| on tax claims | 129,494,243 | 92,198,572 |
| on judicial claims | 2,021,086 | 1,907,032 |
| on municipal claims | 23,255,089 | 11,687,093 |
| Others | 69,834,195 | 71,897,604 |
Others include the following guarantees:
15,904,712 euro (23,861,474 Euro as of 31 December 2007) to guarantee part of the debt of Sonae Sierra affiliates related with the purchase, sale and exchange of Land;
10,576,961 euro (35,800,646 euro as at 31 December 2007) related to VAT reimbursement requests.
During the period ended 31 December 2008, a Retail segment company in Brazil granted a guarantee of approximately 21,856,170 euro (70,892,539 Brazilian real) on a tax claim, which is being judged by tax courts (25,255,265 euro equivalent to 65,570,840 brazilian real as at 31 December 2007).
As a consequence of the sale of a subsidiary company in Brazil, the Group guaranteed the buyer all the losses incurred by that company arising on unfavourable decisions not open for appeal, concerning tax lawsuits on transactions that took place before the sale date (13 December 2005) and that exceed 40 million euro. As at 31 December 2008, the amount claimed by the Brazilian Tax Authorities concerning the tax lawsuits still in progress, which the company's lawyers assess as having a high probability of loss, amount to near 2,3 million euro. Furthermore, there are other tax lawsuits totalling 65 million euro for which the Board of Directors, based on the lawyers' assessment, understand will not imply losses to the sold subsidiary above the referred 40 million euro.
Furthermore, there are other tax lawsuits totalling 65 million Euro for which the Board of Directors, based on the lawyers' assessment, understands will not imply future losses to the sold subsidiary above the referred 40 million Euro.
No provision has been registered to face risks arising from events related to guarantees given, as the Board of Directors considers that no liabilities will result for Sonae.
Minimum lease payments (fixed income) arising from operational leases, in which the Group acts as a lessor, recognised as income during the period ended 31 December 2008, 31 December 2007 pro forma and 2007 amounted to 105,702,189 euro, 82,648,498 euro and 91,675,182 euro, respectively.
Additionally, as at 31 December 2008 and 2007, Sonae had operational lease contracts, as a lessor, fundamentally in the Shopping Centres segment, whose minimum lease payments (fixed income) had the following payment schedule:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | |
|---|---|---|---|
| Due in: | |||
| N+1 automatically renewal | 982,169 | 839,808 | 839,808 |
| N+1 | 101,354,687 | 103,498,232 | 114,508,782 |
| N+2 | 90,091,077 | 96,154,658 | 106,284,524 |
| N+3 | 79,011,410 | 81,058,271 | 90,730,915 |
| N+4 | 68,789,212 | 68,884,581 | 78,048,090 |
| N+5 | 56,516,724 | 54,329,162 | 61,710,768 |
| After N+5 | 43,177,561 | 45,258,431 | 50,619,065 |
| 439,922,840 | 450,023,143 | 502,741,952 |
Rents arising from operational leases, in which the Sonae acts as a lessee, during the period ended 31 December 2008 amounted to 104,297,554 euro (50,768,053 euro as at 31 December 2007).
Additionally, as at 31 December 2008 and 2007, Sonae had operational lease contracts, as a lessee, whose minimum lease payments had the following payment schedule:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Due in: | ||
| N+1 automatically renewal | 19,266,686 | 18,031,480 |
| N+1 | 78,793,722 | 32,647,680 |
| N+2 | 74,801,157 | 28,034,530 |
| N+3 | 67,661,514 | 23,737,448 |
| N+4 | 61,321,705 | 21,166,777 |
| N+5 | 55,431,819 | 14,225,551 |
| After N+5 | 144,126,354 | 64,903,797 |
| 501,402,957 | 202,747,263 |
As at 31 December 2008 and 2007, Turnover is made up as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | ||
|---|---|---|---|---|
| Sale of goods | 4,149,749,990 | 3,291,037,122 | 3,305,597,738 | |
| Sale of products | 18,812,342 | 18,868,127 | 122,711,398 | |
| 4,168,562,332 | 3,309,905,249 | 3,428,309,136 | ||
| Services rendered | 1,184,541,613 | 1,107,395,651 | 1,199,416,024 | |
| Turnover | 5,353,103,945 | 4,417,300,900 | 4,627,725,160 |
As at 31 December 2008 and 2007, Value created on investment properties is made up as follows:
| 31.December.2007 31.December.2008 Pro forma |
31.December.2007 | |||
|---|---|---|---|---|
| Properties previously under development and opened during the period (Note 13) |
18,716,720 | 28,036,069 | 28,035,542 | |
| Changes in fair value of investment properties in operation (Note 13) |
7,579,782 | - | - | |
| Variation in fair value on "fit-out" contracts (Note 13) | (699,811) | 216,458 | 237,263 | |
| Variation in fair value in investment properties in operation | ||||
| Gains | 18,024,012 | 141,329,566 | 137,882,205 | |
| Losses | (159,426,178) | (12,693,132) | (13,746,420) | |
| (115,805,475) | 156,888,961 | 152,408,590 |
As at 31 December 2008 and 2007, Other operational income are as follows:
| 31.December.2007 31.December.2008 Pro forma |
31.December.2007 | |||
|---|---|---|---|---|
| Supplementary income | 373,451,675 | 289,713,481 | 291,096,801 | |
| Own work capitalised | 25,652,913 | 20,237,352 | 114,001,145 | |
| Gains on sales of assets | 19,162,839 | 11,863,888 | 12,771,231 | |
| Negative Goodwill (Note 9) | 9,864,000 | 76,642 | 76,642 | |
| Impairment losses reversals | 3,605,668 | 2,983,458 | 3,361,967 | |
| Key money | 2,498,222 | 3,943,874 | 3,916,290 | |
| Subsidies | 398,525 | 190,430 | 453,326 | |
| Taxes refunded | 123,500 | 526,881 | 526,921 | |
| Others | 21,031,828 | 8,638,367 | 10,846,206 | |
| 455,789,170 | 338,174,373 | 437,050,529 |
S l i i l d i l i l d i h h h f li i i l i i h il b i Supplementary income includes mainly income related with the share of suppliers in promotional campaigns in the retail business.
As at 31 December 2008 and 2007, External supplies and services are as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | |
|---|---|---|---|
| Subcontracts | 447,159,905 | 421,066,567 | 574,869,161 |
| Services | 119,553,347 | 97,447,884 | 105,400,625 |
| Publicity | 153,166,000 | 130,619,432 | 131,546,247 |
| Rents | 105,143,717 | 79,165,604 | 82,362,225 |
| Commissions | 45,847,951 | 54,206,486 | 55,596,027 |
| Transports | 46,097,161 | 36,907,002 | 41,650,000 |
| Electricity | 57,486,013 | 45,901,835 | 50,913,917 |
| Maintenance | 35,899,576 | 27,088,806 | 30,669,721 |
| Security | 27,373,830 | 19,383,267 | 20,333,227 |
| Cleaning up services | 24,698,728 | 18,313,335 | 13,305,585 |
| Insurances | 10,109,386 | 8,841,132 | 11,077,353 |
| Communications | 11,100,082 | 7,797,915 | 8,248,354 |
| Travel expenses | 8,978,656 | 6,803,919 | 8,146,052 |
| Others | 84,627,186 | 57,252,048 | 66,143,494 |
| 1,177,241,538 | 1,010,795,232 | 1,200,261,988 |
As at 31 December 2008 and 2007, Staff costs are as follows:
| 31.December.2007 31.December.2008 Pro forma |
31.December.2007 | ||
|---|---|---|---|
| Salaries | 486,458,558 | 409,404,068 | 459,199,332 |
| Social security contributions | 97,417,066 | 78,224,445 | 86,720,148 |
| Insurance | 10,173,927 | 8,810,172 | 9,553,996 |
| Welfare | 2,404,497 | 1,665,640 | 2,158,726 |
| Other staff costs | 15,950,343 | 10,676,003 | 12,178,524 |
| 612,404,391 | 508,780,328 | 569,810,726 |
As at 31 December 2008 and 2007, Other operational expenses are as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | |
|---|---|---|---|
| ATM expenses | 23,842,612 | 20,086,989 | 20,163,174 |
| Other taxes | 19,501,934 | 16,457,493 | 19,365,725 |
| Write-off of investment properties | 26,518,956 | 858,180 | 858,180 |
| Losses on the sale of assets | 6,375,143 | 5,856,736 | 7,528,622 |
| Municipal Property tax | 6,285,854 | 5,465,636 | 6,430,846 |
| Donations | 6,473,836 | 6,161,226 | 6,192,597 |
| Doubtful debts written-off | 1,587,256 | 939,768 | 1,011,116 |
| Others | 24,404,437 | 20,697,805 | 22,221,205 |
| 114,990,028 | 76,523,833 | 83,771,465 |
As at 31 December 2008 and 2007, net financial expenses are as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | ||
|---|---|---|---|---|
| Expenses | ||||
| Interest payable | ||||
| related with bank loans and overdrafts | (75,234,793) | (48,934,098) | (52,408,752) | |
| related with non convertible bonds | (97,512,565) | (74,014,087) | (74,115,643) | |
| related with financial leases | (1,566,000) | (1,829,875) | (2,068,316) | |
| related with hedge derivatives | (93,535) | (195,730) | (195,730) | |
| others | (11,699,999) | (16,233,172) | (16,019,195) | |
| (186,106,892) | (141,206,962) | (144,807,636) | ||
| Exchange losses | (9,031,784) | (3,547,299) | (3,564,906) | |
| Payment discounts given | - | - | (65,712) | |
| Fair value adjustment of investments registered at fair value on the income statement |
(8,341,676) | (131,724) | (131,724) | |
| Losses on fair value of hedge derivatives | (814,941) | (26,630) | (26,630) | |
| Up front fees and commissions related to loans | (4,595,046) | (13,931,761) | (13,931,761) | |
| Others | (7,921,576) | (8,023,987) | (10,451,061) | |
| (216,811,915) | (166,868,363) | (172,979,430) | ||
| Income | ||||
| Interest receivable | ||||
| related with bank deposits | 3,388,712 | 16,741,390 | 16,969,592 | |
| others | 24,423,197 | 26,953,174 | 22,305,789 | |
| 27,811,909 | 43,694,564 | 39,275,381 | ||
| Exchange gains | 11,034,644 | 3,126,618 | 3,364,509 | |
| Payments discounts received | 161,171 | 180,204 | 248,469 | |
| Fair value adjustment of investments registered at fair value on the income statement |
1,428,137 | 5,024,376 | 5,024,376 | |
| Hedge inefficiency | 814,941 | 134,091 | 134,091 | |
| Other financial income | 1,850,421 | 579,686 | 739,475 | |
| 43,101,223 | 52,739,539 | 48,786,301 | ||
| Net financial expenses | (173,710,692) | (114,128,824) | (124,193,129) | |
As at 31 December 2008 and 2007 investment income are as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | |
|---|---|---|---|
| Dividends | 375,121 | 43,670 | 1,538,075 |
| Partial sale or particiating units on Sierra PTF | 10,708,784 | - | - |
| Sale of 50 % of travel business | 4,674,685 | - | - |
| Sale of shares in Sonaecom | 651,721 | 27,478,036 | 27,478,036 |
| Sale of Safira | - | - | 2,493,061 |
| Partial sale of Loureshopping | - | - | 3,117,745 |
| Others | 765,455 | 8,993,427 | (439,863) |
| Gains / (losses) on the sale of investments in subsidiaries | 16,800,645 | 36,471,463 | 32,648,979 |
| Partial sale of ba Vidro | - | - | 8,744,475 |
| Sale of PT | - | 2,473,445 | 2,473,445 |
| Sale of Despegar | - | 3,017,071 | 3,017,071 |
| Others | 810,746 | - | 269,117 |
| Gains / (losses) on the sale of investments on available for sale |
810,746 | 5,490,516 | 14,504,108 |
| Impairment losses on investments at subsidiaries | 4,809 | (10,000) | - |
| Impairment losses on investments at associated companies | (168,689) | (160,125) | - |
| Impairment losses on investments available for sale | (1,765,850) | - | (210,125) |
| Impairment reversal/(losses) on investments | (1,929,730) | (170,125) | (210,125) |
| 16,056,782 | 41,835,524 | 48,481,037 |
As at 31 December 2008 and 2007, Taxation is as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | |
|---|---|---|---|
| Current tax | 24,656,511 | 22,934,669 | 26,023,270 |
| Deferred tax (Note 22) | (37,302,951) | 5,436,514 | 752,018 |
| (12,646,440) | 28,371,183 | 26,775,288 |
At December 2008 and 2007 deferred taxation includes 8,830,512 euro and 2,342,342 euro, respectively, relating to a withholding tax credit on income received from participation units in the Real Estate Investment Trusts.
The reconciliation between the profit before taxation and the tax charge for the periods ended 31 December 2008 and 2007 is summarised as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
|
|---|---|---|
| Profit before income tax | 26,431,832 | 383,400,446 |
| Difference between capital (losses)/gains for accounting and tax purposes | (19,444,825) | (36,776,049) |
| Results of associated undertakings | (9,419,371) | (5,552,394) |
| Impairment of goodwill | 7,806,839 | - |
| Provisions and impairment losses not accepted for tax purposes | (2,084,940) | 3,349,231 |
| Permanent differences | (16,773,306) | 59,209,391 |
| Taxable Profit | (13,483,771) | 403,630,625 |
| Use of tax losses that have not originated deferred tax assets | (168,348,265) | (149,678,825) |
| Recognition of tax losses that have not originated deferred tax assets | 308,106,748 | 32,110,942 |
| 126,274,712 | 286,062,742 | |
| Income tax rate in Portugal | 25.00% | 25.00% |
| 31,568,678 | 71,515,686 | |
| Effect of different income tax rates in other countries | (1,022,148) | 3,019,084 |
| Effect of change in tax income rate in the calculation of deferred taxes | (1,923,964) | (3,401,152) |
| Effect of increases or decreases in deferred taxes | (39,403,313) | (44,242,716) |
| Under/(over) taxation estimates | (3,306,940) | (1,590,256) |
| Autonomous taxes and tax benefits | (2,647,246) | 908,938 |
| Municipality surcharge | 4,088,493 | 2,161,599 |
| Income tax | (12,646,440) | 28,371,183 |
As at 31 December 2008 and 2007, the reconciliation of consolidated net profit is as follows:
| 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | ||
|---|---|---|---|---|
| 326,656,822 | 1,430,262,587 | 1,350,534,682 | ||
| 3,781,170 | (516,295,006) | (486,508,666) | ||
| 156,359,114 | 18,739,759 | 19,634,169 | ||
| (478,520,374) | (243,058,926) | (249,707,922) | ||
| (116,562,876) | (442,012,268) | (445,059,238) | ||
| 120,638,760 | 43,440,006 | 38,035,172 | ||
| 9,600,021 | 5,370,895 | 2,276,964 | ||
| 16,502,915 | 66,303,045 | 133,843,298 | ||
| 622,720 | (7,720,829) | (6,334,377) | ||
| 39,078,272 | 355,029,263 | 356,714,082 | ||
Balances and transactions with related parties during the periods ended 31 December 2008 and 2007 are as follows:
| Sales and services rendered | Purchases and services obtained | |||||
|---|---|---|---|---|---|---|
| Transactions | 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 |
| Parent company and group companies | 53,583,046 | 51,753,173 | 55,970,999 | 1,502,269 | 1,680,992 | 57,574 |
| Jointly controlled companies | 12,514,431 | 14,175,145 | 30,058,485 | 16,724,063 | 16,562,573 | 17,587,580 |
| Associated companies | 19,975,645 | 1,986,105 | 1,738,332 | 12,746,169 | 4,639,426 | 21,762,420 |
| Other partners in Group companies | 10,766,319 | 10,637,652 | 36,114,271 | 45,901,542 | 38,007,187 | 11,930,393 |
| 96,839,441 | 78,552,075 | 123,882,087 | 76,874,043 | 60,890,178 | 51,337,967 |
| Interest income | Interest expenses | |||||
|---|---|---|---|---|---|---|
| Transactions | 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 |
| Parent company and group companies | - | - | - | - | - | - |
| Jointly controlled companies | 268,731 | 308,301 | 541,120 | 3,215 | 1,171,081 | 1,229,175 |
| Associated companies | - | 559,166 | 3,863 | 138,531 | - | - |
| Other partners in Group companies | 78,816 | 8,810,133 | 45,950 | 1,794,312 | 3,819,537 | 2,994,997 |
| 347,547 | 9,677,600 | 590,933 | 1,936,058 | 4,990,618 | 4,224,172 | |
| Accounts receivable | Accounts payable | |||||
| Balances | 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 |
| Parent company and group companies | 10,870,567 | 11,928,847 | 11,915,663 | 182,140 | 772,191 | 18,659 |
| Jointly controlled companies | 2,287,227 | 2,726,396 | 2,744,092 | 15,458,421 | 5,120,325 | 5,300,970 |
| Associated companies | 7,105,542 | 1,662,571 | 1,856,039 | 2,459,698 | 1,289,753 | 2,231,505 |
| Other partners in Group companies | 4,480,756 | 5,935,785 | 5,787,280 | 19,787,855 | 27,460,298 | 28,092,208 |
| 24,744,092 | 22,253,599 | 22,303,074 | 37,888,114 | 34,642,567 | 35,643,342 | |
| Loans | ||||||
| Obtained | Granted | |||||
| Balances | 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 | 31.December.2008 | 31.December.2007 Pro forma |
31.December.2007 |
| Parent company and group companies | - | - | - | - | - | - |
| Jointly controlled companies | 125,997 | - | - | 4,259,844 | 3,755,497 | 63,427 |
| Associated companies | - | - | - | - | 9,500,000 | - |
| Other partners in Group companies | 13,230,852 | 43,734,875 | 44,297,395 | - | 15,475 | 15,475 |
| 13,356,849 | 43,734,875 | 44,297,395 | 4,259,844 | 13,270,972 | 78,902 |
The caption other partners in Group companies include Sonae Indústria, SGPS, SA and Sonae Capital, SGPS, SA affiliated, associated and jointly controlled companies, and also other shareholders of affiliated companies or jointly controlled companies of Sonae, as well as other affiliated companies of the parent company Efanor Investimentos, SGPS, SA.
Members of the Board of Directors were attributed the following remuneration in 2008 and 2007: g
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Fixed remuneration | 2,250,550 | 2,140,414 |
| Variable remuneration | 1,992,200 | 2,582,100 |
| 4,242,750 | 4,722,514 |
Remunerations attributed in 2008 to key management staff of main companies of the Sonae Group (excluding members of Sonae SGPS, SA Board of Directors) amounted to 10,026,311 euro (12,599,050 euro at 2007), of which 5,463,640 euro (5,736,256 euro at 2007) are fixed remunerations and 4,562,671 euro (6,862,794 euro at 2007) are performance bonuses.
Earning per share for the periods ended 31 December 2008 and 2007, excluding the effect of discontinued operations, were calculated taking into consideration the following amounts:
| 31.December.2008 | 31.December.2007 Pro-forma |
31.December.2008 | |
|---|---|---|---|
| Net profit | |||
| Net profit taken into consideration to calculate basic earnings per share (consolidated profit for the year) |
80,035,669 | 275,002,806 | 284,044,038 |
| Effect of dilutive potential shares | - | - | - |
| Interest related to convertible bonds (net of tax) | - | - | - |
| Net profit taken into consideration to calculate diluted earnings per share |
80,035,669 | 275,002,806 | 284,044,038 |
| Number of shares | |||
| Weighted average number of shares used to calculated basic earnings per share |
1,867,200,000 | 1,866,824,215 | 1,866,824,215 |
| Effect of dilutive potential ordinary shares from convertible bonds | - | - | - |
| Weighted average number of shares used to calculated diluted earnings per share |
1,867,200,000 | 1,866,824,215 | 1,866,824,215 |
| Earnings per share (basic and diluted) | 0.042864 | 0.147310 | 0.152154 |
There are no convertible instruments included in Sonae Holding shares thereby, dilutive effect is reported. The calculation of 2008 average number of shares considered the effect of 132,800,000 Sonae Holding shares underlying the derivative in Note 24 as own shares.
As at 31 December 2008 and 2007, cash receipts and cash payments related to investments are as follows:
| Receipts | 31.December.2008 | 31.December.2007 Pro-forma |
31.December.2007 |
|---|---|---|---|
| Sale of 58% Sierra Purtugal Real Estate | 67,140,700 | - | - |
| Price adjustment of Continente Hipermercados | 30,113,103 | - | - |
| Sale of 50% of travel Business | 15,700,000 | - | - |
| Sale of PT shares | 108,461,473 | 108,461,473 | |
| Sale of Sonaecom shares | 23,150,000 | 23,150,000 | |
| Sale of Agloma Investments | 15,454,999 | 15,454,999 | |
| Sale of Safira | - | 5,000,000 | |
| Sale of 50% of Loureshopping | 14,991,339 | 14,991,339 | |
| Partial sale of Barbaridade Glass | - | 12,056,590 | |
| Others | 10,136,834 | 54,492,481 | 42,678,113 |
| 123,090,637 | 216,550,292 | 221,792,514 | |
| Payments | 31.December.2008 | 31.December.2007 Pro-forma |
31.December.2007 |
| Acquisition of Sonaecom Shares | 28,731,527 | - | - |
| Imosede Capital Increase | 14,878,381 | 21,011,577 | 21,011,577 |
| Acquisition of Geotur | 12,028,500 | - | - |
| Acquisition of Continente Hipermercados | - | 612,370,755 | 612,370,755 |
| Acquisition of insurance operations acquired to Sonae Capital | - | 70,052,475 | 70,052,475 |
| Acquisition of 50% of Arrabidashopping | - | 24,529,683 | 24,529,683 |
| Acquisition of 50% of Gaiashopping | - | 27,040,663 | 27,040,663 |
| Acquisition of Cape Tecnologies | - | 18,569,144 | 18,569,144 |
| Acquisition of DMJB | - | - | 22,000,000 |
| Acquisition of Arbiword | - | - | 9,986,500 |
| Acquisition of Tele 2 | - | 14,506,136 | 14,506,136 |
| Acquisition of Riverplz | - | 11,610,461 | 11,610,461 |
| Acquisition of Craiova | - | 16,016,566 | 16,016,566 |
| Others | 21,347,999 | 62,800,930 | 69,208,683 |
| 76,986,407 | 878,508,390 | 916,902,643 |
In the Shareholders Annual General Meeting held on 21 April 2008, the payment of a gross dividend of 0.03 euro per share (0.03 euro per share in 2007) corresponding to a total of 60,000,000.00 euro (55,997,442.84 euro at 2007) was approved. On the 21 April 2008 the value of the dividends of the derivatives' underlying shares mentioned in Note 24, amounted 3,984,000 euro and were credited in the caption equity.
For 2008, the Board of Directors will propose a gross dividend of 0.03 euro per share corresponding to a total of 60,000,000 euro. This dividend is subject to approval by shareholders in the Shareholders Annual Meeting.
In 2008 and 2007, the following were identified as primary business segments:
The geographic segments (secondary) identified in 2008 and 2007 are listed as follows:
| 31.December.2008 | ||||||
|---|---|---|---|---|---|---|
| Retail | Shopping Centres | Telecommunications | Sonae Holding and Others |
Consolidation Adjustments |
Consolidated | |
| Operational income | ||||||
| Sales | 4,074,293,436 | - | 94,268,896 | - | - | 4,168,562,332 |
| Services rendered | 136,388,111 | 168,772,870 | 859,411,784 | 19,968,848 | - | 1,184,541,613 |
| Value created on investments properties | - | (115,805,475) | - | - | - | (115,805,475) |
| Other operational income | 402,870,469 | 21,878,213 | 29,967,008 | 968,394 | 102,086 | 455,786,170 |
| 4,613,552,016 | 74,845,608 | 983,647,688 | 20,937,242 | 102,086 | 5,693,084,640 | |
| Inter-segment income | 35,262,876 | 2,030,205 | 12,102,989 | 1,985,438 | (51,381,508) | - |
| 4,648,814,892 | 76,875,813 | 995,750,677 | 22,922,680 | (51,279,422) | 5,693,084,640 | |
| Depreciation and amortisation | 114,581,749 | 1,184,431 | 152,524,582 | 420,418 | 5,107,982 | 273,819,162 |
| Provisions and impairment losses | 5,185,021 | 7,946,122 | 20,264,271 | 555,242 | 1,562,238 | 35,512,894 |
| Operational profit (EBIT) | 246,624,773 | (65,581,652) | 5,835,965 | (6,313,737) | (5,432,454) | 175,132,895 |
| Net financial expenses | (72,012,415) | (43,891,966) | (17,782,066) | (38,598,234) | (1,426,011) | (173,710,692) |
| Share of results of associated undertakings | - | - | - | - | 8,952,847 | 8,952,847 |
| Investment income | 3,078,933 | 10,941,494 | (744,990) | 99,395,725 | (96,614,380) | 16,056,782 |
| Profit before taxation | 177,691,291 | (98,532,124) | (12,691,091) | 54,483,754 | (94,519,998) | 26,431,832 |
| Income tax | (10,742,371) | 3,087,765 | 20,181,800 | 754,371 | (635,125) | 12,646,440 |
| Net profit for the period | 166,948,920 | (95,444,359) | 7,490,709 | 55,238,125 | (95,155,123) | 39,078,272 |
| - attributable to equity holders of Sonae | 80,035,669 | |||||
| - attributable to minority interests | (40,957,397) |
| 31.December.2007 | ||||||
|---|---|---|---|---|---|---|
| Retail | Shopping Centres | Telecommunications | Sonae Holding and Others |
Consolidation Adjustments |
Consolidated Pro forma |
|
| Operational income | ||||||
| Sales | 3,238,944,891 | - | 70,960,358 | - | - | 3,309,905,249 |
| Services rendered | 137,012,504 | 145,142,178 | 806,004,561 | 19,236,408 | - | 1,107,395,651 |
| Value created on investments properties Value created on investments |
- | 156 888 961 156,888,961 |
- | - | - | 156 888 961 156,888,961 |
| Other operational income | 297,554,957 | 19,463,187 | 22,080,826 | 1,393,010 | (2,317,607) | 338,174,373 |
| 3,673,512,352 | 321,494,326 | 899,045,745 | 20,629,418 | (2,317,607) | 4,912,364,234 | |
| Inter-segment income | 31,267,428 | 4,581,070 | 8,226,798 | 1,255,394 | (45,330,690) | - |
| 3,704,779,780 | 326,075,396 | 907,272,543 | 21,884,812 | (47,648,297) | 4,912,364,234 | |
| Depreciation and amortisation | 87,177,693 | 1,014,849 | 138,757,031 | 437,589 | 810,452 | 228,197,614 |
| Provisions and impairment losses | 1,737,549 | 1,542,796 | 9,634,720 | 3,348 | 2,375,817 | 15,294,230 |
| Operational profit (EBIT) | 214,011,002 | 222,110,671 | 23,197,641 | (5,835,382) | (3,342,580) | 450,141,352 |
| Net financial expenses | (34,416,395) | (22,663,181) | (27,274,567) | (29,753,695) | (20,986) | (114,128,824) |
| Share of results of associated undertakings | - | - | - | - | 5,552,394 | 5,552,394 |
| Investment income | 326,663 | 8,615,338 | 5,387,986 | 81,030,844 | (53,525,307) | 41,835,524 |
| Profit before taxation | 179,921,270 | 208,062,828 | 1,311,060 | 45,441,767 | (51,336,479) | 383,400,446 |
| Income tax | (7,655,557) | (56,238,942) | 36,635,014 | (1,446,305) | 334,607 | (28,371,183) |
| Net profit for the period | 172,265,713 | 151,823,886 | 37,946,074 | 43,995,462 | (51,001,872) | 355,029,263 |
| - attributable to equity holders of Sonae | 275,002,806 | |||||
| - attributable to minority interests | 80,026,457 | |||||
| 31.December.2007 | |||||||
|---|---|---|---|---|---|---|---|
| Retail | Shopping Centres | Telecommunications | Services | Sonae Holding and Others |
Consolidation Adjustments |
Consolidated | |
| Operational income | |||||||
| Sales | 3,238,716,184 | - | 70,768,384 | 113,611,608 | 5,212,960 | 3,428,309,136 | |
| Services rendered | 135,818,958 | 148,168,873 | 805,204,646 | 94,950,944 | 18,944,973 | (3,672,370) | 1,199,416,024 |
| Value created on investments properties | - | 161,317,713 | - | - | - | (8,909,123) | 152,408,590 |
| Other operational income | 276,351,717 | 18,407,145 | 22,124,087 | 122,144,933 | 601,053 | (2,578,406) | 437,050,529 |
| 3,650,886,859 | 327,893,731 | 898,097,117 | 330,707,485 | 24,758,986 | (15,159,899) | 5,217,184,279 | |
| Inter-segment income | 53,892,921 | 4,581,070 | 9,175,426 | 4,397,265 | 14,789,448 | (86,836,130) | - |
| 3,704,779,780 | 332,474,801 | 907,272,543 | 335,104,750 | 39,548,434 | (101,996,029) | 5,217,184,279 | |
| Depreciation and amortisation | 87,177,693 | 1,014,849 | 138,757,031 | 6,461,804 | 1,479,345 | 61,408 | 234,952,130 |
| Provisions and impairment losses | 1,737,549 | 1,551,796 | 9,634,719 | 864,618 | 3,348 | 3,668,414 | 17,460,444 |
| Operational profit (EBIT) | 214,011,002 | 230,190,112 | 23,197,641 | 11,928,174 | (5,414,042) | (17,415,689) | 456,497,198 |
| Net financial expenses | (34,416,395) | (24,783,308) | (27,274,567) | (8,939,303) | (29,777,723) | 998,167 | (124,193,129) |
| Share of results of associated undertakings | - | - | - | - | - | 2,704,264 | 2,704,264 |
| Investment income | (4,650,171) | 8,615,338 | 5,387,986 | 12,917,603 | 98,120,757 | (71,910,476) | 48,481,037 |
| Profit before taxation | 174,944,436 | 214,022,142 | 1,311,060 | 15,906,474 | 62,928,992 | (85,623,734) | 383,489,370 |
| Income tax | (7,655,557) | (57,818,912) | 36,635,014 | 326,479 | (1,635,518) | 3,373,206 | (26,775,288) |
| Net profit for the period | 167,288,879 | 156,203,230 | 37,946,074 | 16,232,953 | 61,293,474 | (82,250,528) | 356,714,082 |
| - attributable to equity holders of Sonae | 284,044,038 | ||||||
| - attributable to minority interests | 72,670,044 | ||||||
| 31.December.2008 | ||||||
|---|---|---|---|---|---|---|
| Retail | Shopping Centres | Telecommunications | Sonae Holding and Others |
Consolidation Adjustments |
Consolidated | |
| Fixed Assets | ||||||
| Intangible | 164,289,357 | 3,009,221 | 281,717,045 | 207,480 | (8,923,942) | 440,299,161 |
| Tangible | 1,909,424,274 | 1,578,889 | 585,740,992 | 1,449,325 | 9,749,556 | 2,507,943,036 |
| Investment properties | - | 1,845,379,929 | - | - | (3,377,356) | 1,842,002,573 |
| Goodwill1 | - | - | - | - | 697,267,362 | 697,267,362 |
| Investments | 57,266,432 | 45,967,503 | 5,844,034 | 48,356,831 | (1,793,130) | 155,641,670 |
| Deferred tax assets | 67,426,816 | 14,693,600 | 124,862,171 | 19,233 | (47,131) | 206,954,689 |
| Other assets | 747,482,532 | 88,873,065 | 356,772,301 | 33,550,449 | (18,514,092) | 1,208,164,255 |
| Cash, Cash Equivalents and Current Investments | 177,924,802 | 55,093,511 | 105,719,328 | 8,640,440 | (99,460,414) | 247,917,667 |
| Total assets | 3,123,814,213 | 2,054,595,718 | 1,460,655,871 | 92,223,758 | 574,900,853 | 7,306,190,413 |
| Non-current liabilities | ||||||
| Borrowings | 1,243,067,911 | 874,645,638 | 399,257,484 | 502,465,955 | (2,983,875) | 3,016,453,113 |
| Deferred tax liabilities | 76,369,332 | 252,385,172 | 605,414 | 2,030,552 | (481,790) | 330,908,680 |
| Other non-current liabilities | 26,267,148 | 14,788,642 | 172,439,218 | 67,805,609 | (68,749,484) | 212,551,133 |
| Current liabilities | ||||||
| Borrowings | 152,913,562 | 56,223,229 | 6,571,550 | 154,379,919 | (17,087) | 370,071,173 |
| Other current liabilities | 1,242,718,617 | 118,183,412 | 465,433,499 | 126,377,893 | (139,050,986) | 1,813,662,435 |
| Total liabilities | 2,741,336,570 | 1,316,226,093 | 1,044,307,165 | 853,059,928 | (211,283,222) | 5,743,646,534 |
| Total investment | 387,535,547 | 184,789,552 | 299,042,265 | 30,451,457 | 901,818,821 | |
| Gross Debt | 1,395,981,473 | 930,868,867 | 405,829,034 | 656,845,866 | (3,000,955) | 3,386,524,285 |
| Net Debt | 1,218,056,671 | 875,775,356 | 300,109,706 | 648,205,425 | 96,459,460 | 3,138,606,618 |
| 31.December.2007 | ||||||
| Retail | Shopping Centres | Telecommunications | Sonae Holding and Others |
Consolidation Adjustments |
Consolidated Pro forma |
|
| Fixed Assets | ||||||
| Intangible | 153,136,765 | 3,553,684 | 192,416,571 | 118,561 | (2,979,937) | 346,245,644 |
| Tangible | 1,674,779,965 | 1,176,095 | 533,165,965 | 1,391,131 | 9,643,012 | 2,220,156,168 |
| Investment properties | - | 1,851,525,009 | (544,678) | 1,850,980,331 | ||
| Goodwill1 | - | - | - | - | 675,666,021 | 675,666,021 |
| Investments | 43,887,151 | 20,359,968 | 7,102,202 | 22,141,003 | 27,385,380 | 120,875,704 |
| Deferred tax assets | 36,003,939 | 11,221,491 | 101,118,096 | 37,213 | (48,560) | 148,332,179 |
| Other assets | 683,568,652 | 82,380,853 | 320,676,431 | 78,948,664 | (9,884,850) | 1,155,689,750 |
| Cash, Cash Equivalents and Current Investments | 125,062,227 | 32,996,687 | 83,851,612 | 101,744,777 | 818,178 | 344,473,481 |
| Total assets | 2,716,438,699 | 2,003,213,787 | 1,238,330,877 | 204,381,349 | 700,054,566 | 6,862,419,278 |
| Non-current liabilities | ||||||
| Borrowings | 1,106,503,697 | 741,829,177 | 391,596,174 | 497,000,804 | (2,246,197) | 2,734,683,655 |
| Deferred tax liabilities | 46,554,841 | 269,691,571 | 284,402 | 2,416,071 | 73,109 | 319,019,994 |
| Other non-current liabilities | 30,302,969 | 29,927,254 | 30,393,470 | 328,573,323 | 2,569,585 | 421,766,601 |
| Current liabilities | ||||||
| Borrowings | 90,935,924 | 36,242,778 | 2,550,499 | 6,411,526 | (14,300) | 136,126,427 |
| Other current liabilities | 1,121,420,669 | 140,501,006 | 396,728,752 | 35,201,242 | (11,482,835) | 1,682,368,834 |
| Total liabilities | 2,395,718,100 | 1,218,191,786 | 821,553,297 | 869,602,966 | (11,100,638) | 5,293,965,511 |
| Total investment | 800,086,030 | 417,279,028 | 235,657,425 | 549,302 | - | 1,453,571,785 |
| Gross Debt | 1,197,439,621 | 778,071,955 | 394,146,673 | 503,412,330 | (2,260,496) | 2,870,810,083 |
| Net Debt | 1,072,377,395 | 745,080,744 | 310,295,061 | 401,667,554 | (3,084,153) | 2,526,336,601 |
| 31.December.2007 | ||||||
|---|---|---|---|---|---|---|
| Retail | Shopping Centres | Telecommunications | Sonae Holding and Others |
Consolidation Adjustments |
Consolidated | |
| Fixed Assets | ||||||
| Intangible | 153,136,765 | 3,553,684 | 192,416,571 | 118,561 | (2,979,937) | 346,245,644 |
| Tangible | 1,674,779,963 | 1,176,095 | 533,165,965 | 1,391,131 | 9,643,011 | 2,220,156,165 |
| Investment properties | - | 2,062,673,604 | - | - | (544,678) | 2,062,128,926 |
| Goodwill1 | - | - | - | - | 697,390,378 | 697,390,378 |
| Investments | 43,887,151 | 20,359,968 | 7,102,202 | 22,861,867 | (8,607,391) | 85,603,797 |
| Deferred tax assets | 36,003,939 | 12,212,701 | 101,118,096 | 37,213 | (48,561) | 149,323,388 |
| Other assets | 637,723,327 | 77,482,995 | 320,676,431 | 78,948,664 | 25,433,194 | 1,140,264,611 |
| Cash, Cash Equivalents and Current Investments | 125,062,227 | 34,994,583 | 83,851,612 | 101,744,777 | 818,178 | 346,471,377 |
| Total assets | 2,670,593,372 | 2,212,453,630 | 1,238,330,877 | 205,102,213 | 721,104,194 | 7,047,584,286 |
| Non-current liabilities | ||||||
| Borrowings | 1,106,503,697 | 836,262,512 | 391,596,174 | 497,000,804 | (2,246,197) | 2,829,116,990 |
| Deferred tax liabilities | 46,554,841 | 299,080,440 | 284,402 | 2,416,071 | 73,109 | 348,408,863 |
| Other non-current liabilities | 30,302,968 | 32,739,640 | 30,393,470 | 328,573,323 | 319,720 | 422,329,121 |
| Current liabilities | ||||||
| Borrowings | 90,935,924 | 38,433,460 | 2,550,499 | 6,411,526 | (14,298) | 138,317,111 |
| Other current liabilities | 1,121,420,674 | 149,590,790 | 396,728,752 | 35,201,242 | (11,555,512) | 1,691,385,946 |
| Total liabilities | 2,395,718,104 | 1,356,106,842 | 821,553,297 | 869,602,966 | (13,423,178) | 5,429,558,031 |
| Total investment | 800,086,030 | 411,103,512 | 235,657,425 | 124,438,780 | - | 1,571,285,747 |
| Gross Debt | 1,197,439,621 | 874,695,972 | 394,146,673 | 503,412,330 | (2,260,495) | 2,967,434,101 |
| Net Debt | 1,072,377,395 | 839,706,865 | 310,295,061 | 401,667,553 | (3,084,150) | 2,620,962,724 |
1) The allocation of the goodwill is detailed in Note 14.
2) Net Debt in "Holding and others" is made up as follows:
| 31 December 2008 31.December.2008 |
31 December 2007 31.December.2007 |
|
|---|---|---|
| Inflows | ||
| Bank debt | 656,845,874 | 503,412,330 |
| Cash and cash equivalents and current investments | (8,640,440) | (101,744,777) |
| Net bank debt | 648,205,434 | 401,667,553 |
| Sonae Distribuição | - | - |
| Sonae Sierra | - | |
| SonaeCom | - | |
| Others | - | 5,723 |
| Intercompany short term loans obtained | - | 5,723 |
| Total inflows | 648,205,434 | 401,673,276 |
| Outflows | ||
| Sonae Capital | - | |
| Others | 1,943,295 | |
| Intercompany loans granted | - | 1,943,295 |
The contribution of the business segments to the cash flow statements for the periods ended on 31 December 2008 and 2007 is as follows:
| 31.December.2008 | |||||
|---|---|---|---|---|---|
| Shopping | Telecommunications | Sonae Holding | Consolidated | ||
| Retail | Centres | and Others | |||
| Operating activities | 307,684,066 | 65,633,780 | 94,635,907 | (1,728,861) | 466,224,892 |
| Investment activities | (258,455,469) | (111,206,848) | (163,112,138) | (41,792,513) | (574,566,968) |
| Financing activities | 80,738,836 | 90,842,209 | (22,171,509) | (170,249,525) | (20,839,989) |
| Net increase/(decrease) in cash and cash equivalents | 129,967,433 | 45,269,141 | (90,647,740) | (213,770,899) | (129,182,065) |
| 31.December.2007 Pro Forma | |||||
| Shopping | Telecommunications | Sonae Holding | Consolidated | ||
| Retail | Centres | and Others | |||
| Operating activities | 315,399,836 | 54,349,086 | 127,702,339 | (4,049,074) | |
| Investment activities | (818,401,212) | (311,403,158) | (58,431,702) | 69,865,521 | |
| Financing activities | 292,680,496 | 144,137,702 | (131,032,550) | (48,271,546) | 493,402,187 (1,118,370,551) 257,514,102 |
| 31.December.2007 | ||||||
|---|---|---|---|---|---|---|
| Retail | Shopping Centres |
Telecomm. | Services | Sonae Holding and Others |
Consolidated | |
| Operating activities | 336,247,887 | 57,320,142 | 145,444,653 | (13,046,436) | (8,304,090) | 517,662,156 |
| Investment activities | (826,850,091) | (326,526,133) | (58,652,280) | (96,038,286) | 211,554,572 | (1,096,512,218) |
| Financing activities | 303,187,681 | 160,971,979 | (132,688,800) | (69,475,534) | (23,943,759) | 238,051,567 |
| Net increase/(decrease) in cash and cash equivalents |
(187,414,523) | (108,234,012) | (45,896,427) | (178,560,256) | 179,306,723 | (340,798,495) |
| 31.December.2008 | 31.December.2007 Pro forma | 31.December.2007 | ||||
|---|---|---|---|---|---|---|
| Turnover by destination market |
Operational profit | Turnover by destination market |
Operational profit | Turnover by destination market |
Operational profit | |
| Portugal | 5,136,445,409 | 216,225,965 | 4,262,626,613 | 362,812,071 | 4,378,916,324 | 362,310,424 |
| Spain | 82,349,160 | (66,923,455) | 47,765,909 | 24,203,293 | 58,401,633 | 24,266,961 |
| France | 14,827,603 | - | 20,259,131 | - | 71,278,479 | 6,250,198 |
| United Kingdom | 13,729,924 | (3,472,414) | 10,107,463 | (1,488,504) | 12,183,366 | (1,490,883) |
| Germany | 16,092,023 | (5,574,550) | 9,355,127 | 14,899,716 | 10,762,297 | 14,899,716 |
| Brazil | 19,786,228 | 39,311,509 | 17,151,739 | 28,663,270 | 18,727,233 | 28,663,857 |
| Italy | 12,105,508 | 1,536,002 | 5,996,078 | 4,709,757 | 11,937,153 | 4,709,757 |
| Other European countries | 35,397,009 | (6,088,103) | 33,722,391 | 16,290,937 | 53,908,504 | 16,237,593 |
| Rest of the world | 22,371,081 | 117,941 | 10,316,449 | 50,812 | 11,610,171 | 649,575 |
| 5,353,103,945 | 175,132,895 | 4,417,300,900 | 450,141,352 | 4,627,725,160 | 456,497,198 |
| 31.December.2008 | 31.December.2007 Pro forma | 31.December.2007 | ||||
|---|---|---|---|---|---|---|
| Total assets | Total liabilities | Total assets | Total liabilities | Total assets | Total liabilities | |
| Portugal | 6,092,286,140 | 4,961,460,264 | 5,753,040,076 | 4,623,489,377 | 5,959,621,033 | 4,780,459,289 |
| Spain | 484,981,007 | 373,202,953 | 485,190,338 | 336,685,859 | 485,190,338 | 336,685,859 |
| United Kingdom | 1,856,671 | 4,341,477 | 4,060,999 | 2,875,664 | 4,060,999 | 2,875,664 |
| Germany | 223,436,771 | 150,865,907 | 209,739,846 | 140,508,256 | 209,739,846 | 140,508,256 |
| Brazil | 203,077,544 | 57,537,405 | 183,525,327 | 48,626,837 | 183,525,327 | 48,626,837 |
| Italy | 163,181,716 | 160,617,660 | 113,923,755 | 105,584,308 | 113,923,755 | 105,584,308 |
| Hungary | 116,046,107 | 1,246,983 | 92,332,714 | 1,791,088 | 92,332,714 | 1,791,988 |
| Other European countries | 21,181,244 | 34,273,709 | 20,618,255 | 34,358,704 | (797,693) | 12,980,412 |
| Rest of the world | 143,211 | 100,176 | (12,032) | 45,418 | (12,033) | 45,418 |
| 7,306,190,411 | 5,743,646,534 | 6,862,419,278 | 5,293,965,511 | 7,047,584,286 | 5,429,558,031 |
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Retail | 28,895 | 23,273 |
| Shopping Centres | 856 | 761 |
| Telecommunications | 1,983 | 2,054 |
| Sonae Holding and Others | 166 | 163 |
| 31,900 | 26,251 |
Upon being given the UMTS Licence, Optimus (now Sonaecom – Serviços de Comunicações) assumed commitments in the area of promotion of the Information Society, totalling 274 million euro, to be complied with up to the end of the licence period (2015).
In accordance with the Agreement established on 5 June 2007 with the Ministry of Public Works, Transport and Communications ( "MOPTC"), part of these commitments, up to 159 million euro will be realised through own projects which qualify as contributions to the Information Society and incurred under the normal activities of Sonaecom – Serviços de Comunicações, S.A. (investment in the network and technology not resulting from the need to comply with the obligations assumed when the UMTS Licence was granted, and activities relating to research, development and promotion of services, contents and applications) which must be recognised by the MOPTC and by entities created especially for that purpose. At the date of approval of these financial statements, Euro 130 million (Euro 64 million in 2007) were already incurred in previous years and were validated by the above referred entities. The remaining amount is currently under evaluation or not yet realized. These charges will be recorded in the financial statements at the moment the projects are carried out and the estimated costs are known.
The remaining commitments, up to the amount of around 116 million euro, will be realised as agreed between Sonaecom- Serviços de Comunicações and MOPTC, through contributions to the "Initiativas E" project (offer of modems, discounts on tariffs, cash contributions, among others, relating to the widespread use of broadband internet by students and teachers), the contributions being made through an Open fund called Information Society Fund (Fundo para a Sociedade de Informação), to be created by the three mobile operators operating in Portugal. Contributions under this project will be recorded, at their present value, as intangible fixed assets, as an additional cost of the UMTS licence, and will be amortised on a straight-line basis over the remaining period of the licence. Success of the project, which was initiated at the end of 2007, depends on participation of the beneficiaries in the various initiatives (e-opportunities, e-school and e-teacher) and will determine the possible need for a revision of the current conditions of the project, to a new model of contributions, to be determined at least 12 months after the beginning of the project.
The success of this project, initiated in the end of 2007, depended on the beneficiaries' participation to the various initiatives (e-opportunities, e-school and e-teacher) and could have been subject to revision during the a period of 12 months, i.e., until June 2008. Due to these facts, it was not possible, at 31 December 2007, to estimate in a reliable way the success of this project, and therefore, at that date it was not possible to produce a secure and reliable estimate of the responsabilities to be recognised.
Taking into consideration the success of the project during the first semester of 2008, Sonaecom considered that conditions to produce a reliable estimate of the total responsibilities associated with "Initiatives E" project were in place. Therefore, such responsibilities were recorded, at 30 June 2008, as an added cost of the UMTS license, against an entry in the captions 'Other non-current liabilities' and 'Other current liabilities' (Note 12).
During the third quarter of 2008, taking into account important facts occurred in recent months, namely that: incumbent operators weren't allowed to take part in the 4th license tendering process; and current national and international practice of extension, without costs, of GSM licenses and the renewal of UMTS licenses; the Group's Board of Directors decided to revise the useful life of the UMTS license, extending the amortisation period until 2030, given the high probability of its renewal and the high probability of such renewal being granted without significant costs. Therefore, in accordance with IAS 8, the impacts of the estimated useful life revision were recorded prospectively and amounted to minus 4 million Euros.
Following the sale of 49.9% of the share capital of Sierra Holdings BV to a group of Investors, Sonae Sierra has agreed to revise the sale price of such shares if certain of the shopping malls are sold by any of the participating companies of Sierra Holdings BV. The price revision can occur whether with a sale of the asset (investment property in the case) or with a sale of the shares of the company that is directly or indirectly the owner of such asset. The price revision shall occur if either the sale is made for a lower price than the Market Value or Net Asset Value of the shares of the company that owns the asset ("price difference").
In that case, the price revision will correspond to the maximum potential income tax on the profit that would arise if, instead of the contribution or sale of the shares of the company that owns the asset of Sierra Holdings BV, the contribution or sale of the asset had occurred.
(ii) in the case of a sale of shares of the company that directly or indirectly owns the asset, to a maximum amount of 59,670,000 euro( 29,835,000 Euro attributable to Sonae); the price revision will only take place if the price difference will can not be attributed to other reason than deferred income taxes; (iii) in either case, the price revision cannot result in a new price that is greater than the Market Value or the Net Asset Value, as applicable, of the transfer of the asset or of the shares respectively.
These guarantees are valid while the current agreements with the other shareholders of Sierra BV maintained.
Furthermore, Sonae Sierra has the right to make a proposal for the acquisition of the asset or the shares in stake before the same are offered for purchase to a third party.
The Group believes that the direct sale of the asset is not an attractive solution for this kind of operations as it is subject to certain encumbrances which do not exist in the sale of the shares of the asset's owner.
In the Management Report, and for the purposes of calculating financial indicators as EBITDA, the income statement is divided between Direct Income and Indirect Income, according to common practice in the Shopping Centre business.
The Indirect Income includes the contribution of the Shopping Centre business to the consolidated income statement, net of taxes, that results from: (i) valuation of investment properties; (ii) gains (losses) with the sale of financial investments, joint ventures or associates; (iii) impairment losses (including goodwill) and provisions for "Development Funds at Risk".
The values for 2007 were also reexpressed in order to allow the comparison with 2008, being the EBITDA calculated only in the Direct Income, excluding the indirect contributions.
| 31.December.2008 | 31.December.2007 Pro-Forma | ||||||
|---|---|---|---|---|---|---|---|
| Consolidated | Indirect income | Direct income | Consolidated | Indirect income | Direct income | ||
| Operational income | |||||||
| Sales | 4,168,562,332 | - | 4,168,562,332 | 3,309,905,249 | - | 3,309,905,249 | |
| Services rendered | 1,184,541,613 | - | 1,184,541,613 | 1,107,395,651 | - | 1,107,395,651 | |
| Value created on investment properties | (115,805,475) | (115,805,475) | - | 156,888,961 | 156,888,961 | - | |
| Other operational income | - | ||||||
| Negative goodwill (Note 42) | 9,864,000 | - | 9,864,000 | - | - | - | |
| Reversion of impairment losses (Note 42) | 3,605,668 | - | 3,605,668 | 2,983,458 | - | 2,983,458 | |
| Other | 442,319,502 | - | 442,319,502 | 335,190,915 | - | 335,190,915 | |
| Total operational income | 5,693,087,640 | (115,805,475) | 5,808,893,115 | 4,912,364,234 | 156,888,961 | 4,755,475,273 | |
| Total operational cost (a) | 5,517,954,745 | 37,178,747 | 5,480,775,998 | 4,462,222,882 | 4,570,776 | 4,457,652,106 | |
| Depreciation and amortisation | 273,819,162 | - | 273,819,162 | 228,197,614 | - | 228,197,614 | |
| Provisions and impairment losses | 35,512,894 | 7,218,486 | 28,294,408 | 15,294,230 | 1,935,817 | 13,358,413 | |
| Operational profit/(loss) | 175,132,895 | (152,984,222) | 328,117,117 | 450,141,352 | 152,318,185 | 297,823,167 | |
| Financial profit/(loss) | (173,710,692) | - | (173,710,692) | (114,128,824) | - | (114,128,824) | |
| Share of results of associated undertakings | 8,952,847 | (5,588,408) | 14,541,255 | 5,552,394 | 1,301,483 | 4,250,911 | |
| Investment income | 16,056,782 | 12,180,521 | 3,876,261 | 41,835,524 | 7,537,600 | 34,297,924 | |
| Profit before income tax | 26,431,832 | (146,392,109) | 172,823,941 | 383,400,446 | 161,157,268 | 222,243,178 | |
| Income tax | 12,646,440 | 14,530,359 | (1,883,919) | (28,371,183) | (44,402,850) | 16,031,667 | |
| Net profit for the period | 39,078,272 | (131,861,750) | 170,940,022 | 355,029,263 | 116,754,418 | 238,274,845 | |
| - attributable to equity holders of Sonae | 80,035,669 | (79,067,142) | 159,102,811 | 275,002,806 | 76,139,527 | 198,863,279 | |
| - attributable to minority interests | (40,957,397) | (52,794,608) | 11,837,211 | 80,026,457 | 40,614,892 | 39,411,565 | |
| Cash-flow operacional (EBITDA) (b) | 616,761,019 | 536,395,736 |
(a) The amount recorded in Direct income relates mainly to the reduction of investment properties value (Note 42), accruals for "Develpment Funds at Risk" and recognized impairment losses.
(b) EBITDA is computed as Operational income + Depreciation and amortisation + Provisions and impairment losses - Negative goodwill - Reversal of impairment losses.
The accompanying consolidated financial statements were approved by the Board of Directors on 17 March 2009, nevertheless they are still subject to approval at the Shareholders Annual General Meeting.
The Board of Directors
Belmiro de Azevedo
Álvaro Cuervo Garcia
Michel Marie Bon
José Neves Adelino
Duarte Paulo Teixeira de Azevedo
Álvaro Carmona e Costa Portela
Ângelo Gabriel Ribeirinho dos Santos Paupério
Nuno Manuel Moniz Trigoso Jordão
INDIVIDUAL FINANCIAL STATEMENTS
(Amounts expressed in euro)
| ASSETS | Notes | 31.December.2008 | 31.December.2007 | |
|---|---|---|---|---|
| NON-CURRENT ASSETS: | ||||
| Tangible assets | 6 | 181,497 | 94,573 | |
| Intangible assets | 7 | 1,242 | - | |
| Investments in affiliated companies | 8 | 3,070,652,704 | 2,567,891,338 | |
| Other investments | 9 | 100,049,880 | 49,880 | |
| Other non-current assets | 10 | 598,542,161 | 1,086,871,182 | |
| Total Non-Current Assets | 3,769,427,484 | 3,654,906,973 | ||
| CURRENT ASSETS: | ||||
| Trade account receivables | 11 | 1,626,676 | 1,392,495 | |
| Other debtors | 12 | 31,391,881 | 93,347,279 | |
| Taxes recoverable | 13 | 2,263,726 | 2,066,250 | |
| Other current assets | 14 | 237,082 | 521,229 | |
| Investments held for trading | 15 | 576,934 | 242,719 | |
| Cash and cash equivalents | 16 | 418,450 | 88,356,998 | |
| T t lC Total Current Assets tA t |
36,514,749 36 514 749 |
185,926,970 185 926 970 |
||
| TOTAL ASSETS | 3,805,942,233 | 3,840,833,943 | ||
| EQUITY AND LIABILITIES | ||||
| EQUITY: | ||||
| Share capital | 17 | 2,000,000,000 | 2,000,000,000 | |
| Legal reserves | 18 | 161,705,974 | 160,880,817 | |
| Fair value reserve, hedging reserve and other reserves | 19 | 962,614,622 | 1,155,390,776 | |
| Retained earnings | 322,737 | 322,737 | ||
| Profit for the year | 30,472,155 | 16,503,135 | ||
| TOTAL EQUITY | 3,155,115,488 | 3,333,097,465 | ||
| LIABILITIES: | ||||
| NON-CURRENT LIABILITIES: | ||||
| Bonds | 20.1 | 497,619,441 | 497,000,804 | |
| Other loans | 20.2 | 4,846,515 | - | |
| Total Non-Current Liabilities | 502,465,956 | 497,000,804 | ||
| CURRENT LIABILITIES: Bank loans |
20.3 | 138,209,277 | 1,660,856 | |
| Trade accounts payable | 1,116,009 | 476,418 | ||
| Other creditors Taxes payable |
21 22 |
171,430 603,578 |
47,534 1,588,469 |
|
| Other current liabilities | 23 | 8,260,495 | 6,962,397 | |
| Total Current Liabilities | 148,360,789 | 10,735,674 | ||
| TOTAL EQUITY AND LIABILITIES | 3,805,942,233 | 3,840,833,943 | ||
The accompanying notes are part of these financial statements.
(Amounts expressed in euro)
| Notes | 4th Quarter 2008 (Unaudited) |
31.December.2008 | 4th Quarter 2007 (Unaudited) |
31.December.2007 | |
|---|---|---|---|---|---|
| Operational income | |||||
| Services rendered | 27 | 383,839 | 2,273,584 | 1,204,944 | 2,305,141 |
| Other operational income | 28 | (4,985) | 56,774 | 47,569 | 409,235 |
| Total operational income | 378,854 | 2,330,358 | 1,252,513 | 2,714,376 | |
| Operational expenses | |||||
| External supplies and services | 29 | (1,182,690) | (3,692,492) | (1,083,146) | (3,694,440) |
| Staff costs | 30 | (955,090) | (4,194,547) | (2,467,378) | (6,642,538) |
| Depreciation and amortisation | 6 | (14,926) | (45,437) | (23,556) | (91,112) |
| Other operational expenses | 31 | (94,508) | (263,330) | (72,624) | (621,927) |
| Total operational expenses | (2,247,214) | (8,195,806) | (3,646,704) | (11,050,017) | |
| Operational profit/(loss) | (1,868,360) | (5,865,448) | (2,394,191) | (8,335,641) | |
| Financial Expenses | 32 | (15,590,947) | (38,334,504) | (9,188,666) | (41,745,792) |
| Financial Income | 32 | 11,664,922 | 67,426,621 | 17,978,224 | 71,696,285 |
| Investment loss/income | 33 | (87,275,000) | 7,691,335 | (2,156,000) | (4,848,835) |
| Profit/(Loss) before taxation | (93,069,385) | 30,918,004 | 4,239,367 | 16,766,017 | |
| Income tax | 34 | (445,849) ( ) |
(445,849) ( ) |
(262,878) ( ) |
(262,882) ( ) |
| Profit/(Loss) for the year | (93,515,234) | 30,472,155 | 3,976,489 | 16,503,135 | |
| Profit/(Loss) per share | |||||
| Basic | 35 | (0.046758) | 0.015236 | 0.002074 | 0.008761 |
| Diluted | 35 | (0.046758) | 0.015236 | 0.002074 | 0.008761 |
The accompanying notes are part of these financial statements.
| Not es |
Sha re Cap ital |
Ow n Sha res |
Leg al Re ser ve |
Fai lue r va Re ser ve |
He dgi ng Re ser ve |
Oth er Re ser ves |
Re tain ed Ear ning s |
Ne t Pro fit/( Los s) |
Tot al |
|
|---|---|---|---|---|---|---|---|---|---|---|
| Bal 1 J 20 07 s at anc e a anu ary |
2,0 00, 000 ,00 0 |
(13 8,0 44, 363 ) |
157 ,62 3,9 15 |
540 ,12 0,8 26 |
- | 666 ,20 6,0 04 |
322 ,73 7 |
65, 138 ,044 |
3,2 91, 367 ,16 3 |
|
| App riat ion of p rofi t of 20 06: rop |
||||||||||
| nsfe Tra r to leg al r ese rve s |
18 | - | - | 3,2 56, 902 |
- | - | - | - | (3,2 ) 56, 902 |
- |
| Div ide nds dis trib ute d |
- | - | - | - | - | - | - | (55 ,99 7,4 43) |
(55 ,99 7,4 43) |
|
| Tra nsfe r to /( from ) re tain ed ning ear s |
- | - | - | - | - | 5 8 5,8 83 83, 699 699 |
- | (5 8 (5,8 83 83, 699 699 ) ) |
- | |
| (Pu rch ) /Sa le o f ow har ase n s es |
- | 138 ,044 ,36 3 |
- | - | - | 135 ,24 8,5 16 |
- | - | 273 ,29 2,8 79 |
|
| Incr e / (De ) in fai lue of d eriv ativ e h edg net of tax eas cre ase r va es, es |
- | - | - | - | 162 ,774 |
- | - | - | 162 ,774 |
|
| Incr e / (De ) in fai lue of a vai lab le fo le in tme nts eas cre ase r va r sa ves |
- | - | - | 111 ,46 5,8 23 |
- | - | - | - | 111 ,46 5,8 23 |
|
| nsfe fit/( ) o f th Tra r to loss erio d pro e p |
- | - | - | 78, 941 ,38 8 |
- | - | - | 78, 941 ,38 8 |
||
| Pro fit/( Los s) for the riod ded 31 De ber 20 07 pe en cem |
- | - | - | - | - | - | - | 16, 503 ,13 5 |
16, 503 ,13 5 |
|
| Dem er S e C apit al, SG PS , SA erg ona |
- | - | - | - | - | (38 2,6 38, 254 ) |
- | - | (38 2,6 38, 254 ) |
|
| Oth ers |
- | - | - | - | - | - | - | - | - | |
| Bal s at 31 De ber 20 07 anc e a cem |
2,0 00, 000 ,00 0 |
- | 160 ,88 0,8 17 |
730 ,52 8,0 37 |
162 ,774 |
424 ,69 9,9 65 |
322 ,73 7 |
16, 503 ,13 5 |
3,3 33, 097 ,46 5 |
|
| Bal s at 1 J 20 08 anc e a anu ary |
2,0 00, 000 ,00 0 |
- | 160 ,88 0,8 17 |
730 ,52 8,0 37 |
162 ,774 |
424 ,69 9,9 65 |
322 ,73 7 |
16, 503 ,13 5 |
3,3 33, 097 ,46 5 |
|
| App riat ion of p rofi t of 20 07: rop |
||||||||||
| Tra nsfe r to leg al r ese rve s |
18 | - | - | 825 ,15 7 |
- | - | - | - | (82 5,1 57) |
- |
| Div ide nds dis trib ute d |
- | - | - | - | - | (44 ,32 2,0 22) |
- | (15 ,67 7,9 78) |
(60 ,00 0,0 00) |
|
| Tra nsfe /( from ) re tain ed ning r to ear s |
- | - | - | - | - | - | - | - | - | |
| (Pu rch ) /Sa le o f ow har ase n s es |
- | - | - | - | - | - | - | - | - | |
| e / (De ) in fai of d of Incr lue eriv ativ e h edg net tax eas cre ase r va es, es |
- | - | - | - | 144 ,29 6 |
- | - | - | 144 ,29 6 |
|
| Incr e / (De ) in fai lue of a vai lab le fo le in tme nts eas cre ase r va r sa ves |
- | - | - | (14 8,5 98, 428 ) |
- | - | - | - | (14 8,5 98, 428 ) |
|
| Tra nsfe r to fit/( loss ) o f th erio d pro e p |
- | - | - | - | - | - | - | - | - | |
| Pro fit/( Los s) for the riod ded 31 De ber 20 08 pe en cem |
- | - | - | - | - | - | - | 30, 472 ,15 5 |
30, 472 ,15 5 |
|
| Oth ers |
- | - | - | - | - | - | - | - | - | |
| Bal 31 De ber 20 08 s at anc e a cem |
2,0 00, 000 ,00 0 |
- | 161 ,70 5,9 74 |
581 ,92 9,6 09 |
307 ,07 0 |
380 ,37 7,9 43 |
322 ,73 7 |
30, 472 ,15 5 |
3,1 55, 115 ,48 8 |
The accompanying notes are part of these financial statements.
(Translation of the individual financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails)
(Amounts expressed in euro)
| Notes | 31.December.2008 | 31.December.2007 | |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Cash receipts from trade debtors | 2,039,760 | 1,710,885 | |
| Cash paid to trade creditors | (3,113,120) | (3,536,358) | |
| Cash paid to employees | (5,136,990) | (7,309,718) | |
| Cash flow generated by operations | (6,210,350) | (9,135,191) | |
| Income taxes (paid) / received | (343,865) | (872,442) | |
| Other cash receipts and (payments) relating to operating activities | (784,741) | (24,211) | |
| Net cash flow from operating activities (1) | (7,338,956) | (10,031,844) | |
| INVESTMENT ACTIVITIES | |||
| Cash receipts arising from: | |||
| Investments | 36 | 3,579,042 , , |
248,076,285 , , |
| Tangible assets | - | 1,140 | |
| Dividends | 33 | 94,979,579 | 76,848,426 |
| Interest and similar income | 73,527,427 | 60,135,420 | |
| Others | - | 400,000 | |
| Loans granted | 1,314,820,280 | 2,835,208,146 | |
| 1,486,906,328 | 3,220,669,417 | ||
| Cash payments arising from: | |||
| Investments | 36 | (842,085,478) | (20,000,500) |
| Tangible assets | (585,135) | (90,053) | |
| Intangible assets | (399) | - | |
| Loans granted | (771,561,000) | (3,112,236,085) | |
| (1,614,232,012) | (3,132,326,638) | ||
| Net cash used in investment activities (2) | (127,325,684) | 88,342,779 | |
| FINANCING ACTIVITIES | |||
| Cash receipts arising from: | |||
| Loans obtained | 1,015,221,000 | 5,234,410,085 | |
| Sale of own shares | - | 273,398,877 | |
| Others | - | 150,000 | |
| 1,015,221,000 | 5,507,958,962 | ||
| Cash payments arising from: | |||
| Loans obtained | (877,021,000) | (5,533,225,184) | |
| Interest and similar charges | (29,829,089) | (40,764,345) | |
| Dividends | 38 | (59,993,240) | (55,992,318) |
| Purchase of own shares | - | (106,000) | |
| (966,843,329) | (5,630,087,847) | ||
| Net cash used in financing activities (3) | 48,377,671 | (122,128,885) | |
| Net increase in cash and cash equivalents (4) = (1) + (2) + (3) | (86,286,969) | (43,817,950) | |
| Cash and cash equivalents at the beginning of the period | 16 | 86,696,142 | 130,514,092 |
| Cash and cash equivalents at the end of the period | 16 | 409,173 | 86,696,142 |
The accompanying notes are part of these financial statements.
(Translation of the individual financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails)
(Amounts expressed in euro)
SONAE, SGPS, SA ("the Company" or "Sonae"), has its head-office at Lugar do Espido, Via Norte, Apartado 1011, 4470-909 Maia, Portugal.
The company financial statements are presented as required by Commercial Companies Code. According to Decree-Law 35/2005 of 17 February 2008, the company financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.
The principal accounting policies adopted in preparing the accompanying individual financial statements are as follows:
The accompanying financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union efective as at 1 January 2008. This standards were issued by the International Accounting Standards Board ("IASB") and interpretations issued by International Financial Reporting Interpretations Committee ("IFRIC") or by the previous Standing Interpretations Committee ("SIC"), that have been adopted by the European Union.
Interim financial statements are presented quarterly, in accordance with IAS 34 – "Interim Financial Reporting".
The accompanying financial statements have been prepared from the books and accounting records on a going concern basis and under the historical cost convention, except for financial instruments and investment properties which are stated at fair value.
Up to the financial statements approval date, the following Standards and Interpretations, some of which have became effective during the year 2008, have been endorsed by European Union:
| With mandatory application in 2008 | Effective Date |
|---|---|
| IAS 39/IFRS 7 - Amendments: Reclassification of Financial Instruments | 01/07/2008 |
| IFRIC 14/IAS 19 - The Limit on Defined Benefit Asset, Minimum Funding Requirements and their Interaction | 01/01/2008 |
| With mandatory application after 2008 | |
| IFRS 8 – Operating Segments | 01/01/2009 |
| IFRS 2 - Amendments: Share-based Payment | 01/01/2009 |
| IAS 1 - Amendments: Fist-time Adoption of International Financial Reporting Standards | 01/01/2009 |
| IAS 23 - Amendments: Borrowing Costs | 01/01/2009 |
| IAS 32/IAS 1 - Amendments: Puttable Financial Instruments and Obligations Arising on Liquidation | 01/01/2009 |
| Amendments to International Financial Reporting Standards (2007) | 01/01/2009 |
| IFRS 1/IAS 27 - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate | 01/01/2009 |
| IFRIC 13 - Customer Loyalty Programmes | 01/07/2008 |
The adoption of these Standards has not led to any relevant changes in the Company's financial statements.
It is not expected for material impacts to arise to the company financial statements of Sonae from the application of the above mentioned standards, with the exception of presentation and disclosure improvements as a result of the aplication of IAS 1 and IFRS 8.
As at this date, the following standards and interpretions have already been issued by the IASB/IFRIC but have not yet been endorsed by the European Union:
| Effective Date | |
|---|---|
| Amendments to IFRS 3 – Business Combinations | 01/07/2009 |
| Amendments to IFRS 1 – First-time Adoption of Internationl Financial Reporting Standards | 01/07/2009 |
| Amendments to IAS 27 - Consolidated and Separate Financial Statements | 01/07/2009 |
| Amendments to IAS 39 – Qualifying hedging instruments. | 01/07/2009 |
| Amendments to IAS 39 – Reclassification of Financial Assets | 01/07/2009 |
| Amendments to IFRS 7 – Financial Instruments: Disclosures | 01/01/2009 |
| IFRIC 12 - Service Concession Arrangements | 01/01/2009 |
| IFRIC 15 – Agreements for the Construction of Real Estate | 01/01/2009 |
| IFRIC 16 – Hedges of a Net Investments in a Foreign Operation | 01/10/2008 |
| IFRIC 17 – Distributions of Non-cash Assets to Owners | 01/07/2009 |
| IFRIC 18 – Transfer of Assets from Customers | 01/07/2009 |
The future aplication of the standards mentioned above, which have not been yet endorsed by the European Union, is not expected to p ,y yp ,p produce material impacts to the company's financial statements.
Tangible assets acquired up to 1 January 2004 (transition date to IFRS) are recorded at acquisition cost, or revalued acquisition cost in accordance with generally accepted accounting principles in Portugal until that date, net of depreciation and accumulated impairment losses.
Depreciation charges for the period are calculated on a straight line basis over the useful life of each asset.
The impairment losses in the realisable value of tangible assets are recorded in the year they arise in the caption of the Income Statement - "Impairment losses".
Intangible assets are stated at acquisition cost, net of amortisation and accumulated impairment losses. Intangible assets are only recognised if it is probable that future economic benefits will flow from them, if they are controlled by the Company and if their cost can be reliably measured.
Borrowing costs are usually recognised as an expense in the period in which they are incurred on an accruals basis in accordance with effective interest rate method.
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case the sale must be highly probable and the asset or disposal group is available for immediate sale in its present condition. In addition, the sale should be expected to occur within 12 months from the date of classification.
Non-current assets (or disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell. These assets are not depreciated.
The Company classifies the financial instruments in the categories presented and conciliated with the Balance Sheet disclosed in Note 4.
Investments are classified into the following categories:
Held to maturity investments are classified as non-current assets unless they mature within 12 months of the balance sheet date. Investments classified as held to maturity have defined maturities and the Group has the intention and ability to hold them until the maturity date. Investments measured at fair value through profit or loss are classified as current assets. Available for sale investments are classified as non-current assets.
Equity Investments in subsidiaries and associates are classified as Available for sale.
The investments measured at fair value through profit or loss include the investments held for trading that the company acquires for sale in a short period of time, and are classified in the balance sheet as current assets.
The Company classifies as available for sale those investments that are neither included as investments measured at fair value through p yg profit or loss nor as investments held to maturity. These assets are classified as non-current assets, except if the sale is expected to occur within 12 months from the date of classification.
All purchases and sales of investments are recognised on the trade date, independently of the settlement date.
Investments are initially measured at fair value, which is considered to be the fair value of the consideration paid for them, including transaction costs, in the case of available for sale investments.
Available for sale investments and investments measured at fair value through profit or loss are subsequently measured at fair value, without any deduction for transaction costs which may be incurred on sale, by reference to their quoted market price or independent valuation at the balance sheet date. Investments in equity instruments that do not have a quoted market price and whose fair value cannot be reliably measured, are stated at cost, less impairment losses.
Gains or losses arising from a change in fair value of available for sale investments are recognised directly in equity, under Fair value reserve, until the investment is sold or otherwise disposed of, or until it is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is transferred to net profit or loss for the period.
Gains or losses arising from a change in fair value of investments measured at fair value through profit or loss are recorded in the Income statement captions Financial expenses or Financial income.
Held to maturity investments are carried at amortised cost using the effective interest rate, net of capital reimbursements and interest income received.
Loans and accounts receivable are recorded at amortised cost using the effective rate method net of accumulated impairment losses, in order to reflect its realisable value.
Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
These financial investments arise when the Company provides money or services directly to a debtor with no intention of trading the receivable.
Loans and receivables are recorded as current assets, except when its maturity is greater than 12 months from the balance sheet date, situations when they are classified as non-current assets. Loans and receivables are included in the captions presented in Note 4.
Receivables are stated at net realisable value, corresponding to their nominal value less impairment losses (recorded under the caption Impairment losses in accounts receivable).
Impairment is recognised if there is objective and measurable evidence that, as a result of one or more events that occurred, the balance will not be fully received.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate. If the receipt of the full amount is expected to be within one year the discount is considered null as it is immaterial.
Financial liabilities and equity instruments are classified and accounted for based on their contractual substance, independently from the legal form they assume.
Loans are recorded as liabilities at their nominal value, net of up-front fees and commissions related to the issuance of those ,p instruments.
Financial expenses are calculated based on the effective interest rate and are recorded in the income statement on an accruals basis, in accordance with the accounting policy defined in Note 2.8. The portion of the effective interest charge relating to up-front fees and commissions, if not paid in the period, is added to the book value of the loan.
Trade accounts payable are stated at their nominal value.
The Company uses derivatives in the management of its financial risks to hedge such risks and/or in order to optimise funding costs, in accordance with Management interest rate risk policy described in point 3.4.1.
Derivatives classified as cash flow hedge instruments are used by the Company mainly to hedge interest rate risks on loans obtained. Conditions established for these cash flow hedge instruments are identical to those of the corresponding loans in terms of base rates, calculation rules, rate setting dates and repayment schedules of the loans and for these reasons they qualify as perfect hedges. The gain or loss relating to the ineffective portion of the hedge, if any, is recorded in the Income Statement under Financial Income or Expenses.
The Company's criteria for classifying a derivative instrument as a cash flow hedge instrument include:
Cash flow hedge instruments used by the Company to hedge the exposure to changes in interest of its loans are initially accounted for at cost, if any which corresponds to its fair value, and subsequently adjusted to their corresponding fair value. Changes in fair value of these cash flow hedge instruments are recorded in equity under the caption Hedging reserves, and then recognised in the income statement over the same period in which the hedged instrument affects profit or loss.
Hedge accounting of derivative instruments is discontinued when the instrument matures or is sold. Whenever a derivative instrument can no longer be qualified as a hedging instrument, the fair value differences recorded in equity under the caption Hedging reserve, are transferred to profit or loss of the period or to the carrying amount of the asset that resulted from the hedged forecast transaction. Subsequent changes in fair value are recorded in the income statement.
Derivatives entered into in accordance with Interest rate risk management policy described in point 3.4.1 and not eligible for hedge accounting (mainly interest rate option or cancelable swaps), are initially recorded at cost, which corresponds to fair value at inception, and then, are remeasured at fair value through profit and loss under financial income or expenses.
When embedded derivatives exist, they are accounted for as separate derivatives when the risks and the characteristics are not closely related to economic risks and characteristics of the host instruments, and this is not stated at fair value through profit or loss.
The Company may agree to become part of a derivative transaction in order to fair value hedge some interest rate exposure. In these cases, derivatives are recorded at fair value through profit or loss and the effective portion of the hedging relationship is adjusted in the carrying amount of the hedged instrument, if not stated at fair value (namely loans recorded at amortised cost), through profit or loss.
Own shares are recorded at acquisition cost as a reduction to equity. Gains or losses arising from sales of own shares are recorded in Other reserves.
Cash and cash equivalents include cash on hand, cash at bank, term deposits and other treasury applications which mature in less than q ,,p ypp three months and are subject to insignificant risk of change in value.
In the cash flow statement, cash and cash equivalents also include bank overdrafts, which are included in the balance sheet caption of current bank loans.
The effective interest method is a method of calculating the amortised cost of a financial asset or liability and of allocating interest income or expense over the relevant period.
Financial assets, other than Investments measured at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.
For non-quoted equity instruments determining whether the investment is impaired requires an estimation of the value in use of the investment. The value in use calculation requires the entity to estimate the future cash flows expected to arise for the entity and a suitable discount rate in order to calculate present value.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.
For investments of non-quoted subsidiaries, which are measured at acquisition cost less impairment (equity investments and loans granted) the impairment analysis is based on the fair value estimate of its net assets, mainly equity investments in other Company's subsidiaries (some of them listed).
The above mentioned estimate is based on the fair value computation of the value in use of its holdings by means of discounted cash flow models. The results of the fair value estimates of the Company's subholdings is annually approved by the Executive Committee of each subholding and of Sonae.
It is the Board of Directors understanding that the use of the above mentioned methodology is adequate to conclude on the eventual existence of financial investments impairment as it incorporates the best available information as at the date of the financial statements.
With the exception of available for sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of equity available for sale securities, impairment losses previously recognised through profit or loss are not reversed. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.
Contingent liabilities are not recorded in the financial statements. Instead they are disclosed in the notes to the financial statements, unless the probability of a cash outflow is remote, in which case, no disclosure is made.
Contingent assets are not recorded in the financial statements but disclosed when future economic benefits are probable.
Revenue from services rendered is recognised in the income statement in the period they are performed.
Dividends are recognised as income in the year they are attributed to the shareholders. g yy
Income and expenses are recorded in the year to which they relate, independently of the date of the corresponding payment or receipt. Income and expenses for which their real amount is not known are estimated.
Other current assets and Other current liabilities include income and expenses of the reporting year which will only be invoiced in the future. Those captions also include receipts and payments that have already occurred but that correspond to income or expenses of future years, when they will be recognised in the income statement.
Events after the balance sheet date that provide additional information about conditions that existed at the balance sheet date (adjusting events), are reflected in the financial statements. Events after the balance sheet date that are non-adjusting events are disclosed in the notes when material.
The most significant accounting estimates reflected in the financial statements are as follows:
Estimates used are based on the best information available during the preparation of these financial statements and are based on the best knowledge of past and present events. Although future events, are not controlled by the Company are not foreseeable, some could occur and have impact on the estimates. Changes to the estimates used by management that occur after the approval date of these consolidated financial statements, will be recognised in net income prospectively, in accordance with IAS 8.
The main estimates and assumptions in relation to future events included in the preparation of these financial statements are disclosed in the correspondent notes, if applicable.
Share-based payments result from Deferred Performance Bonus Plans that are referenced to the Sonae share price.
Share-based payment liabilities are measured at fair value on the date they are granted (usually in March of each year) and are subsequently remeasured at the end of each reporting period, based on the number of shares granted and the corresponding fair value at the closing date. These obligations are stated as Staff costs and Other current liabilities, and are recorded on a straight-line basis, between the date the shares are granted and their vesting date, taking into consideration the time elapsed between these dates.
Current income tax is determined in accordance with tax rules in force in Portugal, considering the taxable profit for the period.
Deferred taxes are calculated using the balance sheet liability method. Deferred tax assets are recognised only when its use is probable.
The ultimate purpose of financial risk management is to support the Company in the achievement of its strategy by reducing unwanted financial risk and volatility and mitigate any negative impacts in the profit or loss statement arising from such risks.
The Group's attitude towards financial risk management is conservative and cautious. Derivatives are used to hedge certain exposures related to its operating business and, as a rule, Sonae does not enter into derivatives or other financial instruments that are unrelated to its operating business or for speculative purposes.
Financial risk management policies are approved by the Sonae Executive Committee. Exposures are identified and monitored by the Finance Department. Exposures are also monitored by the Finance Committee as noted in the Corporate Governance Report.
Credit risk is defined as the probability of a counterparty defaulting on its payment contractual obligations resulting in a financial loss. Sonae is a Holding company without any relevant commercial or trade activity, other than the normal activities of a portfolio manager. As such, it is only exposed, on a regular basis, to credit risk resulting from its investing activities (holding cash and cash equivalent instruments, deposits with banks and financial institutions or resulting from derivative financial instruments entered into in the normal course of its hedging activities) or from its lending activities to subsidiaries.
Additionally, Sonae may sometimes also be exposed to credit risk as a result of its portfolio management activities (buying or selling investments), but in those exceptional situations risk reducing mechanisms and actions are implemented on a case by case basis under the supervision of the Executive Committee. In order to reduce the probability of counterparties default Sonae transactions (short term investments and derivatives) are only concluded in accordance with the following principles:
In relation to excess funds: i) those are preferentially used, whenever possible and when more efficient to repay debt, or invested preferably in instruments issued by relationship banks in order to reduce exposure on a net basis, and ii) may only be applied on pre approved instruments;
Any departure from the above mentioned policies needs to be pre-approved by the Executive Committee.
Given the above mentioned policies and the minimum credit ratings management does not expect any material failure in contractual obligations from its external counterparties. Nevertheless, exposure to individual counterparties resulting from financial instruments and the credit rating of potential counterparties is regularly monitored by the Financial Department and any departure is promptly reported to the Executive Committee and Finance Committee.
Settlement risk is also a risk faced by Sonae, which is managed through the rigorous selection of its brokers which must be highly rated counterparties.
In relation to credit risk resulting from loans granted to subsidiaries, there is no specific risk management policy as the financing of its subsidiaries is part of the main operations of a holding company.
Sonae needs to raise external funds to finance its activities and investing plans. It holds a diversified loan portfolio, essentially made up of long term bond financing, but which also includes a variety of other short-term financing facilities in the form of commercial paper and credit lines. As at 31 December 2008 the total gross debt was 641 million euro (498 million euro as at 31 December 2007).
The purpose of liquidity risk management is to ensure, at all times, that Sonae has the financial capacity to fulfil its commitments as they become due and to carry on its business activities and strategy.
Given the dynamic nature of its activities, Sonae needs a flexible financial structure and therefore uses a combination of:
Sonae maintains a liquidity reserve in the form of credit lines with its relationship banks , to ensure the ability to meet its commitments without having to refinance itself on unfavourable terms. Sonae has a total of 276 million euro committed credit facilities, of which only 15% are cancellable with a notice period of 6 months and the remainder with no less than a 360 days notice period (147 million euro in 2007). Sonae expects to meet all its obligations by means of its operating cash flows and from its financial assets as well as from drawing existing available credit lines, if needed.
Sonae is exposed to cash flow interest rate risk in respect of items in the balance sheet (Loans and Short Term Investments) and to fair value interest rate risk as a result of interest rate derivatives (swaps, FRA's and options). All Sonae debt bears variable interest rates, and interest rate derivatives may be entered into to convert part of the variable rate debt into fixed rate (usually through interest rate swaps or Forward Rate agreements), or to limit the maximum rate payable (usually through zero cost collars or the purchased caps).
Sonae mitigates interest rate risk by adjusting the proportion of its debt that bears fixed interest to that which bears floating interest although without a fixed goal or percentage to achieve since hedging interest rate risk usually has an opportunity cost associated. Therefore a more flexible approach is considered preferable to a more strict traditional approach. Part of the risk is also mitigated by the fact that Sonae grants loans to its subsidiaries as part of its usual activities and thus there may be some degree of natural hedging on a company basis, since if interest rates increase the additional interest paid would be partially offset by additional interest received.
Sonae hedging activities do not constitute a profit-making activity and derivatives are deemed to be entered into without any speculation purpose. Strict rules are observed in relation to any derivative transaction entered into:
The interest rate sensitivity analysis is based on the following assumptions:
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. As such, all financial instruments with fixed interest rates that are carried at amortised cost are not subject to interest rate risk as defined in IFRS 7;
In the case of fair value hedges designed for hedging interest rate risks, when the changes in the fair values of the hedged item and the hedging instrument attributable to interest rate movements are offset almost completely in the income statement in the same period, these financial instruments are also not exposed to interest rate risk;
Under the previously mentioned assumptions, if interest rates of euro denominated financial instruments had been 75 bp higher, the company net profit before tax at 31 December 2008 would increase by approximately 10 million euro (at 31 December 2007 would increase 4.9 million euro), of which, about 4.4 million euro would result from the Cancelable Swaps fair value booked in net income, being higher; if interest rates of euro denominated financial instruments had been 75 bp lower, the company net profit before tax at 31 December 2008 would decrease by approximately 13 million euro (at 31 December 2007 would decrease 4.9 million euro) of which, ypp y( ),about 4.4 million euro would result from the Cancelable Swaps fair value booked in net income being lower. The impact in equity is immaterial in 2008 and 2007.
Due to its nature of Holding company, Sonae, has very limited transaction exposure to foreign exchange risk. Normally, when such exposures arise Foreign exchange risk management seeks to minimise the volatility of such transactions made in foreign currency and to reduce the impact on the income statement of exchange rate fluctuations. When significant material exposures occur with a high degree of certainty, Sonae hedges such exposures mainly through forward exchange rate contracts. For uncertain exposures, options may be considered, subject to pre-approval from the company's Executive Committee.
Sonae does not have any material foreign exchange rate exposure at holding level, since almost all equity and loans to subsidiaries are denominated in Euros.
The Group is exposed to equity price risks arising from equity investments, recorded for strategic rather than for trading purposes as the group does not actively trade these investments. These investments are presented in Notes 8.
The accounting policies disclosed in note 2.6 have been applied to the line items bellow:
| 31.December.2008 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Notes | Loans and accounts receivable |
Available for sale | Assets at fair value through profit or loss |
Derivatives used for cash flow hedging |
Sub Total | Assets not within scope of IFRS 7 |
Total | ||
| Non-Current Assets | |||||||||
| Investments in affiliated companies | 8 | - | 3,070,652,704 | - | - | 3,070,652,704 | - | 3,070,652,704 | |
| Other available for sale investments | 9 | - | 100,049,880 | - | - | 100,049,880 | - | 100,049,880 | |
| Other non-current assets | 10 | 598,542,161 | - | - | - | 598,542,161 | - | 598,542,161 | |
| 598,542,161 | 3,170,702,584 | - | - | 3,769,244,745 | - | 3,769,244,745 | |||
| Current Assets | |||||||||
| Trade Accounts Receivables | 11 | 1,626,676 | - | - | - | 1,626,676 | - | 1,626,676 | |
| Other debtors | 12 | 31,391,881 | - | - | - | 31,391,881 | - | 31,391,881 | |
| Investments | 15 | - | - | - | 576,934 | 576,934 | - | 576,934 | |
| Cash and cash equivalents | 16 | 418,450 | - | - | - | 418,450 | - | 418,450 | |
| 33,437,007 | - | - | 576,934 | 34,013,941 | - | 34,013,941 | |||
| 631,979,168 | 3,170,702,584 | - | 576,934 | 3,803,258,686 | - | 3,803,258,686 |
| 31.December.2007 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| N t Notes |
Loans and accounts receivable |
Available for sale | Assets at fair value through profit or los |
Derivatives used for cash flow hedging |
Sub Total | Assets not within scope of IFRS 7 |
Total | |||
| Non-Current Assets | ||||||||||
| Investments in affiliated companies | 8 | - | 2,567,891,338 | - | - | 2,567,891,338 | - | 2,567,891,338 | ||
| Other available for sale investments | 9 | - | 49,880 | - | - | 49,880 | - | 49,880 | ||
| Other non-current assets | 10 | 1,086,871,182 | - | - | - | 1,086,871,182 | - | 1,086,871,182 | ||
| 1,086,871,182 | 2,567,941,218 | - | - | 3,654,812,400 | - | 3,654,812,400 | ||||
| Current Assets | ||||||||||
| Trade Accounts Receivables | 11 | 1,392,495 | - | - | - | 1,392,495 | - | 1,392,495 | ||
| Other debtors | 12 | 93,347,279 | - | - | - | 93,347,279 | - | 93,347,279 | ||
| Investments | 15 | - | - | - | 242,719 | 242,719 | - | 242,719 | ||
| Cash and cash equivalents | 16 | 88,356,998 | - | - | - | 88,356,998 | - | 88,356,998 | ||
| 183,096,772 | - | - | 242,719 | 183,339,491 | - | 183,339,491 | ||||
| 1,269,967,954 | 2,567,941,218 | - | 242,719 | 3,838,151,891 | - | 3,838,151,891 |
| 31.December.2008 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Notes | Liabilities at fair value through profit or loss |
Derivatives used for cash flow hedging |
Other financial liabilities | Sub Total | Liabilities not within scope of IFRS 7 |
Total | |||||
| Non-Current Liabilities | |||||||||||
| Bonds | 20.1 | - | - | 497,619,441 | 497,619,441 | - | 497,619,441 | ||||
| Other loans | 20.2 | 4,846,515 | - | - | 4,846,515 | - | 4,846,515 | ||||
| 4,846,515 | - | 497,619,441 | 502,465,956 | - | 502,465,956 | ||||||
| Current Liability | |||||||||||
| Bank loans | 20.3 | - | - | 138,209,277 | 138,209,277 | - | 138,209,277 | ||||
| Trade accounts payable | - | - | - | 1,116,009 | 1,116,009 | - | 1,116,009 | ||||
| Other payables accounts | 21 | - | - | 171,430 | 171,430 | - | 171,430 | ||||
| Other current liabilities | 23 | - | - | 6,884,750 | 6,884,750 | 1,375,745 | 8,260,495 | ||||
| - | - | 146,381,466 | 146,381,466 | 1,375,745 | 147,757,211 | ||||||
| 4,846,515 | - | 644,000,907 | 648,847,422 | 1,375,745 | 650,223,167 |
| 31.December.2007 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Notes | Liabilities at fair value through profit or loss |
Derivatives used for cash flow hedging |
Other financial liabilities | Sub Total | Liabilities not within scope of IFRS 7 |
Total | ||||
| Non-Current Liabilities | ||||||||||
| Bonds | 20.1 | - | - | 497,000,804 | 497,000,804 | - | 497,000,804 | |||
| - | - | 497,000,804 | 497,000,804 | - | 497,000,804 | |||||
| Current Liability | ||||||||||
| Bank loans | 20.3 | - | - | 1,660,856 | 1,660,856 | - | 1,660,856 | |||
| Trade Accounts payable | - | - | - | 476,418 | 476,418 | - | 476,418 | |||
| Other payables accounts | 21 | - | - | 47,534 | 47,534 | - | 47,534 | |||
| Other current liabilities | 23 | 82,340 | - | 5,190,369 | 5,272,709 | 1,689,688 | 6,962,397 | |||
| 82,340 | - | 7,375,177 | 7,457,517 | 1,689,688 | 9,147,205 | |||||
| 82,340 | - | 504,375,981 | 504,458,321 | 1,689,688 | 506,148,009 |
During the period there were no changes in accounting policies or prior period errors.
As at 31 December 2008 and 2007 tangible assets movements are as follows:
| 31.December.2008 31 December 2008 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| Tangible Assets: | Opening balance | Increase | Decrease | Transfers and write offs |
Closing balance | ||||
| Plant and machinery | 17,352 | - | - | - | 17,352 | ||||
| Vehicles | 194,768 | - | - | - | 194,768 | ||||
| Fixtures and fittings | 2,404,297 | - | 5,046 | 113,646 | 2,512,897 | ||||
| Others | 723 | - | - | - | 723 | ||||
| In progress | - | 696,865 | 563,757 | (114,659) | 18,449 | ||||
| Total | 2,617,140 | 696,865 | 568,803 | (1,013) | 2,744,189 |
| 31.December.2007 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Tangible Assets: | Opening balance | Increase | Decrease | Transfers and write offs |
Closing balance | ||||
| Plant and machinery | 17,352 | - | - | - | 17,352 | ||||
| Vehicles | 195,863 | - | 1,095 | - | 194,768 | ||||
| Fixtures and fittings | 2,329,462 | 89,553 | 14,718 | - | 2,404,297 | ||||
| Others | 723 | - | - | - | 723 | ||||
| Total | 2,543,400 | 89,553 | 15,813 | - | 2,617,140 |
| 31.December.2008 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Accumulated depreciation | Opening balance | Increase | Decrease | Transfers and write offs |
Closing balance | |||
| Plant and machinery | 17,352 | - | - | - | 17,352 | |||
| Vehicles | 194,768 | - | - | - | 194,768 | |||
| Fixtures and fittings | 2,309,839 | 45,241 | 5,046 | (98) | 2,349,936 | |||
| Others | 608 | 28 | - | - | 636 | |||
| Total | 2,522,567 | 45,269 | 5,046 | (98) | 2,562,692 |
| 31.December.2007 | |||||
|---|---|---|---|---|---|
| Accumulated depreciation | Opening balance | Increase | Decrease | Transfers and write offs |
Closing balance |
| Plant and machinery | 17,352 | - | - | - | 17,352 |
| Vehicles | 195,864 | - | 1,096 | - | 194,768 |
| Fixtures and fittings | 2,225,963 | 91,085 | 7,209 | - | 2,309,839 |
| Others | 581 | 27 | - | - | 608 |
| Total | 2,439,760 | 91,112 | 8,305 | - | 2,522,567 |
As at 31 December 2008 intangible assets movements are as follows:
| 31.December.2008 | |||||
|---|---|---|---|---|---|
| Intangible Assets: | Opening balance | Increase | Decrease | Transfers and write offs |
Closing balance |
| Software | - | - | - 1,410 |
1,410 | |
| In progress | - | 399 | - (399) |
- | |
| Total | - | 399 | - 1,011 |
1,410 | |
| 31.December.2008 | |||||
| Accumulated depreciation | Opening balance | Increase | Decrease | Transfers and write offs |
Closing balance |
| Software | - | 168 | - - |
168 | |
| Total | - | 168 | - - |
168 |
As at 31 December 2008 and 2007, the Company held investments in the following subsidiaries:
| 31.December.2008 | |||||||
|---|---|---|---|---|---|---|---|
| Companies p |
% Held % |
Opening p g |
Increase | Decrease | Changes in g |
Transfers / | Closing g |
| balance | fair value | demerger | balance | ||||
| Interlog, SGPS, SA | 1.02% | 106,686 | - | - | - | - | 106,686 |
| MDS, SGPS, SA (a) | 89.00% | 20,000,000 | - | 2,200,000 | 17,800,000 | ||
| Sonae Distribuição, SGPS, SA (b) | 82.48% | 1,690,800,661 | - | - | - | - | 1,690,800,661 |
| Sonae Investimentos America Latina | - | 25,684 | - | 25,684 | - | - | - |
| Sonae Investments, BV | 100.00% | 18,151 | 549,981,849 | - | - | - | 550,000,000 |
| Sonae RE, SA | 0.04% | 500 | - | - | - | - | 500 |
| Sonae Sierra SGPS, SA (c) | 50.00% | 856,602,000 | - | - | (148,551,000) | - | 708,051,000 |
| Sonaecom, SGPS, SA | 0.23% | 78,041 | 812,229 | - | (47,428) | - | 842,842 |
| Sonaegest, SA | 20.00% | 159,615 | - | - | - | - | 159,615 |
| Sonaecenter Serviços, SA | 100.00% | - | 50,000 | - | - | - | 50,000 |
| Sontel, BV | 42.86% | 100,000 | 191,241,400 | - | - | - | 191,341,400 |
| Total | 2,567,891,338 | 742,085,478 | 2,225,684 | (148,598,428) | - | 3,159,152,704 | |
| Impairment | - | 88,500,000 | - | - | - | 88,500,000 | |
| Total | 2,567,891,338 | 653,585,478 | 2,225,684 | (148,598,428) | - | 3,070,652,704 |
| 31.December.2007 | |||||||
|---|---|---|---|---|---|---|---|
| Companies | % Held | Opening | Increase | Decrease | Changes in | Transfers / | Closing |
| balance | fair value | demerger | balance | ||||
| Agloma Investimentos, SGPS, SA | - | 11,589,141 | - | 11,589,141 | - | - | - |
| Espmen - Investimentos Imobiliários, SA | - | 6,152,894 | - | - | - | (6,152,894) | - |
| Interlog, SGPS, SA | 1.02% | 106,686 | - | - | - | - | 106,686 |
| Investalentejo, SGPS, SA | - | 2,205,000 | - | 2,205,000 | - | - | - |
| MDS, SGPS, SA (a) | 100.00% | - | 20,000,000 | - | - | - | 20,000,000 |
| Saúde Atlântica, SA | - | - | 250,000 | 250,000 | - | - | - |
| SC, SGPS, SA (d) | - | 382,638,254 | - | - | - | (382,638,254) | - |
| Sonae Distribuição, SGPS, SA (b) | 74.98% | 1,690,800,661 | - | - | - | - | 1,690,800,661 |
| Sonae Investimentos America Latina | 99.99% | 25,684 | - | - | - | - | 25,684 |
| Sonae Investments, BV | 100.00% | 18,151 | - | - | - | - | 18,151 |
| Sonae RE, SA | 0.04% | - | 500 | - | - | - | 500 |
| Sonae Sierra SGPS, SA (c) | 50.00% | 744,950,500 | - | - | 111,651,500 | - | 856,602,000 |
| Sonaecom, SGPS, SA | 0.01% | 233,796,451 | - | 314,409,120 | 80,690,710 | - | 78,041 |
| Sonaegest, SA | 20.00% | 159,615 | - | - | - | - | 159,615 |
| Sontel, BV | 100.00% | 100,000 | - | - | - | - | 100,000 |
| Total | 3,072,543,037 | 20,250,500 | 328,453,261 | 192,342,210 | (388,791,148) | 2,567,891,338 |
(a) Former Resolução, SGPS, SA
(b) - Fair value of this investment is considered to be the price paid in the public tender offer for de-listing occurred in 2006.
(c) - Market value was determined based on an independent valuation as at 31 December 2008 of assets held by this affiliated company, after deduction of associated net debt and of the share attributable to minority interests.
(d) - Former Sonae Capital, SGPS, SA
During the year ended 31 December 2008, the Company recorded an impairment loss over the financial investment held in Sontel B.V. amounting to 88,500,000 euro (Note 33) by the application of accounting policy mentioned in 2.6 I) and according to a valuation made by the use of discounted cash flow models, allowing de estimation of the value in use of that investment. The assumptions used are consistent with the ones descrived in the Note 14 of the Notes to the Consolidated Financial Statements and used for goodwill impairment tests.
During the year ended 31 December 2007, the undertaking in SC, SGPS, S.A. (formerly named Sonae Capital SGPS, S.A.) was demerged. Total shareholding in SC, SGPS, S.A. representative of 100% of its share capital was transferred at book value, 382,638,254 euro, to a new company (Sonae Capital, SGPS, S.A.) in exchange for the issue of shares totally attributed to Sonae shareholders, in accordance with a ratio of 0.125 Sonae Capital, SGPS, S.A. shares for one Sonae's share.
As at 31 December 2008 and 2007 other investments available for sale are as follows:
| 31.December.2008 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Companies | % Held | Opening balance |
Increase | Decrease | Changes in fair value |
Transfers | Closing balance |
|
| Associação Escola Gestão Porto | - | 49,880 | - | - | - | - | 49,880 | |
| Magma No. 1 Securitisation Notes | - | - | 100,000,000 | - | - | - | 100,000,000 | |
| Total | 49,880 | 100,000,000 | - | - | - | 100,049,880 | ||
| 31.December.2007 | ||||||||
| Companies | % Held | Opening | Increase | Decrease | Changes in Transfers |
Closing | ||
| balance | fair value | balance | ||||||
| Associação Escola Gestão Porto | - | 49,880 | - | - | - | - | 49,880 | |
| Total | 49,880 | - | - | - | - | 49,880 |
At December 2008, the Company has completed the subscription of securitized Assets, through a private offering, in the amount of approximately 100 million euro, issued by Tagus - Sociedade de Titularização de Créditos, SA named "MAGMA Nº 1 Securitisation Notes".
These bonds have a maturity of 5 years (2009/2013), and are amortized in quarterly equal instalments, having as underlying asset the future receivables to be generated under a portfolio of existing corporate customer contracts of Sonaecom - Serviços de Comunicações, SA, with a confortable over colaterization, which strongly minimize this investment credit risk.
As at 31 December 2008 and 2007 other non-current assets are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Loans granted to group companies: | ||
| MDS, SGPS, SA | 69,410,000 | - |
| Sonae Investments, BV | 495,856,978 | 881,826,699 |
| Sontel, BV | 33,271,000 | 205,040,300 |
| 598,537,978 | 1,086,866,999 | |
| Guarantee deposits | 4,183 | 4,183 |
| 598,542,161 | 1,086,871,182 |
Loans granted to group companies earn interest at market rates and do not mature within one year.
There are no past due or impaired receivable balances as at 31 December 2008 and 2007. The eventual impairment of loans granted to group companies is assessed in accordance with note 2.6.l). The fair value of loans granted to group companies is considered to be similar to its carrying amount.
Trade accounts receivable amounted to 1,626,676 euro and 1,392,495 euro as at 31 December 2008 and 2007 respectively, and include balances arising solely from services rendered to group companies.
As at the balance sheet dates there is no accounts receivable past due, and no impairment loss was recorded, as there are no indications as of the reporting date that the debtors will not meet their payment obligations.
As at 31 December 2008 and 2007 other debtors are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Group companies - Short term loans: | ||
| MDS, SGPS, SA | 7,510,000 | 63,177,260 |
| Sonaecenter, Serviços, SA | 737,000 | - |
| 8,247,000 , , |
63,177,260 , , |
|
| Group companies - Interest: | ||
| MDS, SGPS, SA | 1,660,159 | - |
| Sonae Investments, BV | 19,218,665 | 23,560,064 |
| Sontel, BV | 1,027,220 | 5,872,627 |
| 30,153,044 | 92,609,951 | |
| Other debtors | ||
| Others | 1,238,837 | 737,328 |
| 31,391,881 | 93,347,279 |
Loans granted to group companies return interest at market rates and have a maturity less than one year.
There were no assets impaired or past due. The fair value of loans granted is similar to its carrying amount.
As at 31 December 2008 and 2007 taxes recoverable are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Advance payments | 23,958 | 59,348 |
| Taxes withheld | 2,175,667 | 2,006,902 |
| Recoverable VAT | 64,101 | - |
| 2,263,726 | 2,066,250 |
As at 31 December 2008 and 2007 other current assets are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Accrued income | 82,075 | 275,983 |
| Prepayments | 155,007 | 245,246 |
| 237,082 | 521,229 |
As at 31 December 2008 and 2007 investments are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Cash flow hedge derivatives | 576,934 | 242,719 |
| 576,934 | 242,719 |
As at 31 December 2008 and 31 December 2007 cash and cash equivalents are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Cash in hand | 4,300 | 2,500 |
| Bank deposits | 414,150 | 88,354,498 |
| Cash and cash equivalents on the balance sheet | 418,450 | 88,356,998 |
| Bank overdrafts (Note 20.3) | 9,277 | 1,660,856 |
| Cash and cash equivalents on the cash flow statement | 409,173 | 86,696,142 |
As at 31 December 2008 bank deposits include short term deposits amounting to 378,000 euro (88,330,000 euro as at 31 December 2007) withdrawn at beginning of 2009 (2008).
As at 31 December 2008 and 2007 share capital consisted of 2,000,000,000 ordinary shares of 1 euro each.
As at 31 December 2008 Efanor Investimentos, SGPS, SA and affiliated companies held 52.983% of Sonae's share capital.
The company has set up legal reserves in accordance with Commercial Companies Code. In 2008 and 2007, respectively, 825,157 euro and 3,256,902 euro has been transferred from profit for the year to legal reserves.
As at 31 December 2008 and 2007 reserves are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Free reserves | 380,377,943 | 424,699,965 |
| Hedging reserve | 307,070 | 162,774 |
| Fair value reserve | 581,929,609 | 730,528,037 |
| 962,614,622 | 1,155,390,776 |
Movements occurring in 2008 and 2007 in these reserves are detailed in the Company Statement of changes in equity.
Hedging Reserves corresponds to the efficient portion of changes in fair value of derivatives that qualify for cash flow hedge accounting.
Fair value reserves correspond to changes in the fair value of the financial instruments classified as available for sale investments.
As at 31 December 2008 and 2007 this caption included the following loans:
Bonds SONAE /05 amounting to 100,000,000 euro, repayable after 8 years, in one instalment, on 31 March 2013. Interest rate equal to Euribor 6 months plus 0.875%, with interest paid half-yearly.
Bonds Sonae 2006/2011 amounting to 250,000,000 euro, repayable after 5 years, in one instalment, on 10 May 2011. Interest rate equal to Euribor 6 months plus 0.65%, with interest paid half-yearly. The company has the option to make whole or partial reimbursements, with no extra cost, on the date of the 6th and 8th coupons.
Bonds Sonae 2007/2014 amounting to 150,000,000 euro, repayable after 7 years, in one instalment, on 11 April 2014. Interest rate equal to Euribor 6 months plus 0.6%, with interest paid half-yearly. The company has the option to make whole or partial reimbursements, with no extra cost, on the date of the 10th and 12th coupons.
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Bonds | 500,000,000 | 500,000,000 |
| Up-front fees not yet charged to income statement | (2,380,559) | (2,999,196) |
| 497,619,441 | 497,000,804 |
The above mentioned loans are unsecured and its estimated fair value is considered to be near its carrying amount, as they bear interests at variable market rates.
As at 31 December 2008 and 31 December 2007, derivatives are made up as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Derivatives qualified as hedging | ||
| Current Investments | ||
| Interest-rate swaps | 576,934 | 242,719 |
| Derivatives not qualified as hedging | ||
| Other loans - Non current | ||
| Interest-rate cancelable swaps | (4,846,515) | - |
| Other current liabilities | ||
| Interest rate floor | - | (82,340) |
| Net Exposure | (4,269,581) | 160,379 |
The derivatives accounted under hedge accounting rules refer to instruments which swap a fixed interest rate for a variable interest rate and that comply with the principles defined by the Company to be qualified as hedging accounting (Note 3.4.1). Those instruments have a notional value of 125 million euro. They were at-the money when the transaction was settled.
The interest rate hedging instruments are stated at fair value at the balance sheet date, in accordance with a valuation made by a derivatives software. The fair value of swaps was calculated, as at the balance sheet, based on the discounted cash flow of the difference between the fixed interet rate of the fixed leg and the indexed variable interest rate inherent to the variable leg.
During 2008, and for the purpose of hedging the interest rate risk, cancelable swaps (which have an interest rate lower than the market rate of an identical term swap as it includes a written put option), were negotiated. The counterparties have the right to cancel the derivatives at the exchange date, after the payment of the first coupon, which occur half-yearly. From the cancelation no cash flow will occur. Since the derivative includes a written put option, it does not qualify for hedge accounting, therefore, the change in fair vale was recorded in the consolidated income statement.
The derivatives were valuated considering the estimated future cash-flows, assuming the exercise of the cancellation options by the counterparties when the forward interest rates are higher than the established fixed interest rate. Sonae intends to keep these derivatives until their expiration date, therefore, this valuation is considered to be the most appropriate to estimate the future cash flows.
As at 31 December 2008, derivatives with negative fair value have the following estimated cash flows:
| 31.December.2008 | |
|---|---|
| N+1 | 221,084 |
| N+2 | (3,433,695) |
| N+3 | (1,020,834) |
| N+4 | (611,221) |
| N+5 | (289,458) |
| N+6 | (35,212) |
As at 31 December 2008 and 2007 this caption included the following loans:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Commercial paper (a) | 138,200,000 | - |
| Bank overdrafts (Note 16) | 9,277 | 1,660,856 |
| 138,209,277 | 1,660,856 |
(a) Short term commercial paper programme, privately placed, launched on 23 August 2004, valid for a ten year period, which may be extended at the option of the company, with a maximum limit of 350,000,000 euro.
The above mentioned loans are unsecured and its estimated fair value is considered to be near its carrying amount, as they bear interests at variable market rates.
As at 31 December 2008 and 2007 the analysis of the maturity of loans are as follows:
| 31.December.2008 | 31.December.2007 | |||
|---|---|---|---|---|
| Nominal value | Interests | Nominal value | Interests | |
| N+1 | 138,209,277 | 31,356,675 | 1,660,856 | 27,201,742 |
| N+2 | - | 28,885,188 | - | 27,029,926 |
| N+3 | 250,000,000 | 22,111,688 | - | 27,029,926 |
| N+4 | - | 15,456,700 | 250,000,000 | 20,365,465 |
| N+5 | 100,000,000 | 12,297,625 | - | 13,794,400 |
| after N+5 | 150,000,000 | 4,586,400 | 250,000,000 | 14,944,175 |
(The interest amount was calculated considering the applied rates for each loan at 31 December 2008)
As at 31 December 2008 and 2007 other creditors are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Shareholders - dividends not yet paid | 47,622 | 40,862 |
| Other creditors | 123,808 | 6,672 |
| 171,430 | 47,534 |
As at 31 December 2008 and 2007 taxes payable are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Income tax charge for the year | 445,849 | 262,878 |
| Taxes withheld | ||
| Staff | 50,130 | 717,673 |
| Services | 197 | 30,840 |
| Capital | 52,192 | 419,043 |
| Other | - | 1,047 |
| Value added tax | 8,876 | 107,241 |
| Social security contributions | 46,279 | 49,687 |
| Stamp duty | 55 | 60 |
| 603,578 | 1,588,469 |
As at 31 December 2008 and 2007, other current liabilities were made up as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Accruals: | ||
| Salaries | 1,364,550 , , |
1,637,700 , , |
| Interest | 6,884,750 | 5,190,369 |
| Others | 11,195 | 134,328 |
| 8,260,495 | 6,962,397 |
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Guarantees given: | ||
| on tax claims | 1,776,135 | 1,776,135 |
| on judicial claims | 425,965 | 355,199 |
As at 31 December 2008 and 2007, the company had operational lease contracts, as a lessee, whose minimum lease payments had the following schedule:
| 31.December.2008 | 31.December.2007 |
|---|---|
| - | 282,021 |
| 261,978 | - |
| - | 106,455 |
| 155,174 | 87,728 |
| 131,309 | 70,190 |
| 41,995 | 21,113 |
| 6,046 | - |
| 596,502 | 567,507 |
As at 31 December 2008 and 2007 balances and transactions with related parties are as follows:
| Subsidiaries and associates | ||
|---|---|---|
| 31.December.2008 | 31.December.2007 | |
| Transactions | ||
| Services rendered | 2,273,584 | 2,305,141 |
| Purchases and services obtained | 1,615,722 | 1,991,785 |
| Interest income | 64,527,232 | 70,650,831 |
| Interest expenses | 665,365 | 5,546,866 |
| Dividend income (Note 33) | 94,979,579 | 76,848,426 |
| Disposal of investments | 3,437,439 | 224,823,745 |
| Acquisition of investments | 700,000 | 50,500 |
| Balance | ||
| Accounts receivable | 24,170,347 | 31,266,265 |
| Accounts payable | 551,937 | 255,568 |
| Loans granted (Note 39) | 606,784,978 | 1,150,044,259 |
All Sonae, SGPS, S.A. subsidiaries, associates and joint ventures are considered related parties and are identified in Consolidated Financial Statements. All Efanor Investimentos, SGPS, SA, subsidiaries, including the ones of Sonae Indústria, SGPS, SA and of Sonae Capital, SGPS, SA. are also considered related parties.
In 2008 and 2007, there were no transactions with the Company's Directors and no loans were granted to the Company's Directors.
As at 31 December 2008 and 2007 no balances existed with the Company's Directors.
Services rendered amounted to 2,273,584 euro and 2,305,141 euro, in 31 December 2008 and 2007, respectively. Services rendered include management fees over subsidiaries in accordance with Holding companies law.
As at 31 December 2008 and 2007 other operational income are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Supplementary income | 31,144 | 175,269 |
| Others | 25,630 | 233,966 |
| 56,774 | 409,235 |
As at 31 December 2008 and 2007 external supplies and services are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Subcontracts | 479,364 | 1,024,665 |
| Fuel | 47,772 | 36,450 |
| Books | 10,838 | 10,725 |
| Office material | 14,198 | 26,548 |
| Operational rents | 640,903 | 403,246 |
| Entertainment expenses | 9,587 | 57,794 |
| Communication | 117,571 | 244,065 |
| Insurance | 155,515 | 187,797 |
| Travelling | 212,065 | 178,155 |
| Fees | 25,243 | 198,997 |
| Legal expenses | 2,055 | 7,853 |
| Maintenance | 54,184 | 36,555 |
| Marketing | 156,422 | 8,058 |
| Cleaning up services | 1,026 | 14,134 |
| Services obtained | 1,607,581 | 949,464 |
| Others | 158,168 | 309,934 |
| 3,692,492 | 3,694,440 |
As at 31 December 2008 and 2007 staff costs are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Directors salaries (a) | 1,368,360 | 3,101,581 |
| Staff salaries | 2,089,087 | 2,822,923 |
| Social costs | 431,134 | 509,057 |
| Other staff costs | 305,966 | 208,977 |
| 4,194,547 | 6,642,538 |
(a) Includes non recurring costs regarding share based deferred performance bonuses paid in advance.
As at 31 December 2008 and 2007, the number of employees were 55 and 62, respectively.
As at 31 December 2008 and 2007 other operational expenses can be detailed as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Donations | 95,000 | 25,060 |
| Taxes | 17,258 | 441,920 |
| Losses on sale of fixed assets | - | 278 |
| Other operational expenses | 151,072 | 154,669 |
| 263,330 | 621,927 |
As at 31 December 2008 and 2007 net financial expenses are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Interest payable and similar expenses | ||
| Interest arising from: | ||
| Bank loans | (2,532,611) | (70,241) |
| Bonds | (27,929,993) | (25,564,393) |
| Other | (675,462) | (14,772,621) |
| Exchange losses | (107) | (844) |
| Hedge inefficiency | - | - |
| Changes in fair value | (6,192,312) | (14,062) |
| Up front fees on the issuance of debt | (618,636) | (633,265) |
| Other financial expenses | (385,383) | (690,366) |
| (38,334,504) | (41,745,792) | |
| Interest receivable and similar income | ||
| Interest income | 65,497,493 | 71,614,358 |
| Changes in fair value | 1,428,137 | 81,722 |
| Exchange gains | 991 | 205 |
| Others | 500,000 | - |
| 67,426,621 | 71,696,285 | |
| Net financial expenses | 29,092,117 | 29,950,493 |
As at 31 December 2008 and 2007 investment income are as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Dividends received (Note 26) | 94,979,579 | 76,848,426 |
| Gains/(Losses) on sale of investments | 1,211,756 | (81,697,261) |
| Impairment losses (Note 8) | (88,500,000) | - |
| 7,691,335 | (4,848,835) |
Dividends were received from Sonae Sierra, SGPS, SA (24,873,210 euro) and Sonae Distribuição, SGPS, SA (70,106,369 euro).
Gains and losses on sale of investments relate mainly to the sale of 11% of MDS, SGPS, SA (1,225,000 euro) to a subsidiary. In 2007, includes losses arising on the sale of 12.7% of Sonaecom, SGPS, S.A. (82,188,375 euro).
Income tax charge for the year was 445,849 euro and 262,882 euro, in 31 December 2008 and 2007, respectively.
The reconciliation between the profit before taxation and the tax charge for the years ended 31 December 2008 and 2007 are summarised as follows:
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Profit before taxes | 30,918,004 | 16,766,017 |
| (Decrease) / Increase to net income for tax purposes | (2,797,671) | (359,980) |
| Taxable income | 28,120,333 | 16,406,037 |
| Use of carried forward tax losses | (28,120,333) | (16,406,037) |
| Net taxable income | - | - |
| Tax charge @ 25% | - | - |
| Autonomous taxation | 24,044 | 16,791 |
| Municipal surcharge | 421,805 | 246,091 |
| Tax charge | 445,849 | 262,882 |
| Effective average tax rate | 1.442% | 1.568% |
| 31.December.2008 | 31.December.2007 | |
|---|---|---|
| Carried forward Limit for use tax loss |
Carried forward tax Limit for use loss |
|
| Generated in 2002 | - | 318,627,117 2008 |
| - | 318,627,117 |
Earnings per share for the period were calculated taking into consideration the following amounts:
| Net profit | 31.December.2008 | 31.December.2007 |
|---|---|---|
| Net profit taken into consideration to calculate basic earnings per share (Net profit for the period) |
30,472,155 | 16,503,135 |
| Effect of dilutive potential shares | ||
| Interest related to convertible bonds (net of tax) | - | - |
| Net profit taken into consideration to calculate diluted earnings per share: |
30,472,155 | 16,503,135 |
| Number of shares | ||
| Weighted average number of shares used to calculated basic earnings |
2,000,000,000 | 1,883,606,633 |
| Effect of dilutive potential ordinary shares from convertible bonds |
- | - |
| Weighted average number of shares used to calculated diluted earnings per share |
2,000,000,000 | 1,883,606,633 |
| Profit/(Loss) per share (basic and diluted) | 0.015236 | 0.008761 |
There are no convertible instruments in Sonae, SGPS shares, hence there is no dilutive effect.
During 2008 and 2007, the following acquisitions and disposals occurred:
| 31.December.2008 | |||||
|---|---|---|---|---|---|
| Companies | Disposals | Acquisitions | |||
| Total price | Amount received | Total price | Amount paid | ||
| Sonaecom, SGPS, SA | - | - | 812,229 | 812,229 | |
| Sonae Investments, BV | - | - | 549,981,849 | 549,981,849 | |
| Sontel, BV | - | - | 191,241,400 | 191,241,400 | |
| Sonaecenter, Serviços, SA | - | - | 50,000 | 50,000 | |
| Magma No. 1 Securitisation Notes | - | - | 100,000,000 | 100,000,000 | |
| MDS, SGPS, SA (a) | 3,425,000 | 3,425,000 | - | - | |
| Sonae Investimentos America Latina | 12,439 | 12,439 | - | - | |
| 3,437,439 | 3,437,439 | 842,085,478 | 842,085,478 | ||
| 31.December.2007 | |||||
|---|---|---|---|---|---|
| Companies | Disposals | Acquisitions | |||
| Total price | Amount received | Total price | Amount paid | ||
| Sonaecom, SGPS, SA | 232,220,745 | 232,220,745 | - | - | |
| Agloma Investimentos, SGPS, SA | 15,454,000 | 15,454,000 | - | - | |
| Investalentejo, SGPS, SA | 49,000 | 49,000 | - | - | |
| Saúde Atlântica, SA | 250,000 | 250,000 | - | - | |
| MDS, SGPS, SA (a) | - | - | 20,000,000 | 20,000,000 | |
| Sonae RE, SA , |
- | - | 500 | 500 | |
| 247,973,745 | 247,973,745 | 20,000,500 | 20,000,500 |
(a) Former Resolução, SGPS, SA
Amounts received on disposals of investments disclosed in the cash flow statement include 141,603 euro (102,504 euro in 2007) relating to disposals in prior years.
In the Shareholders Annual Meeting held on 21 April 2008, payment of a gross dividend of 0.03 euro per share was approved. This was paid on 21 May 2008, the total amount paid being 60,000,000 euro.
For 2008, the Board of Directors proposed a gross dividend of 0.03 euro per share, total amount of dividends is estimated to be 60,000,000 euro. This dividend is subject to approval by shareholders in the Shareholders Annual Meeting.
The accompanying financial statements were approved by the Board of Directors on 17 March 2009. These financial statements will be presented to the Shareholders' General Meeting for final approval.
In the twelve months ended 31 December 2008 shareholders' loan contracts were entered into with the following companies:
MDS, SGPS, SA Sontel, BV Sonae Investments, BV
In the twelve months ended 31 December 2008 short-term loan contracts were entered into with the following companies:
Edições Book.It, SA Equador e Mendes - Agência de Viagens e Turismo, Lda Fozmassimo - Sociedade Imobiliária, SA MDS - Corretor de Seguros, SA MDS, SGPS, SA Modelo Continente - Operações de Retalho, SGPS, SA Nova Equador Internacional, Lda Sonae Distribuição, SGPS, SA Sonaecenter, Serviços, SA SA Star Viagens e Turismo, SA Tlantic Portugal - Sistemas de Informação, SA Todos os Dias - Com.a Retalho e Expl. De Centros Comerciais, SA Valor N, SA
As at 31 December 2008 amounts owed by affiliated undertakings can be detailed as follows:
Loans granted
| Companies | Closing Balance |
|---|---|
| MDS, SGPS, SA | 76,920,000 |
| Sonae Investments, BV , |
495,856,978 , , |
| Sonaecenter, Serviços, SA | 737,000 |
| Sontel, BV | 33,271,000 |
| 606,784,978 | |
As at 31 December 2008 there was no amounts owed to affiliated undertakings.
The Board of Directors
Belmiro de Azevedo
Álvaro Cuervo Garcia
Michel Marie Bon
José Neves Adelino
Duarte Paulo Teixeira de Azevedo
Álvaro Carmona e Costa Portela
Ângelo Gabriel Ribeirinho dos Santos Paupério
Nuno Manuel Moniz Trigoso Jordão
STATUTORY AUDITOR AND AUDITORS' REPORT
(This is a translation of a report originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.)
Porto, 17 March 2009
DELOITTE & ASSOCIADOS, SROC S.A. Represented by Luís Augusto Gonçalves Magalhães
REPORT AND OPINION OF THE STATUTORY AUDIT BOARD
(Translation of a Report and Opinion originally issued in Portuguese. In case of discrepancy the Portuguese version prevails)
To the Shareholders of Sonae S.G.P.S, S.A.
In compliance with the applicable legislation, the Statutory Audit Board issues its Report and Opinion which covers the Management Report and remainder consolidated and individual financial statements of Sonae SGPS, S.A. ("Company") for the year ended 31 December 2008, presented by the Company's Board of Directors.
During the year under analysis, the Statutory Audit Board accompanied in detail the management of the Company on matters that are within the scope of its competencies. The Statutory Audit Board has also oversaw, with the scope considered adequate under the circumstances, the evolution of the operations, having met, with the periodicity considered adequate, with the managers responsible for finance, accounting, internal audit and risk management issues, as well as with the External Auditor who is also the Statutory Auditor of the Company. These entities have always contributed for the proper exercise by the Statutory Audit Board of its competencies as defined in article 420º of the Portuguese Companies Act ("Código das Sociedades Comerciais").
In furtherance of its functions, the Statutory Audit Board examined the consolidated and individual Balance sheets as at 31 December 2008, the consolidated and individual Statements of profit and loss by nature, of cash flows and of changes in equity for the year then ended and the related notes. Additionally, the Statutory Audit Board examined the Management Report for the year under analysis and the Statutory Audit and Auditors' Report issued by the Statutory Auditor and agreed with their content.
By the end of the year, the Statutory Audit Board examined, with special attention the accounting treatment of all circumstances of patrimonial nature that had material economic or financial impacts in the development of operations reflected in the financial statements under analysis. For the examination of those circumstances, the Statutory Audit Board relied on the collaboration of the services of the Company as well as on the Statutory Auditor, namely, in what respects the consolidated Balance sheet and the consolidated Income statement, having obtained explanations considered to be fully satisfactory.
Considering the above, the Statutory Audit Board is of the opinion that the information presented on the financial statements under analysis, was prepared in accordance with the applicable accounting standards and give a true and fair view, of the assets and liabilities, financial position and results of Sonae, S.G.P.S., S.A. and the companies included in consolidation perimeter and that the Management report faithfully describes the business performance and position of the Company, both individually and consolidated, and contains a description of the major risks and uncertainties that they face.
Considering the above, in the opinion of the Statutory Audit Board the Management Report, the consolidated and individual financial statements, and the net result appropriation proposal presented by the Board of Directors, are in accordance with the accounting, legal and statutory requirements and consequently recommends that those should be approved by the Shareholders' General Meeting.
In accordance with paragraph a), number 1 of article 8º of the Regulation of CMVM nr. 5/2008 ("Disclosure Duties"), the members of the Statutory Audit Board declare that, to their knowledge, the information contained in the Management Report and the financial statements were prepared in accordance with applicable accounting standards, giving a true and fair view of the assets and liabilities, financial position and the results of the Company and companies included in the consolidation perimeter. Also it is their understanding that the Management Report faithfully describes the business evolution, performance and financial position of the Company and of the companies included in the consolidation perimeter and contains a description of the major risks and uncertainties that they face.
Maia, 17 March 2009
The Statutory Audit Board
Daniel Bessa Fernandes Coelho
Arlindo Dias Duarte Silva
Jorge Manuel Felizes Morgado
This document may contain forward-looking information and statements, based on management's current expectations or beliefs. Forward-looking statements are statements that are not historical facts.
These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, including, but not limited to, changes in regulation, the industry and economic conditions; and the effects of competition. Forward-looking statements may be identified by words such as "believes," "expects," "anticipates," "projects," "intends," "should," "seeks," "estimates," "future" or similar expressions.
CONSOLIDATED FINANCIAL STATEMENTS Although these statements reflect our current expectations, which we believe are reasonable, investors and analysts are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. You are cautioned not to put undue reliance on any forward-looking information or statements. We do not undertake any obligation to update any forward-looking information or statements.
Report available in Sonae's institutional website www.sonae.pt
Miguel Rangel Head of Institutional Relations and Communication [email protected] Tel: +351 22 010 4705
Patrícia Mendes Investor Relations Manager [email protected] Tel.: +351 22 010 4794
Sonae Lugar do Espido Via Norte 4471-909 Maia Portugal Tel.: +351 22 948 7522 Fax: +351 22 940 4634
Sonae is listed on the Euronext Stock Exchange. Information may be accessed on Reuters under the symbol SONP.IN and on Bloomberg under the symbol SONPL.
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