Annual Report • Apr 3, 2017
Annual Report
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31 december 2016
Subject to the approval by the shareholders' general meeting
| Part I REPORT OF THE BOARD OF DIRECTORS |
5 |
|---|---|
| Part II APPENDIX TO THE REPORT OF THE BOARD OF DIRECTORS |
43 |
| Part III CORPORATE GOVERNANCE REPORT |
49 |
| Part IV CONSOLIDATED FINANCIAL STATEMENTS |
153 |
| Part V INDIVI DUAL FINANCIAL STATEMENTS |
265 |
| Part VI REPORT AND OPINION OF THE FISCAL BOARD |
317 |
| Part VII STATUTORY AUDIT AND AUDITORS' REPORT |
321 |
We are now in a privileged position to even more clearly address the fulfilment of our vocation as an investment holding, seeking out growth and value creation opportunities in the selected new business areas and in the development of our new investment theme – Exporting Portuguese Engineering.
Paulo Azevedo, Chairman of the Board of Directors
2016 was a year when the progress made in previous years was consolidated in the shape of a conservative financial structure suitable to the Group's asset portfolio and businesses. The year was indelibly marked by the conclusion of the shareholdings' sale process in road concessions, the beginning of the macro plots sale process in Tróia for the development of a reference project and the continued improvement in the competitive position of each one of our businesses.
As a result of the performance achieved and particularly the generation of 97M€ of Free Cash Flow, at the end of the year, the Company achieved a quite conservative capital structure. In addition, the Company has a number of non-produtive or nonstrategic assets that is important to continue to place on the market. Of special note are the real estate assets – houses, plots and macro plots – in Tróia Peninsula, not only for their financial dimension, but also for the positive externalities in the operational improvement of the running of the resort and the valuation that this implies for the other assets. As a result of the current market conditions, positive results are still expected from the sale of real estate assets and, therefore, the Company is in a privileged position for continuing to finance the growth of its existing operations. The expansion plan underway in the Fitness segment and the pursuit, in the Energy area, of non-organic growth routes (cogeneration and renewable energy) should be noted.
Moreover, we are now in a privileged position to even more clearly address the fulfilment of our vocation as an investment holding, seeking out growth and value creation opportunities in the selected new business areas and in the development of our new investment theme – Exporting Portuguese Engineering. Our capacity to demonstrate and to generate economic and social value through this new growth route will be critical for us to be able to continue to count on the support of our Shareholders.
Therefore, arising from the conservative financial structure achieved at the end of the year, the Board of Directors has decided to propose, as it did last year, a shareholder remuneration policy in the form of dividend payments. These will be supported by the Group's results and the income made on the sale of non-strategic assets, subject to maintaining a capital structure suitable to the Group's asset portfolio and businesses and the funding of the different growth routes selected.
The Management Team has shown the necessary resilience, persistence and adroitness in implementing the strategy defined, with the success that the results have been showing. The Board of Directors remain confident that the Team will be just as successful in the future in enabling growth opportunities, whether in the scope of its existing businesses or in its scope as an investment holding, in new businesses to be selected.
Finally, we express our special appreciation to all the Teams in the Sonae Capital Group, for their commitment and their merit for the successful results achieved, as well as all the shareholders of our Governing Bodies and all our partners: clients, suppliers, shareholders and financiers.
Chairman of the Board of Directors
The results achieved during the year confirm our commitment and engagement to implement the defined strategy and demonstrate solid performance
Cláudia Azevedo, CEO
"2016 was marked by important milestones in the implementation of the Corporate strategy. These embodied:
The results achieved during the year confirm our commitment and engagement to implement the defined strategy and demonstrate solid performance, which can be observed in the significant improvement of EBITDA (+28%), Net Profit which grew 13.3x to 18.7M€ and a further significant reduction of 83.2M€ in Net Debt, down to 66M€, a conservative figure for the Group's type of business and assets held.
In terms of strengthening and improving the competitive position of most of our businesses, we highlight the following in comparison with the previous year:
In addition, the sale, as referred to above, of a set of non-strategic financial and real estate assets totalling 57.8M€ is worth mentioning, and which, combined with the sale of the aforementioned Macro-Plots in Tróia and the operational performance of each of our businesses, led to another significant reduction (83.2M€) of Net Debt to 66.0M€. This fact allows us to be more optimistic in relation to future growth options. It is important to highlight, in this regard, the steps being taken to strengthen the competitive position of our strategic energy segment, where additional acquisitions and greenfield investments in cogeneration or renewable operations will be considered provided they meet the pre-defined internal requirements of profitability. We also proceeded with the analysis of different sectors and industries in the existing areas of competence, with a view to possible integration in the Group's business portfolio. This is a crucial step towards the effective implementation of our strategic purpose.
Generation of the Group's results and, in particular, the sale of non-strategic assets, notwithstanding our positive expectations regarding the development of interesting investment opportunities, allows the company to propose very significant shareholder remuneration for the second consecutive year, while maintaining adequate capital structure and the ability to finance identified growth options. The Board of Directors will present to the Shareholders' General Meeting a proposal for shareholder remuneration of 25M€ in the form of a dividends payout.
A final word of thanks to all employees for their performance and commitment to the Group and the implementation of its strategy, which enabled the achievement of historical, sound and sustained results for the future."
Claúdia Azevedo CEO
Significant growth of the main financial indicators, confirm the strong operational performance attested by consolidated net profit of 18.7M€ and the sustained reduction by 83.2M€ of the net debt level.
Total Consolidated Operating Income rose to 232.5M€, an increase of 28.3% over the previous year, driven by the following factors:
Consolidated EBITDA amounted to 30.0M€, generating a margin of 15.6%. This is an increase of 27.6% over the previous year, due to:
Consolidated Net Profit amounted to 18.7M€, representing an improvement of 17.3M€ from the previous year. In addition to the already referred 6.5M€ improvement of EBITDA, also to be highlighted are the 13.5M€ increase in Results of Investments and Associated Companies, and the 1.8M€ reduction of net financial costs due to the lower Debt and the refinancing process in order to adjust the financial cost to Sonae Capital's risk profile.
Free Cash Flow (levered) amounted to 97.1M€ benefiting from the overall business units operational improvement and, most importantly, from the sale of non-strategic real estate and financial assets.
As a result of the generation of liquidity and the distribution of dividends in 2016, Consolidated Net Debt decreased by 83.2M€ to 66.0M€, a very conservative result given the Group's type of business and the assets held.
The operational and financial performance during 2016 was clearly positive. It was driven by the continued improvement in the competitive position of most of the businesses, combined with the significant sale of the shareholdings in road concession operators (Norscut and Operscut) for a total value of 43M€ and the sale of the first macroplots block in Tróia for 50M€, for the development of a reference project that will bring important development not only to the Tróia peninsula but also to the entire surrounding region. This resulted in a better economic and financial performance compared to previous years, as shown by EBITDA, Net Profit and Net Debt.
| Consolidated Profit and Loss Account | ||||
|---|---|---|---|---|
| Million euro | FY 2016 | FY 2015 | p 16/15 | |
| Total Operational Income | 232.52 | 181.28 | +28.3% | |
| Turnover | 192.94 | 169.60 | +13.8% | |
| Resorts | 31.13 | 29.68 | +4.9% | |
| Hospitality | 17.00 | 14.48 | +17.4% | |
| Fitness | 18.09 | 15.19 | +19.1% | |
| Energy | 38.23 | 50.58 | -24.4% | |
| Refrigeration & HVAC | 67.18 | 56.50 | +18.9% | |
| Others & Eliminations | 21.32 | 3.17 | >100% | |
| Other Operational Income | 39.58 | 11.68 | >100% | |
| EBITDA, excluding Guaranteed Income Provisions (1) | 30.38 | 24.52 | +23.9% | |
| Resorts | 17.57 | 4.18 | >100% | |
| Hospitality | -2.30 | -3.21 | +28.3% | |
| Fitness | 2.16 | 1.82 | +18.4% | |
| Energy | 7.81 | 9.21 | -15.2% | |
| Refrigeration & HVAC | 1.97 | 3.09 | -36.5% | |
| Others & Eliminations | 3.18 | 9.43 | -66.3% | |
| Provisions for Guaranteed Income | -0.36 | -0.99 | +63.8% | |
| EBITDA | 30.02 | 23.53 | +27.6% | |
| Amortization & Depreciation | -15.87 | -15.72 | -1.0% | |
| Provisions & Impairment Losses | 0.37 | 0.00 | - | |
| Non-recurrent costs/income (2) | 0.08 | 0.06 | +33.4% | |
| EBIT | 14.59 | 7.87 | +85.5% | |
| Net Financial Expenses | -6.78 | -8.60 | +21.2% | |
| Investment Income and Results from Assoc. Undertakings | 16.68 | 3.13 | >100% | |
| EBT | 24.49 | 2.40 | >100% | |
| Taxation | -5.80 | -0.41 | <-100% | |
| Net Profit - Continued Businesses | 18.69 | 1.99 | >100% | |
| Net Profit - Discontinued Businesses | 0.00 | -0.59 | - | |
| Net Profit - Total | 18.69 | 1.40 | >100% | |
| Attributable to Equity Holders of Sonae Capital | 17.59 | -0.29 | - | |
| Attributable to Non-Controlling Interests | 1.10 | 1.69 | -35.0% |
(1) EBITDA excluding the estimated present value of potential costs for the period of the Guaranteed Income from real estate sales at Troia Resort
(2) Non-recurrent items mainly related to restructuring costs and one-off income
Consolidated Operating Income rose to 232.5M€, a significant increase of 28.3% from the previous year. It should be noted that the Other Operating Income item includes movements related to the sale of the macro-plots in Tróia, classified as tangible assets and, therefore, not considered for the purposes of turnover.
Consolidated turnover in 2016 amounted to 192.9M€, corresponding to a growth of 13.8% from the previous year. Double-digit improvements were recorded in all business segments, with the exception of the Energy segment. Consolidated EBITDA amounted to 30.0M€, an increase of 27.6% from the previous year, generating a margin of 15.6%, 1.7pp above the comparable figure in 2015.
Turnover performance is explained by the contribution of
Consolidated EBITDA in 2016 amounted to 30.0M€, an improvement of 27.6% over 2015. EBITDA performance is clearly marked by the aforementioned sale of the macro-plots in Tróia, which generated a capital gain of approximately 14.5M€. The remaining units continued to evolve in line with the performance of turnover, continuing to show gains in efficiency and additional profitability. Conversely, the international operations of the Refrigeration & HVAC segment (Brazil and Angola) performed negatively due to the lower level of business activity, affecting the performance of the segment as a whole. It should be noted for this segment that domestic operations, through the strengthening of export activity, performed positively in terms of both turnover (+27.0%) and EBITDA (+12.6%). The "Other" segment, which includes sales of non-strategic real estate assets, records a decrease in EBITDA, despite the amount of sales achieved, by virtue of the significant margin generated in 2015 with the sale of one asset in particular (Duque de Loulé), which generated a capital gain of approximately 6.0M€.
Consolidated Net Profit rose to positive 18.7M€, an increase of 17.3M€ from the previous year. Of note was:
and (iv) despite higher tax costs of 5.4M€, as a result of the Profit before Taxes.
Capex in 2016 rose to 12.7M€, a reduction of 12.8% from 2015. The main contributors of Capex were in the Energy segment (mainly related to the acquisition of two photovoltaic parks of 1MW each, totalling 5.7M€), the Fitness segment due to the expansion plan, and Hospitality, mainly related to the opening of the new hotel, "The House", in Porto.
Total Capex amounts to 4.5% of total Fixed Assets, 0.1pp lower than the previous year.
Net Debt at the end of 2016 amounted to 66.0M€, 83.2M€ below the level registered at the end of 2015 and, as in previous quarters, the lowest level since the Group's spin-off in 2007.
This result was mainly due to the performance of consolidated FCF, which included during the year the conclusion of the sale of shares in the road concession operators (Norscut and Operscut), for a total amount of 43M€ and the sale of the macro-plots in Tróia for 50M€. Also to be highlighted, due to the materiality of the amounts involved, is the revenue related to the sale of non-strategic real estate assets, amounting to approximately 9.3M€.
The Capital Structure, as a result of the reduction in net debt, also recorded significant improvements, visible in the favourable 27.5 pp evolution of the Debt to Equity ratio to 20.6%.
| Consolidated Balance Sheet | |||||
|---|---|---|---|---|---|
| Million euro | Dec 2016 | Dec 2015 | Dec16/Dec15 | ||
| Total Assets | 500.4 | 574.0 | -12.8% | ||
| Tangible and Intangible Assets | 246.4 | 258.8 | -4.8% | ||
| Goodwill | 37.8 | 60.9 | -37.9% | ||
| Non-Current Investments | 1.7 | 13.6 | -87.4% | ||
| Other Non-Current Assets | 29.4 | 31.5 | -6.6% | ||
| Stocks | 104.5 | 126.8 | -17.6% | ||
| Trade Debtors and Other Current Assets | 47.7 | 47.2 | +1.2% | ||
| Cash and Cash Equivalents | 32.7 | 35.3 | -7.3% | ||
| Total Equity | 320.4 | 310.1 | +3.3% | ||
| Total Equity attributable to Equity Holders of Sonae Capital | 310.4 | 299.9 | +3.5% | ||
| Total Equity attributable to Non-Controlling Interests | 9.9 | 10.2 | -3.1% | ||
| Total Liabilities | 180.0 | 263.9 | -31.8% | ||
| Non-Current Liabilities | 120.7 | 121.0 | -0.2% | ||
| Non-Current Borrowings | 94.3 | 103.9 | -9.3% | ||
| Deferred Tax Liabilities | 19.6 | 10.9 | +79.3% | ||
| Other Non-Current Liabilities | 6.8 | 6.1 | +11.7% | ||
| Current Liabilities | 59.3 | 142.9 | -58.5% | ||
| Current Borrowings | 4.5 | 80.6 | -94.4% | ||
| Trade Creditors and Other Current Liabilities | 54.8 | 62.3 | -12.0% | ||
| Total Equity and Liabilities | 500.4 | 574.0 | -12.8% | ||
| Net Capital Employed | 386.3 | 459.3 | -15.9% | ||
| Fixed Assets | 284.2 | 319.7 | -11.1% | ||
| Non-Current Investments (net) | 4.7 | 28.0 | -83.3% | ||
| Working Capital | 97.4 | 111.6 | -12.7% | ||
| Capex (end of period) | 12.7 | 14.6 | -12.8% | ||
| % Fixed Assets | 4.5% | 4.6% | |||
| Net Debt | 66.0 | 149.2 | -55.8% | ||
| % Net Capital Employed | 17.1% | 32.5% | |||
| Debt to Equity | 20.6% | 48.1% | |||
| Net Debt excluding Energy | 43.9 | 126.2 | -65.2% | ||
| Capital Structure Ratios | |||||
| Loan to Value (Real Estate) | 8.6% | 21.8% | |||
| Net Debt/EBITDA (recurrent) | 2.38x | 2.20x |
Net Capital Employed decreased by 15.9% over the previous year, to 386.3M€, as a result of the 11.1% reduction in fixed assets, 83.3% in non-current investments (due to the sale of Norscut and Operscut) and 12.7% in working capital. Capex amounted to 12.7M€ and represented 4.5% of total fixed assets.
| Profit and Loss Account — Resorts | ||||
|---|---|---|---|---|
| Million euro | FY 2016 | FY 2015 | p 16/15 | |
| Total Operational Income | 69.26 | 32.14 | >100% | |
| Turnover | 31.13 | 29.68 | +4.9% | |
| Other Operational Income | 38.13 | 2.46 | >100% | |
| Total Operational Costs | -51.69 | -27.96 | -84.8% | |
| Cost of Goods Sold | -27.14 | -4.18 | <-100% | |
| Change in Stocks of Finished Goods | -7.41 | -5.49 | -34.9% | |
| External Supplies and Services | -10.07 | -11.78 | +14.5% | |
| Staff Costs | -3.92 | -3.77 | -3.8% | |
| Other Operational Expenses | -3.14 | -2.74 | -14.8% | |
| EBITDA excluding Guaranteed Income Provisions (1) | 17.57 | 4.18 | >100% | |
| Provisions for Guaranteed Income | -0.36 | -0.99 | +63.8% | |
| EBITDA | 17.21 | 3.19 | >100% | |
| EBITDA Margin (% Turnover) | 55.3% | 10.7% | +44.6 pp | |
| Capex | 1.21 | 1.44 | -15.7% | |
| EBITDA-Capex | 16.00 | 1.75 | >100% |
(1) EBITDA excluding the estimated present value of potential costs for the period of the Guaranteed Income from real estate sales at Troia Resort
2016 will be indelibly marked as the year the Resorts segment made the significant sale of the macro-plots called UNOPs 7/8/9, for 50M€, for the development of a project of excellence.
This project is extremely important for the future development of the resort and it incorporates important positive externalities for the businesses and assets already in operation. Moreover, it will decisively contribute to development, not only of the entire Tróia peninsula but also the surrounding region.
In 2016, 24 deeds of residential units in Troia Resort were signed (6 in Q1, 5 in Q2, 4 in Q3 and 9 in Q4 of 2016), plus one fractional deed, resulting from a product launched during the summer. By the closing date of this report, two more deeds had already been signed and 6 promissory purchase and sale contracts and reservations have been made and the deposit paid. It should be noted that, as expected and already mentioned in previous releases, there was a slowdown in the "golden visas" market during 2016, partially mitigated by the recovery of other European markets, namely the domestic market, and by the improvement of the average sale value of units. 375 deeds of sale on residential units of the Troia Resort complex had been signed by 31 December 2016.
Turnover amounted to 31.1M€, an increase of 4.9% over 2015, benefiting from a positive sales mix and the overall improvement in the contribution of the operations that support the Resort, due to the greater number of visitors. The growth recorded by Atlantic Ferries (+9.0% to 5.9M€) and Troia Residence (+36.1% in accommodation revenue) were notable in this respect.
EBITDA for the year was 17.21M€, 5.4x EBITDA of the previous year, mainly due to the capital gain achieved with the sale of the macro-plots for the approximate amount of 14.5M€. The improved profitability of operations supporting the resort, namely Atlantic Ferries (+41% to 2.08M€), only partially offset the lower margin generated by real estate sales.
For prudence reasons, and following the traditional conservative approach that should govern the accounting principles, we have reported in Provisions, at the time of the sale, the present value of potential costs for the Guaranteed Income period on real estate sales in Tróia Resort (by the difference between the rate of guaranteed income and a conservative expectation of commercial operation). This amounted to 0.36M€ in 2016, compared to 0.99M€ in 2015, as a result of sales recorded in 2016 and a more favourable mix, particularly given the slowdown of the "golden visas" market.
Capex in 2016 remained at controlled levels, falling below that registered in 2015 and contributing, together with EBITDA performance, to the 14.25M€ improvement in the value of EBITDA-Capex.
| Profit and Loss Account — Fitness | ||||
|---|---|---|---|---|
| Million euro | FY 2016 | FY 2015 | p 16/15 | |
| Total Operational Income | 18.32 | 15.48 | +18.3% | |
| Turnover | 18.09 | 15.19 | +19.1% | |
| Other Operational Income | 0.23 | 0.29 | -20.4% | |
| Total Operational Costs | -16.16 | -13.66 | -18.3% | |
| Cost of Goods Sold | -0.10 | -0.12 | +10.6% | |
| External Supplies and Services | -9.73 | -8.59 | -13.3% | |
| Staff Costs | -5.41 | -4.16 | -30.1% | |
| Other Operational Expenses | -0.91 | -0.79 | -15.4% | |
| EBITDA | 2.16 | 1.82 | +18.4% | |
| EBITDA Margin (% Turnover) | 11.9% | 12.0% | -0.1 pp | |
| Capex | 1.84 | 1.31 | +40.5% | |
| EBITDA-Capex | 0.32 | 0.51 | -38.3% |
The Fitness segment continues to improve its competitive position, which is confirmed by the 27% growth in the average number of active members.
The opening of 5 new clubs during 2016 is to be highlighted, namely in Guimarães, Maia, Porto-Foz, Laranjeiras and Ermesinde. The Solinca brand currently operates 17 health clubs. It should also be noted that on a comparable basis, excluding openings, the number of active members grew positively by 3.6%, increasing penetration in existing clubs.
Turnover in 2016 increased 19.1% to 18.09M€. The positive evolution of average monthly fees (+5.7%) also stands out. EBITDA amounted to 2.16M€, a significant improvement of 18.4% from the previous year. This corresponds to a margin of 11.9%, in line with the previous year, despite the require effort in terms of costs with the expansion plan and the time needed for the new clubs to reach "cruising speed".
Capex in 2016 amounted to 1.84M€, 40.5% higher than in 2015, due to the investments required to support the expansion plan.
| Profit and Loss Account — Hospitality | ||||
|---|---|---|---|---|
| Million euro | FY 2016 | FY 2015 | p 16/15 | |
| Total Operational Income | 17.58 | 15.00 | +17.2% | |
| Turnover | 17.00 | 14.48 | +17.4% | |
| Other Operational Income | 0.58 | 0.52 | +11.8% | |
| Total Operational Costs | -19.88 | -18.21 | -9.2% | |
| Cost of Goods Sold | -1.71 | -1.61 | -6.3% | |
| External Supplies and Services | -11.49 | -10.50 | -9.4% | |
| Staff Costs | -6.03 | -5.58 | -8.1% | |
| Other Operational Expenses | -0.65 | -0.53 | -23.8% | |
| EBITDA | -2.30 | -3.21 | +28.3% | |
| EBITDA Margin (% Turnover) | -13.5% | -22.2% | +8.6 pp | |
| Capex | 1.36 | 0.16 | >100% | |
| EBITDA-Capex | -3.66 | -3.37 | -8.7% |
In order to adjust information comparability, the contribution of the hotel operation of Lagos (Aqualuz Lagos) in 2015 was excluded.
Turnover of the Hospitality segment in 2016, in line with the trend observed in previous years and following market developments, consolidated the positive trajectory and posted a 17.4% increase in relation to the previous year to 17.0M€.
This performance was mainly due to the growth of the occupancy rate by 4pp and ARR by 7.6%. The number of nights sold, in the same period, grew by 15.8% over all hotel units of the Group and RevPar increased by 17.3%.
The increase in turnover due to the positive performance of the operational indicators coupled with the optimisation and cost saving measures implemented in recent years, led to EBITDA in 2016 posting an improvement of 28.3% (+0.91M€) to negative 2.30M€, from the previous year. It should be noted that the new hotel "The House Ribeira Porto Hotel" in Porto, inaugurated during the year, has already positively contributed to EBITDA, with occupancy rates and average prices in line with the market for this zone.
The EBITDAR value of the Hospitality segment in the period, excluding the value of rents, it should be noted, amounted to positive 2.46M€, an improvement of 1.05M€ compared to 2015, with all operations posting positive performances.
Capex in the segment amounted to 1.36M€, which essentially reflects the investment in the opening of the new hotel "The House Ribeira Porto Hotel" during Q2 of 2016, contributing
to a 8.7% decrease in EBITDA-Capex compared to the previous period.
| Profit and Loss Account — Energy | ||||
|---|---|---|---|---|
| Million euro | FY 2016 | FY 2015 | p 16/15 | |
| Total Operational Income | 38.80 | 51.03 | -24.0% | |
| Turnover | 38.23 | 50.58 | -24.4% | |
| Other Operational Income | 0.57 | 0.45 | +27.6% | |
| Total Operational Costs | -30.99 | -41.82 | +25.9% | |
| Cost of Goods Sold | -23.46 | -34.07 | +31.1% | |
| External Supplies and Services | -4.43 | -4.19 | -5.8% | |
| Staff Costs | -2.32 | -2.87 | +19.2% | |
| Other Operational Expenses | -0.78 | -0.69 | -12.8% | |
| EBITDA | 7.81 | 9.21 | -15.2% | |
| EBITDA Margin (% Turnover) | -20.4% | 18.2% | +2.2 pp | |
| Capex | 7.21 | 6.24 | +15.5% | |
| EBITDA-Capex | 0.60 | -2.96 | -79.7% |
Turnover of the Energy segment in 2016, as expected, decreased 24.4% to 38.23M€. The contributing factors were: (i) lower electricity sale prices, pegged to oil price developments; and (ii) the lower number of cogeneration plants in operation, due to the discontinuation of two plants, one in 2015 and another in 2016, and the change of licensing framework for another one.
In line with the performance of turnover, EBITDA decreased by 15.2% to 7.81M€. Nonetheless, the EBITDA margin improved by 2.2pp from the previous year to 20.4%. It should be noted that EBITDA in the fourth quarter, on a comparable basis, already showed a positive evolution of 17.7% over the previous year.
Capex, mainly driven by the acquisition of two photovoltaic parks of 1MW each (total of 5.7M€) amounted to 7.21M€, 15.5% higher than the previous year. This rise contributed to a deterioration of EBITDA-Capex of 2.36M€.
| Profit and Loss Account — Refrigeration & HV AC |
||||
|---|---|---|---|---|
| Million euro | FY 2016 | FY 2015 | p 16/15 | |
| Total Operational Income | 67.90 | 57.20 | +18.7% | |
| Turnover | 67.18 | 56.50 | +18.9% | |
| Other Operational Income | 0.72 | 0.71 | +1.7% | |
| Total Operational Costs | -65.93 | -54.11 | -21.9% | |
| Cost of Goods Sold | -27.19 | -23.10 | -17.7% | |
| Change in Stocks of Finished Goods | 1.95 | 0.19 | >100% | |
| External Supplies and Services | -26.57 | -19.01 | -39.8% | |
| Staff Costs | -12.59 | -11.59 | -8.7% | |
| Other Operational Expenses | -1.53 | -0.59 | <-100% | |
| EBITDA | 1.97 | 3.09 | -36.5% | |
| EBITDA Margin (% Turnover) | 2.9% | 5.5% | -2.6 pp | |
| Capex | 0.07 | 0.16 | -55.5% | |
| EBITDA-Capex | 1.90 | 2.93 | -35.4% |
Turnover in the Refrigeration & HVAC segment in 2016 amounted to 67.2M€, an increase of 18.9% over the previous year. The volume of international activity of the Refrigeration & HVAC business (consolidating exports originating in Portugal and direct sales abroad) accounted for 38% of consolidated turnover for the year, 9pp above the 2015 figure.
The different performance of international operations (Brazil, Angola and Mozambique) and domestic operations is notable. International operations were severely impacted by a business downturn which, together with the review of the margins of some works in progress, significantly penalised EBITDA in 2016.
In the case of domestic operations, turnover amounted to 60.76M€, an increase of 27.0% over the previous year. This was driven by, in addition to the core segment of Refrigeration, the award of an important contract in Romania, and despite the smaller margin generated when compared with other segments. As regards EBITDA, domestic operations recorded 3.24M€, corresponding to a margin of 5.5% and an increase of 12.6% over the previous year.
Additionally, it should be noted that, at the end of the year, the Backlog in the domestic operations amounted to 25.5M€ (equivalent to 5 months of of the domestic operations Turnover).
Investment remained at low levels, so EBITDA-Capex of 1.9M€ was mainly the result of the performance of EBITDA.
Within the classification of non-startegic assets, and in this sense available for sale, the Sonae Capital Group includes Real Estate and Financial Assets.
Of note where financial holdings are concerned is the conclusion of the process of selling the shareholdings in the businesses associated with road concessions, namely Norscut and Operscut, with full receipt of the sale price of approximately 43M€. This is an important milestone in the crystallisation of value and the disposal of non-strategic assets.
In response to current market trends and demand for the assets included in the current real estate portfolio, 81 deeds of sale for City Flats apartments were signed during the year. The stock available for sale has been practically exhausted.
Moreover, a diverse set of real estate assets was sold, totalling 14.8M€ (6.6M€ of which had already been received in 2015), and also promissory sale contracts have been signed on an additional set of assets, in the amount of 14.5M€.
The capital employed in this asset block (real estate) amounted to 107.4M€ for the year ending 31 December 2016.
Under our commitment to provide the market with the best possible financial information, we also updated the Sonae Capital Group's real estate assets valuation report, conducted by the reference entity Cushman & Wakefield (the Evaluation Summary Report is available on the company's website www.sonaecapital.pt). Sonae Capital's real estate assets (excluding properties located in the Boavista Complex owned by the WTC real estate investment fund, in which the Group owns all the units) was valued at 397.5M€, at 31 December 2016. The current valuation compared to the previous valuation made at 30 September 2014 for the same asset base shows a slight increase of 0.3%, demonstrating the resilience of our portfolio of real estate assets.
It should be noted that the Troia Resort assets were valued at 188.7M€, an increase of 2.6% from the previous report for the same asset base. We kept the same reporting structure to provide a better perception of the types of asset, individualising the Operating Assets (other than the Resort) which, between hotels and fitness clubs, were valued at 82.6M€ (+13.5% from the previous evaluation). The remaining assets, dispersed in nature and geographically, were valued at 126.3M€, a decrease of 9.5% on a comparable basis over the previous report.
2016 is indelibly marked by the sale of the shareholdings in the road concessionaires and the sale of the Macro-plots in Tróia, both of crucial importance for the implementation of the defined corporate strategy. The general strengthening of our business and the consequent strengthening of the competitive position provide confidence and an increased dose of ambition for the pursuit and acceleration of the implementation of the strategy defined for each of the businesses.
It will be especially relevant during 2017, once an adequate and even conservative capital structure has been reached, to pursue the incorporation of new businesses with a strong potential for creation of shareholder value within the Group's areas of competence. The underlying objective is to progressively implement our strategic purpose.
Important steps will continue to be taken in the business segments, to sustain and improve the competitive position of each business, namely:
We remain expectant of the improved economic and financial conditions of the country and of financial markets in general. We will also keep focused – through a specific unit for this purpose – on the disposal of the real estate assets portfolio, one of the fundamental aspects for the effective implementation of the Corporate Strategy. This is of particular relevance because the necessary financial discipline and making the levels of net indebtedness adequate to the types of business and assets of the Group will continue to guide the assumptions and objectives to be defined for each of the business areas and the Group in general.
Lastly, and as stated at the beginning, given the results achieved in 2016 and based on the expectation of future results, namely with regard to the continued disposal of nonstrategic assets, we will take firm steps to implement our corporate strategy.
In view of the achievement of an equity structure deemed balanced and the gains from the sale of non-strategic assets, the Board of Directors of Sonae Capital approved a proposal to distribute a gross dividend of 25 million euros to shareholders. This dividend will be derived from the appropriation of profits for the financial year and distribution of free reserves, corresponding to a gross dividend of 0.10€ per share.
The global dividend of 25 million euros shall exclude the amount of the dividend that would be allocated to shares that, at the dividend payout date, are held by the company itself or its subsidiaries, and which should continue to be allocated to free reserves.
This proposal requires the final approval of the Shareholders' General Meeting.
| Sonae Capital's share information | |||
|---|---|---|---|
| Name: Sonae Capital, SGPS, SA | ISIN code: PTSNP0AE0008 | ||
| Security's Issuer: Sonae Capital, SGPS, SA | NYSE Euronext: SONC | ||
| Listing date: 28 January 2008 | Reuters: SONAC LS | ||
| Share Capital: 250,000,000 Euros | Bloomberg: SONC.PL | ||
| Listed amount: 250,000,000 shares |
Treasury stock: As at 31 December 2016, the company owns 5,516,226 own shares.
During 2016, Sonae Capital's share price increased by 46.7%, closing the year at 0.748€. This performance was once again much higher than that of the Portuguese Stock Market Index (PSI20), which depreciated 11.9% in the same period.
The following table summarises the most relevant information on the Sonae Capital shares traded in Euronext Lisbon:
| Euronext Lisbon | 2016 | 2015 |
|---|---|---|
| Closing price N-1 | 0.510 | 0.261 |
| Maximum price | 0.810 (12.12.2016) |
0.514 (18.12.2015) |
| Minimum price | 0.442 (20.01.2016) |
0.216 (12.01.2015) |
| 31 December N | 0.748 | 0.510 |
| Transactions | ||
| Average daily quantity | 273.068 | 252.366 |
| Total shares traded | 70.178.592 | 64.605.616 |
| Total volume (million euros) | 42.3 | 25.9 |
| Average daily volume (million euros) | 0.17 | 0.10 |
| Market capitalisation 31/12/N (million euros) (a) | 187.0 | 127.5 |
(a) Market Capitalisation calculated based on the total number of shares
Relevant events announced to the market during 2016 were:
The net profit of Sonae Capital, SGPS, SA, the holding company of the Group, was 8,738,315.63€. This profit compares with 12,198,781.85€ the previous year. It was positively impacted by an improvement of approximately 2.5M€ in investment results, which partially offset the lower results of the financial function in about 6.6M€.
The profit of the year already reflects in the amount of 190.693€ for the short term variable remuneration of executive directors and personal, in the form of distribution of profits for the year, pursuant to article 31(2) of the Articles of Association and on proposal of the Remuneration Committee, which is responsible for implementing the remuneration policy approved at the Shareholders' General Meeting of 7 April 2016.
The Company disposed of 398,345 shares during 2016, for the total amount of 241,397€ (reference price of 0.606€ per share) as a result of the distribution of shares among employees in accordance with the provisions of the Medium-Term Variable Remuneration Plans. As at 31 December 2016, Sonae Capital held 5,516,226 own shares, representing 2.206% of its share capital.
During 2016, Non-Executive Board Members made significant contributions in the discussion of the different strategic options, while maintaining close contact with corporate directors and management teams, as in previous years. During the year, Non-Executive Board Members effectively performed their duties as members of the Board of Directors and members of the Board Audit and Finance Committee and the Board Nomination and Remuneration Committee.
Further information on the above mentioned Committees can be found in point 29 of the Company's Corporate Governance Report, complementing information on activities performed by Non-Executive Board Members described in this section of the report.
Sonae Capital, SGPS, SA, as the holding company of the Group, posted a positive net profit of 8,738,315.63€ in 2016. The Board of Directors proposes to the Shareholders' General Meeting that this amount be transferred to Legal Reserve (436,915.78€) and for the dividends payout (8,301,399.85€). Since the proposed gross dividend is 0.10€ per share, free reserves in the amount of 16,698,600.15€ are intended to be used for the aforementioned dividends payout.
There were no subsequent corporate events to highlight.
The Board of Directors wishes to thank all Sonae Capital's stakeholders for their support and trust shown throughout the year, highlighting the cooperation and monitoring by the Supervisory Board and Statutory Auditor.
We thank our employees for their commitment, their valuable contribution to the significant improvement in operational results and the shared effort to achieve the goals set.
We reaffirm that we continue to believe that the foundation for the Group's sound growth is increasingly more established, believing in the success and sustainability of the defined strategy.
Maia, 23 February 2017
The Board of Directors
Duarte Paulo Teixeira de Azevedo Chairman of the Board of Directors Maria Cláudia Teixeira de Azevedo CEO
Álvaro Carmona e Costa Portela Member of the Board of Directors
Ivone Pinho Teixeira CFO
Francisco de La Fuente Sánchez Member of the Board of Directors Miguel Jorge Moreira da Cruz Gil Mata Member of the Board of Directors
Paulo José Jubilado Soares de Pinho Member of the Board of Directors
The consolidated financial statements presented in this report are non-audited and have been prepared in accordance with the International Financial Reporting Standards ("IAS/ IFRS") issued by the International Accounting Standards Board ("IASB"), as adopted by the European Union.
In order to continue providing the best financial information, not only to the consolidated level, but also to each of the business segment level, and aligned with the best market practices, the units sold during the year 2015, namely the hotel operation of Lagos (Aqualuz Lagos) and the General Maintenance business (UPK) of the Refrigeration & HVAC segment, are now reported as discontinued operations. In accordance to this, the 2015 information was restated.
Heating, Ventilation and Air Conditioning.
EBITDA – Capex.
Promissory Sale Contract.
Operating Results (EBIT) + Amortization and Depreciation + Provisions and Impairment Losses + Impairment Losses of Real Estate Assets in stocks(included in Cost of Goods Sold) – Reversal of Impairment Losses and Provisions (included in Other Operating Income)
EBITDA + Provisions related to the estimated present value of potential costs for the full period of the Guaranteed Income from real estate sales in Troiaresort
EBITDAR EBITDA + Rents for buildings.
Net Debt Non-Current Loans + Current Loans – Cash and Cash Equivalents – Current Investments.
Investment in Tangible and Intangible Fixed Assets.
Net Debt/ Equity.
Net Debt of Real Estate Assets/Valuation of Real Estate Assets.
31 december 2016
The individual signatories declare that, to the best of their knowledge, the Report of the Board of Directors, the Consolidated and Individual Financial Statements and other accounting documents required by law or regulation have been prepared in accordance with the applicable International Financial Reporting Standards. They give a true and fair view, in all material respects, of the assets and liabilities, financial position and consolidated and individual results of Sonae Capital, SGPS, S.A. and the companies included in the consolidation perimeter, and that the Report of the Board of Directors faithfully describes the main events occurring in 2016 and their impacts, where applicable, to the evolution of the business, performance and financial position of Sonae Capital, SGPS, S.A. and the companies included in the consolidation perimeter, and includes a description of the main risks and uncertainties they face.
Maia, 23 February 2017
| The Board of Directors | |
|---|---|
| Duarte Paulo Teixeira de Azevedo | Maria Cláudia Teixeira de Azevedo |
| Chairman of the Board of Directors | CEO |
| Álvaro Carmona e Costa Portela | Ivone Pinho Teixeira |
| Member of the Board of Directors | CFO |
| Francisco de La Fuente Sánchez | Miguel Jorge Moreira da Cruz Gil Mata |
| Member of the Board of Directors | Member of the Board of Directors |
| Paulo José Jubilado Soares de Pinho Member of the Board of Directors |
Disclosure of the number of shares and other securities issued by the Company that are held by members of the Management and Supervisory Bodies or by Directors, as well as by persons closely related thereto pursuant to article 248-B of the Portuguese Securities Code, and descriptive of transactions in respect of those securities during the year under review:
| Date | Additions | Reductions | Position as at 31.12.2016 |
Balance as at 31.12.2016 |
|||
|---|---|---|---|---|---|---|---|
| Quantity | Av. Price € | Quantity | Av. Price € | Quantity | |||
| Belmiro Mendes de Azevedo (**) | |||||||
| Efanor Investimentos, SGPS, SA (1) | Dominant | ||||||
| Sonae Capital, SGPS, SA | 837,000 | ||||||
| Maria Margarida Carvalhais Teixeira de Azevedo (**) | |||||||
| Efanor Investimentos, SGPS, SA (1) | Minority | ||||||
| Sonae Capital, SGPS, SA | 1,862 | ||||||
| Duarte Paulo Teixeira de Azevedo () (*) (b) | |||||||
| Efanor Investimentos, SGPS, SA (1) | Minority | ||||||
| Migracom, SA (2) | Dominant | ||||||
| Maria Cláudia Teixeira de Azevedo () () (**) | |||||||
| Efanor Investimentos, SGPS, SA (1) | Minority | ||||||
| Linhacom, SGPS, SA (3) | Dominant | ||||||
| Sonae Capital, SGPS, SA | 31.03.2016 | 169,105 | 0,606 | 169,105 | |||
| Álvaro Carmona e Costa Portela (*) | |||||||
| Sonae Capital, SGPS, SA | 24,942 | ||||||
| Obrigações Sonae Capital/2014-2019 | 1 | ||||||
| Paulo José Jubilado Soares de Pinho (*) | |||||||
| Sonae Capital, SGPS, SA | 12,650 | ||||||
| Pessoa estreitamente relacionada (a) | 8,125 | ||||||
| Miguel Jorge Moreira da Cruz Gil Mata (*) | |||||||
| Sonae Capital, SGPS, SA | 697,931 |
| Date | Purchases | Sales | Position as at 31.12.2016 |
Balance as at 31.12.2016 |
|||
|---|---|---|---|---|---|---|---|
| Quantity. | Av. Price € | Quantity. | Av. Price € | Quantity. | |||
| (1) Efanor Investimentos, SGPS, SA | |||||||
| Sonae Capital, SGPS, SA | 88,859,200 | ||||||
| Pareuro, BV (4) | Dominant | ||||||
| (2) Migracom, SA | |||||||
| Sonae Capital, SGPS, SA | 161,250 | ||||||
| Imparfin - Investimentos e Participações Financeiras, SA (5) | Minority | ||||||
| (3) Linhacom, SGPS, SA | |||||||
| Sonae Capital, SGPS, SA | 43,912 | ||||||
| Imparfin - Investimentos e Participações Financeiras, SA (5) | Minority | ||||||
| (4) Pareuro, BV | |||||||
| Sonae Capital, SGPS, SA | 66,600,000 | ||||||
| (5) Imparfin - Investimentos e Participações Financeiras, SA | |||||||
| Sonae Capital, SGPS, SA | 513,160 |
(*) Member of the Board of Directors of Sonae Capital, SGPS, SA
(**) Member of the Board of Directors of Efanor Investimentos, SGPS, SA (directly and indirectly dominant company)
(***) shares acquired in compliance with the annual and medium-term variable remuneration policy.
(a) article 248 B, no.4, paragraph b) of the Portuguese Securities Code held by Change Partners, SCR, SA, of which is Member of the Board of Directors (b) shares previously held by a family member are no longer attributable because the legal basis for the attribution has ceased arising from article 248 B, no.4, paragragh a) of the Portuguese Securities Code.
| Number of shares as at 31.12.2016 | |
|---|---|
| Efanor Investimentos, SGPS, SA (1) | |
| Sonae Capital, SGPS, SA | 88,859,200 |
| Pareuro, BV | Dominated |
| Pareuro, BV | |
| Sonae Capital, SGPS, SA | 66,600,000 |
(1) Belmiro Mendes de Azevedo is, under the terms of paragraph b number 1 of Article 20 and number 1 of Article 21 of the Portuguese Securities Code, the "ultimate beneficial owner", as he is the controlling shareholder of Efanor Investimentos, SGPS, SA and the latter wholly owns Pareuro BV.
| Shareholder | Nr. of Shares |
% of Share Capital |
% of Voting Rights |
|---|---|---|---|
| Efanor Investimentos, SGPS, S.A. (1) | |||
| Directly Owned | 88,859,200 | 35.544% | 36.346% |
| Through Pareuro, BV (controlled by Efanor) | 66,600,000 | 26.640% | 27.241% |
| Through Belmiro Mendes de Azevedo (Chairman of the Board of Directors of Efanor) |
837,000 | 0.335% | 0.342% |
| Through Maria Margarida Carvalhais Teixeira de Azevedo (Member of the Board of Directors of Efanor) |
1,862 | 0.001% | 0.001% |
| Through Maria Cláudia Teixeira de Azevedo (Member of the Board of Directors of Efanor) |
169,105 | 0.068% | 0.069% |
| Through Linhacom, SGPS, S.A. (controlled by the Member of the Board of Directors of Efanor Maria Cláudia Teixeira de Azevedo) |
43,912 | 0.018% | 0.018% |
| Through Migracom, S.A. (controlled by the Member of the Board of Directors of Efanor Duarte Paulo Teixeira de Azevedo) |
161,250 | 0.065% | 0.066% |
| Total attributable | 156,672,329 | 62.669% | 64.083% |
| Argos Funds | 5,181,429 | 2.073% | 2.119% |
| Total attributable | 5,181,429 | 2.073% | 2.119% |
| Santander Asset Management - Sociedade Gestora de Fundos de Investimento Mobiliários, SA | |||
| Through Santander Acções Portugal Fund (managed by Santander Asset Management) |
4,910,760 | 1.964% | 2.009% |
| Through Santander PPA Fund (managed by Santander Asset Mana gement) |
484,869 | 0.194% | 0.198% |
| Total attributable | 5,395,629 | 2.158% | 2.207% |
| Briarwood Chase Management LLC | |||
| Through Briarwood Capital Partners LP Fund | 12,463,711 | 4.985% | 5.098% |
(1) Belmiro Mendes de Azevedo is, under the terms of Article 20(1)(b) and of Article 21(1) of the Portuguese Securities Code, the "ultimate beneficial owner", as he is the controlling shareholder of Efanor Investimentos, SGPS, SA and the latter wholly owns Pareuro BV.
31 december 2016
The share capital of Sonae Capital, SGPS, S.A. (hereinafter referred to as "Company" or "Sonae Capital") is 250,000,000€, fully subscribed and paid up, and is divided into 250,000,000 ordinary, book entered and bearer shares each with the nominal value of 1 euro.
All the shares of Sonae Capital have been admitted to trading on the Euronext Lisbon regulated market since 28 January 2008.
The Company's shares have no restrictions on their transferability or ownership, nor are there shareholders holding special rights. Accordingly, the shares are freely transferable according to the applicable legal rules.
The Company held 5,156,226 treasury shares at 31 December 2016, representing 2.206% of the share capital, corresponding to the same percentage of voting rights.
The Company has not entered into any agreements which contain clauses intended to be defensive measures for the change of shareholder control in the case of takeover bids.
Under the same terms, the Company did not approve any statutory provision or rules or regulations in order to prevent the success of takeover bids.
No defensive measures were adopted during the 2016 financial year.
The majority of the share capital of the Company is attributed to a single shareholder. There is also no statutory rule that provides for the limitation of the number of votes that may be held or exercised by a shareholder, whether individually or jointly with other shareholders.
The existence of any shareholder agreements with regard to the Company is unknown.
The shareholders who, at 31 December 2016 and in accordance with the notifications received by the Company, in accordance with article 20 of the Securities Code, have a qualifying interest representing at least 2% of the share capital of Sonae Capital, are the following:
| Shareholder | No. Shares Held | % Share capital with voting rights |
|---|---|---|
| Efanor Investimentos, SGPS, S.A.1 | 156,672,329 | 62,669% |
| Briarwood Chase Management LLC | 12,463,711 | 4,985% |
| Santander Asset Management | 5,395,629 | 2,158% |
| Argus Funds | 5,181,429 | 2,073% |
1 Belmiro Mendes de Azevedo is, pursuant to article 20(1)(b) and article 21(1) of the Securities Code, the ultimate beneficial owner since he controls Efanor Investimentos SGPS, SA and this, in turn, fully controls Pareuro BV.
The shares and bonds held by members of the management and supervisory bodies in the Company and in companies in a control or group relationship with the Company, either directly or through related persons, are disclosed in an appendix to the annual report of the Board of Directors, as required by article 447 of the Companies Code and article 14(7) of the CMVM Regulation No. 5/2008.
The powers granted by the Articles of Association to the Board of Directors of the Company to decide on share capital increase operations ceased to exist in December 2012 and, from that date, such power is exclusively held by the Shareholders' General Meeting, under the legally established terms.
In relation to the commercial activities of the businesses that comprise the portfolio of Sonae Capital, there are a set of commercial relationships between the Company and its Subsidiaries and holders of qualifying holdings, or companies held by them.
These transactions form part of the regular business activity of each company and are carried out in accordance with current market practices and conditions. In addition, when related parties are involved, these transactions are scrutinised and, if significant, approved in advance by the Supervisory Board.
No significant business or commercial transactions were carried out in 2016 between the Company and holders of qualifying holdings in the company.
The Shareholders' General Meetings are conducted by the Board of Shareholders' General Meeting, whose members are elected by the shareholders for a term of three years, coinciding with the term of office of the other governing bodies.
The members of the current term of office were elected, for their first term, by decision of the Annual General Meeting of 31 March 2015, for the current term of 2015-2017.
The Company's share capital is represented in its entirety by a single category of ordinary shares, each share corresponding to one vote, and there are no statutory limitations to the exercise of the right to vote.
For shareholders to participate in the Shareholders' General Meeting, the only rules that have to be complied with is applicable legislation regarding the "Registration Date" as a relevant moment for proving the quality of shareholder and for exercising the corresponding right to participate in and vote at the Shareholders' General Meeting, as well as the legal scheme for the participation and voting of shareholders who, on a professional basis, hold shares in their own name but on behalf of clients.
Shareholders may be represented at meetings of the Shareholders' General Meeting upon presentation of a written representation document addressed to the Chairman of the Board of the Shareholders' General Meeting and delivered at the beginning of the meeting, indicating the name and domicile of the representative and the date of the meeting. This communication may also be done by e-mail in accordance with the instructions contained in the notice of meeting.
A shareholder may designate different representatives in respect of the shares held in different securities accounts, without prejudice to the principle of voting unity and to a voting differently allowed to shareholders on a professional basis.
The Company makes available, within the legal deadlines, adequate information – notices of meetings, voting procedures and procedures to be adopted for postal voting, voting by e-mail or by proxy, as well as a draft letter of representation, in Portuguese and English, on its website (www.sonaecapital.pt) in order to ensure, promote and encourage the participation of shareholders in general meetings, either directly or through representatives.
In addition to the Company's website, this documentation is also available to shareholders for consultation at the company headquarters during business hours, as well as in the CMVM Information Disclosure System (www.cmvm.pt), from the date of publication of the notice of meeting.
Shareholders may vote by post on all matters requiring approval of the Shareholders' General Meeting, and the vote may be cast electronically. The means of voting is defined in the notice convening the Shareholders' General Meeting, and a form is available at http://www.sonaecapital.pt/investidores/assembleias-gerais to request the technical elements necessary to vote in this manner.
The Company also makes available to shareholders draft ballot forms in Portuguese and English on its website at (www.sonaecapital.pt), simultaneously with the publication of the Shareholders' General Meeting notice, as well as the corresponding preparatory documents relating to the various items of the agenda, in Portuguese and English.
There is no limit to the number of votes that may be held or exercised by a single shareholder or group of shareholders.
Pursuant to the provisions of the Articles of Association, the decisions of the Shareholders' General Meeting shall be taken by basic majority, unless otherwise established by law.
The Company adopts a monistic governance model (composed of Board of Directors, Supervisory Board and Statutory Auditor), as provided for by articles 278 (1) (a) and 413 (1) (b), both of the Companies Code, complemented by a delegation of management powers in an Executive Committee.
The Board of Directors is the body responsible for managing the Company's business, for performing all management acts related to the corporate purpose, determining the strategic orientation of the Company, as well as designating and supervising the performance of the Executive Committee and the specialised committees it sets up.
The Board of Directors considers that the adopted governance model is appropriate to the exercise of the powers of each of the governing bodies, ensuring, in a balanced manner, both its independence and the functioning of the respective interface. Moreover, the specialised committees, restricted to matters of great relevance, maximize the quality and performance of the management body, reinforcing the quality of its decision-making process.
The Executive Committee exercises the powers delegated in it by the Board of Directors for day-to-day matters of the Company and the corporate services.
The other two bodies are responsible for oversight.
The details of the structure adopted, the bodies that comprise it and corresponding functions and responsibilities are presented in the following paragraphs.
The members of the Board of Directors are elected, in accordance with the law and articles of association, under the terms stated in a proposal approved by the Shareholders' General Meeting.
The articles of association envisage that a director may be elected individually if there are proposals subscribed by shareholders who hold shares individually or jointly with other shareholders representing between ten and twenty percent of the share capital (director elected under the minority rule). The same shareholder may not subscribe to more than one voting list. Each proposal must contain at least the identification of two persons eligible for the same position to be filled. If several proposals are tabled by different shareholders or groups of shareholders, the votes will be taken on all proposals.
The articles of association also establish that in the event of death, resignation or temporary or permanent impediment of any of its members, other than the director elected under the minorities rule, the Board of Directors shall promote that director's replacement by co-opting, and this appointment requires ratification by the shareholders at the first Shareholders' General Meeting held after co-optation. In the event of definitive absence of a Director elected in accordance with the rules set forth in the preceding paragraph, the election shall occur at a Shareholders' General Meeting that is convened.
In the exercise of the Board of Directors' power to co-opt, the Board Nomination and Remuneration Committee is responsible for identifying potential candidates for the position of director with the appropriate profile for the exercise of the management functions.
A director shall be deemed to be definitively absent if he fails to attend two consecutive or interpolated meetings, without presenting a justification that is accepted by the Board of Directors.
In accordance with the Company's articles of association, the Board of Directors may be composed of an even or odd number of members, at least three and a maximum of nine, elected at a Shareholders' General Meeting. The term of office of the Board of Directors is three years, and its members may be re-elected one or more times. The current term of office of the Board of Directors is the 2015-2017 triennium. It is the Board of Directors that, in accordance with the articles of association, elects its Chairman.
The Board of Directors at 31 December 2016 was composed of seven members, three executive members and four non-executive members, two of whom are independent.
| Name | First appointed | Date of termination of term of office |
|---|---|---|
| Duarte Paulo Teixeira de Azevedo | March 2015 | 31 December 2017 |
| Álvaro Carmona e Costa Portela | March 2011 | 31 December 2017 |
| Maria Cláudia Teixeira de Azevedo | March 2011 | 31 December 2017 |
| Ivone Pinho Teixeira | March 2013 | 31 December 2017 |
| Francisco de La Fuente Sánchez | April 2008 | 31 December 2017 |
| Paulo José Jubilado Soares de Pinho | April 2008 | 31 December 2017 |
| Miguel Jorge Moreira da Cruz Gil Mata | April 2016 | 31 December 2017 |
The current members of the Board of Directors who were elected for the 2015-2017 term are listed in the following table:
| Duarte Paulo Teixeira de Azevedo | Chairman – Non-Executive |
|---|---|
| Álvaro Carmona e Costa Portela | Vice-Chairman – Non-Executive |
| Maria Cláudia Teixeira de Azevedo | Executive |
| Ivone Pinho Teixeira | Executive |
| Miguel Jorge Moreira da Cruz Gil Mata | Executive |
| Francisco de La Fuente Sánchez | Non-Executive (Independent) |
| Paulo José Jubilado Soares de Pinho | Non-Executive (Independent) |
Non-executive members were appointed on the basis of their prestige in the business, finance, academic and consulting fields, with the aim of strengthening the Board of Directors' competences, namely with regard to the strategy for setting up the business portfolio and the annual financial plan, as well as their revising.
The non-executive members of the Board of Directors, Francisco de La Fuente Sánchez and Paulo José Jubilado Soares de Pinho, are considered independent according to the criterion of independence established in section 18.1 of Annex I of the CMVM Regulation No. 4/2013 and Recommendation II.1.7 of the CMVM (2013).
Independent non-executive directors are under a duty to inform the Company immediately of any occurrence during their term of office that may cause incompatibilities or loss of independence, as required by law.
The current composition of the Board of Directors, in particular regarding the number of independent non-executive directors (2 out of 7 members), ensures the degree of supervision necessary for the activities carried out by the Executive Directors, taking into account the governance model adopted, the size of the company and its free float. The Report of the Board of Directors includes a chapter describing the activities carried out by the non-executive members of the Board of Directors.
The professional qualifications and other relevant details of the CVs of the members of the Board of Directors are detailed in this report, in the respective annex.
The Chairman of the Board of Directors and the Chief Executive Officer, Duarte Paulo Teixeira de Azevedo and Maria Cláudia Teixeira de Azevedo, respectively, are shareholders and members of the Board of Directors of Efanor Investimentos, SGPS, S.A., a legal person to which the control of the majority of the voting rights in this Company is imputed, and they are the children of Belmiro Mendes de Azevedo, a natural person to whom, in turn, the control of said company Efanor Investimentos, SGPS, SA is indirectly imputed.
To the best knowledge of the Company, there are no other usual and significant family, business and commercial relationships between shareholders holding qualifying holdings in excess of 2% of the voting rights and members of the Board of Directors.
According to the current corporate governance structure, the Board of Directors is responsible for strategic decisions at the business portfolio level and their implementation.
The Board of Directors delegates in the Executive Committee powers for the day-today operational management, also controlling the way in which this body functions and how the delegated powers are exercised.
The following powers of the Board of Directors may not be delegated, while all others have been delegated:
The Corporate Centre plays an instrumental role in supporting the Executive Committee and Board of Directors in the definition and control of the implementation of the defined strategies, policies and objectives. Composed of sovereign functions and shared functions, which are described below, its purpose is to provide transversal services to all Group companies:
The Corporate Finance role is to be responsible for defining and implementing financial management strategies and policies, ensuring an integrated and transversal vision of the Group's needs as well as ensuring the upkeep of relations with the capital, debt and banking markets. It is also responsible for managing the Group's financial risks and for preparing and monitoring the Group's financial plan.
The Legal area provides legal support in all fields, guaranteeing the defence of the Group's interests and promoting in an integrated and cross-cutting manner the strategy defined by the Board of Directors. It is responsible for monitoring legal compliance, litigation management, the corporate secretariat and the management of the Group's legal risks.
The Corporate Management Planning and Control function is to assist in the strategic development of the Group and in the definition of management information policies and ensure the reporting of consolidated information internally. This function is part of the Investor Relations Office which has the main responsibilities of reporting information to the market and ensuring permanent contact with institutional investors, shareholders and analysts.
Corporate Human Resources is responsible for the definition and implementation of the Group's human resources strategy and policies as well as the planning and management of talent and careers of top managers, under the terms approved by the Board of Directors and Remuneration Committee.
Portfolio Development, including Mergers & Acquisitions, has the mission to support the Board of Directors of Sonae Capital in projects of organisational growth and in the Group's business management, as well as in portfolio optimisation projects including the analysis and negotiation of investment and divestment opportunities.
The Internal Audit function defines and implements the Internal Audit activities by systematically and independently evaluating the Group's activities in order to ensure the effectiveness of the internal management and control systems and processes.
The Risk Management function assists the Board of Directors in the identification, modelling and monitoring of the Group's risks with the aim of ensuring their control and mitigation, as well as making it possible to include the risk dimension in strategic and operational decisions.
The Information Systems function is to ensure the alignment of information systems with the Group's strategy, creating value through the provision of solutions that promote effectiveness, efficiency and innovation of processes.
The sovereign functions report to the Executive Committee of Sonae Capital.
As for the Shared Functions, the Financial Department's mission is:
The function is coordinated by a director at the Corporate Centre level.
The rules of procedure of the Board of Directors are available for consultation on the Company's website (http://www.sonaecapital.pt) (investors tab, Corporate Governance section, Regulations).
The Articles of Association establish that the Board of Directors must meet at least once every quarter and, in addition, whenever the Chairman or two Directors convene it. During 2016, the Board of Directors met 9 times and the attendance record, either in person or through representation, was as follows:
| Duarte Paulo Teixeira de Azevedo | 100% |
|---|---|
| Maria Cláudia Teixeira de Azevedo | 100% |
| Álvaro Carmona e Costa Portela | 100% |
| Ivone Pinho Teixeira | 100% |
| Francisco de La Fuente Sánchez | 100% |
| Paulo José Jubilado Soares de Pinho | 100% |
| Miguel Jorge Moreira da Cruz Gil Mata | 100% |
The Secretary of the Board of Directors is responsible for the preparation and functioning of the meetings. The Secretary also keeps records of all decisions taken in the minutes of the meetings and sends the agendas of the meetings and supporting documents at least five days in advance, always with a weekend before the date of the meeting.
The Remuneration Committee, elected at the Shareholders' General Meeting, is the body responsible for assessing the performance and approving the remuneration of the members of the Board of Directors and other governing bodies, in representation of the shareholders and in accordance with the remuneration policy approved by the Shareholders at the General Meeting.
On the other hand, non-executive members, as part of their supervisory role, monitor in particular the performance of executive directors.
The Board Nomination and Remuneration Committee (CNR), which is solely composed of non-executive directors, supports the Remuneration Committee in the performance of its remuneration responsibilities. These committees may be assisted by international consultants of recognised competence, in order to carry out these functions. The independence of the consultants is guaranteed by their autonomy vis-à-vis the Board of Directors, the Company and the Group, as well as by their broad experience and credibility recognised by the market.
The performance assessment of executive directors is based on pre-determined criteria, consisting of objective performance indicators set for each period and in line with the overall strategy of growth and positive business performance.
These indicators consist of the business, economic and financial KPIs (Key performance indicators), subdivided into collective, departmental and personal KPIs. The collective business KPIs consist of economic and financial indicators that are defined based on the budget, the performance of each business unit, as well as on the consolidated performance of the Company.
Departmental business KPIs, in turn, are similar in nature to the previous ones, and they measure the specific contribution of the director to the performance of the business. Personal KPIs include objective and subjective indicators and are intended to measure compliance with duties and commitments individually taken on by the executive director. Additional information can be found in points 71 to 75 below.
The list of positions held by the Company's directors and other relevant activities is included in the appendix to this Report. Each of the members of the Board of Directors have consistently demonstrated their availability to perform their duties, having regularly attended the meetings of the body and participated in its work.
The committees created by the Board of Directors are the Executive Committee, the Board Audit and Finance Committee and the Board Nomination and Remuneration Committee.
The functioning of the various committees is established in the rules of procedure of the Board of Directors, available for consultation on the Company's website (http:// www.sonaecapital.pt) (investors tab, Corporate Governance section, Regulations).
| Name | Position |
|---|---|
| Maria Cláudia Teixeira de Azevedo | Chief Executive Officer |
| Ivone Pinho Teixeira | CFO |
| Miguel Jorge Moreira da Cruz Gil Mata 1 | Executive Director |
1 Appointed by the Board of Directors on 7 April 2016.
The Executive Committee is empowered to deliberate on all matters that have been delegated by the Board of Directors or related to the day-to-day management of the Company, following the strategic guidelines defined by the Board of Directors and under the aforementioned delegation of powers.
Pursuant to the established policy, the members of the Executive Committee share responsibilities in more than one area, and the allocation of these responsibilities is done according to the profile and experience of each member.
The Executive Committee of the Company shall meet on a monthly basis and at any time a meeting is called in writing, at least 3 days in advance, by the Chief Executive Officer or by a majority of its members. Notwithstanding regular contact between the members of the Executive Committee in the periods between meetings, 16 meetings were held in 2016.
The Executive Committee may only take decisions if the majority of its members are attending or represented. Decisions are taken by majority of the votes cast by the members attending or represented and by those voting by post.
Employees of the Corporate Centre may attend Executive Committee meetings, at the request of one of the Executive Directors, to give support and opinions on certain matters.
The Secretary of the Executive Committee (who is also the Secretary of the Board of Directors) is responsible for the functioning of the Executive Committee and other logistical aspects. The Secretary is also responsible for recording the decisions in the minutes of the meetings and for providing the members of the Executive Committee with the agenda and supporting documents for the meeting, at least three business days prior to the date of the meeting. The fact that the Secretary is the same for both bodies ensures the adequate flow of information between both bodies, allows the timely distribution of information and minimises any problems in the interpretation of requests for clarification, contributing to greater efficiency and effectiveness of the process.
During 2016, the Executive Committee sent the agendas and approved minutes of the respective meetings to the Non-Executive Directors and to the members of the Supervisory Board. The members of the Executive Committee shall provide, in a timely and adequate manner, any information requested by other members of the governing bodies.
The Board Audit and Finance Committee (BAFC) functions under the terms approved by the Board of Directors.
At 31 December 2016, the BAFC is composed of the independent Non-Executive Directors, Francisco de La Fuente Sánchez (Chairman) and Paulo José Jubilado Soares de Pinho.
The BAFC reviews the reports, financial information and financial statements of the Company prior to their approval by the Board of Directors, issues opinions on the reports addressed to shareholders and financial markets as to the adequacy and regularity of the information provided by the Executive Committee, including the internal business control systems, compliance with corporate governance best practices and it accompanies, on behalf of the Board of Directors, the audit and risk management activities and evaluates the processes and procedures in order to ensure the monitoring of internal control and efficient risk management. The BAFC meets with the Statutory Auditor and the Internal Audit team.
Refer to Chapter III of this report for information on risk-taking and control of risks.
The BAFC must meet at least six times a year, prior to the annual and interim disclosure of the results, once before the approval of the consolidated annual budget, once to evaluate the effectiveness of the Company's governance policies and practices and whenever convened by its Chairman, or by the Chairman of the Board of Directors, or by the Chief Executive Officer.
The Secretary of BAFC distributes the agenda and supporting documents to the members of the Committee at least five days before the date of the meeting and with a weekend beforehand. The Secretary also records the decisions taken in the minutes of the meetings.
The Board Nomination and Remuneration Committee (BNRC) is composed of the Chairman of the Board of Directors, Duarte Paulo Teixeira de Azevedo, Vice-Chairman Álvaro Carmona e Costa Portela and the independent Non-Executive Director Francisco de La Fuente Sánchez.
The members have been appointed to the BNRC for a period of three years (2015-2017).
The BNRC ordinarily meets once a year, before the meeting of the Remuneration Committee, and whenever such is deemed necessary.
The BNRC operates in accordance with the provisions of the rules of procedure of the Board of Directors. It is responsible for:
BNRC has at its disposal, in partnership with the Remuneration Committee, the possibility of hiring the services of specialised external entities whose independence, repute and competence are recognised by the market.
The Supervisory Board and Statutory Auditor are the supervisory bodies of the Company, according to the adopted governance model.
In accordance with the Company's articles of association, the Supervisory Board may be composed of an even or odd number of members, at least three and a maximum of five. The number of members is defined at the Shareholders' General Meeting. The Supervisory Board shall also have one or two substitute members, if it is made up of three or more members, respectively.
The members of the Supervisory Board are elected for three-year terms, jointly with the members of the other governing bodies.
The Supervisory Board appoints its Chairman, if the Shareholders' General Meeting does not do so.
If the Chairman leaves office before the expiry of the respective term of office, the other members must elect a chairman from among themselves to carry out those duties until the end of the term of office. The substitute members must replace current members unable to perform their duties or who have resigned. They shall remain a full member until the next Shareholders' General Meeting, which shall appoint new members to fill the vacant positions. In the event that there are no substitute members, the Shareholders' General Meeting shall appoint new members.
| Name | Position | First appointed |
|---|---|---|
| António Monteiro de Magalhães | Chairman | March 2015 |
| Manuel Heleno Sismeiro | Member | April 2009 |
| Carlos Manuel Pereira da Silva | Member | March 2015 (substitute between December 2007 and March 2015) |
| Joaquim Jorge Amorim Machado | Substitute | March 2015 |
The members appointed for the current mandate (triennium 2015-2017) and in office are:
All the members of the Supervisory Board are independent, with the exception of Manuel Heleno Sismeiro, pursuant to article 414(5) of the Companies Code and they comply with all the incompatibility rules mentioned in paragraph 1 of article 414-A of the Companies Code. Manuel Heleno Sismeiro has lost independence due to the fact that he has been re-elected for more than two terms.
The members of the Supervisory Board are required to immediately inform the Company of any occurrence during their term of office that may cause incompatibilities or the loss of independence, as required by law.
The Statutory Auditor will be discussed in points 39 to 41 below.
The professional qualifications and other relevant details of the CVs of the members of the Supervisory Board are detailed in this report, in the respective annex.
The rules of procedure of the Supervisory Board are available for consultation on the Company's website (http://www.sonaecapital.pt) (investors tab, Corporate Governance section, Regulations).
The Supervisory Board meets at least once every quarter. 7 formal meetings of this body were held in 2016 and the respective attendance rate, in person or through representation, was as follows:
| António Monteiro de Magalhães | 100% |
|---|---|
| Manuel Heleno Sismeiro | 100% |
| Carlos Manuel Pereira da Silva | 100% |
The decisions of the Supervisory Board are approved by simple majority.
Each of the members of the Supervisory Board have consistently demonstrated their availability to perform their duties, having regularly attended the meetings of the body and participated in its work.
The information on other positions held by members of the Supervisory Board, their qualifications and professional experience is available in the curricula vitae included in the annex to this report.
It is the responsibility of the Supervisory Board to approve the provision of additional audit services to be provided by the External Auditor.
At the first meeting of each financial year, the Supervisory Board prepares a plan and work schedule for that year which includes, inter alia, the coordination and supervision of the External Auditor's work. It shall include the following activities:
In assessing the criteria that backed the contracting of additional services from the External Auditor, the Supervisory Board verified the presence of the following safeguards:
• that as of 1 January 2016, the services provided comply with the terms established by Law No. 140/2015 of 7 September, which approves the new Statute of the Order of Statutory Auditors.
In addition to the duties described in the previous point, the Supervisory Board is responsible for, among others:
situation of the company;
For the performance of the duties mentioned above, the Supervisory Board:
In support of the activity of the Supervisory Board, the Company provides the human and technical resources necessary for the organisation of meetings, preparation of agendas, minutes and supporting documentation and their timely distribution. In addition, these meetings are attended by the internal liaisons considered relevant to the issues under discussion, for presentation and explanation of the issues raised by the Supervisory Board. The items on the agenda of these meetings on matters related to Auditing are discussed, at the discretion of the Supervisory Board, without the presence of employees of the Company.
The Supervisory Board represents the Company with the External Auditor and proposes to the Shareholders' General Meeting its appointment, as well as its dismissal, also evaluating the activity performed by the Auditor, ensuring that the appropriate conditions exist within the company for the performance of its services. The Supervisory Board is the company's liaison and first recipient of the respective reports.
The Supervisory Board annually prepares a report on its supervisory action for the year, including an annual assessment of the Statutory Auditor, and it issues an opinion on the management report, the consolidated and individual financial statements and corporate governance report presented by the Board of Directors, in order to comply with the legal deadlines for disclosure at the date established for the Annual General Meeting. The annual report on its audit activity is included in the reports and accounts made available on the Company's website (www.sonaecapital.pt).
The Statutory Auditor is the supervisory body responsible for the legal certification of the Company's financial information. Its fundamental duties are:
• Check the consistency of all the books, accounting records and supporting documents;
The Statutory Auditor of the Company for the 2015-2017 period is Pricewaterhouse-Coopers & Associados, SROC, represented by Hermínio António Paulos Afonso or by António Joaquim Brochado Correia.
The Statutory Auditor is in its third term of office, which, unlike the two previous two terms, will last for 3 years. It was re-elected for the present term on proposal of the Supervisory Board, at the Shareholders' General Meeting of 31 March 2015. The Company has the same statutory auditor since 2011 in almost all the companies in which it has interests.
The Statutory Auditor also provides the Company with Audit services as described in the points below.
The External Auditor of the Company, designated for the terms of Article 8 of the Portuguese Securities Code, is PricewaterhouseCoopers & Associados, SROC, registered under no. 9077 at the Portuguese Securities Market Commission, represented by the statutory auditor Hermínio António Paulos Afonso or by António Joaquim Brochado Correia.
In 2016, the representative of the Company's Statutory Audit Firm was Hermínio António Paulos Afonso.
The External Auditor was elected at the Shareholders' General Meeting on proposal of the Supervisory Board for the first time in 2011, for the 2011-2012 biennium and it is in its third term. The partner that represents it has been working with the Company since that same date.
The External Auditor and the Statutory Auditor partner representing it in the performance of these duties are in the third term of office, and the Company is therefore complying with the recommendations currently in force. The frequency of rotation of the External Auditor and the Statutory Auditor partner representing it will be assessed according to the best practices in matters of corporate governance, where applicable.
In accordance with the Company's governance model, the election or dismissal of the Statutory Auditor is decided by the Shareholders' General Meeting, upon proposal of the Supervisory Board.
In addition, the Supervisory Board supervises the performance of the External Auditor and the work throughout each year, considers and approves additional work by the auditor and annually conducts an overall assessment of the auditor, which includes an assessment of the auditor's independence.
(1) Appointed "Auditor" in accordance with Regulation (EU) 537/2014 of the European Parliament and of the Council of 16 April 2014
Tax consultancy services and other services were provided by technicians other than those involved in the audit process in order to ensure the independence of the External Auditor. The Board Audit and Finance Committee and the Supervisory Board analysed the scope of the other services and approved them, considering that they did not jeopardise the independence of the Auditors.
The services provided by the External Auditor, other than audit services, were previously approved by the Supervisory Board according to the recommended principles. The percentage of such services in the total amount of services provided by PricewaterhouseCoopers & Associados, SROC (PwC) to the Company amounts to 14.1% and is not estimated to represent 30% of the total average of fees received in the last three financial years, by reference to the period established in Article 77(1) of Law No. 140/2015 of 7 September. Considering the amounts involved, within the recommended limits, and the fact that the services are provided by a totally different team from the entity providing audit services, the External Auditor's independence and impartiality are assured.
The External Auditor reported to the Supervisory Board of the Company all the different audit services provided to the Company, without prejudice to the fact that such services are subject to the prior approval of the latter through the annual communication referred to in article 24(6)(b) of Law No. 148/2015 of 9 September.
Within the scope of its work, the External Auditor verified the application of the remuneration policies and systems, as well as the effectiveness and functioning of the internal control mechanisms. It did not identify any material deficiencies that should be reported to the Company's Supervisory Board.
| Services | Total 2016 | % | Sonae Capital SGPS |
% | Other Group entities |
% |
|---|---|---|---|---|---|---|
| Statutory Auditor 1 | 178,002 | 85,9 | 35,707 | 100,0 | 142,295 | 83,0 |
| Other Services 2 | 29,180 | 14,1 | 0 | 0,0 | 29,180 | 17,0 |
| Total | 207,182 | 100 | 35,707 | 100 | 171,475 | 100 |
The total remuneration paid to the Company's External Auditor in 2016 was 207,182€ corresponding to the following services:
1 Fees agreed for the year. 2 Amounts invoiced.
The amendments to the Articles of Association follow the terms of the Companies Code, requiring a two-thirds majority of the votes cast for approval of such resolution.
For the Shareholders' General Meeting to decide on the first call, the Articles of Association require that a minimum of 50% of the issued share capital be in attendance or represented at the General Meeting.
Irregularities are defined, within the scope of the Policy and Procedures for Reporting Irregularities in the Company, as facts that violate or seriously jeopardise:
The fundamental features of the policy for reporting irregularities currently in force in the Company are:
• Establishment of procedures for reporting irregularities, namely the provision of a mailbox with exclusive access for the Chairman of the Supervisory Board, along with the receipt by post, that guarantee all employees, shareholders or stakeholders that the report, communication or complaint of irregularities arrives inviolably to the addressee. Although there is a need for the explicit and unequivocal identification of the complainant, this identity must be kept confidential and only known by the Chairman of the Supervisory Board, whenever this is requested in the report or complaint.
According to best corporate governance practices, the Company's Reporting of Irregularities Policy, the main characteristics of which are described above, is available for consultation on the Company's website (www.sonaecapital.pt) and it covers the entire perimeter of the Sonae Capital Group.
The Supervisory Board did not receive in 2016, through the means defined for this purpose, any reports on matters under the scope of this policy.
Risk Management is one of the core components of the Sonae Capital Group's culture and a pillar of Corporate Governance, being present in all management processes. It is a responsibility of all Group employees, at different levels of the organisation.
Sonae Capital attaches primary importance to the implementation of internal control and risk management principles appropriate to the Group's activities. Visibility vis-à-vis the market, the exposure and diversification of business risks and the increasing speed of information transmission make it fundamental to adopt these principles, following a philosophy of value creation, ethical affirmation and social responsibility.
Risk Management is developed with the objective of creating shareholder value through (i) managing and controlling the opportunities and threats that may affect the objectives of Sonae Capital's portfolio and companies, (ii) preventing the occurrence of errors and irregularities and minimizing their consequences; and (iii) maximizing the
organization's performance and the reliability of its information, in an ongoing business perspective. It stands out as one of the components of the sustainable development of companies, since, when embodied in coordinated plans and systems of management and control, it contributes to a continuous development of the business through greater knowledge of the uncertainties and threats and more effective management and control of the risks that can affect organisations.
Risk Management is inherent in all management processes and is assumed as a responsibility for all managers and employees of the Group. These are a fundamental element of a conservative risk management culture that is intended to be transversal to all activities and hierarchical levels of the company.
The Risk Management role is to support companies in achieving their business objectives through a systematic and structured approach in identifying and managing risks and opportunities, promoting and supporting the integration of Risk Management into the planning and control of the respective companies.
The Internal Audit role is to identify and evaluate the effectiveness and efficiency of the management and control of the risks of business processes and information systems, reporting functionally to the Supervisory Board.
It should be noted that the risks concerning the reliability and integrity of accounting and financial information are also evaluated and reported by the External Auditor activity.
The Board of Directors is the maximum body responsible for the risk management process. The Board of Directors is responsible for defining and approving the Group's risk management policies.
It is the responsibility of the Executive Committee to permanently assess the risks of the Group, approve the action measures/plans, models and mechanisms for the evaluation, control and mitigation of these risks.
The Board Audit and Finance Committee informs the Board of Directors on the adequacy of the internal information provided by the Executive Committee and of the internal control systems and principles, and on the compliance with the Corporate Governance best practices.
Moreover, the Board Audit and Finance Committee supports the Supervisory Board in appointing the External Auditor as well as defining the scope and remuneration of its work and it reports to the Board of Directors on the quality and independence of the Internal Auditor and should be consulted by management on the appointment of the Internal Audit manager.
External Audit evaluates and reports the risks of reliability and integrity of accounting and financial information, thus validating the internal control system established for this purpose by Sonae Capital.
Internal Audit, acting as an independent internal advisory body, identifies and evaluates the effectiveness and efficiency of risk management and control of business processes and information systems, as well as the risks of non-compliance with laws, contracts, policies and procedures of the companies. Its activity is reported to and monitored by the Board Audit and Finance Committee, and is also reported to the Supervisory Board.
Regarding the interrelationship between the two Audit bodies, the Board Audit and Finance Committee reviews the scope of Internal Audit work and its relations with the scope of the External Auditor's work and analyses with this and with the Internal Audit manager the reports on the review of the annual financial information and on the review of internal control, reporting its findings to the Board of Directors. These reports are issued for the Supervisory Board and for the Board Audit and Finance Committee at the same time.
In turn, Risk Management promotes the performance of procedures and the internal dissemination of best practices, and is responsible for coordinating the entire risk management process of the Sonae Capital Group, collaborating with the risk managers of each business unit in the activities arising from the risk management process, and continuously ensuring the efficiency and effectiveness of the process.
Risk Management, integrated in the Corporate Centre, reports to the Executive Committee. It promotes, coordinates, facilitates and supports the development of Risk Management processes, promoting the inclusion of the risk dimension in strategic and operational decisions. This role and the Internal Audit role are coordinated by managers at the Corporate Centre level of Sonae Capital and their activities are reported and monitored by the Board Audit and Finance Committee of their Board of Directors.
Similar to that which occurs with the Internal Audit and Risk Management roles, the financial and legal risk management role is also coordinated by two managers, at the Corporate Centre level of Sonae Capital and its activities are reported and monitored in the Board Audit and Finance Committee, and also reported to the Supervisory Board.
There are Risk Management Pivots at each business segment level, coordinated by the Group's Risk Management function, which works with the owners of each risk in order to ensure the implementation of the determined action plans, and the permanent update of the risk matrix of each segment.
Contextual Risks: The activity developed by the Sonae Capital Group is shaped by the macroeconomic situation and by the profiles of the business segments where it operates. Considering that a large part of the activity of its subsidiaries is currently developed in Portugal, Sonae Capital is exposed to the situation of the Portuguese economy, which is, in turn, greatly shaped by the evolution of the situation in the Euro Zone.
In May 2011, Portugal formalised a memorandum of understanding with the Troika relative to the Programme for Economic and Financial Stabilisation, which provided 78 billion € in funding to Portugal, disbursed over a period of up to three years and subject to the implementation of a set of budgetary and structural measures. With the end of the Stabilization Programme in May 2014, and despite the adjustments implemented, doubts remain about the evolution of the Portuguese economy.
In view of the foregoing, Sonae Capital's activity, business, operating results, financial position, future prospects or ability to achieve its objectives may be potentially adversely affected by a negative development of the economic situation in Portugal or the Euro Zone.
The Sonae Capital Group has several initiatives in order to mitigate this risk, whether through the internationalisation of business or through strict control of costs, or by presenting innovative and differentiating solutions according to the profile of the markets where it operates.
Financial Risks: Sonae Capital is exposed to a diversified set of risks of a financial nature, namely interest rate, foreign exchange risk (transaction and currency translation risks), liquidity and fluctuations in the capital and debt markets, credit (especially relevant in economic recession) and exposure to commodity prices.
Sonae Capital's financial risk management policy aims to minimise the potential adverse effects of financial market volatility and, to this end, a coherent set of systems and processes are implemented at Sonae Capital enabling the timely identification, monitoring and management by the Corporate Finance function.
The current state of the financial markets has led liquidity risk, credit risk, and capital market and debt fluctuations to take centre stage in corporate priorities for the potential impact on business continuity and development. In fact, the business development of some Sonae Capital subsidiaries may require the reinforcement of Sonae Capital's investment in these subsidiaries, or Sonae Capital may wish to expand its business through organic growth or any acquisitions and business continuity requires the maintenance of liquidity reserves appropriate to the business requirements of the companies. The reinforcement of investment and maintenance of liquidity reserves may be done by means of equity or funds from third parties. Sonae Capital cannot ensure that such funds, if necessary, are obtained under the intended conditions, which may lead to changes or deferrals in the business development objectives or plans, restricting the success of the defined strategic objectives.
In this context, the aforementioned financial risk management systems and processes, centralised in the Company's corporate centre, are established in order to mitigate these risks by ensuring liquidity management through:
(i) short, medium and long-term financial planning based on predictive cash flow models;
(iv) diversification of funding sources and counterparties;
(v) adjustment of the debt maturity profile to the profile of cash flow generation and investment plans;
(vi) maintenance of an adequate level of liquidity by contracting with known banks cash support lines.
Sonae Capital does not contract derivatives or other financial instruments, except those strictly related to the hedging of risks arising from its operational activities and its financing. The risk management policy of the Company and the Group prevents the use of financial derivative instruments for purposes other than the strict hedging of these risks.
Legal Risks: Sonae Capital and its subsidiaries are subject to extensive and often complex regulations as a result of their activities and compliance requires investment in terms of time and other resources. It has legal and tax advice for this purpose. In fact, Sonae Capital and its businesses have a permanent legal and tax function dedicated to the activity, which works in conjunction with other corporate and sovereign functions so as to ensure, in a preventive manner, the protection of Sonae Capital's interests in strict respect for the fulfilment of its legal duties as well as the enforcement of good practices.
Legal and tax advice is also supported, nationally and internationally, by external professionals selected from reputable firms and according to high standards of competence, ethics and experience. However, Sonae Capital and its subsidiaries may be affected by legal and tax changes in Portugal, the European Union and other countries where it operates. Sonae Capital does not control these changes, or changes in the interpretation of laws by any authority. Any changes in legislation in Portugal, in the European Union or in the countries where Sonae Capital carries out its activities may affect the conduct of the business of Sonae Capital or its subsidiaries and, consequently, hinder or impede the achievement of the strategic objectives.
Information Systems Risk: Sonae Capital's information systems are characterised by being comprehensive, multifaceted and distributed. In terms of information security, several actions have been developed to mitigate the risk of compromising the confidentiality, availability and integrity of business data, namely off-site backups, implementation of high availability systems, network infrastructure redundancy, verification and control of the quality of flows between applications, access and profile management and reinforcement of data network perimeter protection mechanisms. On a recurrent basis, the Internal Audit function performs audits in various domains: applications, servers and networks, with the objective of identifying and correcting potential vulnerabilities that may have a negative impact on the business as well as ensuring the protection of the confidentiality, availability and integrity of the information.
Following the audit of the management and governance processes in the information systems, based on the Cobit V5 framework, an Information Security project started in 2016 with a view to addressing the recommendations of the audit evaluation as well as outlining strategies and intervention plans to protect Sonae Capital's information and information systems. This project will culminate in the development of an Information Security Management System founded on policies, standards and procedures, based on information security risk management and supported by specific processes with unequivocally identified and qualified managers.
People Risks: Sonae Capital's ability to successfully implement the defined strategies depends on its ability to recruit and retain the most qualified and competent employees for each role. Although Sonae Capital's human resources policy is geared towards achieving these objectives, it is not possible to guarantee that in the future there may be no limitations in this area.
Insurable Risks: As regards the transfer of insurable risks (technical and operational), the Group's companies contract cover pursuing an objective of rationalisation by the correct adjustment of the financial structure to the values of the risk capital, based on the permanent changes in the businesses encompassed. Moreover, this architecture was improved by the optimisation of the insurance programme in terms of coverage and retention, consistent with each business, internally ensuring effective insurance management.
Sonae Capital, as the shareholdings management company (SGPS), directly and indirectly develops management activities over its subsidiaries, and therefore, the fulfilment of the obligations taken on depends on the cash flows generated by its subsidiaries. Sonae Capital therefore depends on the distribution of dividends by its subsidiaries, the payment of interest, the repayment of loans granted and other cash flows generated by those companies. The ability of the invested companies to make available/repay funds to Sonae Capital will depend in part on their ability to generate positive cash flows from their operational activities, as well as on the statutory, legal and fiscal framework applicable to the distribution of dividends and other forms of payment/return of funds to its shareholders.
Sonae Capital's portfolio includes a diversified business portfolio, therefore some of the main risks its subsidiaries are exposed to may be sectoral. The main risks are identified below.
a. The activities developed by Resorts are subject to economic cycles and depend on the growth of tourism and real estate in Portugal. Thus, the tourism operations of this business depend on tourism demand, which is associated with the evolution of both the national and international economy. Any negative economic developments in Portugal or in the main tourist countries for the Portuguese market may have a negative impact on the performance of this activity, due to a reduction in the number of tourists.
The most relevant risks in the leisure sector, namely in the Fitness segment, where the Sonae Capital Group operates through Solinca Health & Fitness (health clubs), are as follows:
In order to minimise this risk, Solinca Health & Fitness carries out constant benchmarking of its competitors' actions and invests in new formats and products/services, or in the improvement of existing ones, in order to offer its customers an innovative proposal.
c. Making services, equipment and infrastructures available that do not comply with quality levels and the changing needs demanded by customers may expose the company to complaints, hinder customer attraction and loyalty as well as negatively impact on its image and reputation.
Consumers frequently change their preferences and expectations, which requires continuous adaptation and optimisation of the product offer and business concepts. The difficulty or inability to foresee, understand and/or satisfy the frequent variations of the needs and expectations of customers can be reflected in difficulties concerning their loyalty in the medium term.
To anticipate market and consumer trends, Solinca Health & Fitness regularly reviews customer behaviour, satisfaction and loyalty by conducting monthly surveys (Net Promoter Score). The introduction of new concepts, products and/or services is always tested on pilots before being generalised to all clubs. In addition, Solinca Health & Fitness allocates a significant portion of its annual budget to the renewal of equipment and facilities in order to ensure attractiveness and keep up with the challenges imposed by the market.
d. Solinca Health & Fitness may be held liable in the event of accidents or unforeseen circumstances due to inappropriate physical activity that affect the life, health or physical integrity of people, which may have an adverse effect on its reputation and consequently on its results.
Solinca Health & Fitness has several initiatives in place to mitigate this risk, namely the obligation of customers to carry out a medical evaluation questionnaire at the time of enrolment, offering an initial physical evaluation to all customers and encouraging its realisation, training in basic life support for all employees, as well as the existence of occupational accident, property damage and civil liability insurance.
e. Legislative changes (e.g. tax, legal, labour, competition, etc.) may threaten the specific strategies defined by Solinca Health & Fitness in the development of its activities, involve contractual changes with the main stakeholders or dictate an increase in its costs.
The activities related to Refrigeration and Air Conditioning have specific risks, mostly related to the competition of other companies operating in the same markets and the evolution of the economy. The most relevant risks are related to:
a. The activity developed by the Group is shaped by the macroeconomic situation and by the profiles of the markets where it operates. The products developed by the Group have the nature of durable goods, mainly aimed at the real estate and food distribution sectors. The Group's operating activity, as a result, is cyclical and is positively correlated with the cycles of the economy in general and, in particular, with developments in those specific sectors. Accordingly, the Group's business and that of its invested companies may be adversely affected by periods of economic recession, in particular by the deterioration of private investment. The availability of credit in the economy is also relevant to the business, due to the potential impact it has on the real estate market. The Group, through its subsidiaries, is directly represented in Portugal, Brazil, Angola and Mozambique, where it produces and sells. These markets have different macroeconomic, political and social profiles and, as such, are experiencing different responses to the global economic and financial crisis. In fact, the pace at which the various markets will emerge from the current crisis is dependent on variables that the Group does not control. Likewise, the possible occurrence of political and/or social tensions in any of the markets may have a material impact that cannot be estimated on the Group's operations and financial situation.
The development of this segment considering the market framework in Portugal, is therefore based on the growth of the international component, via exports. The evolution of the world economy, the specific risks of the selected countries and the capacity to conquer new markets could, therefore, have an impact on the activity of this segment.
b. The Group's business is geographically diversified, with subsidiaries located in three different continents, therefore there are transactions and balances in reais, kwanzas and meticais.
The consolidated statements of financial position and the income statement are thus exposed to the currency translation risk (risk relative to the value of capital invested in subsidiaries outside the euro area) and the subsidiaries are exposed to the currency translation risk (risk associated with commercial transactions carried out in a currency other than the euro). The transaction risk arises essentially when there is a currency risk related to cash flows denominated in a currency other than the functional currency of each of the subsidiaries. The cash flows of group companies are largely denominated in their respective local currencies. This is true regardless of the nature of the cash flows, i.e. operational or financial, and allows a considerable degree of natural hedging, reducing the Group's transaction risk. In line with this principle, the Group's subsidiaries only contract financial debt denominated in the respective local currency. The currency translation risk arises from the fact that, in the preparation of the consolidated financial statements of the Group, the financial statements of subsidiaries with a functional currency different from the reporting currency of the consolidated accounts (Euro) have to be Converted into Euros. As exchange rates vary between accounting periods and since the value of the subsidiaries' assets and liabilities do not coincide, volatility is introduced in the consolidated accounts.
In order to minimise potentially adverse effects arising from the unpredictability of financial markets, the Group, besides having an exchange risk management policy and implementing control mechanisms for the identification and determination of exposure, sometimes uses derivative instruments to cover this risk.
The Energy production area focuses mainly on the development and management of cogeneration projects.
Cogeneration is a way of rationalizing energy consumption, since the production of electricity from the energy released during combustion is synonymous with a more efficient use of the fuel used – natural gas in the Sonae Capital projects. In a cogeneration plant there is a reduction in fuel consumption, compared to the production of the same quantities of thermal energy and electricity, separately.
Although this type of electricity generation is a more efficient and environmentally friendly alternative, it nevertheless carries with it certain specific risks that may have an impact on the companies' results. The most relevant risks are as follows:
a. The Sonae Capital Group's cogeneration projects use natural gas as the primary fuel in the combined production of electricity and thermal energy, so the purchase price of this raw material has significant weight on the variable cost structure. Consequently, the volatility of the purchase price of natural gas, normally pegged to the price of oil in international markets and the euro/dollar exchange rate, could translate into a significant impact on the company's results and margin.
It should be noted, however, that the tariff for the sale of electricity by cogeneration units is regulated and also pegged to the evolution of the price of oil in the international markets and the euro/dollar exchange rate, which, by itself, allows exposure to this risk to be significantly reduced. In particular, the electricity sales tariff defined by Ordinance 58/2002, the remuneration scheme applicable to most cogeneration units, and the purchase price of natural gas are highly correlated, giving a considerable level of natural hedging as regards gross margin.
However, DL 23/2010 and Ordinance 140/2012 established a new remuneration scheme for cogeneration in Portugal, applicable to new cogeneration units, which entailed the loss of the natural hedging existing to then, since the elasticity of prices to unit variations of the indexing factors is now totally different. The natural gas purchase price has significantly higher sensitivity than the electricity sales tariff, which translates into an increased risk of exposure to the volatility of the natural gas purchase price. This fact will become increasingly relevant as cogeneration facilities move to this new remuneration scheme.
The Sonae Capital Group, in order to mitigate this risk, regularly monitors the development of the natural gas price as well as its future development tendency, assessing at all times the attractiveness of the hedging of this risk by fixing natural gas purchase price over a set period of time, whether with the supplier or through derivative financial instruments.
In addition, as regards the allocation of CO2 emission allowances, the European greenhouse gas emissions allowance trading scheme (ETS) has introduced significant changes in the allocation rules for the period from 2013 onwards. The total quantity of allowances is determined at Community level and the allocation of allowances carried out by auction, with the free allocation still marginally permitted through compliance with benchmarks defined at Community level. The free allocation of allowances follows a downward trend year after year, with a view to its extinction in 2027. The cogeneration units covered by this scheme (rated terminal power above 20MW) will have increasing need to go to the market for CO2 allowances and are exposed to fluctuations in their price.
In order to minimise this risk, the Sonae Capital Group has established a growth plan for this business segment which provides for investment in renewable energy as well as the internationalisation of the business with a view to the technological and geographical diversification of its portfolio.
The following specific risks are identified regarding the production of energy from renewable energy sources:
In order to minimise this risk, the Sonae Capital Group promotes, under the technical due diligence procedure carried out for each of its projects, a thorough study of the resource in order to define different scenarios and the consequent evaluation of the economic feasibility of the projects.
The Energy production area encompasses the following risks of a more general nature, regardless of the primary energy source used:
f. Energy generation under the special schemes in Portugal has the tariffs predefined by the Portuguese State, as a way of encouraging alternative forms of electricity production that are more efficient and environmentally clean. Consequently, the risks regarding the electricity sale price are currently reduced. Although electricity is sold at a price defined by the Portuguese State for a long period of time, the profitability of the operations depends on the stability in the short, medium and long term of regulatory policies and schemes that support the development of energy efficiency.
Any possible governmental changes to energy policy in the future may prove to be a risk to future projects and to the viability of developing the business in the long term.
In order to minimise this risk, the Sonae Capital Group conducts regular preventive and safety audits of the facilities and equipment and periodically reviews and adapts the insurance plans for property damage, operating losses and civil liability in force.
The Sonae Capital Group has a diversified real estate portfolio, the strategic orientation for which is to sell, although subject to a price considered acceptable. However, even if current strategic orientation is to sell, Sonae Capital cannot guarantee the realisation of such or the period when that will occur, especially if no suitable acquisition proposals arise. This real estate portfolio (excluding real estate assets in Tróia) comprises a wide range of assets at different licensing and construction stages, including plots of land with and without construction permits, residential units, construction projects, offices, industrial buildings and commercial spaces, and with extensive geographical dispersion. At 31 December 2016, the date of the most recent valuation of the real estate assets of the Sonae Capital Group carried out by the reference entity Cushman & Wakefield, the valuation amount was 137.5M€. The capital employed in this asset block, at 31 December 2016, amounts to 107.4M€.
The loss of liquidity of portfolio assets and/or difficulties in placement of these assets on the market may affect the ability to grow of the business and the fulfilment of its strategic objectives.
Besides the Sonae Capital Group developing a wide range of activities in various sectors of activity, and therefore exposed to diversified economic cycles, such as Tourism Promotion, Hospitality, Fitness, Energy, Refrigeration and HVAC and the Real Estate and Financial Assets, several of these sectors are still very competitive, through the intervention of national and international companies, so the invested companies of Sonae Capital are exposed to heavy competition. The ability of Sonae Capital's subsidiaries to position themselves adequately in the sectors and markets in which they operate may have a significant impact on Sonae Capital's business or the results of its activities.
The Sonae Capital Group regularly monitors the behaviour of the markets in which it operates, seeking at all times to anticipate changes and/or new market trends, in order to offer its customers an innovative and differentiating proposal.
As a structured and disciplined approach that aligns strategy, processes, people, technologies and knowledge, Risk Management is integrated throughout Sonae Capital's planning process, with the objective of identifying, evaluating and managing the opportunities and threats that the businesses of Sonae Capital face in pursuit of their value creation goals.
Sonae Capital's management and monitoring of its main risks is implemented through different approaches and agents, including:
Internal Control policies and procedures defined at the central level and at the level of the businesses, in order to guarantee:
Regular audits are carried out by the Internal Audit team to ensure permanent compliance with established policies and procedures.
Risk Management Process supported by a uniform and systematic methodology, based on the international standard of Enterprise Risk Management – Integrated Framework of COSO (The Committee of Sponsoring Organizations of the Treadway Commission), which includes, in particular:
• Identification of the causes of risks and indicators to measure these risks;
• Assessment of risk management strategies (e.g. accept, prevent, mitigate, transfer);
| Identification of risks |
Prioritization of risks |
Risk strategy |
Assessment and Monitoring |
|---|---|---|---|
| Identify and assess risks Annually review the matrix, in budget terms |
Establish the importance of each risk in relative terms Allocate an owner |
Definition of key risk measures: (i)Tolerated risk profile; (ii) mitigation actions; (iii) transfer |
Integrated risk assessment: (i) how to measure, (ii) incorporation into the Business Plan and (iii) aggregate levels of risk and hedging |
| Business Risk Model (Individual and Aggregate) Follow-up Group |
Action Plan | Reporting and Planning |
This process comprises the following routines:
In accordance with the methods defined and implemented in previous years, the risk management processes were integrated with the processes of business management planning and control, from the strategic reflection phase to the operational planning phase. The risk management actions are included in the activity and resource plans of the business units and functional units, and monitored throughout the year.
In 2016, the Enterprise Wide Risk Management activities focused mainly on monitoring progress in the implementation of action plans and assessing their impact on risk perceptions, following the annual cycle of Enterprise Wide Risk Management, which is based on the following activities:
| Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec |
|||||
|---|---|---|---|---|---|
| Set-up/review of the risk management function |
Annual performance of risk management |
Monitoring and follow-up |
Review yearly |
||
| Board of Directors |
Review of the align ment of risk mana gement with Sonae Capital's strategy Definition/updating of the governance structure |
Analysis of the im pact of decisions on risk management |
Monitoring of the significant risks and the general risk pro file of Sonae Capital |
Approval of new risk profiles (if applicable) |
|
| Executive Committee |
Definition of periodic risk repor ting mechanisms by business areas |
Approval of the risk profile of Sonae Ca pital at the corporate level and level of each business |
Definition and review of risk appetite defi ned at the corporate and business level Approval of the defined mitigation actions |
Approval of new risk portfolios (if applicable) |
|
| Corporate Risk Manager |
Internal disclosure/ communication of Sonae Capital's risk management poli cies, procedures and milestones |
Aggregation and hierarchy of risks to be handled Support to the Board of Directors for the standardisation and prioritization of the risks of the various businesses Sonae Capital risk profile proposal |
Follow-up of the KRIs of Sonae Capi tal (corporate and business) Follow-up of Sonae Capital's mitigation actions (corporate and business) |
Drawing up situation report of the KRIs and mitigation ac tions of the Group Presenting the situa tion to the Board of Directors |
|
| BU Risk Manager |
Assessment of business risks and definition of risk profiles and files and response strategies |
Update of KRIs Monthly reporting of KRIs and actions |
Analysis of current risks and identifica tion of new critical risks Updating risk files |
Sonae Capital encourages the continuous training and adoption of the best international methodologies and practices in the Risk Management and Internal Audit areas. In this sense, the Group supports staff in attending a training and knowledge updating programme that includes the international professional certification in Internal Audit organised by the Institute of Internal Auditors – that of Certified Internal Auditor (CIA). The members of the Internal Audit team have obtained this professional certification.
External Audit evaluates and reports on the risks of reliability and integrity of accounting and financial information, thereby validating the internal control system established for this purpose by Sonae Capital, which embodies the clear separation between the preparer and its users and the implementation of various validation procedures throughout the process of preparation and disclosure of financial information.
The Board Audit and Finance Committee analyses the risks of the Company, the risk control models and mechanisms adopted and the mitigation measures taken by the Executive Committee. It evaluates their suitability and proposes to the Board of Directors any needs for change of the Company's risk management policy.
The implementation of an effective internal control environment, particularly in the financial reporting process, is a commitment taken by the Board of Directors of Sonae Capital to identify and improve the most relevant processes for preparing and disclosing financial information, with a view to ensure transparency, consistency, simplicity, reliability and relevance. The internal control system is designed to ensure a reasonable guarantee with regard to the preparation of the financial statements, according to the accounting principles used, and the quality of the financial reporting.
The reliability of the financial information is ensured by the clear separation between preparers and its users and the implementation of various control procedures throughout the process of preparation and disclosure of the financial information.
The internal control system for accounting, preparation and disclosure of financial information includes the following key controls:
• The plans, procedures and records of the Group companies allow for a reasonable assurance that transactions are only carried out with general or specific authorisation from management and that these transactions shall be recorded in order to enable financial statements compliance with the generally accepted accounting principles. This also ensures that the companies keep up-to-date records of the assets and that these records are checked against the existing assets. Appropriate steps shall be taken whenever discrepancies come to light;
• The financial information is examined by the business unit administrators and the representatives of the results centres on a systematic and regular basis, thus providing for a constant monitoring and budget control;
Audit and Finance Committee a summary of the key findings from the annual audit on the financial information;
More specific information on how these and other risk factors were mitigated is available in the notes to the consolidated financial statements.
Sonae Capital, SGPS, SA, through its Investor Relations Office, is in constant contact with its shareholders and analysts, providing information that is always up-to-date. In addition, upon request, it provides timely clarification of the relevant facts about the Company's activities, which have made available to public in accordance with the law.
The aim of the Sonae Capital, SGPS, SA Investor Relations Office is to ensure adequate communication with shareholders, investors, analysts and financial markets, in particular with Euronext Lisbon and the Portuguese Securities Commission (CMVM).
When necessary, the Investor Relations Office provides all the information related to relevant events and answers questions from shareholders, investors, analysts and the general public about the financial indicators and information made available to public on the different businesses, keeping a record of the requests received and the answers given.
In strict compliance with the law and the regulations, the Company promptly informs its shareholders and the capital market in general of all the relevant facts related to its activity, avoiding delays between their occurrence and their disclosure, so that informed judgements can be made regarding the progress of the Company's business.
This release is made public through publication on the Portuguese Securities Commission Information Disclosure System (www.cmvm.pt) and on the Company's website (www.sonaecapital.pt).
The Investor Relations Office can be contacted by telephone (+351 22 010 79 03), fax (+351 22 010 79 35), email ([email protected]) or post (Lugar do Espido, Via Norte, Apartado 3053, 4471-907 Maia). The Director of the Investor Relations Office is Nuno Parreiro, who can be contacted using the same above numbers and address.
The representative for Capital Market Relations is Anabela Nogueira Matos, who can be contacted by telephone (+351 22 010 79 25), fax (+351 22 010 79 35) or email (anm@ sonaecapital.pt).
In 2016, the Investor Relations Office received a normal number of requests for information, bearing in mind the importance of the Company in the capital market.
Sonae Capital, SGPS, SA, through its Investor Relations Office, is in constant contact with its shareholders and analysts, providing information that is always up-to-date. In addition, upon request, it provides clarification of the relevant facts about the Company's activities, which have made available to public in accordance with the law. All information requested by investors is analysed and answered in the shortest possible time, by email, post or telephone, whichever is most suitable.
Sonae Capital has a website where all the information about the Company is posted. The address is: http://www.sonaecapital.pt.
Specific information is available at the following address:
• http://www.sonaecapital.pt/pt/investidores/identificacao-da-sociedade
Specific information is available at the following addresses:
Specific information is available at the following addresses:
Specific information can be consulted at the following address:
Specific information can be consulted at the following address:
• http://www.sonaecapital.pt/pt/investidores/assembleias-gerais
Specific information can be consulted at the following address:
• http://www.sonaecapital.pt/pt/investidores/assembleias-gerais
Based on the remuneration policy and other payments approved by the Shareholders' General Meeting, the Sonae Capital Remuneration Committee is responsible for approving remuneration and other payments to the Board of Directors, the Supervisory Board and the members of the Shareholders' General Meeting.
With regard to the remuneration of the Executive Directors, the Board Nomination and Remuneration Committee assists the Remuneration Committee, presenting its proposals before any decisions are made.
The Board of Directors appointed the Board Nomination and Remuneration Committee (BNRC) for the 2015-2017 term of office.
The BNRC is composed the Chairman of the Board of Directors, Duarte Paulo Teixeira de Azevedo, Vice-Chairman, Álvaro Carmona e Costa Portela and the independent Non-Executive Director Francisco de La Fuente Sánchez.
The Board Nomination and Remuneration Committee, which is solely composed of non-executive directors, supports the Remuneration Committee in the performance of its duties.
The members of the Remuneration Committee are independent of the board of directors, as explained in the paragraph below.
Duarte Paulo Teixeira de Azevedo, Chairman of the Board of Directors and non-executive member of this body, is on the Remuneration Committee. He was elected to this position by the Shareholders' General Meeting. His participation in the Remuneration Committee corresponds to representation of the shareholder interest, acting in that capacity and not in his capacity as Chairman of the Board of Directors. To ensure these duties are carried out independently, this member abstains from discussing or deciding on matters where conflict of interest exists or may exist.
The professional experience and qualifications of the members of the Remuneration Committee are detailed in the curricula vitae included in the annex to this document and enable them to carry out their duties carefully and skilfully. They have the adequate skills to carry out their duties.
The remuneration policy for the Company's statutory bodies is approved by the Shareholders' General Meeting.
The Shareholders' General Meeting held on 7 April 2016, consistently continuing with the policy previously followed, approved the Remuneration and Compensation Policy in force, in compliance with the provisions of article 2 of Law no. 28/2009 of 19 June.
The remuneration proposals for the members of the statutory bodies are decided based on:
The remuneration policy for the members of the governing bodies and managers of Sonae Capital, SGPS, SA in force during the year under review is detailed in the corresponding annex to this report.
The remuneration policy is a formal instrument ensuring alignment between the management team and the interests of the shareholders, insofar as the set of remuneration components is separate from the variable part, whose amount depends on the individual performance and the performance of Sonae Capital. This encourages a long-term interests-oriented company management and behaviours weighing the risks taken.
The structure of the remuneration policy includes control mechanisms, bearing in mind the connection to individual and collective performance, thus preventing excessive risk-taking behaviours. This objective is also reinforced by the fact that each Key Performance Indicator (KPI) is limited to a maximum value.
The remuneration policy for the Company's statutory bodies is approved by the Shareholders' General Meeting. The Remuneration Committee is responsible for preparing the remuneration policy proposal and approving the remuneration of the Board of Directors, including executive and non-executive members, and other Sonae Capital bodies. The members of the Remuneration Committee are elected by the Shareholders' General Meeting, which also sets the corresponding remuneration.
The Board Nomination and Remuneration Committee supports the Remuneration Committee in setting the remuneration for the Executive Directors, preparing remuneration proposals based on relevant information requested by the Remuneration Committee.
Guiding principles for the remuneration policy were established within the principles of corporate governance.
The Policy is defined in comparison with the global market and the practices of comparable companies, according to information from the main studies carried out in Portugal and in European markets. Mercer and Hay Group market studies are presently used as reference.
Therefore, the remuneration parameters for the members of the governing bodies are set and periodically reviewed in accordance with the remuneration practices of comparable national and international companies, and the potential maximum amounts to be paid to the members of the governing bodies, both individual and aggregate, are in line with market practices. The members of the governing bodies are individually and positively differentiated, considering specific factors, such us the profile and CV of the member, the nature and description of the duties and powers of the governing body in question and of the actual member and the degree of direct correlation between individual performance and business performance, among others.
The average applicable to senior executives in Europe is used to determine global market values. For remuneration purposes the group of peer companies consists of the societies with securities admitted to trading on Euronext Lisbon.
The Policy provides for the attribution of bonuses calculated according to the degree of success of the Company. The variable component of the remuneration is defined so as to link the bonuses to the degree of individual and collective performance. When predefined objectives are not achieved, measured using business and individual KPIs, the value of the short and medium term incentives will be partially or totally reduced.
Part of the Executive Directors variable bonus refers to a 4-year period, including the year to which it relates and the 3-year deferral period. The amount depends on the share performance and the extent to which the medium and long term objectives had been achieved during the deferral period. This ensures an alignment between the director, the interests of the shareholders and the medium-term performance, aimed at business sustainability.
All aspects of the remuneration structure are clear and openly disclosed, internally and externally, through publication of the documents on the Company's website. This communication process helps to promote equity and independence.
The policy aims at ensuring a balance between the interests of the Company, the market position, the expectations and motivation of the members of the governing bodies and the need to retain talent.
The Remuneration and Compensation Policy applicable to the governing bodies and Company managers follow EU guidelines, national legislation and the recommendations from the CMVM.
The Shareholders' General Meeting held on 7 April 2016, consistently continuing with the policy previously followed, approved the Remuneration and Compensation Policy in force, which is guided by the following general principles:
• Awarding no compensation to the directors or the members of the other governing bodies due to their term of office coming to an end, at its expiration or by early termination, whatever the reason, notwithstanding the Company's duty of compliance with the legal provisions in force concerning this matter;
The remuneration package for Executive Directors is defined in comparison with the market, based on market studies on remuneration packages for senior executives in Portugal and in Europe. The fixed remuneration for comparable market situations should then correspond to the average market value and the total remuneration should be close to the third quartile of the market.
Who are our comparable/peer companies?
Sonae Capital reviews its remuneration policy annually as part of the risk management process, with a view to creating a remuneration policy that is fully compliant with the expected risk profile. In 2016 no problematic payment practices that may pose relevant risks to Sonae Capital were identified.
When designing the remuneration policy, the need to control behaviours involving excessive risk taking was taken into account, with a balanced relevance assigned to the variable component so as to associate the individual remuneration to collective performance.
Sonae Capital has internal control procedures for the remuneration policy, aimed at identifying potential risks posed by the remuneration policy itself.
On the one hand, the variable remuneration structure is designed so as to discourage risky behaviour, insofar as the remuneration is associated with performance assessment. Definition of objective KPIs enables this method to work as an efficient control mechanism.
On the other hand, Sonae Capital policy does not allow for agreements aimed at minimising the essence of the Medium-Term Variable Bonus to be concluded. This restriction includes transactions aimed at eliminating or minimising the risk of fluctuation in share prices.
The Board Nomination and Remuneration Committee brings its remuneration proposals for the directors before the Remuneration Committee for approval, in accordance with the internal procedure adopted.
The fixed remuneration of the Executive Directors is established based on the level of responsibility of the Board of Directors and is reviewed annually.
According to Sonae Capital's remuneration policy, in addition to the fixed remuneration, the Executive Directors also benefit from an incentive plan, also called variable bonus.
The variable bonus is awarded in the first quarter of the year following the year to which it relates and depends on the previous year performance and aims to guide and compensate the board directors for achieving pre-defined objectives. This is divided into two parcels:
The various components of the annual remuneration are clearly shown in the following table:
| Components | Description | Objective | Market position | |
|---|---|---|---|---|
| Fixed | Basic salary | VAnnual salary (in Por tugal the fixed annual salary is paid in 14 parts) |
Adequacy to the status and responsibilities of the Director |
Average |
| Variable | Short term variable bonus (STVB) |
Performance bonus paid in the first half of the following year, after the income for the year has been calculate |
Designed to ensure competitiveness of the remuneration package and a link between the remuneration to the company objectives |
Third quartile |
| Medium term varia ble bonus (MTVB) |
Compensation deferred for 3 years; the amount established depends on the share performance |
Third quartile |
The variable bonus may be paid in cash, using any of the payment methods provided for by Law and in the Company's Articles of Association.
There is currently no plan assigning share acquisition options.
The remuneration of Non-Executive Directors is established according to market data and the following principles: (1) attribution of a fixed remuneration (2) attribution of an annual responsibility allowance. No remuneration is paid in the form of a variable bonus.
The variable bonus is discretionary in nature and because its value depends on the achievement of objectives payment is not guaranteed. The variable bonus is calculated annually and the value of the predefined objective varies between 30% and 60% of the total annual remuneration (fixed remuneration and objective value of the variable bonus)
The variable component of the remuneration is calculated based on performance assessment of a set of performance indicators relating to the various businesses which are primarily economic and financial in nature – "Key Performance Indicators of Business Activity" (Business KPIs). The content of the performance indicators and their
specific weight in determining the effective remuneration provide for the alignment of the Executive Directors with the strategic objectives defined and the compliance with the legal regulations governing the company business.
The value of each bonus has a minimum limit of 0% and a maximum limit of 140% of the predefined target.
Payment of at least 50% of the variable component of the remuneration for the year to which it relates is deferred for a period of 3 years, in a total of four years, as provided for in point 70.1 (Medium Term Variable Bonus).
The MTVB is one of the components of Sonae Capital's Remuneration Policy. This component differs from the others as it has a restricted and casuistic character, being subject to the eligibility rules set out for that purpose.
The MTVB allows the eligible persons to share with shareholders the value that is created as a result of their direct influence on the strategy definition and management of the underlying businesses, in the proper measurement of the annual assessment of their performance.
The MTVB constitutes a way of aligning the executive directors' interests with the company objectives, reinforcing their commitment and strengthening the perception of the importance of their performance for the success of Sonae Capital, reflected in the market capitalisation of the share.
The executive directors of the company and of its subsidiary companies are eligible to be awarded the MTVB. According to the remuneration policy approved by the Board of Directors, the MTVB plan may also apply to employees covered by that policy.
| Participants | Reference value of the medium-term variable bonus (% of the total variable remuneration target) |
|---|---|
| Directors Company Executive Directors |
At least 50% |
| Directors Executive Directors of Business Units |
At least 50% |
| Employees | terms to be defined by the Board of Directors of each Company |
The MTVB is set out on a period of four years, including the year to which it relates and a three-year deferral period.
The MTVB is valued at the date of attribution using prices which represent the price of the share, in the Portuguese stock market, considering for this effect the most favourable of the following: closing share price of the first day of trading after the Shareholder's General Meeting or the average closing share price (regarding the thirty-day period of trading prior to the Shareholder's General Meeting).
Members entitled to MTVB have the right to acquire a number of shares corresponding to the division between the amount of MTVB granted and the price of the share at the date of attribution calculated under the terms of the previous paragraph. If, after the granting date and before its exercise, dividends are distributed, changes in the nominal value of shares or in the share capital of the company occur or any other change in equity with impact in the economic value of the attributed rights, the number of shares attributed will be adjusted to an equivalent figure considering the effect of the mentioned changes.
In line with the statement of a policy that strengthens the alignment of executive directors with the company's long term interests, the Shareholders' Remuneration Committee can, at its discretion, adjust the percentage discount granted to the executive directors for acquisition of shares, and determine that the executive director contributes to the acquisition of shares up to a percentage that cannot exceed 5% of its share price at the date of the share transmission. All other employees to whom that right is assigned may acquire the shares under the conditions established by the Board of Directors of each Company.
When exercising the right to acquire shares, as granted under the scope of the MTVB, the Company retains the right to pay the equivalent value in cash at the vesting date rather than transfer actual shares.
The acquisition right of the shares attributed by the MTVB become due at the end of the deferral period.
The right to exercise the acquisition right of shares granted under the plan expires if the contractual link between the member and the company ceases before the threeyear period subsequent to its attribution, notwithstanding situations included in the following paragraphs.
The right will remain valid in case of permanent incapacity or death of the member, in which case the payment is made to the member or to his/her heirs on the vesting date.
In case of retirement of the member, the attributed right can be exercised in the respective vesting date. To ensure the effectiveness and transparency of the remuneration and compensation policy objectives, it was agreed that the executive directors of the company:
The Company did not establish any variable remuneration in options.
The main parameters and grounds for the variable remuneration system are described in the remuneration policy approved by the Shareholders' General Meeting of 7 April 2016, available at www.sonaecapital.pt.
The Company has no supplementary pension or early retirement schemes in place for Directors.
During 2016, remuneration and other payments made to the members of the Board of Directors, were as follow
| Name | Fixed Remuneration |
Short Term Variable Remuneration |
Deferred Performance Bonus |
Total |
|---|---|---|---|---|
| Board of Directors in office | ||||
| Maria Cláudia Teixeira de Azevedo | 143,533 | 58,800 | 97,354 | 299,687 |
| Ivone Pinho Teixeira | 139,040 | 41,702 | 105,915 | 286,657 |
| Miguel Jorge Moreira da Cruz Gil Mata (1) | 90,063 | 10,514 | 0 | 100,577 |
| Executive Directors Subtotal | 372,636 | 111,016 | 203,269 | 686,921 |
| Duarte Paulo Teixeira de Azevedo | 142,300 | 0 | 0 | 142,300 |
| Álvaro Carmona e Costa Portela | 72,300 | 0 | 0 | 72,300 |
| Francisco de La Fuente Sánchez | 44,800 | 0 | 0 | 44,800 |
| Paulo José Jubilado Soares de Pinho | 34,800 | 0 | 0 | 34,800 |
| Non-executive Directors Subtotal | 294,200 | 0 | 0 | 294,200 |
| Total | 666,836 | 111,016 | 203,269 | 981,121 |
(1) Member elected at the Shareholder's General Meeting on 7 April 2016 and remunerated from that date. The remuneration prior to that date was paid through controlled company Capwatt Brainpower SA, as shown in point 78.
The remuneration of Miguel Jorge Moreira da Cruz Gil Mata, director of Sonae Capital, attributed by the controlled and in a group relationship company, until 7 April 2016, is described in the following table:
| Name | Fixed Remune ration |
Short Term Variable Remu neration |
Deferred Performance Bonus |
Total |
|---|---|---|---|---|
| Miguel Jorge Moreira da Cruz Gil Mata | 39,577 | 40,921 | 131,973 | 212,471 |
The variable bonus for the executive directors was attributed based on the performance assessment and the remuneration policy approved at the Shareholders' General Meeting on 7 April 2016, as detailed in point 71 above and shown in the remuneration table under point 77 above.
The bonus paid in the form of profit-sharing is contained in the Short-Term Variable Bonus listed in the table under point 77 above.
No compensation to former executive directors is due or was paid.
In 2016, the members of the Supervisory Board of Sonae Capital, SGPS, SA received the following fixed remuneration (no other type of remuneration was received):
| Name | Fixed Remuneration (Values in euros) |
|---|---|
| António Monteiro de Magalhães | 9,200 |
| Manuel Heleno Sismeiro | 7,200 |
| Carlos Manuel Pereira da Silva | 7,200 |
| Total | 23,600 |
The remuneration received by the Statutory Auditor is detailed in point 47 above.
In 2016, the Chairman of the Board of the Shareholders' General Meeting received the amount of 5,000€ as fixed remuneration.
In the event of removal without just cause of the members of the Board of Directors, the policy of the Group determines the payment of the compensation provided for by the law, without any additional compensation. A different value may be negotiated according in each situation if deemed more suitable by both parties.
There are no individual agreements with directors defining the calculation method for any compensation in case of resignation, removal without just cause or termination of the employment relationship, following a change in the control of the Company.
The share attribution plan, with the conditions defined in point 73, includes the variable component of the remuneration and is addressed to the Executive Directors, as well as employees of Group companies, under terms to be defined by the Boards of Directors in question.
The attribution plan is described in points 71 to 73.
The remuneration and compensation policy for governing bodies, as well as the share attribution plan in force, were approved at the Annual General Meeting held on 7 April 2016, upon proposal from the Remuneration Committee, as laid down in Art. 2 of Law no. 29/2009 of June, and Recommendation II.3.4 CMVM (2013).
The remuneration policy approved upon the proposal from the Remuneration Committee established the principle of inalienability of the shares accessed by the executive directors of the company under the MTVB, in accordance with Recommendation III.6 CMVM (2013).
The decisions of the Annual General Meeting under review can be consulted at http:// www.sonaecapital.pt/investidores/assembleias-gerais.
The ongoing MTVB plans for the executive members of the Board of Directors of Sonae Capital in 2016 can be summarised as follows:
| Data atribuição | 31.12.2016 | ||||||
|---|---|---|---|---|---|---|---|
| Granting Year |
Vesting Year | Number of participants1 |
# shares granted |
Share Price | Value | Share Price | Value |
| 2014 | 2017 | 2 | 210,386 | 0,461 € | 97,058 € | 0,748 € | 157,369 € |
| 2015 | 2018 | 2 | 287,391 | 0,392 € | 112,571 € | 0,748 € | 214,968 € |
| 2016 | 2019 | 3 | 312,053 | 0,573 € | 178,650 € | 0,748 € | 233,416 € |
| Total | 809,830 | 388,279 € | 605,753 € |
According to the remuneration policy approved, the Executive Directors must not sell, until the end of their term of office, the company shares acquired under the attribution of the variable remuneration up to the limit of twice the total annual remuneration value, with the exception of those that need to be sold in order to pay the taxes on the benefits from those shares.
In 2016, the Company did not approve any stock option plan.
There are no mechanisms of control for employees participating in the share capital Company.
The transactions between the Company and any related parties are governed by principles of thoroughness, transparency and strict compliance with the market competition rules. These transactions are subject to specific administrative procedures that arise from regulatory requirements, in particular those related to transfer price rules or the rules on voluntary adoption of internal checks and balances, particularly processes for reporting or formal validation, according to the value of the transaction in question.
In 2010, the Supervisory Board adopted the regulation on Company transactions with shareholders holding qualifying holdings (under the terms of art. 16 and 20 of the Portuguese Securities Code) and its related parties (definition in art. 20(1) of the Portuguese Securities Code), which establishes the relevant level of transactions carried out from which the Executive Committee must notify the Audit and Finance Committee and the Supervisory Board.
The adoption of this regulation implies that all transactions with related parties above 1 million euros are subject to half-yearly reporting to these two bodies by the Secretary of the Executive Committee. Transactions above 10 million euros must be formally submitted to the prior opinion of the Audit and Finance Committee, the Board of Directors and the Supervisory Board.
Under this regulation, in addition to the notification of the transaction, the Executive Committee shall also submit to the Audit and Finance Committee and the Supervisory Board the procedures established to ensure that the transaction is concluded under normal market conditions and does not entail any conflicts of interest.
After receiving all the relevant information, the Supervisory Board will issue its opinion on the transactions referred to it.
In 2016, the Supervisory Board received regular information on the transactions with related parties and detailed information was provided whenever warranted.
During the year, there was no need for prior approvals under the regulation in force.
As described in point 10, there were no significant business or other relationships between the holders of qualifying holdings and the company in 2016.
Business or transactions with holders of qualifying holdings or companies held by them that are not considered significant are part of normal activity of Sonae Capital's subsidiaries and are carried out under normal market conditions.
There were no business or transactions with any member of the board of directors or of the supervisory board in 2016.
The transactions with the Statutory Auditor related to various audit services were approved by the Supervisory Board and are detailed under point 47 of this report.
The transactions with companies in a control or group relationship were carried out under normal market conditions and are part of the Company's normal activity. The following types of transactions should be highlighted:
In addition to regular transactions, the following should also be pointed out:
The value of trading and the balances are disclosed in the notes to the consolidated financial statements, as stated in point 92.
91. Description of the procedures and criteria applicable to the intervention of the Supervisory Body for the purpose of conducting a prior assessment of the transactions to be concluded between the Company and holders of qualifying holding or entities with whom they are in a relationship, under the terms of Article 20 of the CVM
The procedures and criteria were already mentioned under point 87 above.
Relevant information on related party business relationships is available in note 45 of the Notes to the Consolidated Company accounts and in note 20 of the Notes to the Individual Company accounts, available on the Company's website www.sonaecapital. pt (investors tab, Annual Report and Accounts section).
This Corporate Governance Report contains a description of the governance structure, policies and practices followed by the Company and meets the standards set out in article 245-A of the Portuguese Securities Code and the duties of information expressed in the Portuguese Securities Commission (CMVM) Regulation No. 4/2013 of 1 August. The report also discloses, in accordance with the comply or explain principle, the Company's compliance with the CMVM recommendations provided for in the Corporate Governance Code, issued by the CMVM in 2013.
This document should be read as an integral part of the Annual Management Report and Consolidated and Individual Financial Statements for 2016.
The Company met the duties of information required in article 3 of Law no. 28/2009 of 19 June, articles 447 and 448 of the Portuguese Companies Code, article 245-A of the Portuguese Securities Code and Regulation No. 5/2008 of the CMVM.
The Company adopted the Corporate Governance Code published by the CMVM in July 2013.
All the legal and regulatory rules referred to in this Report are available at www.cmvm.pt.
Sonae Capital has been promoting the implementation and adoption of the best corporate governance practices, basing its policy on high standards of ethics and social responsibility.
The Board of Directors aims to implement an integrated and effective Group management, which will create value for the Company, promoting and ensuring the legitimate interests of shareholders, employees and stakeholders, while encouraging transparency in the relationship with investors and the market.
To this end, we would point out that of the forty recommendations of the new CMVM Corporate Governance Code of 2013, the Company has fully adopted thirty-five, with five not being applicable for the reasons set out below, which constitutes fullest adoption of these recommendations.
Below is a list of the recommendations included in the CMVM Corporate Governance Code, under the terms and for the purpose of article 245-A(1) (o) of the Portuguese Securities Code:
I.1 Companies shall encourage shareholders to attend and vote at general meetings and shall not set an excessively large number of shares required for the entitlement of one vote, and implement the means necessary to exercise the right to vote by mail and electronically
RECOMMENDATION FULLY ADOPTED – POINT 12 OF THIS REPORT
The Company encourages its shareholders to take part in the General Meetings, namely attributing one vote to each share, not limiting the number of votes that can be held or cast by each shareholder and ensuring that the shareholders have the means required for postal or electronic voting.
In addition, the Company publishes in its website the date of the notice for each Shareholders' General Meeting, the standard documents designed to facilitate access to information, transmission of shareholders' communications to ensure their presence at the general meeting, and an email address for clarification of any doubts and receipt of all the notices of participation in the General Meeting.
I.2 Companies shall not adopt mechanisms that hinder the passing of resolutions by shareholders, including fixing a quorum for resolutions greater than that provided for by law.
RECOMMENDATION FULLY ADOPTED – POINTS 12, 13 AND 14 OF THIS REPORT
The Company's Articles of Association do not set a decision-making quorum higher than that provided for by law.
I.3 Companies shall not establish mechanisms intended to cause mismatching between the right to receive dividends or the subscription of new securities and the voting right of each common share, unless duly justified in terms of longterm interests of shareholders.
RECOMMENDATION FULLY ADOPTED – POINTS 12 AND 13 OF THIS REPORT
No mechanism of this kind has been introduced.
I.4 The company's articles of association that provide for the restriction of the number of votes that may be held or exercised by a sole shareholder, either individually or in concert with other shareholders, shall also foresee for a resolution by the General Assembly (5 year intervals), on whether that statutory provision is to be amended or prevails – without super quorum requirements as to the one legally in force – and that in said resolution, all votes issued be counted, without applying said restriction.
The Articles of Association do not establish any limitation to the number of votes that can be cast by one shareholder.
I.5 Measures that require payment or assumption of fees by the company in the event of change of control or change in the composition of the Board and that which appear likely to impair the free transfer of shares and free assessment by shareholders of the performance of Board members, shall not be adopted.
RECOMMENDATION FULLY ADOPTED – POINTS 4 AND 84 OF THIS REPORT
The Company does not unilaterally adopt policies causing any of the restrictions listed in the recommendation. Contracts concluded by the Company reflect the protection of company interests, with a view to achieving long term business sustainability under the background of market conditions.
II.1.1 Within the limits established by law, and except for the small size of the company, the board of directors shall delegate the daily management of the company and said delegated powers shall be identified in the Annual Report on Corporate Governance.
RECOMMENDATION FULLY ADOPTED – POINTS 28 AND 29 OF THIS REPORT
The Board of Directors delegated day-to-day running of the Company to the Executive Committee.
II.1.2 The Board of Directors shall ensure that the company acts in accordance with its objectives and shall not delegate its responsibilities as regards the following: i) define the strategy and general policies of the company, ii) define business structure of the group iii) decisions considered strategic due to the amount, risk and particular characteristics involved.
RECOMMENDATION FULLY ADOPTED – POINT 21 OF THIS REPORT
Non-delegated powers of the Board of Directors follow the rules of this recommendation.
II.1.3 The General and Supervisory Board, in addition to its supervisory duties supervision, shall take full responsibility at corporate governance level, whereby through the statutory provision or by equivalent means, shall enshrine the requirement for this body to decide on the strategy and major policies of the company, the definition of the corporate structure of the group and the decisions that shall be considered strategic due to the amount or risk involved. This body shall also assess compliance with the strategic plan and the implementation of key policies of the company.
RECOMMENDATION NOT APPLICABLE
The governance model adopted does not include a General and Supervisory Board.
II.1.4 Except for small-sized companies, the Board of Directors and the General and Supervisory Board, depending on the model adopted, shall create the necessary committees in order to:
a) Ensure a competent and independent assessment of the performance of the executive directors and its own overall performance, as well as of other committees;
b) Reflect on the system structure and governance practices adopted, verify its efficiency and propose to the competent bodies, measures to be implemented with a view to their improvement.
The Board of Directors has set up two specialized committees, made up of non-executive members, to ensure the quality of the work performed. The Audit and Finance Committee and the Board Nomination and Remuneration Committee are in operation.
II.1.5 The Board of Directors or the General and Supervisory Board, depending on the applicable model, should set goals in terms of risk-taking and create systems for their control to ensure that the risks effectively incurred are consistent with those goals.
RECOMMENDATION FULLY ADOPTED – POINTS 29 AND 51 OF THIS REPORT
The Board of Directors has set up internal risk control systems with the appropriate components.
II.1.6 The Board of Directors shall include a number of non-executive members ensuring effective monitoring, supervision and assessment of the activity of the remaining members of the board.
RECOMMENDATION FULLY ADOPTED – POINTS 18 AND 29 OF THIS REPORT
The Board of Directors consists of a total of seven members, of whom four are nonexecutive directors.
RECOMMENDATION FULLY ADOPTED – POINT 18 OF THIS REPORT
The Board of Directors includes two independent, non-executive directors who meet the independence criteria in this recommendation.
II.1.8 When board members that carry out executive duties are requested by other board members, said shall provide the information requested, in a timely and appropriate manner to the request.
RECOMMENDATION FULLY ADOPTED – POINT 29 OF THIS REPORT
Throughout the year, the Executive Committee discloses its decisions to the Board of Directors on a timely basis. The executive members provide clarifications, by their own initiative, as well in response to requests from non-executive members and other members of corporate bodies, so that the latters have the necessary information to fulfil their roles.
II.1.9 The Chair of the Executive Board or of the Executive Committee shall submit, as applicable, to the Chair of the Board of Directors, the Chair of the Supervisory Board, the Chair of the Audit Committee, the Chair of the General and Supervisory Board and the Chairman of the Financial Matters Board, the convening notices and minutes of the relevant meetings.
RECOMMENDATION FULLY ADOPTED – POINT 29 OF THIS REPORT
The Chairman of the Executive Committee has made available all information regarding the meetings held to the Chairman of the Board of Directors and to the Chairman of the Supervisory Board.
II.1.10 If the chair of the board of directors carries out executive duties, said body shall appoint, from among its members, an independent member to ensure the coordination of the work of other non-executive members and the conditions so that said can make independent and informed decisions or to ensure the existence of an equivalent mechanism for such coordination.
The Chairman of the Board of Directors does not have an executive role.
II.2.1 Depending on the applicable model, the Chair of the Supervisory Board, the Audit Committee or the Financial Matters Committee shall be independent in accordance with the applicable legal standard, and have the necessary skills to carry out their relevant duties.
RECOMMENDATION FULLY ADOPTED – POINTS 32 AND ANNEX TO THIS REPORT
The Chairman of the Supervisory Board is independent, in accordance with the criteria provided for in art. 414(5) of the Portuguese Companies Code, and has the skills and experience required to carry out his duties.
II.2.2 The supervisory body shall be the main representative of the external auditor and the first recipient of the relevant reports, and is responsible, inter alia, for proposing the relevant remuneration and ensuring that the proper conditions for the provision of services are provided within the company.
RECOMMENDATION FULLY ADOPTED – POINT 38 OF THIS REPORT
The Supervisory Board interacts with the Statutory Auditor and the External Auditor so as to supervise their activity and independence, in the exercise of its functions, and as determined by the operating rules in this Board's Regulation, and receive their reports. Concurrent submission of the reports to the Board of Directors by the Statutory Auditor and External Auditor is not regarded by the Company as calling into question the compliance with this recommendation.
II.2.3 The supervisory board shall assess the external auditor on an annual basis and propose to the competent body its dismissal or termination of the contract as to the provision of their services when there is a valid basis for said dismissal.
RECOMMENDATION FULLY ADOPTED – POINT 28 OF THIS REPORT AND ANNUAL REPORT AND OPINION OF THE SUPERVISORY BOARD
The Supervisory Board shall assess the External Auditor on an annual basis and include the assessment in its annual report and opinion, made available along with the other accounting documents at www.sonaecapital.pt (investors tab, Corporate Governance section, General Meetings).
II.2.4 The supervisory board shall assess the functioning of the internal control systems and risk management and propose adjustments as may be deemed necessary.
RECOMMENDATION FULLY ADOPTED – POINT 38 OF THIS REPORT
The Board of Directors proactively implements the internal control and risk management system. The Supervisory Board shall assess the effectiveness of these systems and propose the optimisation measures it deems necessary and comments on those in its annual report and opinion.
II.2.5 The Audit Committee, the General and Supervisory Board and the Supervisory Board decide on the work plans and resources concerning the internal audit services and services that ensure compliance with the rules applicable to the company (compliance services), and should be recipients of reports made by these services at least when it concerns matters related to accountability, identification or resolution of conflicts of interest and detection of potential improprieties.
The Supervisory Board shall establish with the Internal Audit the action plan to be developed, supervise its activity, receive regular activity reports, assess the results and findings, checks for the existence of any irregularities and provides the guidelines it deems appropriate.
II.3.1 All members of the Remuneration Committee or equivalent should be independent from the executive board members and include at least one member with knowledge and experience in matters of remuneration policy.
Duarte Paulo Teixeira de Azevedo, Chairman of the Board of Directors and non-executive member of this body was elected to these positions at the Shareholders' General Meeting, upon proposal from the majority shareholder, Efanor Investimentos, SGPS, S.A. His participation in the Remuneration Committee corresponds to representation of the shareholder interest, acting in that capacity and not in his capacity as Chairman of the Board of Directors. The two additional members of the Remuneration Committee are independent.
To ensure these duties are carried out independently, this member abstains from discussing or deciding on matters where conflict of interest exists or may exist. The adoption of this procedure ensures the necessary conditions for independence of the actions of the members and the decisions taken by this body.
II.3.2 Any natural or legal person that provides or has provided services in the past three years, to any structure under the board of directors, the board of directors of the company itself or who has a current relationship with the company or consultant of the company, shall not be hired to assist the Remuneration Committee in the performance of their duties. This recommendation also applies to any natural or legal person that is related by employment contract or provision of services with the above.
The Board Nomination and Remuneration Committee, which is solely composed of non-executive directors, supports the Remuneration Committee in the performance of its duties. These duties are supported by international consultants of recognised ability. Their independence is ensured by their independence from the Board of Directors, the Company and the Group and by their wide experience and recognition in the market.
II.3.3 A statement on the remuneration policy of the management and supervisory bodies referred to in Article 2 of Law No. 28/2009 of 19 June, shall also contain the following:
a) Identification and details of the criteria for determining the remuneration paid to the members of the governing bodies ;
b) Information regarding the maximum potential, in individual terms, and the maximum potential, in aggregate form, to be paid to members of corporate bodies, and identify the circumstances whereby these maximum amounts may be payable;
c) Information regarding the enforceability or unenforceability of payments for the dismissal or termination of appointment of board members.
RECOMMENDATION FULLY ADOPTED: POINTS 69 AND 80 OF THIS REPORT, AS WELL AS THE REMUNERATION POLICY APPROVED ON 7 APRIL 2016.
The statement on the remuneration policy was delivered at the Annual General Meeting on 7 April 2016 and includes the information referred to in this recommendation. Payments for dismissal or termination of duties of directors are not enforceable, notwithstanding the applicable legal provisions.
The statement on the remuneration policy is available at http://www.sonaecapital.pt
II.3.4 Approval of plans for the allotment of shares and/or options to acquire shares or based on share price variation to board members shall be submitted to the General Meeting. The proposal shall contain all the necessary information in order to correctly assess said plan.
The medium-term variable remuneration plan, including its implementation, was approved at the Annual General Meeting held on 7 April 2016 and is available at http://www.sonaecapital.pt
II.3.5 Approval of any retirement benefit scheme established for members of corporate members shall be submitted to the General Meeting. The proposal shall contain all the necessary information in order to correctly assess said system.
RECOMMENDATION NOT APPLICABLE
The remuneration policy approved does not establish any scheme of retirement benefits.
III.1 The remuneration of the executive members of the board shall be based on actual performance and shall discourage taking on excessive risk-taking.
RECOMMENDATION FULLY ADOPTED – POINTS 69 TO 76 OF THIS REPORT AND REMUNERATION POLICY APPROVED ON 7 APRIL 2016
The remuneration of the members of the Board of Directors carrying out executive duties shall be based on the performance of the directors, measured against predetermined criteria and designed so as to align their performance with the Company's sustainability and the stability of the interest of the shareholders, discouraging excessive risk taking.
III.2 The remuneration of non-executive board members and the remuneration of the members of the supervisory board shall not include any component whose value depends on the performance of the company or of its value.
RECOMMENDATION FULLY ADOPTED – POINTS 69 TO 76 OF THIS REPORT AND REMUNERATION POLICY APPROVED ON 7 APRIL 2016
The remuneration of the non-executive members of the Board of Directors consists solely of a fixed value and is not linked to the Company performance or its value.
III.3 The variable component of remuneration shall be reasonable overall in relation to the fixed component of the remuneration and maximum limits should be set for all components.
The remuneration policy includes an explicit relationship between the fixed and variable components that is suitable to the profile of the Company and the Group, and the maximum limits established match the practices of comparable companies. The policy is therefore accepted and annually approved by the Shareholders' General Meeting.
III.4 A significant part of the variable remuneration should be deferred for a period not less than three years, and the right of way payment shall depend on the continued positive performance of the company during that period.
RECOMMENDATION FULLY ADOPTED – POINTS 71, 72 AND 86 OF THIS REPORT
In accordance with the remuneration policy approved at the Annual General Meeting held on 7 April 2016, proposed by the Remuneration Committee, a part of no less than fifty per cent of the variable remuneration shall be deferred for a period of three years and its value shall be dependent upon the Company's performance during the said period, as it is pegged to the share price.
III.5 Members of the Board of Directors shall not enter into contracts with the company or with third parties which intend to mitigate the risk inherent to remuneration variability set by the company.
RECOMMENDATION FULLY ADOPTED – POINT 73 OF THIS REPORT AND REMUNERATION POLICY
The remuneration policy approved, upon proposal from the Remuneration Committee, at the Shareholders' General Meeting on 7 April 2016 adopted the principle set out in this recommendation.
III.6 Executive board members shall maintain the company's shares that were allotted by virtue of variable remuneration schemes, up to twice the value of the total annual remuneration, except for those that need to be sold for paying taxes on the gains of said shares, until the end of their mandate.
RECOMMENDATION FULLY ADOPTED – POINT 73 OF THIS REPORT AND REMUNERATION POLICY
The remuneration policy approved at the Shareholders' General Meeting on 7 April 2016 adopted the principle set out in this recommendation.
III.7 When the variable remuneration includes the allocation of options, the beginning of the exercise period shall be deferred for a period not less than three years.
RECOMMENDATION NOT APPLICABLE
The remuneration policy approved does not include the attribution of stock options.
III.8 When the removal of board member is not due to serious breach of their duties nor to their unfitness for the normal exercise of their functions but is yet due on inadequate performance, the company shall be endowed with the adequate and necessary legal instruments so that any damages or compensation, beyond that which is legally due, is unenforceable.
RECOMMENDATION FULLY ADOPTED – POINTS 69 TO 76 OF THIS REPORT AND REMUNERATION POLICY APPROVED ON 7 APRIL 2016
The Company policy fully complies with this recommendation.
IV.1 The external auditor shall, within the scope of its duties, verify the implementation of remuneration policies and systems of the corporate bodies as well as the efficiency and effectiveness of the internal control mechanisms and report any shortcomings to the supervisory body of the company.
RECOMMENDATION FULLY ADOPTED – POINT 46 OF THIS REPORT
The Statutory Auditor shall comment on its activities in its annual audit report, which is subject to the evaluation of the Shareholders' Annual General Meeting and made available at www.sonaecapital.pt
IV.2 The company or any entity with which it maintains a control relationship shall not engage the external auditor or any entity with which it finds itself in a group relationship or that incorporates the same network, for services other than audit services. If there are reasons for hiring such services - which must be approved by the supervisory board and explained in its Annual Report on Corporate Governance - said should not exceed more than 30% of the total value of services rendered to the company.
The services provided by the External Auditor, other than audit services, were previously approved by the Supervisory Board, thus fully complying with the CMVM recommendation. The percentage of these services over the total services provided by PricewaterhouseCoopers& Associados, SROC (PwC) to the Company is 14.1%.
IV.3 Companies shall support auditor rotation after two or three terms whether four or three years, respectively. Its continuance beyond this period must be based on a specific opinion of the supervisory board that explicitly considers the conditions of auditor's independence and the benefits and costs of its replacement;
RECOMMENDATION FULLY ADOPTED – POINT 44 OF THIS REPORT
The External Auditor and the Statutory Auditor partner representing it in the performance of its duties are still on the third term of office.
V.1 The company's business with holders of qualifying holdings or entities with which they are in any type of relationship pursuant to article 20 of the Portuguese Securities Code, shall be conducted during normal market conditions.
The transactions between the Company and any related parties are governed by principles of thoroughness, transparency and strict compliance with the market competition rules. These transactions are subject to specific administrative procedures that arise from regulatory requirements, in particular those related to transfer price rules or the rules on voluntary adoption of internal checks and balances, particularly processes for reporting or formal validation, according to the value of the transaction in question.
V.2 The supervisory or oversight board shall establish procedures and criteria that are required to define the relevant level of significance of business with holders of qualifying holdings - or entities with which they are in any of the relationships described in article 20/1 of the Portuguese Securities Code – thus significant relevant business is dependent upon prior opinion of that body.
The Company has approved and enforced a formal internal procedure aimed at receiving the opinion of the Supervisory Board and the Audit and Finance Committee before the Executive Committee concludes any transaction with holders of qualifying holdings or with entities with whom they are in a relationship provided for in art. 20 of the Portuguese Securities Code, when such transactions involve an interest greater than ten million euros. All the transactions concluded with the said entities that exceed one million euros are also subject to half-yearly reporting to these two bodies.
VI.1 Companies shall provide, via their websites in both the Portuguese and English languages, access to information on their progress as regards the economic, financial and governance state of play.
All the recommended information is available in Portuguese and in English on the Company's website – www.sonaecapital.pt.
VI.2 Companies shall ensure the existence of an investor support and market liaison office, which responds to requests from investors in a timely fashion and a record of the submitted requests and their processing, shall be kept.
RECOMMENDATION FULLY ADOPTED – POINT 56 OF THIS REPORT
The Company has an Investor Support Office which provides regular and relevant information to the investors and the financial community, keeping a record of the relevant communication to enhance the quality of its performance.
There are no recommendations requiring subsequent reasoning for non-compliance or non-enforcement.
Maia, 23 February 2017
| The Board of Directors | |
|---|---|
| Duarte Paulo Teixeira de Azevedo | Maria Cláudia Teixeira de Azevedo |
| Chairman of the Board of Directors | CEO |
| Álvaro Carmona e Costa Portela | Ivone Pinho Teixeira |
| Member of the Board of Directors | CFO |
| Francisco de La Fuente Sánchez | Miguel Jorge Moreira da Cruz Gil Mata |
| Member of the Board of Directors | Member of the Board of Directors |
Paulo José Jubilado Soares de Pinho Member of the Board of Directors
curricula vitae of the members of the governing bodies and Remuneration Policy
Chairman of the Board of Directors of Sonae Capital, SGPS, S.A.
Age: 51 Nationality: Portuguese
Bachelor's Degree in Chemical Engineering from École Polytechnique Fédérale de Lausanne (1986) MBA – Porto Business School (1989)
Chairman of the Board of Directors of Sonae MC – Modelo Continente, SGPS, S.A. Chairman of the Board of Directors of Sonae – Specialized Retail, SGPS, S.A. Chairman of the Board of Directors of Sonae Center II, S.A. Chairman of the Board of Directors of Sonae Indústria, SGPS, S.A. Chairman of the Board of Directors of Sonae Arauco, SA Chairman of the Board of Directors of Sonae Sierra, SA Chairman of the Board of Directors and Co-CEO of Sonae, SGPS, S.A. Chairman of the Board of Directors of Migracom, SGPS, S.A. Member of the Board of Directors of Efanor Investimentos, SGPS, S.A. Member of the Board of Directors of Imparfin – Investimentos e Participações Financeiras, S.A.
2009–2015 – Chairman of the Board of Trustees of the University of Porto 2012-2015 – Member of the Board of COTEC Portugal Since 2008 – Member of ERT – European Round Table of Industrialists Since 2013 – Member of the International Advisory Board of Allianz, SE Since 2015 – Member of the Consejo Iberoamericano para la Productividad y la Competitividad (Ibero-American Council for Productivity and Competitiveness)
Vice-chairman of the Board of Directors of Sonae Capital, SGPS, S.A.
Age: 65 Nationality: Portuguese
Bachelor's Degree in Mechanical Engineering – FEUP (1974) Master of Business Management – MBA (Universidade Nova de Lisboa – 1983) AMP / ISMP – Harvard Business School (1997)
Member of the Board of Directors of Capwatt, SGPS, S.A. Member of the Board of Directors of SC, SGPS, S.A. Member of the Board of Directors of Sistavac, SGPS, S.A. Member of the Board of Directors of SC Hospitality, SGPS, S.A.
Non-executive Director of Casa Agrícola HMR, S.A. Non-executive Director of COPAM – Companhia Portuguesa de Amidos, S.A. Non-executive Director of SPDI – SECURE PROPERTY Development & Investment, PLC Director of the Victor e Graça Carmona e Costa Foundation Manager of Portela & Portela, Lda. Member of the Investment Committee of the ECE European Prime Shopping Centre Fund, Luxembourg Director of the Belmiro de Azevedo Foundation
2010-2015 – Non-executive Director of Sonae SGPS, S.A. 2010-2014 – Chairman (until 2012) and Member of the Board of Representatives of the Faculty of Economics, University of Porto 2010-2012 – Trustee of the Urban Land Institute (USA) 2010-2012 – Director of Sonae RP 2010-2014 – Non-executive Chairman of the Board of Directors of MAF Properties, Dubai, UAE 2011-2013 – Member of the Investment Advisory Committee of PanEuropean Property Limited Partnership
Non-executive Director of Sonae Capital, SGPS, S.A.
Age: 75 Nationality: Portuguese
Bachelor's Degree in Electrical Engineering – Instituto Superior Técnico (1965)
Chair of the Board of the General Meeting of APEDS – Portuguese Association of Engineers for Social Development
Chair of the Board of the General Meeting of AAAIST – Association of Alumni of Instituto Superior Técnico
Honorary Chairman of Hidroeléctrica del Cantábrico, S.A.
Member of the Remuneration Committee of Sonae SGPS, S.A. and of Sonaecom, SGPS, S.A. Member of the Board of Trustees of the Luso-Brazilian Foundation
Member of the Ibero-America Forum
Member of the Board of Trustees of the Luso-Spanish Foundation
Member of the Board of Trustees of the Hidroeléctrica del Cantábrico Foundation
2012-2016 – Chairman of the Board of AAAIST
2010-2015 – Chair of the Board of the General Meeting of Iberwind – Desenvolvimento e Projectos, S.A.
2007-2013 – Chairman of the General Board of PROFORUM
2007-2013 – Chairman of the National Council of the Engineers Association College of Electrical Engineering
2007-2012 – Guest member of the National Water Board
2007-2012 – Vice-chairman and Non-executive Chairman of the Board of Directors of EFACEC Capital
2005-2012 – Member of Advisory Board of the Forum for Competitiveness
2009-2016 – Co-opted member of the Instituto Superior Técnico School Board
Since 2005 – Member of the Board of Trustees of the Hidroeléctrica del Cantábrico Foundation
Since 2004 – Member of the Board of Trustees of the Luso-Brazilian Foundation
Since 2003 – Member of the Ibero-America Forum
Since 2002 – Member of the Board of Trustees of the Luso-Spanish Foundation
Non-executive Director of Sonae Capital, SGPS, S.A.
Age: 54 Nationality: Portuguese
Bachelor's Degree in Economic – Faculty of Economics, Universidade Nova de Lisboa (1985) MBA – Master of Business Administration – Faculty of Economics, Universidade Nova de Lisboa (1989) Doctorate in Banking and Finance – City University Business School, London (1994) Negotiation Analysis – Amsterdam Institute of Finance (2005) Advanced Course – European Venture Capital and Private Equity Association (2006) Valuation Guidelines Masterclass – European Venture Capital and Private Equity Association (2007) Private Equity and Venture Capital Programme – Harvard Business School (2007)
Chairman of the General Council of the PME-IAPMAI Venture Capital Syndication Fund Chairman of the Supervisory Board of Novabase, SA Member of the Board of Directors of Change Partners, SCR, S.A. Managing Partner of Finpreneur, Ltda. Academic director of the Lisbon MBA (MIT – Católica – Nova)
Member of Strategic Advisory Board of the Fast Change Venture Capital Fund Member of the Board of Directors of Biotecnol, S.A. Director (representative in Portugal) of Venture Valuation, Switzerland Senior Consultant at New Next Moves Consultants, Portugal Associate Professor at the Faculty of Economics, Universidade Nova de Lisboa Guest Lecturer at Cass Business School, London Guest Lecturer at the University of Luxembourg
Director and Chairman of the Executive Committee of Sonae Capital, SGPS, S.A.
Age: 47 Nationality: Portuguese
Bachelor's Degree in Management from Universidade Católica do Porto and MBA from INSEAD
Chairman of the Board of Directors of Troiaresort, SGPS, S.A. Chairman of the Board of Directors of Capwatt, SGPS, S.A. Chairman of the Board of Directors of SC, SGPS, S.A. Chairman of the Board of Directors of SC Hospitality, SGPS, S.A. Member of the Board of Directors of Sistavac, SGPS, S.A.
Chairman of the Board of Directors of Bright Development Studio, S.A. Chairman of the Board of Directors of Digitmarket – Sistemas de Informação, S.A. Chairman of the Board of Directors of Efanor – Serviços de Apoio à Gestão, S.A. Chairman of the Board of Directors of GRUPO S 21 SEC GÉSTION, S.A. Chairman of the Board of Directors of S21SEC PORTUGAL – CYBERSECURITY SERVICES, S.A. Chairman of the Board of Directors of Linhacom, SGPS, S.A. Chairman of the Board of Directors of PCJ – Público, Comunicação e Jornalismo, S.A. Chairman of the Board of Directors of Saphety Level – Trusted Services, S.A. Chairman of the Board of Directors of Sonaecom – Ciber Security and Intelligence Services, SGPS, S.A. Chairman of the Board of Directors of TLANTIC PORTUGAL – Sistemas de Informação, S.A. Chairman of the Board of Directors of WeDo Consulting, Sistemas de Informação, S.A. Chairman of the Board of Directors of WeDo Technologies Americas, INC. Member of the Board of Directors of Armilar Venture Partners – Sociedade de Capital de Risco, S.A. Member of the Board of Directors of Efanor Investimentos, SGPS, S.A. Member of the Board of Directors of Imparfin, SGPS, S.A. Member of the Board of Directors of Praesidium Services Limited Member of the Board of Directors of Público – Comunicação Social, S.A. Member of the Board of Directors of Sonaecom, SGPS, S.A. Member of the Board of Directors of Sonaecom – Serviços Partilhados, S.A. Member of the Board of Directors of Sonae Investment Management – Software and Technology, SGPS, S.A. Member of the Board of Directors of WeDo Tecnologies (UK) Limited Member of the Board of Directors of WeDo Technologies Australia PTY, Limited Member of the Board of Directors of ZOPT, SGPS, S.A. Member of the Board of Directors of NOS – SGPS, S.A. Member of the Board of Trustees of the Belmiro de Azevedo Foundation Sole Administrator of Sekiwi, SGPS, SA Director of WeDo Technologies Egypt Director of Sonaecom – Sistemas de Información Espana, S.L. Manager of WeDo Technologies Mexico, S. De R.L. de C.V. General Manager at Saphety – Transacciones Electronicas, S.A.S
Executive Director of Sonaecom, SGPS, S.A. Executive Director of Zon Optimus, SGPS, S.A. Member of the Board of Directors in the following companies: Sonae Investment Management – Software and Technology, SGPS, S.A. (previously called Sonaecom Sistemas de Informação, SGPS, S.A.) Sonae Matrix Multimédia WeDo Consulting, Sistemas de Informação, S.A. Efanor Investimentos, SGPS, S.A. ZOPT, SGPS, S.A.
Executive Director and CFO of Sonae Capital, SGPS, S.A.
Age: 44 Nationality: Portuguese
Licenciatura em Economia – Faculdade de Economia do Porto (1995) Pós-Graduação em Análise Crédito – Instituto Superior de Gestão Bancária (1996) Pós Graduação em Fiscalidade Internacional – Universidade Católica (2004)
Chairman of the Board of Directors of Acrobatic Title, S.A. Member of the Board of Directors of Aqualuz Tróia – Exploração Hoteleira e Imobiliária, S.A. Chairman of the Board of Directors of UP Invest, SGPS, S.A. Member of the Board of Directors of Atlantic Ferries – Tráfego Local, Fluvial e Marítimo, S.A. Member of the Board of Directors of Bloco Q – Sociedade Imobiliária, S.A. Member of the Board of Directors of Capwatt, SGPS, S.A. Member of the Board of Directors of Capwatt ACE, S.A. Member of the Board of Directors of Capwatt – Brainpower, S.A. Member of the Board of Directors of Capwatt Colombo – Heat Power, S.A. Member of the Board of Directors of Capwatt Engenho Novo – Heat Power, S.A. Member of the Board of Directors the Complementary Grouping of Companies Capwatt Hectare – Heat Power, ACE Member of the Board of Directors of Capwatt II – Heat Power, S.A. Member of the Board of Directors of Capwatt III – Heat Power, S.A. Member of the Board of Directors of Capwatt Maia – Heat Power, S.A. Member of the Board of Directors of Capwatt Martim Longo – Solar Power, S.A. Member of the Board of Directors of Capwatt Vale do Caima – Heat Power, S.A. Member of the Board of Directors of Capwatt Vale do Tejo – Heat Power, S.A. Member of the Board of Directors of Casa da Ribeira – Sociedade Imobiliária, S.A. Member of the Board of Directors of Centro Residencial da Maia – Urbanismo, S.A. Member of the Board of Directors of Cinclus – Imobiliária, S.A. Member of the Board of Directors of Contacto Concessões, SGPS, S.A. Member of the Board of Directors of Country Club da Maia – Imobiliária, S.A. Member of the Board of Directors of Empreendimentos Imobiliários Quinta da Azenha, S.A. Member of the Board of Directors of Golf Time – Golfe e Investimentos Turísticos, S.A. Member of the Board of Directors of Imobeauty, S.A. Member of the Board of Directors of Imoclub – Serviços Imobiliários, S.A. Member of the Board of Directors of Imodivor – Sociedade Imobiliária, S.A. Member of the Board of Directors of Imohotel – Empreendimentos Turísticos, S.A. Member of the Board of Directors of Imopenínsula – Imobiliária, S.A. Member of the Board of Directors of Imoponte – Sociedade Imobiliária, S.A. Member of the Board of Directors of Imoresort – Sociedade Imobiliária, S.A. Member of the Board of Directors of Imosedas – Imobiliária e Serviços, S.A. Member of the Board of Directors of Implantação – Imobiliária, S.A. Member of the Board of Directors of Inparvi, SGPS, S.A. Member of the Board of Directors of Marina de Tróia, S.A. Member of the Board of Directors of Marmagno – Exploração Hoteleira e Imobiliária, S.A. Member of the Board of Directors of Marvero – Exploração Hoteleira e Imobiliária, S.A. Member of the Board of Directors of Porto Palácio Hotel – Exploração Hoteleira, S.A. Member of the Board of Directors of Porturbe – Edifícios e Urbanizações, S.A.
Member of the Board of Directors of Praedium – Serviços, S.A. Member of the Board of Directors of Praedium II – Imobiliária, S.A. Member of the Board of Directors of Prédios Privados – Imobiliária, S.A. Member of the Board of Directors of Predisedas – Predial das Sedas, S.A. Member of the Board of Directors of Promessa – Sociedade Imobiliária, S.A. Member of the Board of Directors of QCE – Desenvolvimento e Fabrico de Equipamentos, S.A. Member of the Board of Directors of SC – Engenharia e Promoção Imobiliária, SGPS, S.A. Member of the Board of Directors of SC, SGPS, S.A. Member of the Board of Directors of SC – Sociedade de Consultadoria, S.A. Member of the Board of Directors of SC Assets, SGPS, S.A. Member of the Board of Directors of SC Finance, BV Member of the Board of Directors of SC Hospitality, SGPS, S.A. Member of the Board of Directors of S.I.I. – Soberana – Investimentos Imobiliários, S.A. Member of the Board of Directors of Sistavac, S.A. Member of the Board of Directors of Sistavac, SGPS, S.A. Member of the Board of Directors of Sete e Meio Herdades – Investimentos Agrícolas e Turismo, S.A. Member of the Board of Directors of Soira – Sociedade Imobiliária de Ramalde, S.A. Member of the Board of Directors of Solinca – Health and Fitness, S.A. Member of the Board of Directors of Soltróia – Sociedade Imobiliária de Urbanização e Turismo de Tróia, S.A. Member of the Board of Directors of Sopair, S.A. Member of the Board of Directors of Sotáqua – Sociedade de Empreendimentos Turísticos de Quarteira, S.A. Member of the Board of Directors of Spinveste – Gestão Imobiliária, SGII, S.A. Member of the Board of Directors of Spinveste – Promoção Imobiliária, S.A. Member of the Board of Directors of Spred, SGPS, S.A. Member of the Board of Directors of The Artist Porto Hotel & Bistro – Actividades Hoteleiras, S.A. Member of the Board of Directors of The House Ribeira – Exploração Hoteleira, S.A. Member of the Board of Directors of Tróia Market – Supermercados, S.A. Member of the Board of Directors of Troiaresort – Investimentos Turísticos, S.A. Member of the Board of Directors of Troiaresort, SGPS, S.A. Member of the Board of Directors of Tulipamar – Exploração Hoteleira e Imobiliária, S.A. Member of the Board of Directors of Urbisedas – Imobiliária das Sedas, S.A. Member of the Board of Directors of Vistas do Freixo – Empreendimentos Turísticos, S.A. Member of Management at Carvemagere, Manutenção e Energias Renováveis, Lda Member of Management at Companhia Térmica Tagol, Unipessoal, Lda. Member of Management at C.T.E. – Central Termoeléctrica do Estuário, Unipessoal, Lda. Member of Management at Enerlousado – Recursos Energéticos, Unipessoal, Lda. Member of Management at Ronfegen – Recursos Energéticos, Unipessoal, Lda. Member of Management at SC For – Serviços de Formação e Desenvolvimento de Recursos Humanos, Unipessoal, Lda.
Since 2012 – Chief Financial Officer, Sonae Capital Group 2007-2012 – Director of Corporate Finance, Sonae Capital Group
Member of the Board of Directors and the Executive Committee of Sonae Capital, SGPS, S.A.
Age: 43 Nationality: Portuguese
Bachelor's Degree in Mechanical Engineering – Faculty of Engineering, University of Porto (1998)
Postgraduate Degree in Industrial Maintenance – Faculty of Engineering, University of Porto (1999)
MBA – School of Management, University of Porto (2003)
Chairman of the Board of Directors of the Complementary Grouping of Companies Atelgen, Produção de Energia, ACE Chairman of the Board of Directors of the Complementary Grouping of Companies Capwatt Hectare – Heat Power, ACE Chairman of the Board of Directors of the Complementary Grouping of Companies Companhia Térmica do Serrado, ACE Chairman of the Board of Directors of the Complementary Grouping of Companies Soternix – Produção de Energia, ACE Member of the Board of Directors of Capwatt, SGPS, S.A Member of the Board of Directors of Capwatt ACE, S.A. Member of the Board of Directors of Capwatt – Brainpower, S.A. Member of the Board of Directors of Capwatt Colombo – Heat Power, S.A. Member of the Board of Directors of Capwatt Engenho Novo – Heat Power, S.A. Member of the Board of Directors of Capwatt II – Heat Power, S.A. Member of the Board of Directors of Capwatt III – Heat Power, S.A. Member of the Board of Directors of Capwatt Maia – Heat Power, S.A. Member of the Board of Directors of Capwatt Martim Longo – Solar Power, S.A. Member of the Board of Directors of Capwatt Vale do Caima – Heat Power, S.A. Member of the Board of Directors of Capwatt Vale do Tejo – Heat Power, S.A. Member of the Board of Directors of the Complementary Grouping of Companies Feneralt – Produção de Energia, ACE Member of the Board of Directors of QCE – Desenvolvimento e Fabrico de Equipamentos, S.A. Member of the Board of Directors of SC SGPS, S.A. Member of the Board of Directors of Sistavac, S.A. Member of the Board of Directors of Sistavac, SGPS, S.A. Member of the Board of Directors of Spred, SGPS, S.A. Member of the Board of Directors of Suncoutim – Solar Energy, S.A. Member of Management at C.T.E. – Central Termoeléctrica do Estuário, Unipessoal, Lda. Member of Management at Carvemagere, Manutenção e Energias Renováveis, Lda. Member of Management at Companhia Térmica, Tagol Unipessoal, Lda. Member of Management at Enerlousado – Recursos Energéticos, Unipessoal, Lda. Member of Management at Ronfegen – Recursos Energéticos, Unipessoal, Lda. Member of Management at SC For – Serviços de Formação e Desenvolvimento de Recursos Humanos, Unipessoal, Lda.
Chairman of the Executive Committee of APGEI – Portuguese Association of Industrial Engineering and Management Chairman of the Executive Committee of COGEN Portugal – Portuguese Association of Co-generation and Energy Efficiency Member of the Board of IPES – Portuguese Solar Energy Society Member of Management at Vantipal, Lda.
Chief Operating Officer at CapWatt (Since 2008) Chief Operating Officer at Sonae Indústria de Revestimentos (2012 – 2014) Chief Operating Officer at Euroresinas (2012 – 2014) Chief Operating Officer at Impaper (2012 – 2014
Chairman of the Supervisory Board of Sonae Capital, SGPS, S.A.
Bachelor's Degree in Economics – Faculty of Economics, University of Porto (1969)
Partner and Director of António Magalhães & Carlos Santos – Statutory Audit Firm (Since its setup in 1989) Member of the Supervisory Board of the following companies: Montepio Holding, SGPS, S.A. Montepio Investimento, S.A. Cin – Corporação Industrial do Norte, S.A.
Chairman of the Supreme Council of the Statutory Auditors Association in 2012/2014 and 2015/2017 Chairman of the Board of the General Meeting of the Statutory Auditors Association in 2009/2011
Member of the Supervisory Board of Sonae Capital, SGPS, S.A.
Contabilista, ICL, Lisboa (1964) Licenciatura em Finanças, ISCEF, Lisboa (1971)
Chairman of the Supervisory Board of the following companies: Sonae Indústria, SGPS, S.A. OCP Portugal – Produtos Farmacêuticos, S.A. Member of the Supervisory Board of Sonae, SGPS, S.A. Chairman of the General Meeting of Segafredo Zanetti (Portugal) – Comercialização e Distribuição de Café, S.A.
Main professional activities over the last five years:
Since 2008 – Special consultant in internal audit and internal control areas
Member of the Supervisory Board of Sonae Capital, SGPS, S.A.
Bachelor's Degree in Economics – Faculty of Economics, University of Porto (1978)
Positions held in the group companies:
Positions held in other companies:
Main professional activities over the last five years:
Since 2010 – Statutory Auditor and partner at Armando Magalhães, Carlos Silva & Associados, SROC, Lda.
The MTVB is an integral part of the annual variable bonus and constitutes a way of aligning the executive directors' interests with the company objectives, reinforcing their commitment and strengthening the perception of the importance of their performance for the success of Sonae Capital, reflected in the market capitalisation of the share.
The variable annual bonus attributed to the executive directors of the company and its affiliates, and to the employees with responsibilities in a strategic context, is subject to deferral. Level of deferral of the variable annual bonus:
| Participants | Reference value of the medium term variable bonus (% of the total variable remuneration target) |
||||
|---|---|---|---|---|---|
| Directors Company Executive Directors |
At least 50% | ||||
| Directors Executive Directors of Business Units |
At least 50% | ||||
| Employees | Terms to be defined by the Board of Directors of each Company |
The MTVB is set out on a period of four years, including the year to which it relates and a three-year deferral period.
The acquisition right of the shares attributed by the MTVB become due at the end of the deferral period.
The MTVB is valued at the date of attribution using prices which represent the price of the share, in the Portuguese stock market, considering for this effect the most favourable of the following: closing share price of the first day of trading after the Shareholder's General Meeting or the average closing share price (regarding the thirty-day period of trading prior to the Shareholder's General Meeting).
Members entitled to MTVB have the right to acquire a number of shares corresponding to the division between the amount of MTVB granted and the price of the share at the date of attribution calculated under the terms of the previous paragraph. If, after the granting date and before its exercise, dividends are distributed, changes in the nominal value of shares or in the share capital of the company occur or any other change in equity with impact in the economic value of the attributed rights, the number of shares attributed will be adjusted to an equivalent figure considering the effect of the mentioned changes.
In line with the statement of a policy that strengthens the alignment of executive directors with the company's long term interests, the Shareholders' Remuneration Committee can, at its discretion, adjust the percentage discount granted to the executive directors for acquisition of shares, and determine that the executive director contributes to the acquisition of shares up to a percentage that cannot exceed 5% of its share price at the date of the share transmission. All other employees to whom that right is assigned may acquire the shares under the conditions established by the Board of Directors of each Company.
When exercising the right to acquire shares, as granted under the scope of the MTVB, the Company retains the right to pay the equivalent value in cash at the vesting date rather than transfer actual shares.
The right to exercise the acquisition right of shares granted under the plan expires if the contractual link between the member and the company ceases before the threeyear period subsequent to its attribution, notwithstanding situations included in the following paragraphs.
The right will remain valid in case of permanent incapacity or death of the member, in which case the payment is made to the member or to his/her heirs on the vesting date.
In case of retirement of the member, the attributed right can be exercised in the respective vesting date. To ensure the effectiveness and transparency of the remuneration and compensation policy objectives, it was agreed that the executive directors of the company:
| Amounts expressed in euro | Notes | 31/12/2016 | 31/12/2015 | |||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| NON CURRENT ASSETS: | ||||||||
| Tangible assets | 10 | 238,784,870 | 251,495,972 | |||||
| Intangible assets | 11 | 7,615,431 | 7,338,337 | |||||
| Goodwill | 12 | 37,841,090 | 60,892,528 | |||||
| Investments in associated companies and joint ventures | 6 | 1,234,900 | 12,960,522 | |||||
| Other investments | 7 | 478,855 | 597,515 | |||||
| Deferred tax assets | 19 | 27,380,258 | 23,620,310 | |||||
| Other non-current debtors | 13 | 2,036,474 | 7,871,931 | |||||
| Total non-current assets | 315,371,878 | 364,777,107 | ||||||
| CURRENT ASSETS | ||||||||
| Inventories | 14 | 104,511,954 | 126,761,744 | |||||
| Trade account receivables | 15 | 18,030,267 | 19,375,097 | |||||
| Other debtors | 16 | 7,327,649 | 9,003,693 | |||||
| Income tax receivable | 17 | 4,685,068 | 3,795,910 | |||||
| Other taxes receivable | 17 | 5,855,313 | 8,831,026 | |||||
| Other current assets | 18 | 11,848,239 | 6,169,502 | |||||
| Cash and cash equivalents | 20 | 32,747,208 | 35,318,251 | |||||
| Total current assets | 185,005,698 | 209,255,223 | ||||||
| TOTAL ASSETS | 47 | 500,377,576 | 574,032,330 | |||||
EQUITY
| TOTAL EQUITY | 320,357,729 | 310,134,850 | |
|---|---|---|---|
| Equity attributable to non-controlling interests | 22 | 9,925,965 | 10,247,125 |
| Equity attributable to the equity holders of Sonae Capital | 310,431,764 | 299,887,725 | |
| Profit/(Loss) for the year attributable to the equity holders of Sonae Capital | 17,594,199 | (294,678) | |
| Reserves and retained earnings | 21 | 44,241,791 | 51,609,194 |
| Own Shares | 21 | (1,404,226) | (1,426,791) |
| Share capital | 21 | 250,000,000 | 250,000,000 |
LIABILITIES
| NON CURRENT LIABILI TIES: |
|||
|---|---|---|---|
| Bank Loans | 23 | 20,532,367 | 46,693,174 |
| Bonds | 23 | 57,107,711 | 42,123,598 |
| Obligation under finance leases | 24 | 16,375,972 | 14,809,541 |
| Other loans | 23 | 246,178 | 297,289 |
| Other non-current creditors | 26 | 3,751,701 | 3,033,619 |
| Deferred tax liabilities | 19 | 19,635,287 | 10,948,548 |
| Provisions | 31 | 3,079,824 | 3,079,824 |
| Total non-current liabilities | 120,729,040 | 120,985,593 | |
| CURRENT LIABILI TIES: |
|||
| Bank Loans | 23 | 1,137,237 | 17,725,702 |
| Bonds | 23 | - | 59,982,062 |
| Obligation under finance leases | 24 | 3,214,278 | 2,546,998 |
| Other loans | 23 | 121,930 | 337,920 |
| Trade creditors | 28 | 16,479,554 | 17,167,600 |
| Other creditors | 29 | 4,690,071 | 11,562,222 |
| Income tax payable | 17 | 1,288,312 | 945,628 |
| Other taxes payable | 17 | 3,430,692 | 2,624,731 |
| Other current liabilities | 30 | 24,989,717 | 24,661,098 |
| Provisions | 31 | 3,939,016 | 5,357,926 |
| Total Current Liabilities | 59,290,807 | 142,911,887 | |
| TOTAL LIABILI TIES |
47 | 180,019,847 | 263,897,480 |
| TOTAL EQUITY AND LIABILI TIES |
500,377,576 | 574,032,330 |
The accompanying notes are part of these financial statements.
| Amounts expressed in euro | Notes | 31/12/2016 | 31/12/2015 |
|---|---|---|---|
| Sales | 34 | 127,164,481 | 104,387,059 |
| Services rendered | 34 | 64,162,429 | 59,222,865 |
| Other operating income | 35 | 40,916,196 | 18,892,024 |
| Cost of sales | 14 | (65,555,341) | (60,854,177) |
| Changes in stocks of finished goods and work in progress | 36 | (17,321,045) | (5,983,889) |
| External supplies and services | 37 | (61,313,637) | (52,274,779) |
| Staff costs | 38 | (34,948,254) | (31,944,706) |
| Depreciation and amortisation | 10 and 11 | (15,873,543) | (15,716,598) |
| Provisions and impairment losses (Increases)/decreases | 31 | (18,958,006) | (439,207) |
| Other operating expenses | 39 | (3,679,654) | (7,510,900) |
| Operational profit/(loss) | 14,593,626 | 7,867,692 | |
| Financial Expenses | 40 | (7,623,434) | (10,264,529) |
| Financial Income | 40 | 844,658 | 1,664,711 |
| Net financial income / (expenses) | (6,778,776) | (8,599,818) | |
| Profit/(Loss) in associated and jointly controlled companies mea sured using the equity method |
6 | 350,193 | 3,976,671 |
| Investment income | 41 | 16,329,928 | (844,951) |
| Profit/(Loss) before taxation | 24,494,971 | 2,399,594 | |
| Taxation | 42 | (5,802,076) | (409,237) |
| Profit/(Loss) for the year - continued operations | 18,692,895 | 1,990,357 | |
| Profit/(Loss) for the year - discontinued operations | - | (594,004) | |
| Profit/(Loss) for the year | 43 | 18,692,895 | 1,396,353 |
| Attributable to: | |||
| Equity holders of Sonae Capital | 17,594,199 | (294,678) | |
| Non-controlling interests | 22 | 1,098,695 | 1,691,031 |
| Profit/(Loss) per share - continued operations | |||
| Basic | 45 | 0,071307 | 0,001215 |
| Diluted | 45 | 0,071307 | 0,001215 |
| Profit/(Loss) per share - discontinued operations | |||
| Basic | 45 | n,a, | (0,002411) |
| Diluted | 45 | n,a, | (0,002411) |
The accompanying notes are part of these financial statements.
| Amounts expressed in euro Notes |
4th QUARTER 2016 1 |
4th QUARTER 2015 1 |
|---|---|---|
| Sales | 47,267,977 | 48,781,139 |
| Services rendered | 12,919,144 | (4,943,255) |
| Other operating income | 37,603,131 | 2,159,942 |
| Cost of sales | (23,032,099) | (14,086,635) |
| Changes in stocks of finished goods and work in progress | (12,270,429) | (3,284,357) |
| External supplies and services | (16,471,687) | (16,356,207) |
| Staff costs | (9,705,947) | (7,401,641) |
| Depreciation and amortisation | (3,979,511) | (3,888,043) |
| Provisions and impairment losses (Increases)/decreases | (18,353,433) | (409,476) |
| Other operating expenses | (941,291) | (1,036,674) |
| Operational profit/(loss) | 13,035,860 | (465,207) |
| Financial Expenses | (1,264,056) | (2,104,493) |
| Financial Income | 212,198 | 575,591 |
| Net financial income / (expenses) | (1,051,858) | (1,528,902) |
| Profit/(Loss) in associated and jointly controlled companies measured using the equity method |
167,414 | 989,985 |
| Investment income | (1,665,185) | (862,197) |
| Profit/(Loss) before taxation | 10,486,231 | (1,866,321) |
| Taxation | (4,990,336) | 387,873 |
| Profit/(Loss) for the year - continued operations | 5,495,890 | (1,478,448) |
| Profit/(Loss) for the year - discontinued operations | - | (177,457) |
| Profit/(Loss) for the year | 5,495,890 | (1,655,905) |
| Attributable to: | ||
| Equity holders of Sonae Capital | 5,331,611 | (2,348,716) |
| Non-controlling interests | 164,278 | 692,812 |
| Profit/(Loss) per share - continued operations | ||
| Basic | 0,021608 | (0,099077) |
| Diluted | 0,021608 | (0,099077) |
| Profit/(Loss) per share - continued operations | ||
| Basic | 0,00000 | 0,014498 |
| Diluted | 0,00000 | 0,014498 |
The accompanying notes are part of these financial statements. 1 Prepared in accordance with IAS 34 - Interim Financial Reporting
Unaudited Financial Statements
| Amounts expressed in euro | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Consolidated net profit/(loss) for the period | 18,692,895 | 1,396,353 |
| Items that may be reclassified subsequently to net profit / (loss): | ||
| Changes in the currency translation differences | 36,226 | 146,452 |
| Share of other comprehensive income of associates and joint ven tures accounted for by the equity method (Note 5) |
7,380,000 | 1,588,081 |
| Change in the fair value of assets available for sale | - | 750,961 |
| Change in the fair value of cash flow hedging derivatives | 16,960 | 228,041 |
| Tax related to other comprehensive income captions | (3,562) | 293,476 |
| Other comprehensive income for the period – continued operations |
7,429,624 | 2,420,059 |
| Other comprehensive income for the period – discontinued operations |
- | |
| Total comprehensive income for the period | 26,122,519 | 3,816,412 |
| Attributable to: | ||
| Equity holders of Sonae Capital | 25,023,342 | 2,085,740 |
| Non-controlling interests | 1,099,177 | 1,730,672 |
The accompanying notes are part of these financial statements.
| Amounts expressed in euro | 4th QUARTER 2016 1 |
4th QUARTER 2015 1 |
|---|---|---|
| Consolidated net profit/(loss) for the period | 5,495,890 | (1,655,904) |
| Items that may be reclassified subsequently to net profit / (loss): | ||
| Changes in the currency translation differences | (65,045) | (41,930) |
| Share of other comprehensive income of associates and joint ven tures accounted for by the equity method (Note 5) |
(1,842) | 419,002 |
| Change in the fair value of assets available for sale | - | (90,943) |
| Change in the fair value of cash flow hedging derivatives | 3,070 | 5,637 |
| Tax related to other comprehensive income captions | (645) | (27,643) |
| Other comprehensive income for the period – continued opera tions |
(64,941) | 264,123 |
| Other comprehensive income for the period – discontinued operations |
- | - |
| Total comprehensive income for the period | 5,430,949 | (1,391,781) |
| Attributable to: | ||
| Equity holders of Sonae Capital | 5,262,176 | (2,086,958) |
| Non-controlling interests | 169,297 | 695,177 |
The accompanying notes are part of these financial statements. 1 Prepared in accordance with IAS 34 - Interim Financial Reporting
Unaudited Financial Statements
Amounts expressed in euro
| Attributable to Equity Holders of Sonae Capital | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Notes | Share Capital | Own Shares | Demerger Reserve (Note 15) |
Translation Reserves |
Fair Value Reserves |
Hedging Reserves |
Other Reserves and Retained Earnings |
Sub total Reserves and Retained Earnings |
Net Profit/ (Loss) |
Total | Non-Control ling Interests |
Total Equity | |
| Balance as at 1 January 2015 | 250,000,000 (1,486,301) | 132,638,253 | (130,882) | (750,961) | (239,276) (75,237,394) | 56,279,740 (6,832,009) | 297,961,430 | 9,375,864 307,337,294 | |||||
| Total consolidated comprehensive income for the period |
- | - | - | 107,532 | 750,961 | 227,320 | 1,294,605 | 2,380,418 | (294,678) | 2,085,740 | 1,730,672 | 3,816,412 | |
| Appropriation of profit of 2014 | |||||||||||||
| Transfer to legal reserves and retained earnings |
- | - | - | - | - | - (6,832,009) | (6,832,009) | 6,832,009 | - | - | - | ||
| Dividends paid | - | - | - | - | - | - | - | - | - | - | (1,079,240) | (1,079,240) | |
| (Acquisition)/Sales of own shares | - | 59,510 | - | - | - | - | - | - | - | 59,510 | - | 59,510 | |
| Changes in the percentage of capital held in affiliated companies |
- | - | - | - | - | - | (219,830) | (219,830) | - | (219,830) | 219,830 | - | |
| Other changes | - | - | - | - | - | - | 875 | 875 | - | 875 | (1) | 874 | |
| Balance as at 31 December 2015 | 250,000,000 (1,426,791) | 132,638,253 | (23,350) | - | (11,956) (80,993,753) | 51,609,194 | (294,678) | 299,887,725 | 10,247,125 310,134,850 | ||||
| Balance as at 1 January 2016 | 250,000,000 (1,426,791) | 132,638,253 | (23,350) | - | (11,956) (80,993,753) | 51,609,194 | (294,678) | 299,887,725 | 10,247,125 310,134,850 | ||||
| Total consolidated comprehensive income for the period |
- | - | - | 36,226 | - | 16,960 | 7,375,957 | 7,429,143 | 17,594,199 | 25,023,342 | 1,099,177 | 26,122,519 | |
| Appropriation of profit of 2015 | |||||||||||||
| Transfer to legal reserves and retained earnings |
- | - | - | - | - | - | (294,678) | (294,678) | 294,678 | - | - | - | |
| Dividends paid | 21 | - | - | - | - | - | - (14,669,026) (14,669,026) | - (14,669,026) | (1,441,468) | (16,110,494) | |||
| (Acquisition)/Sales of own shares | - | 22,565 | - | - | - | - | - | - | - | 22,565 | - | 22,565 | |
| Changes in the percentage of capital held in affiliated companies |
- | - | - | - | - | - | 122,230 | 122,230 | - | 122,230 | (24,782) | 97,448 | |
| Other changes | - | - | - | - | - | - | 44,928 | 44,928 | - | 44,928 | 45,913 | 90,841 | |
| Balance as at 31 December 2016 | 250,000,000 (1,404,226) | 132,638,253 | 12,876 | - | 5,004 (88,414,342) | 44,241,791 | 17,594,199 310,431,764 | 9,925,965 320,357,729 |
The accompanying notes are part of these financial statements.
| Amounts expressed in euro | Notes | 31/12/2016 | 31/12/2015 4th QUARTER 16 1 4th QUARTER 15 1 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| OPERATING ACTIVITIES | |||||||||||
| Cash receipts from trade debtors | 177,185,015 | 179,322,909 | 46,499,499 | 42,023,545 | |||||||
| Cash receipts from trade creditors | (119,332,922) | (109,671,262) | (35,515,506) | (29,811,416) | |||||||
| Cash paid to employees | (33,700,997) | (34,110,758) | (9,450,173) | (8,287,973) | |||||||
| Cash flow generated by operations | 24,151,096 | 35,540,889 | 1,533,820 | 3,924,156 | |||||||
| Income taxes (paid) / received | (1,437,556) | (628,184) | (1,009,753) | (403,498) | |||||||
| Other cash receipts and (payments) relating to operating activities |
20 | 1,549,339 | (5,377,976) | 2,245,058 | (2,047,162) | ||||||
| Net cash from operating activities (1) | 24,262,879 | 29,534,729 | 2,769,125 | 1,473,496 | |||||||
| INVESTMENT ACTIVITIES | |||||||||||
| Cash receipts arising from: | |||||||||||
| Investments | 46 | 37,684,157 | 35,935,067 | (1,143,477) | 12,050,733 | ||||||
| Tangible assets | 35 | 50,246,646 | 15,494,817 | 48,296,357 | 890,195 | ||||||
| Subsidies to investment | 226,089 | - | - | - | |||||||
| Interest and similar income | 430,595 | 2,189,792 | 12,662 | 1,083,566 | |||||||
| Loans Granted Dividends |
13 6 and 41 |
5,911,400 332,859 |
13,693,513 13,634,340 |
- - |
13,693,513 13,294,657 |
||||||
| Changes in consolidation perimeter (companies in) | 46 | 478,496 | - | 478,496 | (339,683) | ||||||
| 95,310,242 | 80,947,529 | 47,644,038 | 41,012,664 | ||||||||
| Cash Payments arising from: | |||||||||||
| Investments | 8 and 46 | (3,188,157) | (26,143) | (3,039,711) | (280) | ||||||
| Tangible assets | (8,672,960) | (13,547,643) | (4,311,615) | (4,512,524) | |||||||
| Intangible assets | (1,090,723) | (416,113) | (662,731) | (128,765) | |||||||
| Loans granted | (62,007) | (1,015,749) | (4,000) | (161) | |||||||
| (13,013,847) | (15,005,648) | (8,018,057) | (4,641,730) | ||||||||
| Net cash used in investment activities (2) | 82,296,395 | 65,941,881 | 39,625,981 | 36,370,934 | |||||||
| FINANCING ACTIVITIES | |||||||||||
| Cash receipts arising from: | |||||||||||
| Loans obtained | 23 and 24 | 99,318,907 | 16,100,000 | 264,311 | 7,000,000 | ||||||
| Sale of own shares | 144,043 | 72,435 | - | - | |||||||
| 99,462,950 | 16,172,435 | 264,311 | 7,000,000 | ||||||||
| Cash Payments arising from: | |||||||||||
| Loans obtained | (184,814,438) | (73,800,598) | (57,286,509) | (11,997,041) | |||||||
| Interest and similar charges | 23 and 24 40 |
(7,232,276) | (9,477,026) | (1,402,006) | (2,295,162) | ||||||
| Dividends | 21 and 22 | (16,247,196) | (924,617) | (259,491) | (888) | ||||||
| Purchase of own shares | - | (12,925) | - | (12,925) | |||||||
| (208,293,910) | (84,215,166) | (58,948,006) | (14,306,016) | ||||||||
| Net cash used in financing activities (3) | (108,830,960) | (68,042,731) | (58,683,695) | (7,306,016) | |||||||
| Net increase in cash and cash equivalents (4) = (1) + (2) + (3) |
(2,271,686) | 27,433,879 | (16,288,589) | 30,538,414 | |||||||
| Effect of foreign exchange rate | 18 | 252,737 | 264,504 | (32,434) | 46,456 | ||||||
| Cash and cash equivalents at the beginning of the period |
20 | 35,318,251 | 8,148,876 | 49,049,983 | 4,826,293 | ||||||
| Cash and cash equivalents at the end of the period | 20 | 32,731,439 | 35,318,251 | 32,731,439 | 35,318,251 |
The accompanying notes are part of these financial statements.
1 Prepared in accordance with IAS 34 - Interim Financial Reporting Unaudited Financial Statements
(Translation from the Portuguese Original) (Amounts expressed in Euro)
SONAE CAPITAL, SGPS, SA ("Company", "Group" or "Sonae Capital") whose headoffice is at Lugar do Espido, Via Norte, Apartado 3053, 4471-907 Maia, Portugal, is the parent company of a group of companies, as detailed in Notes 5 to 7 ("Sonae Capital Group") and was set up on 14 December 2007 as a result of the demerger of the shareholding in SC, SGPS, SA (previously named Sonae Capital, SGPS, SA) from Sonae, SGPS, SA, which was approved by the Board of Directors on 8 November 2007 and by the Shareholder's General Meeting held on 14 December 2007.
Reflecting the current management structure, the reporting segments were revised, addressing the strategic business areas identified in the Group:
The non-strategic assets (including non-tourism real estate assets and financial shareholdings) are included in the segment "Other assets"
The main 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" – previously named International Accounting Standards – "IAS") adopted by the European Union, issued by the International Accounting Standards Board ("IASB") and Interpretations issued by the "International Financial Reporting Interpretations Committee" ("IFRIC"), previously named "Standing Interpretations Committee" ("SIC"), beginning on 1 January 2016.
Interim financial statements were 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 and of its subsidiaries on a going concern basis and under the historical cost convention, except for derivative financial instruments which are stated at fair value.
As at the date of the approval of these consolidated financial statements, the following standards have been endorsed by the European Union
| Accounting standards | Effective Date (Started on or after) |
|---|---|
| IAS 1 – Presentation of financial statements | 1 January 2016 |
| IAS 16 and IAS 38 – Calculation methods of depreciation and amortization | 1 January 2016 |
| IAS 16 and IAS 41 – Agriculture: Bearer plants | 1 January 2016 |
| IAS 19 – Employee benefits | 1 February 2015 |
| IAS 27 – Separate financial statements | 1 January 2016 |
| Amendments to IFRS 10, 12 and IAS 28: Investments in associates and joint ventures – Application of the consolidation exception |
1 January 2016 |
| IFRS 11 – Joint arrangements | 1 January 2016 |
| Annual amendments to International Financial Reporting Standards – 2010 - 2012 | 1 February 2015 |
| Annual amendments to International Financial Reporting Standards – 2012 - 2014 | 1 January 2016 |
| Accounting standards | Effective Date (Started on or after) |
|---|---|
| IFRS 9 – Financial instruments | 1 January 2018 |
| IFRS 15 – Revenue from contracts with customers | 1 January 2018 |
There will be no material impacts on future financial statements of the Group when these standards are enforced.
| Accounting standards | Effective Date (Started on or after) |
|---|---|
| IAS 7 – Statement of Cash Flows | 1 January 2017 |
| IAS 12 – Income taxes | 1 January 2017 |
| IAS 40 – Investment property | 1 January 2018 |
| IFRS 2 – Share-based payment | 1 February 2018 |
| IFRS 4 – Insurance contracts (amendments regarding the interaction of IFRS 4 and 9) |
1 January 2018 |
| Amendments to IFRS 15 - Revenue from contracts with customers | 1 January 2018 |
| IFRS 16 – Leases | 1 January 2019 |
| Annual amendments to International Financial Reporting Standards – 2014 – 2016 | 1 January 2017 and 2018 |
| IFRIC 22 – Foreign currency transactions and advance consideration | 1 January 2016 |
It is expected that the enforcement of these standards and interpretations, with the exception of IFRS 15 and 16, will not generate material impacts in the Group financial statements. However, the material effects of these standards are still under review.
The consolidation methods adopted by the Group are as follows:
The Group controls an entity when it is exposed to, or has rights to, the variable returns from its involvement with the Entity, and has the ability to affect those returns through the power exercised over the Entity (definition of control normally used by the Group), 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 non-controlling 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.
Comprehensive income and other components of equity are attributable to non-controlling interests, even if these captions show negative values.
The acquisition of subsidiaries is recorded using the purchase method. The cost of an acquisition is measured at the fair value of the delivered assets, equity instruments issued and liabilities incurred or assumed at the acquisition date. The costs directly attributable to the acquisition are recorded in the income statement when incurred.
Assets and liabilities of each Group company are measured at their fair value at the date of acquisition and this measurement may be adjusted within 12 months from the date of acquisition. When the Group starts to have control on a subsidiary and already holds a previously acquired shareholding, the fair value of such shareholding contributes to the calculation of goodwill or bad will. Any excess of the cost of acquisition over the Group's interest in the fair value of the identifiable net assets acquired is recognised as goodwill (Note 2.2.c). Any excess of the Group's share in the fair value of the identifiable net assets acquired over cost is recognized as income in profit or loss for the period of acquisition, after reassessment of the estimated fair value of net assets acquired. Non-controlling interests include their proportion of the fair value of net identifiable assets and liabilities recognised on acquisition of Group companies.
The results of its subsidiaries companies acquired/sold during the period are included in the income statement since the date of acquisition or until the date of sale.
Adjustments to the financial statements of Group companies are performed, whenever necessary, in order to adapt accounting policies to those used by the Group. All intra-group transactions, balances, income and expenses and distributed dividends are eliminated on consolidation. Unrealized losses are also eliminated, but are considered as an impairment indicator for the transferred asset.
Financial investments in companies excluded from consolidation are recorded at acquisition cost net of impairment losses (Note 7).
Whenever the Group 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.
Subsequent transactions in the disposal or acquisition of shareholding to non-controlling interests, and not involving any change in control, don't generate recognition of gains, losses or goodwill. Any difference between the transaction value and the book value of the traded shareholding is recognized in Equity, in other equity instruments.
Investments in associated companies (companies where the Group 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) and in jointly controlled companies are accounted for in accordance with the equity method.
Under the equity method, investments are recorded at cost value, adjusted by the amount corresponding to the Group's share of changes in equity (including net profit) of associated and jointly controlled companies and by dividends received.
Any excess of the cost of acquisition over the Group's share in the fair value of the identifiable net assets acquired is recognised as goodwill (Note 2.2.c), which is included in the caption Investment in associated and jointly controlled companies. Any excess of the Group'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.
An assessment of the investment in associated and jointly controlled companies is performed when there is an indication that the asset might be impaired and any impairment loss is disclosed in the income statement whenever the shareholding includes goodwill and / or implicit loans / financing.
Impairment losses recorded in prior years that are no longer justifiable are reversed.
When the Group's share of losses exceeds the carrying amount of the investment, this is reported at nil value and recognition of losses is discontinued, unless the Group is committed beyond the value of its investment, or in case it has made payments in favour of the subsidiaries, with the Group recording additional losses.
The Group's share in unrealized gains arising from transactions with associated and jointly controlled 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 and jointly controlled companies are disclosed in Note 6.
The accounting policies of the joint ventures are amended, where necessary, to ensure that they are applied consistently with those of the Group.
The excess of the cost of acquisition of investments in group companies, jointly controlled companies and associated companies over the Group's share in the fair value of the assets and liabilities of those companies at the date of acquisition is shown as Goodwill (Note 12) or as Investments in associated and jointly controlled companies (Note 6).
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 currency (Euro) is made using the closing exchange rate. Exchange rate differences arising from this translation are disclosed in Currency Translation Reserves.
Goodwill is not amortised, but is subject to impairment tests on an annual basis.
For impairment testing purposes, Goodwill is allocated to the cash generating units to which it belongs, the latter being the smallest identifiable group of assets that generates independent cash flows among themselves. The recoverable amount is determined based on the business plans used in the management of the Group or on valuation reports prepared by independent entities.
Impairment losses identified in the period are disclosed in the income statement under Provisions and impairment losses, and may not be reversed.
Any excess of the Group's share in the fair value of identifiable assets and liabilities in Group companies over costs is recognised as income in the profit and loss for the period, at the date of acquisition, after reassessment of the fair value of the identifiable assets and liabilities acquired.
When the Group reorganizes its activity, implying a change in the composition of its cash-generating units to which goodwill has been allocated, a review of Goodwill's allocation to the new cash-generating units is carried out when appropriate. The reallocation is done through a relative value approach, of the new cash-generating units that are created from the reorganization.
Assets and liabilities denominated in foreign currencies in the individual 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 Currency Translation Reserves. Exchange rate differences that 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 (in whole or in part), the share of the corresponding accumulated exchange rate differences is recorded in the income statement as a gain or loss on the disposal, in the caption Investment income.
Whenever a subsidiary in foreign currency is fully disposed of, the accumulated exchange difference is recognized in the income statement as a gain or loss on disposal. If the subsidiary is partially disposed, without loss of control, the accumulated exchange difference is derecognised in its share and transferred to non-controlling interests. If the subsidiary company is partially disposed, with loss of control, the exchange difference is recorded in the income statement.
Exchange rates used on translation of foreign group, jointly controlled and associated companies are listed below:
| 31 December 2016 | 31 December 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| End of the Period | Average of Period | End of the Period | Average of Period | |||||
| Mozambican Metical | 0,01327 | 0,01489 | 0,01918 | 0,02320 | ||||
| Brazilian Real | 0,29150 | 0,26105 | 0,23193 | 0,27451 | ||||
| Angolan Kwanza | 0,00567 | 0,00545 | 0,00679 | 0,00757 |
Source: Bloomberg
The items included in the consolidated financial statements are measured using the currency of the economic environment in which the Group operates (functional currency). The Consolidated Financial Statements of the Group and the notes thereto are presented in euros, the functional and disclosure currency of the Group, unless otherwise stated.
Exchange gains or losses resulting from the payment / receipt of transactions, as well as the translation of assets and liabilities in foreign currency at the exchange rate at the reporting date, are recognized in the income statement under Financial Expenses or Financial Income if the transactions are related with loans, and Other Income or Other Expenses for all other balances / transactions.
Tangible assets acquired up to 1 January 2004 (transition date to IFRS) are recorded at acquisition cost, or revaluated 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 those dates are recorded at acquisition cost, net of depreciation and accumulated impairment losses.
The acquisition cost includes the purchase price of the asset, the expenses directly attributable to its acquisition and the costs incurred with the preparation of the asset so that it is placed in condition of use. Financial costs incurred on loans obtained for the construction of tangible assets are recognized as part of the construction cost of the asset.
Depreciation is calculated on a straight line basis, once the asset is available for use, over the expected useful life for each class of assets and disclosed in "Amortisation and depreciation" in the consolidated profit and loss account.
Impairment losses in tangible assets are accounted for in the year when they are estimated, and are disclosed in Impairment losses in the consolidated profit and loss account, except for those relating to Inventories whose impairment is recorded in Cost of goods sold and materials consumed.
Impairment losses are recorded in the year in which they are estimated and booked in Provisions and impairment losses in the Consolidated Income Statement.
| Years | |
|---|---|
| Buildings | 10 a 50 |
| Plant and machinery | 10 a 20 |
| Vehicles | 4 a 5 |
| Tools | 4 a 8 |
| Fixture and fittings | 3 a 10 |
| Other tangible assets | 4 a 8 |
Depreciation rates used correspond to the following estimated useful lives:
The useful lives of the assets are reviewed in each financial report so that the depreciation practiced is in accordance with the useful life of the assets. The land is not depreciated. Changes to useful lives are treated as a change in accounting estimates and are applied prospectively.
Subsequent costs incurred with renewals and major repairs resulting in an increase in the useful life or the ability to generate economic benefits from an asset, are added to the carrying amount of that asset. Maintenance and repair costs related 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 start being used.
Gains or losses on a sale or a 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".
Expenses incurred with the dismantling or removals of assets installed in third-party property are considered as part of the initial cost of the respective assets, when they constitute significant amounts.
When individually acquired, intangible assets are stated at acquisition cost, which comprises: i) the purchase price, including intellectual property costs and fees after deduction of any discounts; and ii) any costs directly attributable to the preparation of the asset to be placed in condition of use.
After the initial accounting, the Group measures its intangible assets according to the cost model.
When acquired within the scope of a business combination, separable from goodwill, intangible assets are initially valued at fair value determined in the application of the purchase method, as stated by IFRS 3 - Business Combinations.
Intangible assets are stated at acquisition cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognised if they are identifiable, if it is probable that future economic benefits will flow from them, if they are controlled by the Group 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 the Group 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 is 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 capitalized as intangible assets.
The Group adopted IFRIC 12 – Service Concession Arrangements from 2009 onwards whenever a Group company enters into a service concession arrangement with a public sector entity to provide services to the public. The Troia Marina is the sole service concession arrangement to which this interpretation is applicable. In this case, costs incurred with building the infrastructure for the marina were recorded as an intangible asset which is amortised, on a straight line, over the period of the arrangement, because rights were given to this company to charge users of the public service but has no unconditional contractual right to receive cash from the grantor and bearing the risk of demand. These Intangible Assets are added to the amounts agreed with the grantor for the construction / acquisition of assets for the commercial use of the concession, when these are translated in investments of expansion or requalification in the infrastructures.
Amortisation is calculated on a straight line basis, once the asset is available for use, over the expected useful life which normally is between 3 and 6 years, and are disclosed in Amortisation and Depreciation in the consolidated profit and loss account, except for Troia Marina assets, recorded as Intangible assets under IFRIC 12 - Service Concession Arrangements, which are amortised over the period of the arrangement (50 years).
Whenever there is evidence of impairment of intangible assets, impairment tests are performed in order to estimate the recoverable value of the asset and, when necessary, to record an impairment loss.
The useful lives of the assets are reviewed in each financial report so that the amortization practiced is in accordance with the useful life of the assets. Changes to useful lives are treated as a change in accounting estimates and are applied prospectively.
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 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 the lower of fair value and present value of minimum lease payments up to the end of the lease. 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.
Tangible fixed assets acquired through finance leases are depreciated by the lower of the two criteria - useful life of the asset or the period of the lease (when the Group has no option to purchase at the end of the lease), or estimated useful life (when the Group Intends to acquire the assets at the end of the contract).
Lease payments under operating lease contracts are recognised as an expense on a straight line basis over the lease term.
Where the Group acts as a lessor in operating leases, the value of assets leased is maintained in the Group's balance sheet and related rents (net of any incentives granted to the lessee) are taken to the profit and loss account on a straight line basis over the period of the lease.
Government grants are recognised at fair value when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them.
Investment subsidies related to the acquisition of fixed assets are recognised as deferred income under other current liabilities that are taken to the income statement, under other operating profit, on a systematic basis over the estimated useful life of the asset.
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 in provisions and impairment losses (increases/decreases). 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 normally recognised as an expense in the period in which they are incurred.
Borrowing costs directly or indirectly attributable to the acquisition, construction or production of tangible and real estate projects included under Inventories are capitalised as part of the cost of the qualifying asset. The capitalization of these charges begins after the start of the preparation or construction of the asset and is discontinued when those assets are available for use or when the project concerned is suspended. Borrowing costs are capitalised from the time 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.
Non-current assets (or disposal groups) are classified as held for sale if the 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 costs to sell. These assets are not depreciated since the date they were classified as available for sale, and will remain so until the sale happens or the sale is not likely to happen.
When non-current assets (or disposal groups) no longer meet the conditions to be classified as held for sale, these assets (or disposal groups) will be reclassified according to the nature of the underlying assets and will be remeasured at the lower of: i) The carrying amount before they have been classified as held for sale, adjusted for any depreciation / amortization, or revaluation amounts that have been recognized had those assets not been classified as held for sale ii) by the recoverable amounts of these assets at the date when they are reclassified according to their underlying nature. These adjustments will be recognized in the net income of the year.
Goods for sale and raw materials are stated at the lower of cost, net of discounts obtained or estimated, and net realisable value. Cost is determined on a weighted average basis. Goods for sale include mostly land for real estate developments.
Finished goods and work in progress are stated at the lower of the weighted average production cost or net realisable value. Production cost includes cost of raw materials, labour costs and overheads (including depreciation of production equipment based on normal levels of activity). Work in progress includes mostly resorts and real estate developments for sale in the normal course of business. Changes in the inventories of finished goods and work in progress during the year are stated in caption Changes in stocks of finished goods and work in progress in the income statement.
Net realisable value is the estimated selling price less estimated costs of completion and estimated costs necessary to make the sale.
Differences between cost and net realisable value, if negative, are shown as operating expenses under Cost of sales or Changes in Inventories of finished goods and work in progress, depending on whether they refer to goods for sale and raw materials or finished goods and work in progress.
Provisions are recognised when, and only when, the Group 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.
Provisions are measured at the present value of estimated expense to pay the obligation, using a pre-tax interest rate, which reflects the market valuation for the discount period and the risk of the provision in question.
Restructuring provisions are recorded by the Group whenever a formal and detailed restructuring plan exists and that plan has been communicated to the parties involved.
Provisions related to lawsuits in which the Group is a defendant. The Group recognizes this provision when it estimates, based on information provided by legal counsel on the progress of the process, that it is likely the Group will have to pay for an indemnity.
Financial instruments were classified in the categories presented in the consolidated balance sheet as detailed in Note 9.
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 includes investments held for negotiation, which the Group acquires with a view to their disposal within a short time period. They are shown in the consolidated balance sheet as Current Investments.
The Group classifies as investments available for sale, those which are not considered as investments measured at fair value through profit or loss nor as investments held to maturity. These assets are classified as non-current assets, unless there is an intention to dispose of them in a period of less than 12 months from the balance sheet date.
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, with the exception of the investments measured at fair value through profit or loss.
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. Impairment losses associated with debt instruments recognized in the consolidated income statement are reversible through profit or loss and impairment losses associated with equity instruments recognized in the consolidated income statement are not reversible through profit or loss.
Held to maturity investments are carried at amortised cost using the effective interest rate, net of capital reimbursements and interest income received.
Investments are derecognised when the rights to receive the cash flows arising from the said investments expire or are transferred, as well as all the risks and benefits associated with their possession.
Loans and accounts receivable are booked at amortised cost using the effective interest method less any impairment losses.
Financial income is calculated using the effective interest rate, except for amounts receivable within a very short time period, for which the income receivable is immaterial.
These financial investments arise when the Group supplies money, goods or services directly to a debtor without the intention to negotiate the debt involved.
Loans and accounts receivable are classified as current assets, expect in cases where the maturity date is more than 12 months from the date of the balance sheet, when they are classified as non-current assets. These financial investments are included in the classes identified in Note 9.
Amounts owing from Customers and other third party debts are booked at their nominal value and are subsequently measured at amortized cost and shown in the consolidated balance sheet net of any impairment losses, recognised in the caption Losses due to impairment in receivables in order to reflect their net realisable value. These captions, when current, do not include interest, since the discount impact is considered immaterial.
Impairment losses are booked following the events that have taken place, which indicate objectively and in a quantifiable manner that the whole or a part of the debt will not be received. For this, each Group company takes into consideration market information which demonstrates that:
Recognised impairment losses equal the difference between the amount receivable in the accounts and the present value of future estimated cash flows, discounted at the initial effective interest rate, which is considered to be zero. The discount is considered immaterial in those cases where a receipt is expected within less than a year.
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 commissions and other financing expenses 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 2.16. The portion of the effective interest charge relating to commissions and other financing expenses, if not paid in the period, is added to the book value of the loan.
Loans will be classified as current liabilities if the payment is due within 12 months or less, otherwise they will be classified as non-current liabilities.
Accounts payable and other creditors are stated at their nominal value, subsequent to their initial recognition these items are measured at amortized cost using the effective interest rate method.
The Group uses derivatives in the management of its financial risks, only to hedge such risks and/or to optimise funding costs.
Derivatives classified as cash flow hedge instruments are used by the Group 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. Inefficiencies that may exist are shown in the caption Net Financial Income/Expenses in the consolidated income statement.
The Group's criteria for classifying a derivative instrument as a cash-flow hedge instrument include:
Cash-flow hedge instruments used by the Group to hedge the exposure to changes in interest rate of its loans are accounted by its 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 net financial income/expenses in the income statement over the same period in which the hedged instrument affects income statement.
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, to the extent that the hedged instrument affects profit and loss. Subsequent changes in fair value are recorded in the income statement.
In those cases in which derivative instruments, in spite of having been negotiated with the abovementioned objectives (essentially derivatives in the form of interest rate options), in relation to which the company did not apply hedge accounting, are initially recorded at cost, if any, and subsequently measured at fair value. The changes in value resulting from the measurement at fair value, calculated using especially designed software tools are included in Net financial charges in the consolidated income statement.
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 contract, and this is not stated at fair value, and unrealised gains or losses recorded in the consolidated income statement.
In specific situations, the Group may use interest rate derivatives with the goal of obtaining fair value cover. In these situations, derivatives are booked at their fair value in the consolidated financial statements. If this hedge no longer meets the criteria for hedge accounting, changes in the fair value of the hedged instrument for which the effective interest rate method is used are amortized through profit and loss over the maturity period of the hedge instrument. In the cases in which the derivative involved is not measured at fair value (in particular borrowings that are measured at amortised cost), the effective share of cover will be adjusted to the accounting value of the derivative covered through the profit and loss account.
Equity instruments are those that represent a residual interest on the Group's net assets and are recorded at the amount received, net of costs incurred with their issuance.
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 current bank loans.
Share-based payments result from Deferred Performance Bonus Plans that are referenced to the Sonae Capital, SGPS, SA share price 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. 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 Group has the choice to settle the transaction in cash.
Whenever one of the criteria for recognition of provisions is not complied with or the existence of the obligation is conditional on the occurrence (or non-occurrence) of a future event, there is a contingent liability. 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 "possible" assets generated by past events whose existence derives from the confirmation of the future occurrence of one or more uncertain events over which the Group has no control. 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 in the consolidation perimeter and considers deferred taxation. Current tax is calculated in accordance with the tax rules in force, or with the tax rules substantially considered as being in force at the balance sheet date.
Current income tax is determined based on the taxable income of the companies included in the consolidation perimeter, or optionally, in the groups of companies included in tax consolidations perimeters, in accordance with the tax rules in force in the respective country.
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 liabilities are recognized on all taxable temporary differences, except those related with: i) initial recognition of the goodwill; ii) The initial recognition of assets and liabilities, that are not from a concentration of activities, and that at the date of the transaction do not affect the accounting or tax result. However, there are no taxable temporary differences related to investments in subsidiaries, since; i) the parent company has the ability to control the reversal period of the temporary difference: ii) It is likely that the temporary difference will not reverse in the near future.
Deferred taxes 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.
Under current legislation, tax returns are subject to review and correction by the tax authorities for a period of four years (five years for Social Security), except if there have been tax losses or tax benefits, or ongoing tax inspections or claims. In these cases, and depending on the circumstances, the time limits are extended or suspended. In this way the Company tax return, from the years 2013 to 2016, could still be subject to review. However, in the opinion of the Company's Board of Directors, it is not expected that any correction relating to the said financial years will be significant for the consolidated financial statements as at 31 December 2016.
In the fiscal year 2016, the Company is subject to taxation on Corporate Income Tax at the normal rate of 21%, plus municipal taxes at a maximum rate of 1.5%.
In addition, on the part of the taxable profit of more than 1,500,000 euros subject to and not exempt from Corporate Income Tax, the following state levy fees are levied: 3% over 1,500,000 euros and less than 7,500,000 euros; 5% on the upper part to 7,500,000 euros and up to 35,000,000 euros; and 7% that is levied on the part of the taxable income that exceeds 35,000,000 euros.
Under the terms of Article 88 of the Portuguese Income Tax Code, the company is also subject to separate taxation on a set of charges at the rates provided for in the mentioned article.
The Corporate income tax rate in force for 2017 is 21%.
The Revenue is the fair value of the amount received or receivable earned from the sale of products and rendering of services by the Group.
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.
Revenue from work in progress is recognized at the end of each year as follows: when total amounts invoiced are higher than the corresponding expenses, the excess is recorded in other current liabilities, and when expenses are higher than the corresponding amounts invoiced the excess is recorded in work in progress.
Revenues arising from contract variations, claims and completion premiums are recorded when these are agreed with the customer, or when negotiations are at an advanced stage and it is probable that these will be favourable to the Group.
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 booked in the income statement.
Income and expenses are booked in accordance with the accrual basis of accounting, whereby they are recognized as they are earned, regardless of when the cash is received or paid. The differences between the amounts received and paid and the corresponding income and expenses, are recorded under the captions "Other current assets" and "Other current liabilities".
Dividends are recognised as income in the year they are attributed to the shareholders.
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.
Events after the balance sheet date and before the financial statements are issued 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 and before the financial statements are issued that are nonadjusting events are disclosed in the notes when material.
The most significant accounting estimates reflected in the financial statements are as follows:
Estimates were based on the best information available at the date of the preparation of the financial statements and on the best knowledge and experience of past and/ or current events. These estimates may, however, be affected by subsequent events which are not foreseeable at the present date. Changes to these estimates, which take place after the date of the financial statements, will be recognised prospectively in the income statement, in accordance with IAS 8.
The main estimates and assumptions used relating to future events included in the consolidated financial statements are described in the corresponding notes attached.
Financial information regarding business segments is included in Note 47.
The ultimate purpose of financial risk management is to support Sonae Capital in the achievement of its long term strategy, reducing unwanted financial risk and volatility and mitigate any negative impacts in the income statement arising from such risks. Sonae Capital'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 Capital does not enter into derivatives or other financial instruments that are unrelated to its operating business or for speculative purposes.
The Corporate Finance Department of Sonae Capital is responsible for consolidating and measuring the group's financial risk exposure for reporting and monitoring purposes, being also responsible for submit proposal and implementation of hedging instruments to managing their own currency, interest rate, liquidity and refinancing risks. Exposures are recorded in a main system (Treasury Management System). Risk control and reporting is carried out both at each business level and on a consolidated.
In what concerns to customer and partner´s credit risk management, the Department of Counterparty Risk, as part of the Finance Services, is responsible for assessing and monitoring the clients and partners' risk profile for all the business units as well as the implementation of instruments to mitigate such risks and reporting of exposures and credit quality.
As a result of maintaining its debt in the consolidated balance sheet at variable rates, and the resulting cash flows from interest payments, the Group is exposed to a Euro interest rate risk.
In view of the fact that:
In view of the above, the Group policy concerning this issue defines a case by case review of each potential transaction, such that any contract for derivatives must follow the following principles:
• All transactions are entered into by using market standard contracts (ISDA International Swaps and Derivatives Association), with schedules negotiated with each one of the Institutions;
• To determine the fair value of the hedging transactions, the Group uses a range of methods in accordance with market practices, namely option valuation models and discounted future cash flow models, with specific market assumptions (interest and exchange rates, volatilities, etc.) prevailing at the Balance Sheet date. Comparative quotes provided by financial institutions are also used as a valuation benchmark;
Interest rate sensitivity is based on the following assumptions:
• The sensitivity analysis is applied to all financial instruments existing at the end of the period.
Given the above mentioned assumptions, if interest rates of financial instruments denominated in euro had been 0.75 percentage points higher/lower, the consolidated net profit before tax of the Group as at 31 December 2016 would have been higher/ lower by 773,310 euro (as at 31 December 2015 they would have been higher/lower by 1,055,902 euro). The impact in equity (excluding the impact on net profit) of the interest rate sensitivity analysis as at 31 December 2016 would have been lower/higher by around 0 euro (as at 31 December 2015 the impact would have been lower/higher by around 0 euro).
The Sonae Capital Group, as an all, has an immaterial exposure to exchange rate risk.
However, the refrigeration and air conditioning business has international operations with subsidiaries operating in different jurisdictions and therefore it is exposed to the exchange rate risk.
The Consolidated Statements of Financial Position and Income Statement are exposed to the risk of a change in exchange rates (risk relative to the value of capital invested in subsidiaries outside the Eurozone) and Group's subsidiaries are exposed to the risk of a change in both exchange and transaction rates (risk associated with commercial transactions made in currencies other than the euro). Transaction risk arises when there is exchange risk related to a cash flow in other than a subsidiary local currency. The Group company cash flows are largely denominated in the subsidiary local currency. This is valid independently of the nature of the cash flows, i.e.: operating or financial, and provides a degree of natural hedging, reducing the Group's transaction risk. In line with this reasoning, Group's subsidiaries only contract debt that is denominated in the respective local currency. In turn, the currency conversion risk emerges from the fact that, when preparing the Group's consolidated accounts, the financial statements of the subsidiaries denominated in currencies other than that of the consolidated accounts (euro), must be converted into euros. As exchange rates vary between accounting periods and as the value of the subsidiaries' assets do not match their liabilities, volatility in the consolidated accounts arise as a result of conversion in different periods at different exchange rates.
As a rule, whenever it is possible and economically viable, subsidiaries aim to offset assets and liabilities denominated in the same foreign currency, thus mitigating foreign exchange risks. Also as a general rule, in situations where there is significant exchange rate risk resulting from operating activities involving currencies other than the local currency of each subsidiary, the foreign exchange risk should be mitigated through the use of short-term foreign exchange derivatives contracted by the subsidiary exposed to that risk. Sonae Capital's subsidiaries do not contract exchange rate derivatives for trading, profit making or speculative purposes. As policy, the translation risk as a result of conversion of equity investments in subsidiaries different from Euro is not hedged,
since these investments are considered long-term. Gains and losses related to the translation at different exchange rates of Equity investments in foreign non Euro subsidiaries are accounted under the Conversion Reserve, included in Other Reserves and Accumulated Earnings, on the Consolidated Balance Sheet.
In view of the low volume of balances in foreign currency, no exchange rate sensitivity analysis was carried out.
The Group is exposed to risks arising from the value of investments made in financial shareholdings. However, these investments are in general made with strategic objectives in mind and not for current trading.
Credit risks at Sonae Capital arise mainly from (i) debts from customers relating to operational activity, (ii) its relationships with financial institutions in the course of its day to day business activity, and (iii) the risk of noncompliance by business counterparts in portfolio transactions.
Customer Credit: Sonae Capital's credit management is structured according to the particular needs of the businesses that are part of the Group, always taking in consideration:
The implementation of all these mechanisms has allowed a strict fulfilment of the credit risk policy and also an under the average rate of clients' unfulfillment.
According to Intrum Justitia, during 2016 the client's unfulfillment rate in Portugal was 2.3% of the sales, in Europe 3.1%, whereas Sonae Capital achieved a 0.35% rate.
In the normal course of activity collection risk may arise in trade debtors. The amounts presented on the face of the balance sheet are net of impairment losses, which were estimated based on the Group's experience and on the assessment of present economic conditions. As a result, amounts disclosed in Trade debtors reflect their fair value.
Financial Institutions: The credit risk is linked to possible noncompliance by financial institutions, to which the Group is contractually bound, in its normal operational activity, term deposits, cash balances and derivatives.
To mitigate this risk, the Group:
Shareholding Buy/Sale transactions: In the course of its business, the Group is exposed to the credit risk of counterparts with whom it agrees transactions concerning investments in shareholdings. In these cases, the means used to mitigate risks are determined on a one on one basis, in order to take into account the specifics of the transaction, with the constant supervision of the Board of Directors. Despite the variability of the means used, there exists always the possibility of using normal market methods, namely carrying out due diligences, obtaining financial information concerning the counterpart in question, or the pledging of an asset which is released when the financial transaction has been completed, requesting bank guarantees, setting up escrow accounts, obtaining collateral, among others.
Sonae Capital Group's available cash mainly includes bank deposits resulting from cash generated by operations. By geography, bank deposits and short-term investments are distributed as follows:
| Deposits and short term investments | |||||||
|---|---|---|---|---|---|---|---|
| Portugal | 98,74% | ||||||
| Angola | 1,21% | ||||||
| Spain | 0,04% | ||||||
| Brazil | - | ||||||
| Netherlands | - | ||||||
| Mozambique | - |
Apresentam-se de seguida os ratings (notação S&P, excepto no caso do Montepio Geral – Fitch) das principais Instituições de Crédito onde o Grupo Sonae Capital tinha depósitos e outras aplicações financeiras a 31 de Dezembro de 2016:
| Rating | % of deposits |
|---|---|
| BB+ | 0,10% |
| BB- | 10,50% |
| B+ | 88,10% |
| n.d. | 1,20% |
In accordance with established policy, Sonae Capital Group only carry out bank deposits and other short-term investments with counterparties that have a high national and international prestige based on their respective rating notations and preference should be given to financial institutions that form part of Sonae Capital's relationship banks that have a credit position equal or greater that the amount of the short term investment that Sonae Capital aims to do.
Sonae Capital has the need, regularly, to raise external funds to finance its activities and investing plans. It holds a long term diversified portfolio, essentially made of, loan´s and structured facilities, but which also includes a variety of other short-term financing facilities in the form of commercial paper and credit lines.
The objective of liquidity risk management is to ensure at any given moment that the Group has the financial capability under favourable market conditions to: (i) comply with its payment obligations when these fall due and (ii) ensure in a timely manner the appropriate financing for the development of its businesses and strategy.
To that end, the Group aims at maintaining a flexible financial structure, so that the process of managing liquidity within the Group includes the following key aspects:
A liquidity reserve in form of credit lines with its relationship banks is maintained by Sonae Capital, to ensure the ability to meet its commitments without having to refinance itself in unfavourable terms.
Additionally, Sonae Capital held, as at 31 December 2015, cash and cash equivalents and current investments.
Consequentially, Sonae Capital expects to meet all its obligations by means of its operating cash flows and its financial assets as well as from drawing existing available credit lines or contracting new, if needed.
Changes in international accounting standards that took effect on or after 1 January 2016 (note 2.1), had no significant impact on the financial statements at 31 December 2016.
Group companies included in the consolidated financial statements, their head offices and percentage of the share capital held by the Group as at 31 December 2016 and 2015, are as follows:
| Percentage of capital held | |||||||
|---|---|---|---|---|---|---|---|
| 31 December 2016 | 31 December 2015 | ||||||
| Company | Head Office | Direct | Total | Direct | Total | ||
| Sonae Capital SGPS, SA | Maia | Holding | Holding | Holding | Holding | ||
| Hotels | |||||||
| Porto Palácio Hotel, SA | a) | Porto | 100,00% | 100,00% | 100,00% | 100,00% | |
| 3) | SC Hospitality, SGPS, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% |
| The Artist Porto Hotel & Bistrô - Actividades Hoteleiras, SA |
a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| 4) | The House Ribeira Hotel – Exploração Hoteleira, SA a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Aqualuz Tróia, SA | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| Resorts | |||||||
| Atlantic Ferries-Tráf.Loc,Flu.e Marít,SA | a) | Grândola | 95,77% | 95,77% | 95,77% | 95,77% | |
| Golf Time-Golfe e Invest. Turísticos, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Imopenínsula - Sociedade Imobiliária, SA | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| Imoresort - Sociedade Imobiliária, S.A. | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| Marina de Tróia, SA. | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| Marmagno-Expl.Hoteleira Imob.,SA | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| Marvero-Expl.Hotel.Im.,SA | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| SII - Soberana Invest. Imobiliários, SA | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| Soltroia-Imob.de Urb.Turismo de Tróia,SA | a) | Lisbon | 100,00% | 100,00% | 100,00% | 100,00% | |
| Tróia Market, S.A. | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| Tróia Natura, S.A. | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| Troiaresort-Investimentos Turísticos, SA | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| 1) | Troiaresort, SGPS, SA | a) | Matosinhos | 100,00% | 100,00% | 100,00% | 100,00% |
| Tulipamar-Expl.Hoteleira Imob.,SA | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| Fitness | |||||||
| 6) | Acrobatic Tittle, S.A. | a) | Lisbon | 10,00% | 10,00% | - | - |
| Solinca - Health & Fitness, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Energy | |||||||
| Atelgen - Produção Energia, ACE | a) | Barcelos | 51,00% | 51,00% | 51,00% | 51,00% | |
| CAPWATT - Brainpower, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| CAPWATT - ACE, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Capwatt Colombo - Heat Power, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Capwatt Engenho Novo - Heat Power, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Capwatt Hectare - Heat Power, ACE | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Capwatt II - Heat Power, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Capwatt III - Heat Power, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Capwatt Maia - Heat Power, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Capwatt Martim Longo - Solar Power, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Capwatt Vale do Caima - Heat Power, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Capwatt Vale do Tejo - Heat Power, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| CAPWATT - SCSGPS, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Carvemagere - Manutenção e Energias Renováveis, Lda |
a) | Barcelos | 65,00% | 65,00% | 65,00% | 65,00% | |
| Companhia Térmica SERRADO, ACE | a) | Maia | 70,00% | 70,00% | 70,00% | 70,00% | |
| Companhia Térmica Tagol, Lda. | a) | Oeiras | 100,00% | 100,00% | 100,00% | 100,00% | |
| CTE - Central Termoeléctrica do Estuário, Lda | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Enerlousado - Recursos Energéticos, Lda. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Ronfegen - Recursos Energéticos, Lda. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Soternix - Produção de Energia, ACE | a) | Barcelos | 51,00% | 51,00% | 51,00% | 51,00% | |
| 6) | Suncoutim – Solar Energy, SA. | a) | Faro | 85,00% | 85,00% | - | - |
| Refrigeration and HVAC | |||||||
|---|---|---|---|---|---|---|---|
| QCE - Desenvolvimento e fabrico de Equipamentos, SA |
a) | Matosinhos | 100,00% | 70,00% | 100,00% | 70,00% | |
| Sistavac, SA | a) | Matosinhos | 100,00% | 70,00% | 100,00% | 70,00% | |
| Sistavac, SGPS, SA | a) | Matosinhos | 70,00% | 70,00% | 70,00% | 70,00% | |
| Sistavac Sistemas HVAC-R do Brasil, Ltda | a) | São Paulo | 100,00% | 70,00% | 100,00% | 70,00% | |
| Sopair, S.A. | a) | Madrid | 100,00% | 70,00% | 100,00% | 70,00% | |
| Spinarq Moçambique, Lda | a) | Maputo | 70,00% | 70,00% | 70,00% | 70,00% | |
| Spinarq-Engenharia,Energia e Ambiente,SA | a) | Luanda | 99,90% | 99,90% | 99,90% | 99,90% | |
| Other Assets | |||||||
| Bloco Q-Soc.Imobil.SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Casa da Ribeira-Sociedade Imobiliária, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Centro Residencial da Maia,Urban.,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Cinclus Imobiliária,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Contacto Concessões, SGPS, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Contry Club da Maia-Imobiliaria,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Empreend.Imob.Quinta da Azenha,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Fundo Esp.Inv.Imo.Fec. WTC | a) | Maia | 100,00% | 100,00% | 99,82% | 99,82% | |
| Imoclub-Serviços Imobilários,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Imodivor - Sociedade Imobiliária, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Imohotel-Emp.Turist.Imobiliários,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Imoponte - Sociedade Imobiliária, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Imosedas-Imobiliária e Seviços,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Implantação - Imobiliária, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Inparvi SGPS, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Interlog-SGPS,SA | a) | Lisbon | 98,98% | 98,98% | 98,98% | 98,98% | |
| Porturbe-Edifícios e Urbanizações,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Praedium - Serviços, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Praedium II-Imobiliária,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Prédios Privados Imobiliária,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Predisedas-Predial das Sedas,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Promessa Sociedade Imobiliária, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| SC-Eng. e promoção imobiliária,SGPS,S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| SC Assets, SGPS, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Sete e Meio Herdades-Inv. Agr. e Tur.,SA | a) | Grândola | 100,00% | 100,00% | 100,00% | 100,00% | |
| 2) | Société de Tranchage Isoroy SAS. | a) | Honfleur | 100,00% | 100,00% | 100,00% | 100,00% |
| Soira - Soc. Imobiliária de Ramalde, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Sótaqua - Soc. de Empreend. Turisticos | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Spinveste - Promoção Imobiliária, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Spinveste-Gestão Imobiliária SGII,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Urbisedas-Imobiliária das Sedas, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Vistas do Freixo-Emp.Tur.Imobiliários,SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Others | |||||||
| Imobeauty, S.A. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| SC - Sociedade de Consultadoria, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| SC Finance BV | a) | Amsterdam | 100,00% | 100,00% | 100,00% | 100,00% | |
| SC For - Ser.Formação e Desenvolv. | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Recursos Humanos, SA | |||||||
| 5) | UP Invest, SGPS, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% |
| SC, SGPS, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% | |
| Solinfitness - Club Málaga, S.L. | a) | Málaga | 100,00% | 100,00% | 100,00% | 100,00% | |
| Spred, SGPS, SA | a) | Maia | 100,00% | 100,00% | 100,00% | 100,00% |
1) Ex-Imoareia - Invest. Turísticos, SGPS, SA;
2) Ex- Praedium, S.G.P.S., S.A; 3) Ex- Sonae Turismo, SGPS, SA;
4) Ex- The Artist Ribeira, SA;
5) Ex- SC Hospitality, SGPS, SA;
6) Company acquired in the year.
a) Majority of voting rights
These group companies are consolidated using the full consolidation method as described in Note 2.2.a).
Associated and 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 2016 and 2015 are as follows:
| Percentage of Capital Held | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2016 | ||||||||||||
| Company name | Head Office |
Direct | Total | Total Assets |
Total Liabilities |
Total Costs | Total income |
Share Capital |
Net income | Balance Value |
||
| Jointly Controlled Companies |
||||||||||||
| Other Assets | ||||||||||||
| Andar - Sociedade Imobi liária, SA |
Maia | 50,00% | 50,00% | 16,604,641 | 16,776,815 | 917,743 | - | (172,174) | (917,743) | |||
| 1) | Sociedade de Construções do Chile, SA |
Maia | 100,00% | 50,00% | 14,746,910 | 810,256 | 63,685 | 166 | 13,936,655 | (63,520) | ||
| 1) | Vastgoed One - Sociedade Imobiliária, SA |
Maia | 100,00% | 50,00% | 12,050,074 | 610 | 1,389 | 135 | 12,049,464 | (1,254) | ||
| 1) | Vastgoed Sun - Sociedade Imobiliária, SA |
Maia | 100,00% | 50,00% | 12,054,754 | 610 | 1,297 | 135 | 12,054,143 | (1,162) | ||
| Associated Companies | ||||||||||||
| Other Assets | ||||||||||||
| Lidergraf - Artes Gráficas, Lda |
Vila do Conde |
24,50% | 24,50% | 17,937,039 | 10,378,691 | 21,305,990 22,539,972 | 7,558,348 | 1,233,982 | 1,138,099 | |||
| 2) | Norscut - Concessionária de Scut Interior Norte, SA |
Lisbon | - | - | - | - | - | - | - | |||
| 2) | Operscut - Operação e Manu tenção de Auto-estradas, SA |
Lisbon | - | - | - | - | - | - | - | |||
| Energy | ||||||||||||
| Feneralt - Produção de Energia, ACE |
Barcelos | 25,00% | 25,00% | 1,036,916 | 522,770 | 1,404,866 | 1,910,592 | 442,562 | 438,352 | 96,801 | ||
| 74,430,334 28,489,752 23,694,970 24,451,000 45,868,998 | 688,655 | 1,234,900 |
| Percentage of Capital Held | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2016 | ||||||||||||
| Head Total Total Total Share Balance Company name Direct Total Total Costs Net income Office Assets Liabilities income Capital Value |
||||||||||||
| Other Assets | ||||||||||||
| Andar - Sociedade Imobiliária, SA |
||||||||||||
| Sociedade de Construções do Chile, SA |
Maia | 50,00% | 50,00% | 16,601,678 | 15,689,545 | 913,295 | - | 912,133 | (913,295) | |||
| 1) | Vastgoed One - Sociedade Imobiliária, SA |
Maia | 100,00% | 50,00% | 14,746,390 | 748,215 | 478,001 | 97,288 | 13,998,175 | (380,713) | ||
| 1) | Vastgoed Sun - Sociedade Imobiliária, SA |
Maia | 100,00% | 50,00% | 12,047,839 | 720 | 756 | - | 12,047,118 | (756) | ||
| 1) | Associated Companies | Maia | 100,00% | 50,00% | 12,052,426 | 720 | 749 | - | 12,051,705 | (749) | ||
| Other Assets | ||||||||||||
| Lidergraf - Artes Gráficas, Lda |
||||||||||||
| Norscut - Concessionária de Scut Interior Norte, SA |
Vila do Conde |
24,50% | 24,50% | 17,380,421 | 11,722,546 | 23,609,998 24,530,934 | 5,657,875 | 920,936 | 975,156 | |||
| 2) | Operscut - Operação e Manu tenção de Auto-estradas, SA |
Lisboa | 36,00% | 36,00% | 437,718,268 405,046,568 40,521,621 51,002,998 32,671,700 | 10,481,377 | 11,761,812 | |||||
| 2) | Energy | Lisboa | 15,00% | 15,00% | 2,564,420 | 1,255,652 | 3,498,708 | 4,720,261 | 1,308,768 | 1,221,553 | 24,000 | |
| Feneralt - Produção de Energia, ACE |
||||||||||||
| Feneralt - Produção de Energia, ACE |
Barcelos | 25,00% | 25,00% | 1,267,185 | 832,081 | 1,873,475 | 2,295,950 | 435,105 | 422,475 | 199,546 | ||
| 514,378,626 435,296,047 70,896,603 82,647,431 | 79,082,579 | 11,750,828 | 12,960,514 |
1) Null investment values arise from the adoption of the equity method in Andar – Sociedade Imobiliária, SA, holder of all of these investments; 2) Company sold in 30 September 2016.
The sale value and the transaction net income for the companies sold in caption 2) are as follows:
| Company | Sale value (Note 46) |
Transaction net income (Note 41) |
|---|---|---|
| Norscut - Concessionária de Scut Interior Norte, SA | 42,516,000 | 16,082,072 |
| Operscut - Operação e Manutenção de Auto-estradas, SA | 1,750,000 | 1,726,000 |
| 44,266,000 | 17,808,072 |
Associated and jointly controlled companies are consolidated using the equity method.
Nil balances shown result from the reduction to acquisition cost of amounts determined by the equity method, discontinuing the recognition of its part of additional losses under the terms of IAS 28.
During the periods ended 31 December 2016 and 2015, movements in investments of associated and jointly controlled companies may be summarized as follows:
| Company | 31 December 2016 | 31 December 2015 |
|---|---|---|
| Opening balance as at 1 January | 12,992,457 | 20,762,638 |
| Acquisitions in the period | - | 8,000 |
| Disposals in the period | (19,168,575) | - |
| Equity method | 7,730,200 | 5,564,752 |
| Dividends received | (287,240) | (13,342,933) |
| Change in the consolidation method | - | - |
| Closing balance as at 31 December | 1,268,842 | 12,992,457 |
| Closing balance as at 31 December | (31,943) | (31,943) |
| 1,234,900 | 12,960,514 |
The use of the equity method had the following impacts: 350,194 euro recorded on share of results of associated undertakings (3,976,671 euro at 31 December 2015), and 7,380,000 euro in changes in reserves (1,588,081 euro at 31 December 2015).
During the year ended 31 December 2016 dividends were received totalling 290,000 euros (13,342,933 at 31 December 2015) paid by the companies Lidergraf-graphic arts, Lda and Feneralt-Energy Production, ACE.
The head offices, percentage of share capital held and book value of Other Investments as at 31 December 2016 and 2015 are made up as follows:
| Percentage of capital held | |||||||
|---|---|---|---|---|---|---|---|
| 31 December 2016 | 31 December 2015 | ||||||
| Company | Head Office |
Direct | Total | Direct | Total | 31 December 2016 |
31 December 2015 |
| Resorts | |||||||
| Infratróia - Infraestruras de Tróia, E.M. | Grândola | 25,90% | 25,90% | 25,90% | 25,90% | 64,747 | 64,747 |
| Other Assets | |||||||
| Fundo de Investimento Imobiliário Imosonae Dois |
Maia | 0,06% | 0,06% | 0,06% | 0,06% | - | 124,892 |
| Net, SA | Lisbon | 0,98% | 0,98% | 0,98% | 0,98% | 23,034 | 23,034 |
| Fundo de Capital de Risco F-HITEC | Lisbon | 6,48% | 6,48% | 6,48% | 6,48% | 250,950 | 250,950 |
| Other investments | 140,124 | 133,892 | |||||
| Total (Note 9) | 478,855 | 597,515 |
As at 31 December 2016 and 2015, movements in investments were as follows:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Non-current | Current | Non-current | Current | |
| Investments at acquisition cost | ||||
| Opening balance as at 1 January | 889,353 | - | 879,446 | - |
| Acquisitions in the period | 23,752 | - | 9,907 | - |
| Disposals in the period | (142,412) | - | - | - |
| Transfers | - | - | - | - |
| Closing balance as at 31 December | 770,693 | - | 889,353 | - |
| Accumulated impairment losses (Note 31) | (291,838) | - | (291,838) | - |
| 478,855 | - | 597,515 | - | |
| Investments held for sale | ||||
| Fair value as at 1 January | - | - | 33,493,884 | - |
| Disposals in the period | - | - (34,244,847) | - | |
| Transfers | - | - | - | - |
| Increase/(Decrease) in fair value | - | - | 750,963 | - |
| Fair value as at 31 December | - | - | - | - |
| Accumulated impairment losses (Note 31) | - | - | - | - |
| Fair value (net of impairment losses) as at 31 De cember |
- | - | - | - |
| Other Investments | 478,855 | - | 597,515 | - |
These investments are recorded at acquisition cost less impairment losses.
Imosede Real Estate Investment Fund was fully sold in 2015, with a loss in Investment Income of 263,315 euros (Note 41).
During the period ended 31 December 2016 the following companies were acquired:
| Percentage of capital held At the date of disposal |
||||
|---|---|---|---|---|
| Company | Head Office | Direct | Total | |
| Acrobatic Title, SA. | Faro | 10,00% | 10,00% | |
| Suncoutim – Solar Energy, SA. | Lisbon | 85,00% | 85,00% |
Impacts in the consolidated financial statements at the inclusion date were as follows:
| Empresa | Acquisition Date | |
|---|---|---|
| Net assets acquired | ||
| Tangible and intangible assets (Notes 10 and 11) | 2,795,415 | 2,795,415 |
| Other assets | 188,129 | 1,105,245 |
| Cash and cash equivalents | 478,496 | 584,195 |
| Other liabilities | (21,549) | (815,457) |
| 3,440,489 | 3,669,398 | |
| Total equity | 3,440,488 | 3,391,714 |
| Income statements from the acquired companies | ||
| External supplies and services | 171,448 | 233,646 |
| Staff costs | - | 16,757 |
| Depreciation and amortisation | 344,923 | 385,033 |
| Provisions and impairment losses | 2,000 | 2,000 |
| Other operating expenses | 1 | 66,778 |
| Operational profit/(loss) | 518,372 | 704,214 |
| Sales | - | 21 |
| Services rendered | 616,790 | 753,887 |
| Other operating expenses | 2,094 | 3,989 |
| Other operating income | 618,884 | 757,897 |
| Operational profit/(loss) | 100,511 | 53,683 |
| Financial Income | - | - |
| Financial Expenses | - | 1,946 |
| Net financial income / (expenses) | - | (1,946) |
| Profit/(Loss) before taxation | 100,511 | 51,737 |
| taxation | - | - |
| Profit/(Loss) for the year | 100,511 | 51,737 |
| Gain/(Loss) on acquisition | 3,048 | |
| Acquisition price | 3,339,994 | |
| Payments made | 3,089,994 | |
| Net cash flow from the acquisition | ||
| Payments made | 3,089,994 | |
| Cash and equivalents acquired | (478,496) | |
| 2,611,498 |
Financial Instruments, in accordance with the policies described in Note 2.1, were classified as follows:
| Financial Instruments | |||||||
|---|---|---|---|---|---|---|---|
| Financial Assets | Note | Borrowings and accounts receivable |
Available for sale |
Invest ments held to maturity |
Sub-total | Assets not covered by IFRS 7 |
Total |
| As at 31 de December 2016 | |||||||
| Non-current assets | |||||||
| Other Investments | 7 | 478,855 | - | - | 478,855 | - | 478,855 |
| Other non-current assets | 13 | 2,036,474 | - | - | 2,036,474 | - | 2,036,474 |
| 2,515,329 | - | 2,515,329 | - | 2,515,329 | |||
| Current Assets | |||||||
| Trade account receivables | 15 | 18,030,267 | - | - | 18,030,267 | - | 18,030,267 |
| Other debtors | 16 | 7,327,649 | - | - | 7,327,649 | - | 7,327,649 |
| Cash and cash equivalents | 20 | 32,747,208 | - | - | 32,747,208 | - | 32,747,208 |
| 58,105,124 | - | - | 58,105,124 | - | 58,105,124 | ||
| 60,620,453 | - | - 60,620,453 | - 60,620,453 | ||||
| As at 31 de December 2015 | |||||||
| Non-current Assets | |||||||
| Other Investments | 7 | 597,515 | - | - | 597,515 | - | 597,515 |
| Other non-current assets | 13 | 7,871,931 | - | - | 7,871,931 | - | 7,871,931 |
| 8,469,446 | - | - | 8,469,446 | - | 8,469,446 | ||
| Current Assets | |||||||
| Trade account receivables | 15 | 19,375,097 | - | - | 19,375,097 | - | 19,375,097 |
| Other debtors | 16 | 9,003,693 | - | - | 9,003,693 | - | 9,003,693 |
| Cash and cash equivalents | 20 | 35,318,251 | - | - | 35,318,251 | - | 35,318,251 |
| 63,697,041 | - | - | 63,697,041 | - | 63,697,041 | ||
| 72,166,487 | - | - | 72,166,487 | - | 72,166,487 |
| Financial Liabilities | Note | Financial liabilities recorded at amortised cost |
Liabilities not covered by IFRS 7 |
Total |
|---|---|---|---|---|
| As at 31 de December 2015 | ||||
| Non-current liabilities | ||||
| Bank Loans | 23 | 20,532,367 | - | 20,532,367 |
| Bonds | 23 | 57,107,711 | - | 57,107,711 |
| Other loans | 23 | 16,622,150 | - | 16,622,150 |
| Other non-current liabilities | 26 | 2,681,126 | 1,070,575 | 3,751,701 |
| 96,943,354 | 1,070,575 | 98,013,929 | ||
| Current Liabilities | ||||
| Bank Loans | 20 and 23 | 1,137,237 | - | 1,137,237 |
| Other loans | 23 and 24 | 3,336,208 | - | 3,336,208 |
| Bonds | 23 | - | - | - |
| Trade Creditors | 28 | 16,479,554 | - | 16,479,554 |
| Other current liabilities | 29 | 3,647,289 | 1,042,782 | 4,690,071 |
| 24,600,288 | 1,042,782 | 25,643,070 | ||
| 121,543,642 | 2,113,357 | 123,656,999 | ||
| As at 31 de December 2016 | ||||
| Non-current liabilities | ||||
| Bank Loans | 23 | 46,693,174 | - | 46,693,174 |
| Bonds | 23 | 42,123,598 | - | 42,123,598 |
| Other loans | 23 and 24 | 15,106,830 | - | 15,106,830 |
| Other non-current liabilities | 26 | 2,721,247 | 312,372 | 3,033,619 |
| 106,644,849 | 312,372 | 106,957,221 | ||
| Current Liabilities | ||||
| Bank Loans | 20 and 23 | 17,725,702 | - | 17,725,702 |
| Other loans | 23 and 24 | 2,884,918 | - | 2,884,918 |
| Bonds | 23 | 59,982,062 | - | 59,982,062 |
| Trade Creditors | 28 | 17,167,600 | - | 17,167,600 |
| Other current liabilities | 29 | 2,951,833 | 8,610,389 | 11,562,222 |
| 100,712,115 | 8,610,389 | 109,322,504 | ||
| - | ||||
| 207,356,964 | 8,922,761 | 216,279,725 |
During the periods ended 31 December 2016 and 2015, movements in tangible assets as well as in amortisation and accumulated impairment losses, are made up as follows:
| Tangible Assets | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land and Natural Resources |
Buildings and Other Constructions |
Plant and Machinery |
Vehicles | Fixtures and Fittings |
Others | Tangible Assets in progress |
Total Tangible Assets |
|
| Gross Cost: | ||||||||
| Opening balance as at 1 January 2015 |
53,697,478 168,591,970 | 172,941,915 | 1,493,339 | 5,006,029 | 2,197,777 | 11,880,186 415,808,694 | ||
| Changes in consolidation perimeter (companies out) (Note 8) |
- | (48,781) | (2,031,168) | (46,937) | (369,605) | (81,957) | (413,843) | (2,992,291) |
| Capital expenditure | - | 331,308 | 1,324,552 | 61,425 | 9,552 | 3,607 | 12,189,440 | 13,919,884 |
| Disposals | (2,733,066) | (9,597,599) | (5,162,834) | (222,774) | (564,352) | (70,369) | (5,025) | (18,356,019) |
| Exchange rate effect | - | - | (25,237) | (81,884) | (17,382) | (13,333) | - | (137,836) |
| Transfers | 2,868,273 | 11,326,139 | 20,322,470 | 16,336 | 112,811 | 45,898 (8,935,005) | 25,756,922 | |
| Opening balance as at 1 January 2016 |
53,832,685 170,603,037 187,369,698 | 1,219,505 | 4,177,053 | 2,081,623 | 14,715,753 433,999,354 | |||
| Changes in consolidation perimeter (companies in) (Note 8) |
- | - | 3,541,005 | - | - | 7,875 | - | 3,548,880 |
| Capital expenditure | - | 349,771 | 2,402,980 | 8,414 | 7,450 | 2,331 | 5,587,580 | 8,358,526 |
| Disposals | (11,249,688) | (940,854) (6,030,400) | (174,977) | (320,662) | (46,132) | (150,754) | (18,913,467) | |
| Exchange rate effect | - | - | (13,955) | (78,710) | 2,920 | 8,930 | - | (80,815) |
| Transfers | 6,694,025 | (6,869,314) | 16,609,042 | 14,139 | 250,440 | 184,655 (17,533,330) | (650,343) | |
| Closing balance as at 31 December 2016 |
49,277,022 163,142,640 203,878,370 | 988,371 | 4,117,201 | 2,239,282 | 2,619,249 426,262,135 | |||
| Accumulated depreciation | ||||||||
| Opening balance as at 1 January 2015 |
- | 43,962,399 | 85,079,785 | 1,260,756 | 4,219,029 | 1,751,497 | - 136,273,466 | |
| Changes in consolidation perimeter (companies out) (Note 8) |
- | (48,508) | (1,805,772) | (18,152) | (319,764) | (76,558) | - | (2,268,754) |
| Charges for the period | - | 2,684,671 | 11,855,388 | 140,857 | 209,095 | 86,333 | - | 14,976,344 |
| Disposals | - | (1,357,968) | (3,268,129) | (222,016) | (559,944) | (62,970) | - | (5,471,027) |
| Exchange rate effect | - | - | (9,527) | (58,860) | (12,715) | (10,137) | - | (91,240) |
| Transfers | - | (1,112) | (10,806) | (14,383) | (11,686) | (7,217) | - | (45,204) |
| Opening balance as at 1 January 2016 |
- | 45,239,482 | 91,840,939 | 1,088,202 | 3,524,015 | 1,680,948 | - 143,373,586 | |
| Changes in consolidation perimeter (companies in) (Note 8) |
- | - | 785,898 | - | - | 1,421 | - | 787,319 |
| Charges for the period | - | 2,746,894 | 12,067,024 | 72,506 | 180,487 | 79,890 | - | 15,146,801 |
| Disposals | - | (131,879) | (5,534,674) | (172,980) | (313,778) | (43,816) | - | (6,197,128) |
| Exchange rate effect | - | - | (2,318) | (57,469) | 4,416 | 7,663 | - | (47,709) |
| Transfers | - | (6,263,893) | 6,013,748 | 453 | 13,973 | 16,045 | - | (219,675) |
| Closing balance as at 31 December 2016 |
- | 41,590,603 | 105,170,616 | 930,711 | 3,409,113 | 1,742,151 | - 152,843,194 | |
| Accumulated impairment losses | ||||||||
| Opening balance as at 1 January 2015 |
7,829,144 | 30,168,842 | 826,526 | - | - | - | - | 38,824,512 |
| Charges for the period (Note 31) | 89,259 | 188,056 | 27,970 | - | - | - | - | 305,285 |
| Opening balance as at 1 January 2016 |
7,918,403 | 30,356,898 | 854,496 | - | - | - | - | 39,129,797 |
| Charges for the period (Note 31) | 1,218,065 | 1,315,411 | 472,540 | - | - | - | - | 3,006,017 |
| Reversals for the period (Note 31) | (1,533,656) | (5,968,088) | - | - | - | - | - | (7,501,743) |
| Closing balance as at 31 December 2016 |
7,602,813 | 25,704,222 | 1,327,036 | - | - | - | - | 34,634,071 |
| Carrying amount | ||||||||
| As at 31 December 2015 | 45,914,282 95,006,657 | 94,674,263 | 131,303 | 653,038 | 400,675 | 14,715,753 251,495,971 | ||
| As at 31 December 2016 | 41,674,209 | 95,847,815 | 97,380,718 | 57,660 | 708,088 | 497,131 | 2,619,249 238,784,870 |
In December 2015 transfers of real estate projects, from inventories to tangible assets, totalled 20,877,300 euro. Those assets will be used for renting. Regarding the divestments of tangible fixed assets, the most significant amount is related to the sale of the land plot "Duque de Loulé".
The disposals carried out during the year are mainly sales of real estate assets located in Tróia.
The major acquisitions made during the year are essentially from the Energy segment (acquisition of two photovoltaic parks of 1MW each, in the total amount of 5,7 million euro), from the Fitness segment, in pursuit of the expansion plan, and from the Hotels segment, related, above all, with the opening of the new hotel The House in Porto.
Impairment losses and reversals of impairment losses for the year 2016 and 2015 are calculated from the assessments of the property assets of Sonae Capital Group, carried out by "Cushman & Wakefield – Consultoria Imobiliária, Unipessoal, Lda.". The evaluation was performed according to the Professional Standards contained in the RICS Valuation January 2014, published by The Royal Institution of Chartered Surveyors.
The assessments were intended to determine the fair value of the assets concerned, in accordance with the following rules:
| AVALIAÇÃO C&W | ||||
|---|---|---|---|---|
| 31 December 2016 31 December 2016 (VM) |
31 December 2016 (OV) |
31 December 2016 Valor Contabilistico |
||
| Tourism Assets | 82,594,000 | 74,094,000 | 8,500,000 | 67,492,101 |
| Hotels | 74,094,000 | 74,094,000 | - | 60,874,537 |
| Fitness | 8,500,000 | - | 8,500,000 | 6,617,564 |
| Troia Resort | 188,654,810 | 117,272,700 | 71,382,110 | 96,831,568 |
| Assets for sale | 109,357,774 | 37,975,664 | 71,382,110 | 62,174,630 |
| Real estate projects | 79,297,036 | 79,297,036 | - | 34,656,938 |
| Other Assets | 126,274,100 | 110,678,000 | 15,596,100 | 78,990,008 |
| Assets for sale | 29,211,900 | 22,465,800 | 6,746,100 | 23,726,806 |
| Real estate projects | 97,062,200 | 88,212,200 | 8,850,000 | 55,263,201 |
| Total | 397,522,910 | 302,044,700 | 95,478,210 | 243,313,677 |
| Valuation Simulation | ||||
| Market Value | +/- 10% | 30,204,470 | ||
| Opinion of Value | +/- 15% | 14,321,732 | ||
| Total | 44,526,202 | 30,204,470 | 14,321,732 |
The simulation of the valuation, for the year 2016, taking into account a variation in the Market Value of +- 10% and +- 15% for the Opinion of Value is as follows:
The evaluations comprised the total of 108 properties held by the Group, of which 46 using the Market value rules, these being the most relevant in terms of net value at 31 December 2016 and 2015. This portfolio consists of number of properties for residential, hotel, retail, office and warehouse use as well as plots of urban and rural land.
The acquisition cost of Tangible assets held by the Group under finance lease contracts amounted as at 31 December 2016 to euro 35,650,252 (35,601,106 euro at 31 December 2015) and their net book value as of those dates amounted to 20,168,568 euro and 21,995,999 euro, respectively (Note 24).
Major amounts included in the caption Tangible assets in progress, refer to the following projects:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Tróia | 1,657,460 | 8,091,116 |
| Cogeneration Project | - | 52,083 |
| Health Clubs Refurbishment | 300,884 | 1,208,506 |
| Others | 660,905 | 5,364,048 |
| 2,619,249 | 14,715,753 |
During the periods ended 31 December 2016 and 2015, movements in intangible assets as well as in amortisation and accumulated impairment losses, are made up as follows:
| Intangible Assets | |||||||
|---|---|---|---|---|---|---|---|
| Patents and other similar rights |
Software | Others | Intangible Assets in pro gress |
Total dos activos Intangíveis |
|||
| Gross Cost | |||||||
| Opening balance as at 1 January 2015 | 7,846,758 | 2,877,589 | 466,858 | 217,498 | 11,408,703 | ||
| Changes in consolidation perimeter | - | - | - | - | - | ||
| (companies out) (Note 8) | - | (43,811) | - | (2,925) | (46,736) | ||
| Capital expenditure | 14,040 | 189 | 200,883 | 429,266 | 644,378 | ||
| Disposals | - | (36,187) | (492,681) | - | (528,868) | ||
| Exchange rate effect | - | (7,801) | - | - | (7,801) | ||
| Transfers | (71,561) | 491,313 | (19,586) | (418,293) | (18,127) | ||
| Opening balance as at 1 January 2016 | 7,789,237 | 3,281,292 | 155,474 | 225,546 | 11,451,549 | ||
| Changes in consolidation perimeter | - | - | 242,000 | - | 242,000 | ||
| (companies in) (Note 8) | - | - | - | - | - | ||
| Capital expenditure | 393,800 | - | 1,154 | 695,980 | 1,090,935 | ||
| Disposals | - | (31,461) | - | - | (31,461) | ||
| Exchange rate effect | - | 3,922 | - | - | 3,922 | ||
| Transfers | 6,915 | 524,516 | (114,847) | (538,700) | (122,116) | ||
| Closing balance as at 31 December 2016 | 8,189,952 | 3,778,269 | 283,781 | 382,826 | 12,634,829 | ||
| Accumulated amortization | |||||||
| Opening balance as at 1 January 2015 | 1,380,363 | 1,994,300 | 9,421 | - | 3,384,083 | ||
| Changes in consolidation perimeter (companies out) (Note 8) |
- | (39,928) | - | - | (39,928) | ||
| Charges for the period | 184,688 | 626,224 | - | - | 810,912 | ||
| Disposals | - | (41,694) | - | - | (41,694) | ||
| Exchange rate effect | - | (5,668) | - | - | (5,668) | ||
| Transfers | (42,405) | 47,912 | - | - | 5,507 | ||
| Opening balance as at 1 January 2016 | 1,522,646 | 2,581,146 | 9,421 | - | 4,113,212 | ||
| Changes in consolidation perimeter (companies in) (Note 8) |
- | - | 208,146 | - | 208,146 | ||
| Charges for the period | 178,329 | 541,678 | 6,722 | - | 726,729 | ||
| Disposals | - | (31,461) | - | - | (31,461) | ||
| Exchange rate effect | - | 2,772 | - | - | 2,772 | ||
| Closing balance as at 31 December 2016 | 1,700,975 | 3,094,135 | 224,289 | - | 5,019,398 | ||
| Carrying amount | |||||||
| As at 31 December 2015 | 6,266,592 | 700,147 | 146,053 | 225,546 | 7,338,337 | ||
| As at 31 December 2016 | 6,488,978 | 684,135 | 59,492 | 382,826 | 7,615,431 |
At 31 December 2016 and 2015, there are no impairment losses relating to Intangible Assets.
As at December 2016 net assets of Marina de Troia amount to 5,701,558 euro (5,849,778 euro at December 2015).
"APSS – Administração dos Portos de Setubal e Sesimbra, SA" (APSS) signed in 2007 with an Group company a service concession arrangement to build and operate, in the public interest, a marina and support services in Troia, during a period of 50 years from the date of entry into operation. This period may be extended a maximum of 10 years if agreed between the parties. At the end of the service concession arrangement the concession will revert to APSS at no consideration, with some exceptions in the arrangement.
The Group has the right to charge fees for services to be provided under the concession. Maximum fee limits must be approved by the grantor based on a proposal submitted by the Group.
During the concession period the Group has a contractual obligation to maintain the infrastructure in a specific level of serviceability and pays the grantor a fixed fee and a variable fee, the latter based on revenues charged for the service provided.
The grantor may cancel the service concession arrangement whenever public interest is affected, provided that at least the contractual period is over and with at least 1 year notice, in which case the Group is entitled to compensation equal to the net book value of the infrastructure plus lost revenue calculated in accordance with the terms of the contract.
The Group carried out a sensitivity analysis of the recoverable value of the assets of "Marina de Tróia".
The use of a five-year period for projecting cash flows has taken into consideration the extension and intensity of economic cycles to which the Group's activity is subject to.
Calculation of recoverable amounts consisted in projecting operating cash flows over a five year period, thereafter extrapolated using perpetuity and discounted to 31 December 2016. Weighted Average Cost of Capital, before tax, calculated using CAPM (Capital Asset Pricing Model) methodology for this cash generating unit, was used as discount rate. These rates include specific market features and include different risk factors as well as risk-free interest rates for ten-year bonds.
The use of a five-year period for projecting cash flows takes into account the extension and intensity of economic cycles to which "Marina de Tróia" activity is subject to.
Projected cash flows are based on the Group's business plan and are updated annually so as to include changes in the economic outlook of each market where the Group is conducting business.
The impairment tests did not show any impairment loss to be recognized under Intangible Assets at 31 December 2016.
During the periods ended 31 December 2016 and 2015, movements in goodwill, as well as in corresponding impairment losses, are as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Gross amount | ||
| Opening balance | 62,194,124 | 62,291,840 |
| Increases - acquisition of affiliated companies | - | - |
| Closing balance | 62,194,124 | 62,194,124 |
| Accumulated impairment losses: | ||
| Opening balance | 1,301,596 | 1,301,596 |
| Increases | 23,051,438 | 0 |
| Closing balance | 24,353,034 | 1,301,596 |
| Total | 37,841,090 | 60,892,528 |
The increase in impairment losses in 2016 is due to the sale of real estate assets located in Troia.
The Impairment tests to Goodwill were calculated by projecting operating cash flows over a five year period, thereafter extrapolated using perpetuity and discounted to 31 December 2015. The Sistavac business plan reports an average growth rate of 6% with a rate of 20.4% for increase in sales and EBITDA (it is assumed a growth on industrial refrigeration - a strategic focus - on building efficiency and after-sales services). The average growth rate for uFCF is 19.5%, achieved by economies of scale and focus in the business segments with better profitability. The discount rates used are the average rates of the Weighted Average Cost of Capital (WACC).
The WACC rates used were calculated on the specific nature of each business and its respective target capital structures, as follows:
| Real Estate | 9,57% | Energy - photovoltaic | 7,01% |
|---|---|---|---|
| Operational Resorts | 9,13% | Refrigeration & HVAC- Portugal | 7,86% |
| Energy- cogeneration | 8,15% | Other assets | 8,02% |
The Goodwill remains without impairment in the sensitivity tests performed, through assessments by discounted cash flow, making WACC vary 1 p.p.
As at 31 December 2016 and 2015, Goodwill may be split as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Resorts | 1,223,234 | 24,274,672 |
| Hotels | - | - |
| Fitness | - | - |
| Energy | 622,829 | 622,829 |
| Refrigeration and HVAC | 9,619,730 | 9,619,730 |
| Other Assets | 26,375,298 | 26,375,298 |
| 37,841,090 | 60,892,528 |
As at 31 December 2016 and 2015, other non-current assets are detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Loans granted to related parties | ||
| Norscut - Concessionária de Scut Interior Norte, SA | - | 5,911,400 |
| Others | 874,613 | 812,606 |
| 874,613 | 6,724,006 | |
| Impairment losses (Note 31) | (34,916) | (34,916) |
| 839,697 | 6,689,090 | |
| Trade accounts receivable and other debtors | ||
| Others | 1,196,779 | 1,182,841 |
| Impairment losses (Note 31) | - | - |
| 1,196,779 | 1,182,841 | |
| Other non-current debtors | 2,036,476 | 7,871,931 |
Generally, values included in other non-current debtors bear interest at market rates, and it is estimated that their fair value does not significantly differ from amounts in the balance sheet.
The amount in others, loans granted to related parties, is a loan to the company Andar - Soc. Imobiliária S.A. (note 44).
The variation in loans granted on 31 December 2016 to the previous year is due to the receipt of a loan granted to an associated company sold in the previous year.
The amounts considered in others, Trade accounts receivable and other debtors, are essentially related with (i) payment to the State to benefit from a 2002 tax amnesty (ii) pecuniary deliveries in the context of ongoing lawsuits.
At 31 December 2016 and 2015 the caption Clients and other debtors includes loans granted to related parties and do not have a defined maturity, and therefore are not due. These loans bear interests.
Inventories as at 31 December 2016 and 2015 can be detailed as follows, highlighting the value attributable to real estate developments:
| 31 December 2016 | 31 December 2015 | ||||
|---|---|---|---|---|---|
| Total | of which Real Estate Developments |
Total | of which Real Estate Developments |
||
| Raw materials, by-products and consumables |
1,416,846 | - | 1,441,888 | - | |
| Goods for sale | 30,621,892 | 29,396,542 | 30,394,043 | 29,000,343 | |
| Finished goods | 16,227,654 | 16,227,654 | 23,487,868 | 23,487,868 | |
| Work in progress | 71,597,057 | 67,573,121 | 77,389,696 | 75,405,755 | |
| 119,863,449 | 113,197,317 | 132,713,495 | 127,893,966 | ||
| Accumulated impairment losses on stocks (Note 31) |
(15,351,494) | (15,340,458) | (5,951,751) | (5,939,087) | |
| 104,511,954 | 97,856,859 | 126,761,744 | 121,954,879 |
Cost of goods sold as at 31 December 2016 and 2015 amounted to 65,555,341 euro and 60,854,177 respectively, and may be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Opening Stocks | 31,828,075 | 32,130,186 |
| Exchange rate effect | (156,777) | (169,621) |
| Changes in consolidation perimeter | (1,647) | (13,794) |
| Purchases | 62,499,698 | 61,044,198 |
| Adjustments | 370,493 | (261,412) |
| Closing Stocks | 32,038,738 | 31,828,075 |
| 62,509,105 | 60,901,482 | |
| Impairment losses (Note 31) | 3,440,084 | 804 |
| Reversion of impairment losses (Note 31) | (393,848) | (48,109) |
| Continued operations | 65,555,341 | 60,854,177 |
| Discontinued operations | 284,071 | |
| Total operations | 65,555,341 | 61,138,248 |
Impairment losses and reversals of impairment losses for the years 2016 and 2015 are calculated from the assessments of the property assets of Sonae Capital Group, carried out by "Cushman & Wakefield – Consultoria Imobiliária, Unipessoal, Lda".
As at 31 December 2016 and 2015, trade accounts receivable and other current assets are detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Trade accounts receivable | ||
| Resorts | 1,653,662 | 1,405,548 |
| Hotels | 758,049 | 1,009,200 |
| Fitness | 170,149 | 143,316 |
| Energy | 4,683,723 | 6,944,235 |
| Refrigeration and HVAC | 13,255,090 | 11,658,890 |
| Other Assets | 361,050 | 438,689 |
| 20,881,723 | 21,599,878 | |
| Doubtful debtors | 1,407,753 | 1,762,156 |
| 22,289,475 | 23,362,034 | |
| Accumulated impairment losses on Trade Debtors (Note 31) | (4,259,208) | (3,986,937) |
| Total Operations | 18,030,267 | 19,375,097 |
In the normal course of activity collection risk may arise in Trade debtors. The amounts presented on the face of the balance sheet are net of impairment losses, which were estimated based on the Group's experience and on the assessment of present economic conditions. As a result, amounts disclosed in Trade debtors reflect their fair value.
As at 31 December 2016 we do not have any reason to believe that normal collection times regarding trade accounts receivable not due for which there are no impairment losses will not be met.
As at 31 December 2016 and 2015, the ageing of Trade Accounts Receivables can be detailed as follows:
| Trade Accounts Receivable | |||||||
|---|---|---|---|---|---|---|---|
| 31 December 2016 | Resorts | Hotels | Fitness | Energy | Refrigeration and HVAC |
Holding and Others |
Total |
| Not Due | 347,424 | 218,663 | 50,908 | 4,365,253 | 9,149,389 | 110,443 | 14,242,080 |
| Due but not impaired | |||||||
| 0 - 30 days | 97,712 | 111,751 | 8,756 | 300,424 | 965,274 | 75,846 | 1,559,763 |
| 30 - 90 days | 112,922 | 115,067 | 73,804 | 1,859 | 795,927 | 69,939 | 1,169,518 |
| + 90 days | 301,117 | 28,396 | 5,689 | 812 | 694,642 | 26,054 | 1,056,710 |
| Total | 511,751 | 255,214 | 88,249 | 303,095 | 2,455,843 | 171,839 | 3,785,991 |
| Due and impaired | |||||||
| 0 - 90 days | 2,226 | 873 | - | - | 2,430 | 2,351 | 7,880 |
| 90 - 180 days | 17,518 | 685 | - | - | 1,132 | 2,276 | 21,611 |
| 180 - 360 days | 62,894 | 19,015 | - | - | 342,346 | 15,357 | 439,612 |
| + 360 days | 889,979 | 439,633 | 59,414 | 15,375 | 1,961,041 | 426,859 | 3,792,301 |
| Total | 972,617 | 460,206 | 59,414 | 15,375 | 2,306,949 | 446,843 | 4,261,404 |
| Total accumulated before impairments | 1,831,792 | 934,083 | 198,571 | 4,683,723 | 13,912,181 | 729,125 | 22,289,475 |
| 31 December 2015 | Resorts | Hotels | Fitness | Energy | Refrigeration and HVAC |
Holding and Others |
Total |
| Not Due | 335,298 | 229,825 | 2,198 | 5,563,518 | 7,032,975 | 181,700 | 13,345,514 |
| Due but not impaired | |||||||
| 0 - 30 days | 34,226 | 136,099 | 1,722 | 1,269,302 | 962,635 | 158,079 | 2,562,063 |
| 30 - 90 days | 172,439 | 312,347 | 200 | 88,593 | 1,714,124 | 36,258 | 2,323,961 |
| + 90 days | 178,011 | 16,071 | 19,236 | 7,447 | 896,340 | 25,458 | 1,142,563 |
| Total | 384,676 | 464,517 | 21,158 | 1,365,342 | 3,573,099 | 219,795 | 6,028,587 |
| Due and impaired | |||||||
| 0 - 90 days | 5,430 | 3,623 | 2,012 | - | 5,397 | - | 16,462 |
| 90 - 180 days | 3,692 | 4,272 | 1,170 | - | 17,371 | - | 26,505 |
| 180 - 360 days | 17,852 | 11,804 | 3,218 | - | 77,462 | - | 110,336 |
| + 360 days | 840,173 | 471,193 | 141,981 | 15,375 | 1,955,226 | 410,682 | 3,834,630 |
| Total | 867,147 | 490,892 | 148,381 | 15,375 | 2,055,456 | 410,682 | 3,987,933 |
| Total accumulated before impairments | 1,587,121 | 1,185,234 | 171,737 | 6,944,235 | 12,661,530 | 812,177 | 23,362,034 |
To determine the recoverability of Trade accounts receivable, the Group reviews all changes to the credit quality of its counterparties since the date of the credit to the date of reporting consolidated financial statements. Credit risk is not concentrated because of the significant number of trade debtors. The Group thus believes that credit risk does not exceed recorded impairment losses for trade accounts receivable doubtful accounts.
As at 31 December 2016 and 2015, other debtors are made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Loans granted to and other amounts to be received from related parties |
||
| Others | 139,309 | 74,506 |
| 139,309 | 74,506 | |
| Other Debtors | ||
| Suppliers with a debtor balance | 1,222,273 | 458,365 |
| Sale of assets | 5,920 | 10,525 |
| Sale of financial investments | 4,088,126 | 4,656,580 |
| Others | 3,875,438 | 4,369,117 |
| 9,191,757 | 9,494,587 | |
| Other Debtors | 9,331,066 | 9,569,093 |
| Accumulated impairment losses on Other Debtors (Note 31) | (2,003,416) | (565,400) |
| Total financial instruments (Note 9) | 7,327,649 | 9,003,693 |
| Total Operations | 7,327,649 | 9,003,693 |
Loans granted to relate parties bear interest at market rates.
At December 2016 the sale of financial Investments includes (i) balance receivable for which impairment loss was recorded during the year (ii) balance receivable from the sale of "UPK – Gestão de Facilities e Manutenção S.A." and "BoxLines Navegação S.A."
The caption "Others" is made up of the balances receivable from the WTC fund (1,056,000 euros), taxes recoverable overseas (633,000 euros), among others.
As at 31 December 2016 and 2015, ageing of other debtors can be summarised as follows:
| Other Debtors | |||||
|---|---|---|---|---|---|
| 31 December 2016 | 31 December 2015 | ||||
| Not Due | 4,213,419 | 1,219,772 | |||
| Due but not impaired | |||||
| 0 - 30 days | 1,047,581 | 457,467 | |||
| 30 - 90 days | 91,291 | 1,452,350 | |||
| + 90 days | 3,336,908 | 5,816,248 | |||
| Total | 4,475,780 | 7,726,065 | |||
| Due and impaired | |||||
| 0 - 90 days | - | - | |||
| + 360 days | 502,446 | 548,749 | |||
| Total | 502,558 | 548,749 | |||
| Total accumulated before impairments | 9,191,757 | 9,494,587 |
As at 31 December 2016 we do not have any reason to believe that normal collection times regarding other debtors not due, and for which there are no impairment losses, will not be met.
Values included in other debtors are close to their fair value.
As at 31 December 2016 and 2015, taxes recoverable and taxes and contributions payable are made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Tax recoverable | ||
| Income tax receivable | ||
| Amounts withheld | 1,346,472 | 611,016 |
| Payments on account | 2,944,835 | 3,502,382 |
| Income taxation | 393,761 | (317,488) |
| 4,685,068 | 3,795,910 | |
| Other taxes receivable | ||
| VAT | 1,768,735 | 7,812,029 |
| Other taxes | 4,086,578 | 1,018,997 |
| 5,855,313 | 8,831,026 | |
| Total Operations | 10,540,381 | 12,626,936 |
| Taxes and contributions payable | ||
| Income tax payable | ||
| Income taxation | 1,288,312 | 945,628 |
| 1,288,312 | 945,628 | |
| Other taxes payable | ||
| VAT | 1,350,223 | 1,157,441 |
| Income taxation - amounts withheld | 983,539 | 714,652 |
| Social security contributions | 737,082 | 496,234 |
| Other taxes | 359,848 | 256,404 |
| 3,420,692 | 2,624,731 | |
| Total Operations | 4,719,004 | 3,570,359 |
The amount in "Other taxes receivable" includes 2,706,000 euro in additional payments to the Portuguese Tax Services and also from complaints and reviews to the said body. Also included is an amount of 1,341,000 euro paid in Brazil of prepaid tax on revenues.
As at 31 December 2016 and 2015, other current assets are made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Interest receivable | 28,246 | 42,156 |
| Invoicing to be issued for services rendered | 867,824 | 1,381,730 |
| Deferred costs - External supplies and services | 1,155,795 | 1,121,317 |
| Deferred costs - Rents | 373,360 | 291,265 |
| Other current assets | 9,423,015 | 3,333,034 |
| Total Operations | 11,848,239 | 6,169,502 |
"Other current assets" at 31 December 2016 includes income accruals of works in progress at the end of the year.
Deferred tax assets and liabilities as at 31 December 2016 and 2015 can be detailed as follows, split between the different types of temporary differences:
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 31 December 2016 |
31 December 2015 |
31 December 2016 |
31 December 2015 |
|
| Amortisation and Depreciation harmonisation adjust ments |
566,662 | 592,345 | 4,068,443 | 3,754,439 |
| Provisions and impairment losses of non-tax deductible | 5,320,494 | 6,682,330 | - | - |
| Write off of tangible and intangible assets | 71,250 | 71,250 | - | - |
| Write offs of accruals | - | - | - | - |
| Revaluation of tangible assets | - | - | 93,307 | 93,307 |
| Tax losses carried forward | 21,414,207 | 16,252,396 | - | - |
| Financial instruments | - | - | - | - |
| Write off of stocks | - | - | 462,815 | 548,376 |
| Taxable temporary differences arising from the fair value of non-current liabilities |
- | - | 6,529,266 | 6,543,174 |
| Others | 7,644 | 21,990 | 8,481,456 | 9,252 |
| 27,380,258 | 23,620,310 | 19,635,287 | 10,948,548 |
During the periods ended 31 December 2016 and 2015, movements in deferred tax are as follows:
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 31 December 2016 |
31 December 2015 |
31 December 2016 |
31 December 2015 |
|
| Opening balance | 23,620,310 | 23,718,439 | 10,948,548 | 11,709,284 |
| Effect in results (Note 42): | ||||
| Amortisation and Depreciation harmonisation adjust ments |
(25,683) | (26,953) | 314,004 | 608,630 |
| Provisions and impairment losses of non-tax deductible | - | - | - | - |
| Write off of tangible and intangible assets | - | - | - | - |
| Write off of accruals | - | - | - | - |
| Revaluation of tangible assets | - | - | - | - |
| Tax losses carried forward | 5,161,816 | 188,709 | - | - |
| Impairment of Assets | (1,361,839) | (80,662) | - | - |
| Financial Instruments | - | - | - | (1,353,851) |
| Changes in tax rates | - | - | - | - |
| Others | (10,784) | (24,635) | 8,372,735 | (301,641) |
| 3,763,510 | 56,459 | 8,686,739 | (1,046,862) | |
| Effect in reserves: | ||||
| Financial Instruments | - | - | - | 286,989 |
| Others | (3,562) | (6,487) | - | (863) |
| (3,562) | (6,487) | - | 286,126 | |
| Changes in consolidation perimeter | - | (148,101) | - | - |
| Others | - | - | - | - |
| Closing balance | 27,380,258 | 23,620,310 | 19,635,287 | 10,948,548 |
In accordance with the tax statements presented by companies that recorded deferred tax assets arising from tax losses carried forward, as at 31 December 2016 and 2015, and using exchange rates effective at that time, tax losses carried forward can be summarized as follows:
| 31 December 2016 | 31 December 2015 | |||||
|---|---|---|---|---|---|---|
| Tax losses carried forward |
Deferred tax assets |
Time limit | Tax losses carried forward |
Deferred tax assets |
Time limit | |
| With limited time use | ||||||
| Generated in 2012 | 15,843,716 | 3,327,180 | 2017 | 20,023,107 | 4,204,852 | 2017 |
| Generated in 2013 | 18,024,639 | 3,785,174 | 2018 | 18,024,639 | 3,785,174 | 2018 |
| Generated in 2014 | 13,536,168 | 2,842,595 | 2026 | 11,725,573 | 2,462,370 | 2026 |
| Generated in 2015 | 47,663,128 | 10,009,257 | 2027 | 27,619,048 | 5,800,000 | 2027 |
| Generated in 2016 | 6,904,762 | 1,450,000 | 2028 | - | - | 2028 |
| 101,972,414 | 21,414,207 | 77,392,368 | 16,252,396 | |||
| With a time limit different from the above mentioned |
- | - | - | - | ||
| 101,972,414 | 21,414,207 | 77,392,368 | 16,252,396 |
An analysis was made on the relevance of the recognition of deferred taxes, taking into account the possibility of them to be recovered in accordance with the medium and long term prospects of the Group.
Deferred tax assets and liabilities are calculated and annually evaluated using the tax rates in effect, at the date of reversal of the temporary differences.
Deferred tax assets arising from tax losses have been recorded only when it is likely to occur taxable income in the future.
Deferred tax assets were re-assessed against each company's business plans, which are regularly updated.
Since fiscal year 2014, most of the Group's subsidiaries based in Portugal belong to the perimeter of the group of companies that are taxed in accordance with the special taxation regime for company groups ("RETGS"), being Sonae Capital, SGPS, S.A. the dominant company.
Of the analysis made at 31 December 2016, it is concluded that there is a reasonable expectation on the recovery of the recorded deferred tax assets before their date expires.
As at 31 December 2016, tax losses carried forward amounting to 54,752,193 euro (75,631,592 euro as at 31 December 2015), have not originated deferred tax assets for prudential reasons and are detailed as follows:
| 31 December 2016 | 31 December 2015 | |||||
|---|---|---|---|---|---|---|
| Tax losses carried forward |
Tax Credit | Time limit | Tax losses carried forward |
Tax Credit | Time limit | |
| With limited time use | ||||||
| Generated in 2012 | 13,872,225 | 2,913,167 | 2017 | 15,178,378 | 3,187,459 | 2017 |
| Generated in 2013 | 25,870,105 | 5,432,722 | 2018 | 27,046,176 | 5,679,697 | 2018 |
| Generated in 2014 | 22,249 | 4,672 | 2026 | 22,249 | 4,672 | 2026 |
| Generated in 2015 | 29,058 | 6,102 | 2027 | 20,217,314 | 4,245,636 | 2027 |
| Generated in 2016 | 2,892,333 | 607,390 | 2028 | - | - | 2028 |
| 42,685,969 | 8,964,054 | 62,464,117 | 13,117,465 | |||
| Without limited time use | 11,658,674 | 2,914,669 | - | - | ||
| With a time limit different from the above mentioned |
407,549 | 94,305 | 18,874,767 | 4,758,800 | ||
| 12,066,224 | 3,008,973 | 18,874,767 | 4,758,800 | |||
| 54,752,193 | 11,973,027 | 81,338,884 | 17,876,265 |
As at 31 December 2014 and 2015, cash and cash equivalents can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Cash at hand | 133,923 | 111,450 |
| Bank deposits | 32,604,013 | 35,201,904 |
| Treasury applications | 9,272 | 4,897 |
| Cash and cash equivalents on the balance sheet | 32,747,208 | 35,318,251 |
| Bank overdrafts (Note 23) | (15,769) | - |
| Cash and cash equivalents in the statement of cash-flows |
32,731,439 | 35,318,251 |
The balances of cash and cash equivalents in the periods ended 31 December 2016 and 2015 are as follows:
| Foreign currency | Amount | Exchange rates used on translation |
Euro |
|---|---|---|---|
| Mozambican Metical | (178,991) | 0,01327 | (2,375) |
| Brazilian Real | 47,046 | 0,2915 | 13,714 |
| Angolan Kwanza | 98,613,142 | 0,00567 | 559,137 |
Bank overdrafts include creditor balances of current accounts in financial institutions, and are disclosed in the balance sheet under current bank loans (Note 23).
The caption of other receipts / payments in the Cash Flow Statement includes mainly payments and receipts from other taxes, and settlements and receipts of other operating expenses or income.
Credit risk analysis is in accordance with caption 3.2.
The share capital of Sonae Capital SGPS, SA is represented by 250,000,000 ordinary shares, which do not have the right to a fixed remuneration, with a nominal value of 1 euro each.
As at 31 December 2016, Sonae Capital SGPS, S.A. owns 5,516,226 own shares (5,914,571 own shares at 31 December 2015) booked for 1,404,226 euro (1,426,791 euro at 31 December 2015).
Other reserves includes amounts equal to the value of own shares held by the Group's parent company. This reserve should be unavailable while these shares are kept by the company.
The Reserves and retained earnings of Sonae Capital Group in the periods ended 31 December 2016 and 2015 are as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Demerger reserve | 132,638,253 | 132,638,253 |
| Translation reserves | 12,876 | (23,350) |
| Fair value reserves | - | - |
| Hedging reserves | 5,004 | (11,956) |
| Other reserves and retained earnings | (88,414,342) | (80,993,753) |
| Reserves and retained earnings | 44,241,791 | 51,609,194 |
The demerger originated a reserve in the amount of 132,638,253 euro, which has a treatment similar to that of a Legal Reserve. According to Company Law, it cannot be distributed to shareholders, unless the company is liquidated, but can be used to make good prior year losses, once other reserves have been used fully, or for capital increases.
These reserves are comprised by the conversion into euro of the financial statements of the subsidiaries that have other functional currency.
In this caption is the fair value of the assets available for sale.
This caption is comprised by the fair value of hedging derivatives and the accrued interest of that derivative. The amounts in this reserve are transferred to the income statement when subsidiaries are sold or liquidated.
Changes in Equity are detailed in the Consolidated Statements of Changes in Equity.
Movements in non-controlling interests in the periods ended 31 December 2016 and 2015 are as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Opening balance as at 1 January | 10,247,125 | 9,375,864 |
| Changes in hedging reserves | - | 721 |
| Changes in the percentage of capital held in Group companies |
(24,782) | 219,830 |
| Changes resulting from currency translation | 482 | 38,920 |
| Dividends paid | (1,441,468) | (1,079,240) |
| Others | 45,913 | (1) |
| Profit for the period attributable to minority interests | 1,098,695 | 1,691,031 |
| Closing balance | 9,925,965 | 10,247,125 |
The non-controlling interests are primarily from companies in the refrigeration and HVAC segment.
As at 31 December 2016 and 2015, Borrowings are made up as follows:
| 31 December 2016 | 31 December 2015 | ||||
|---|---|---|---|---|---|
| Outstanding amount | Outstanding amount | Repayable on |
|||
| Current | Non-Current | Current | Non-Current | ||
| Bank loans | |||||
| Sonae Capital SGPS - commercial paper a) | - | - | 8,250,000 | - | Jun/2021 |
| Sonae Capital SGPS - commercial paper b) | - | - | - | 30,000,000 | Dez/2017 |
| Sonae Capital SGPS - commercial paper c) | - | - | 3,250,000 | 1,500,000 | Mai/2017 |
| Sonae Capital SGPS - commercial paper d) | - | - | 1,200,000 | 4,800,000 | Mar/2020 |
| Sonae Capital SGPS - commercial paper e) | - | 20,000,000 | - | - | Jun/2021 |
| Sonae Capital SGPS f) | - | - | 3,290,000 | 9,047,500 | Set/2019 |
| Up-front fees | - | (445,544) | - | (255,080) | |
| Others | 1,121,468 | 977,912 | 1,735,702 | 1,600,754 | |
| 1,121,468 | 20,532,367 | 17,725,702 | 46,693,174 | ||
| Bank overdrafts (Note 14) | 15,769 | - | - | - | |
| Bank loans | 1,137,237 | 20,532,367 | 17,725,702 | 46,693,174 | |
| Bond Loans | |||||
| Sonae Capital 2011/2016 Bonds | - | - | 10,000,000 | - | |
| Sonae Capital 2016/2021 Bonds | - | 15,000,000 | Jul/2021 | ||
| SC, SGPS, S.A. 2008/2018 Bonds | - | - | 50,000,000 | - | |
| Sonae Capital 2014/2019 Bonds | - | 42,500,000 | - | 42,500,000 | Mai/2019 |
| Up-front fees | - | (392,289) | (17,938) | (376,402) | |
| Bond Loans | - | 57,107,711 | 59,982,062 | 42,123,598 | |
| Other loans | 117,400 | 246,177 | 311,968 | 297,289 | |
| Derivatives (Note 18) | 4,530 | - | 25,952 | - | |
| Obligations under finance leases (Note 24) | 3,214,278 | 16,449,963 | 2,546,998 | 14,886,301 | |
| Up-front fees on finance leases | - | (73,991) | - | (76,760) | |
| 4,473,445 | 94,262,228 | 80,592,682 | 103,923,602 |
a) Commercial paper programme, with subscription guarantee, issued on 31 December 2013, with automatic annual renewals up to seven years and six months, unless denunciated by either party.
b) Commercial paper programme, with subscription guarantee, issued on 27 December 2012 and valid up to December 2017.
c) Commercial paper programme, with subscription guarantee, issued on 7 May 2014 and valid for a three year period, with semi-annual payments. This commercial paper programme has been totally refunded. d) Commercial paper programme, with subscription guarantee, issued on 18 March 2015 and valid up to March 2020, with annual payments. This commercial
paper programme has been totally refunded. e) Commercial paper programme, with subscription guarantee, issued on 23 June 2016 and valid up to five years, with annual payments and grace period for
one year. f) Bank loan guaranteed by a mortgage on real estate, started on 2 June 2011 and valid up to September 2019, with quarterly payments. This loan has been totally refunded. The said mortgage was cancelled during the year.
As at 31 December 2016, borrowings of the Group were as follows:
The interest rate on bonds and bank loans in force on 31 December 2016 was on average 2.69% (2.83% in 31 December 2015)
Bank loans pay interest rates that are indexed to the Euribor market rates of the period, and its fair value is considered close to its book value.
Other non-current loans include government reimbursable grants to Group companies, which do not bear interest. Fair value was not calculated for these subsidies due to their low values.
The repayment schedule of the nominal value of borrowings may be summarised as follows:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Nominal value | Interest | Nominal value | Interest | |
| N+1 | 4,468,915 | 2,557,645 | 80,584,669 | 4,867,436 |
| N+2 | 8,786,986 | 2,280,282 | 39,321,659 | 3,938,199 |
| N+3 | 51,245,074 | 1,368,522 | 7,644,816 | 2,421,339 |
| N+4 | 8,466,613 | 482,773 | 49,335,366 | 1,074,827 |
| N+5 | 22,619,129 | 422,525 | 3,505,904 | 87,101 |
| After N+5 | 4,056,251 | 62,467 | 4,824,098 | 109,720 |
| 99,642,967 | 7,174,215 | 185,216,512 | 12,498,622 |
As at 31 December 2016 and 2015, the credit lines available and the amount of contracted lines, can be summarized as follows:
| 31 December 2016 | 31 December 2015 | ||||
|---|---|---|---|---|---|
| Commitments < 1 year |
Commitments < 1 year |
Commitments < 1 year |
Commitments < 1 year |
||
| Value of available lines | |||||
| Tourism | - | - | - | - | |
| Energy | - | - | - | - | |
| Refrigeration and HVAC |
612,766 | - | 741,161 | - | |
| Other Assets | - | - | - | - | |
| Holding and Others | 63,850,000 | 30,000,000 | 53,799,398 | 24,400,000 | |
| 64,462,766 | 30,000,000 | 54,540,559 | 24,400,000 | ||
| Value of contracted lines | |||||
| Tourism | - | - | |||
| Energy | - | - | - | - | |
| Refrigeration and HVAC |
1,096,405 | - | 1,424,885 | - | |
| Other Assets | - | - | - | - | |
| Holding and Others | 63,850,000 | 50,000,000 | 62,049,398 | 54,400,000 | |
| 64,946,405 | 50,000,000 | 63,474,283 | 54,400,000 |
As at 31 December 2016 and 2015, Obligations under finance leases are made up as follows:
| Obligations under finance leases | Minimum finance lease payments |
lease payments | Present value of minimum finance | |
|---|---|---|---|---|
| Montantes a pagar por locações financeiras: | 31 December 2016 | 31 December 2015 | 31 December 2016 | 31 December 2015 |
| N+1 | 3,549,899 | 2,814,372 | 3,214,278 | 2,546,998 |
| N+2 | 3,550,020 | 2,814,372 | 3,283,104 | 2,592,843 |
| N+3 | 3,416,974 | 2,814,372 | 3,214,318 | 2,640,100 |
| N+4 | 3,416,428 | 2,750,944 | 3,276,618 | 2,624,899 |
| N+5 | 2,699,879 | 2,286,141 | 2,619,305 | 2,204,362 |
| After N+5 | 4,119,202 | 4,933,818 | 4,056,617 | 4,824,098 |
| 20,752,403 | 18,414,019 | 19,664,241 | 17,433,300 | |
| Future Interest | (1,088,162) | (980,718) | ||
| 19,664,241 | 17,433,301 |
| Obligations under finance leases - net of current obligations | 16,375,972 | 14,809,541 |
|---|---|---|
| Current obligations under finance leases | 3,214,278 | 2,546,998 |
| Up-front fees | (76,760) |
Finance leases are contracted at market interest rates, have defined useful lives and include an option for the acquisition of the related assets. The interest rate of these contracts as at 31 December 2016 was on average 1.80% (1.63% at 31 December 2015).
As at 31 December 2016 and 2015, the fair value of finance leases is close to their book value.
Obligations under finance leases are guaranteed by the reservation of ownership of the leased assets.
As at 31 December 2016 and 2015, the book value of assets acquired under finance leases can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Assets acquired under finance leases | ||
| Land and Buildings | - | - |
| Plant and machinery | 20,165,918 | 21,992,829 |
| Vehicles | - | - |
| Tools | - | - |
| Fixtures and Fittings | 2,650 | 3,170 |
| Total tangible assets | 20,168,568 | 21,995,999 |
Hedging instruments used by the Group as at 31 December 2016 were mainly interest rate options (cash-flow hedges) contracted with the goal of hedging interest rate risks on loans in the amount of 193,263 euro, whose fair value of 4,530 euro (25,952 euro at 31 December 2015) is recorded as liabilities in other loans. As at 31 December 2016 and 31 December 2015, all derivatives are hedging derivatives.
These interest rate hedging instruments are valued at fair value as at the balance sheet date, determined by valuations made by the Group using derivative valuation calculation schedules and external valuations when these schedules do not permit the valuation of certain instruments. For options, fair value is determined using the Black-Scholes model and its variants.
The fair value of derivatives is calculated using valuation models based on assumptions which are confirmed by market benchmarks, thus complying with level 2 requirements set on the IFRS 7.
Risk coverage guidelines generally used by the Group in contractually arranged hedging instruments are as follows:
Counterparts for derivatives are selected based on their financial strength and credit risk profile, with this profile being generally measured by a rating note attributed by rating agencies of recognized merit. Counterparts for derivatives are top level, highly prestigious financial institutions which are recognized nationally and internationally.
The fair value of derivatives is as follows:
| Assets | Liabilities | |||
|---|---|---|---|---|
| 31 December 2016 |
31 December 2015 |
31 December 2016 |
31 December 2015 |
|
| Non-Hedge accounting derivatives | ||||
| Interest rate | - | - | - | - |
| Hedge accounting derivatives | ||||
| Interest rate (Note 23) | - | - | 4,530 | 25,952 |
| Other derivatives | - | - | - | - |
| - | - | 4,530 | 25,952 |
As at 31 December 2016 and 2015 other non-current creditors liabilities can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Loans and other amounts payable to related parties | ||
| Plaza Mayor Parque de Ocio, SA (Note 44) | 1,825,274 | 1,928,510 |
| Others | 232,150 | 230,846 |
| 2,057,424 | 2,159,356 | |
| Other creditors | ||
| Creditors in the restructuring process of Torralta | 623,702 | 561,891 |
| Others | ||
| 623,702 | 561,891 | |
| Deferred income | ||
| Obligations by share-based payments (Note 27) | 464,519 | 312,372 |
| 464,519 | 312,372 | |
| Other creditors | 3,751,701 | 3,033,619 |
As at 31 December 2016 and 2015, other creditor's balances maturity can be detailed as follows:
| 31 December 2016 | N+1 | N+2 | N+3 | N+4 | N+5 | Total |
|---|---|---|---|---|---|---|
| Fixed assets suppliers | - | - | - | - | - | - |
| Other creditors | - | - | - | - | 623,702 | 623,702 |
| Total | - | - | - | - | 623,702 | 623,702 |
| 31 December 2015 | N+1 | N+2 | N+3 | N+4 | N+5 | Total |
| Fixed assets suppliers | - | - | - | - | - | - |
| Other creditors | - | - | - | - | 561,891 | 561,891 |
| Total | - | - | - | - | 561,891 | 561,891 |
In 2012 and in previous years, the Sonae Capital Group granted deferred performance bonuses to employees, based on shares of Sonae Capital SGPS, SA to be acquired at nil cost, three years after they were attributed to the employee. In any case, 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 Capital Group on the vesting date.
As at 31 December 2016 and 2015, the market value of total liabilities arising from share-based payments, which have not yet vested, may be summarised as follows:
| Year of grant | Vesting year | Number of participants |
Fair Value | ||
|---|---|---|---|---|---|
| Shares | 31 December 2016 | 31 December 2015 | |||
| 2013 | 2016 | 6 | - | 579,291 | |
| 2014 | 2017 | 6 | 406,269 | 272,420 | |
| 2015 | 2018 | 6 | 512,554 | 335,036 | |
| 2016 | 2019 | 6 | 368,445 | - | |
| Total | 1,287,269 | 1,186,747 |
As at 31 December 2016 and 2015, 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 have not yet vested:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Other non-current creditors (Note 26) | 464,518 | 312,372 |
| Other current creditors (Note 29) | 406,269 | 579,291 |
| Reserves | 170,768 | 34,317 |
| Staff Costs (Note 38) | 700,019 | 857,346 |
As at 31 December 2016 and 2015 trade accounts payable can be detailed as follows:
| A pagar | ||||
|---|---|---|---|---|
| 31 December 2016 |
Less than 90 days |
90 to 180 days | More than 180 days |
|
| Trade creditors current account | ||||
| Resorts | 1,632,377 | 1,449,710 | 136,321 | 46,347 |
| Hotels | 626,848 | 538,477 | 35,702 | 52,669 |
| Fitness | 993,969 | 973,927 | 13,001 | 7,040 |
| Energy | 2,548,252 | 2,547,049 | 20 | 1,183 |
| Refrigeration and HVAC | 8,914,751 | 8,464,145 | 303,384 | 147,222 |
| Other Assets | 538,323 | 476,278 | 13,057 | 48,988 |
| 15,254,520 | 14,449,586 | 501,485 | 303,449 | |
| Trade creditors - Invoices Accruals | 1,225,034 | 873,098 | 309,858 | 42,078 |
| Total | 16,479,554 | 15,322,684 | 811,343 | 345,527 |
| A pagar | ||||
| 31 December 2016 |
Less than 90 days |
90 to 180 days | More than 180 days |
|
| Trade creditors current account | ||||
| Resorts | 1,744,931 | 1,315,687 | 33,588 | 395,656 |
| Hotels | 667,938 | 554,915 | 27,641 | 85,382 |
| Fitness | 755,298 | 741,367 | 2,391 | 11,540 |
| Energy | 3,410,076 | 3,325,996 | 80,878 | 3,202 |
| Refrigeration and HVAC | 8,519,106 | 8,234,815 | 231,330 | 52,961 |
| Other Assets | 785,412 | 735,273 | 24,454 | 25,685 |
| 15,882,761 | 14,908,053 | 400,282 | 574,426 | |
| Trade creditors - Invoices Accruals | 1,284,839 | 1,136,608 | 109,197 | 39,034 |
As at 31 December 2016 and 2015 other creditors can be detailed as follows:
| Payable | ||||
|---|---|---|---|---|
| 31 December 2016 |
Less than 90 days |
90 to 180 days | More than 180 days |
|
| Other creditors | ||||
| Fixed assets suppliers | 1,164,703 | 1,066,800 | 6,150 | 171,254 |
| Others | 2,482,586 | 1,333,683 | 61,764 | 1,087,139 |
| 3,647,289 | 2,400,483 | 67,914 | 1,258,393 | |
| Advances from customers and down payments |
838,494 | |||
| 4,485,783 | ||||
| Related parties | 204,288 | |||
| Total | 4,690,071 | |||
| Payable | ||||
| 31 December 2016 |
Less than 90 days |
90 to 180 days | More than 180 days |
|
| Other creditors | ||||
| Fixed assets suppliers | 1,273,301 | 857,257 | 390,544 | 25,500 |
| Others | 1,678,532 | 636,061 | 49,476 | 992,995 |
| 2,951,833 | 1,493,318 | 440,020 | 1,018,495 | |
| Advances from customers and down payments |
8,291,899 | |||
| 11,243,732 | ||||
| Related parties | 318,490 |
As at 31 December 2016 and 2015, this caption includes balances payable to other creditors and fixed assets suppliers that do not include interest. The caption includes also advances from customers on promissory sales of Inventories and tangible assets and down payments from financial institutions regarding the discount of letters of credit over customers. The Board of Directors believes that the fair market value of these payables is approximately their book value, and that effects of discounting these balances are immaterial.
As at 31 December 2016 and 2015 other current liabilities can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Staff Costs | 6,376,663 | 5,902,111 |
| Amounts invoiced for works not yet completed | 4,892,128 | 3,219,828 |
| Accruals of Purchases expenses - Energy segment | 1,872,405 | 2,321,743 |
| Interest payable | 408,023 | 611,463 |
| Investment aid | 926,085 | 1,447,902 |
| Others | 10,514,414 | 11,158,051 |
| Total Operations | 24,989,717 | 24,661,098 |
Refrigeration and HVAC is the segment with the most significant contribution to works not yet completed, amounting to 4.8 million euros as at 31 December 2016 (2.4 million euros at 31 December 2015).
Movements in provisions and accumulated impairment losses over the period ended 31 December 2016 and 2015 were as follows:
| Captions | Balance as at 1 January 2016 |
Increases | Decreases | Utilisations | Transfers | Balance as at 31 December 2016 |
|---|---|---|---|---|---|---|
| Accumulated impairment losses on: | ||||||
| Tangible Assets (Note 10) | 39,129,797 | 3,006,017 | (7,501,743) | - | - | 34,634,071 |
| Goodwill (Note 12) | 1,301,596 | 23,051,438 | - | - | - | 24,353,034 |
| Other Investments (Notes 6 and 7) |
323,781 | - | - | - | - | 323,781 |
| Other non-current debtors (Note 13) |
34,916 | - | - | - | - | 34,916 |
| Trade accounts receivable (Note 15) |
3,986,937 | 978,794 | (372,415) | (334,112) | - | 4,259,204 |
| Other current debtors (Note 16) |
565,400 | 1,506,119 | (48,401) | (19,701) | - | 2,003,417 |
| Stocks (Note 14) | 5,951,751 | 5,206,562 | (1,077,752) | - | 5,270,932 | 15,351,493 |
| Non-current provisions | 3,079,824 | - | - | - | - | 3,079,824 |
| Current provisions | 5,357,926 | 764,036 | (179,078) | (2,003,868) | - | 3,939,016 |
| 59,731,929 | 34,512,966 | (9,179,389) | (2,357,681) | 5,270,932 | 87,978,757 |
| Captions | Balance as at 1 January 2015 |
Increases | Decreases | Utilisations | Balance as at 31 December 2015 |
|---|---|---|---|---|---|
| Accumulated impairment losses on: | |||||
| Tangible Assets (Note 10) | 38,824,512 | 305,285 | - | - | 39,129,797 |
| Goodwill (Note 12) | 1,301,596 | - | - | - | 1,301,596 |
| Other Investments (Notes 6 and 7) | 323,781 | - | - | - | 323,781 |
| Other non-current debtors (Note 13) | 34,916 | - | - | - | 34,916 |
| Trade accounts receivable (Note 15) | 4,356,479 | 298,264 | (617,895) | (49,910) | 3,986,937 |
| Other current debtors (Note 16) | 6,356,348 | 85,434 | (75,105) | (5,801,277) | 565,400 |
| Stocks (Note 14) | 6,292,456 | 804 | (341,509) | - | 5,951,751 |
| Non-current provisions | 3,079,824 | - | - | - | 3,079,824 |
| Current provisions | 5,642,201 | 1,512,681 | (294,286) | (1,502,670) | 5,357,926 |
| 66,212,114 | 2,202,468 | (1,328,795) | (7,353,857) | 59,731,929 |
On December 2016 and 2015, the amounts recorded in provisions and impairment losses were recognized for prudence; it is not possible to predict when these provisions and impairment charges will result in future cash flows.
During an inventory of assets at 31 March 2016, it was detected that the accounting, in some assets, of the impairment charges from previous years in the amount of 5,270,932 euro was made in the account of Inventories and not in the impairment account. A decision was taken to transfer these amounts to the impairment account and disclose this event in transfers.
As at 31 December 2016 and 2015 increases in provisions and impairment losses can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Provisions and impairment losses (increases) | 27,831,673 | 2,202,544 |
| Provisions and impairment losses recorded in cost of goods sold (note 14) and changes in inventories (note 36) |
5,206,562 | - |
| Impairment in Investment Income (note 41) | 1,449,406 | - |
| Other increases | 25,325 | (76) |
| Balances increases | 34,512,966 | 2,202,468 |
| Provisions and impairment losses (decreases) | 8,873,667 | 1,742,723 |
| Decreases in Provisions and impairment losses recor ded in cost of goods sold (note 14) |
1,076,105 | 335,571 |
| Other reversals of impairment losses and provisions to the income statement |
(769,236) | (854,676) |
| Exchange rate effect | - | 55,231 |
| Changes in consolidation perimeter | - | 20,614 |
| Other decreases | (1,147) | 29,332 |
| Balance decreases | 9,179,839 | 1,328,795 |
Impairment losses are deducted from the book value of the corresponding asset.
As at 31 December 2016 and 2015 detail of other provisions was as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Judicial claims | 1,697,459 | 2,033,391 |
| Provision for secured income | 2,628,037 | 3,838,298 |
| Others | 2,693,345 | 2,566,061 |
| 7,018,840 | 8,437,750 |
The amount considered in "Provision for secured income" is calculated estimating the difference between the amount to be charged through the properties leased in Tróia and the secured income to be paid to property owners.
The amount to be charged through the marketing of real estate is estimated based on the average of the values obtained in previous years. It is expected that the provision for secured income, totalling 1,467,138 euro, will generate a cash outflow for the year 2017.
As at 31 December 2016 and 2015 the most important contingent liabilities referred to guarantees given and were made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Guarantees given: | ||
| on VAT reimbursements | 5,199,346 | 5,105,475 |
| on tax claims | 17,589,470 | 9,956,905 |
| on municipal claims | 1,134,224 | 1,134,224 |
| on loans | 3,521,714 | 202,898 |
| Others | 10,172,103 | 12,082,176 |
Others include the following guarantees:
The Group has not registered provisions for the events/disagreements for which these guarantees were given since the Group believes that the above mentioned events will not result in a loss for the Group.
Minimum lease payments (fixed income) arising from operational leases, in which the Group acts as a lessor, recognized as income during the period ended 31 December 2016 and 2015 amounted to 3,511,991 euro and 2,787,429 euro, respectively.
Additionally, as at 31 December 2016 and 2015, the Group had operational lease contracts, as a lessor, whose minimum lease payments (fixed income) had the following payment schedule:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Due in: | ||
| N+1 automatically renewed | 3,309,035 | 3,314,032 |
| N+1 | 2,116,111 | 629,063 |
| N+2 | 1,959,339 | 495,476 |
| N+3 | 1,546,687 | 439,448 |
| N+4 | 1,427,361 | 439,448 |
| N+5 | 978,808 | 231,697 |
| After N+5 | 6,263,417 | 41,575 |
| 17,600,758 | 5,590,739 |
Lease payments arising from operational leases, in which the Group acts as a lessee, recognized as an expense during the period ended 31 December 2016 and 2015 amounted to 4,980,633 euro and 4,804,731 euro, respectively.
Additionally, as at 31 December 2016 and 2015, the Group had operational lease contracts, as a lessee, whose minimum lease payments (fixed income) had the following payment schedule:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Due in: | ||
| N+1 automatically renewed | 3,002,254 | 2,262,169 |
| N+1 | 451,841 | 1,285,020 |
| N+2 | 394,410 | 854,093 |
| N+3 | 361,699 | 654,289 |
| N+4 | 185,762 | 536,417 |
| N+5 | 27,371 | 401,731 |
| After N+5 | 52,409 | 784,355 |
| 4,475,746 | 6,778,074 |
Turnover for the year ended 31 December 2016 and 2015 was as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Sale of goods | 101,950,737 | 87,779,979 |
| Sale of products | 25,213,744 | 16,607,080 |
| 127,164,481 | 104,387,059 | |
| Services Rendered | 64,162,429 | 59,222,865 |
| Total Operations | 191,326,910 | 163,609,924 |
| Discontinued Operations | - | 6,523,231 |
| Total Operations | 191,326,910 | 170,133,155 |
The Sale of Products includes amounts from the sale of real estate assets totalling 23.7 million euro as at 31 December 2016 (14.5 million euro at 31 December 2015).
At 31 December 2016 the most significant amounts under IAS 11 - Construction contracts, are as follows:
| Total | |
|---|---|
| Revenue on the works in progress for construction contracts at 31 December 2016 | 69,447,836 |
| Invoicing on works in progress at 31 December 2016 | 70,389,514 |
| Amounts not invoiced for works in progress at 31 December 2016 | 25,789,532 |
| Expenses with works in progress at 31 December 2016 | 59,638,656 |
| Other current liabilities - Works already invoiced but not yet performed (Note 30) | 4,892,130 |
| Inventories for the works in progress at 31 December 2016 | 3,950,452 |
Other operational income for the year ended 31 December 2016 and 2015 was as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Own work capitalised | 44,284 | 2,206,574 |
| Gains on sales of assets | 36,972,481 | 8,814,591 |
| Supplementary income | 650,656 | 829,669 |
| Others | 3,248,775 | 7,131,190 |
| Total | 40,916,196 | 18,982,024 |
| Discontinued Operations | - | (1,592,259) |
| Total Operations | 40,916,196 | 17,389,764 |
At December 2015 in the amount of gains on disposal of assets, about 6 million are related to the sale of the non-strategic asset "Duque de Loulé".
The caption "Gains on sales of assets" in 2016 includes the gain obtained in the sale of real estate assets located in Tróia, called UNOP 7, 8 and 9.
The caption "Others" includes in the year ended in 2016, (i) government subsidies (353,604 euro); (ii) foreign exchange gains (523,965 euro) and other non-recurring gains related to the sale of assets (621,551 euro). When compared to the previous year the difference in the amounts comes from non-recurring gains obtained in 2015.
Changes in Inventories for the years ended 31 December 2016 and 2015 was as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Finished goods | (7,410,866) | (5,491,839) |
| Work in progress | (8,825,957) | (779,513) |
| (16,236,823) | (6,270,652) | |
| Impairment losses (note 31) | (1,084,222) | 287,462 |
| Continued Operations | (17,321,045) | (5,983,889) |
| Discontinued Operations | 699 | |
| Total Operations | (17,321,045) | (5,983,190) |
Changes in Inventories were calculated as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Opening inventories | 100,877,564 | 131,721,679 |
| Inventories adjustments | 3,183,970 | (24,573,463) |
| Closing inventories (Note 14) | 87,824,711 | 100,877,564 |
| (16,236,823) | (6,270,652) | |
| Impairment losses | (1,766,480) | - |
| Reversion of impairment losses | 682,258 | 287,462 |
| Total Operations | (17,321,045) | (5,983,190) |
At 31 December 2015 in "Inventories adjustments" are included 20,877,300 euro related to real estate assets transferred to tangible fixed assets (Note 10).
As at 31 December 2016 and 2015, external supplies and services were made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Subcontracts | 20,819,643 | 14,783,338 |
| Services | 7,452,218 | 6,520,249 |
| Rents | 7,241,209 | 6,639,093 |
| Fees | 892,312 | 794,322 |
| Maintenance | 4,684,762 | 3,979,136 |
| Cleaning, health and safety | 2,995,987 | 2,693,317 |
| Electricity | 2,508,611 | 2,157,965 |
| Travelling expenses | 1,085,759 | 1,094,162 |
| Publicity | 1,227,040 | 1,981,627 |
| Fuel | 698,573 | 750,149 |
| Security | 522,773 | 541,404 |
| Communication | 846,860 | 833,097 |
| Commissions | 3,950,027 | 3,690,177 |
| Other fluids | 1,073,753 | 1,166,832 |
| Insurance | 810,422 | 740,886 |
| Others | 4,503,688 | 3,909,024 |
| Continued Operations | 61,313,637 | 52,274,779 |
| Discontinued Operations | - | 2,100,514 |
| Total Operations | 61,313,637 | 54,375,292 |
Refrigeration and HVAC is the segment with the most significant contribution to subcontracts, totalling 19.7 million euros as at 31 December 2016 (13.8 million euros at 31 December 2015).
The caption "Services" includes consultancy services, fees and subcontracting of labour. Compared to the previous year the differences in the amounts are from the increase of fees with consultancy services with ongoing projects in the Energy and Refrigeration and HVAC segments.
In "Fees" are included fees with lawyers, musicians and external staff (mainly personal trainers hired to the Fitness segment).
In "Commissions" are included the amounts with services provided by real state agencies and paid by the segments Hotels, Resorts and Other Assets.
In the caption "Others" are included, among others, bank services, water consumptions and costs with transports of goods.
As at 31 December 2016 and 2015, staff costs were made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Salaries | 27,452,653 | 25,318,932 |
| Social security contributions | 4,970,530 | 4,502,515 |
| Insurance | 673,907 | 650,770 |
| Welfare | 187,726 | 168,926 |
| Other staff costs | 1,663,438 | 1,303,563 |
| Continued Operations | 34,948,254 | 31,944,706 |
| Discontinued Operations | - | 2,893,229 |
| Total Operations | 34,948,254 | 34,837,935 |
Sonae Capital's average headcount can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Resorts | 140 | 143 |
| Hotels | 277 | 263 |
| Fitness | 265 | 182 |
| Energy | 52 | 48 |
| Refrigeration and HVAC | 508 | 507 |
| Other Assets | 111 | 107 |
| 1,353 | 1,250 |
The caption "Staff costs" includes 700,019 euro (857,346 euro in 31 December 2015) with liabilities for payments in shares (Note 27).
As at 31 December 2016 and 2015, other operational expenses were made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Losses on sales of assets | 10,464 | 298,719 |
| Other taxes | 794,671 | 790,633 |
| Property tax | 856,535 | 710,196 |
| CO2 Emissions | 304,633 | 376,436 |
| Doubtful debts written-off | 3,145 | 3,614 |
| Others | 1,710,206 | 5,331,303 |
| Continued Operations | 3,679,654 | 7,510,900 |
| Discontinued Operations | - | 6,124 |
| Total Operations | 3,679,654 | 7,517,024 |
The caption "Others" includes in the year ended in 2016, mainly, write-offs of debtor balances and foreign exchange losses. When compared to the previous year the difference in the amounts comes from non-recurring gains incurred in 2015 that where not repeated during this year.
As at 31 December 2016 and 2015, net financial expenses were made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Expenses: | ||
| Interest payable | ||
| Related with bank loans and overdrafts | 1,943,228 | 2,991,827 |
| Related with bank non-convertible bonds | 1,931,018 | 2,759,434 |
| Related with finance leases | 336,227 | 364,654 |
| Related with hedge accounting derivatives | 17,563 | 230,796 |
| Others | 183,603 | 155,428 |
| 4,411,638 | 6,502,139 | |
| Exchange Losses | 848,311 | 1,266,215 |
| Payment discounts given | 533 | |
| Up-front fees | 122,488 | - |
| Other financial expenses | 2,240,998 | 2,495,703 |
| 7,623,434 | 10,264,590 | |
| Income: | ||
| Interest receivable | 417,506 | 1,161,357 |
| Exchange gains | 427,151 | 492,910 |
| Other financial income | 1 | 10,444 |
| 844,658 | 1,664,711 | |
| Net financial expenses | (6,778,776) | (8,599,879) |
| Discontinued Operations | - | (167,761) |
| Total Operations | (6,778,776) | (8,767,579) |
At 31 December 2016 the caption "Other financial expenses" mainly includes expenses with bank commissions.
As at 31 December 2016 and 2015, Investment income was made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Dividends | 119,197 | 205,358 |
| Adjustment to the selling price of Box Lines Navegação | 119,300 | 108,650 |
| Acquisition of Suncoutim Solar Energy S.A. | 1,689 | |
| Acquisition of Acrobatic Title S.A. | 1,359 | |
| Sale of Aqualuz - Turismo e Lazer, Lda | (1,112,341) | |
| Sale of UPK - Gestão de Facilities e Manutenção, SA | 116,836 | |
| Gains on disposal of investments in group companies | 122,348 | (886,855) |
| Equity settlement in other investments (Note 6) | 17,808,072 | - |
| Impairment losses (Note 31) | (1,449,563) | - |
| Settlement of the sale agreement of UPK - Gestão de Facilities e Manutenção, SA |
(247,557) | |
| Sale of investment units from Fundo de Investimento Imobiliá rio Fechado Imosede |
(22,325) | (263,315) |
| Income from Fundo de Investimento Imobiliário Fechado Imosede |
100,922 | |
| Income from Fundo de Investimento Imobiliário Imosonae Dois | 31,235 | |
| Sale of investment units from Fundo de Investimento Imobiliário Imosonae Dois |
(21,529) | |
| Gains/(Losses) on sale of other investments | 16,088,627 | (131,158) |
| Others | (244) | (32,296) |
| Investment Income | - 16,329,928 |
- (844,951) |
| Discontinued Operations | - 31,805 |
|
| Total Operations | 16,329,928 | (813,146) |
As at 31 December 2016 and 2015, Taxation was made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Current tax | 878,846 | 1,529,880 |
| Deferred tax | 4,923,230 | (1,120,643) |
| Taxation | 5,802,076 | 409,237 |
| Discontinued Operations | - | 13,096 |
| Total Operations | 5,802,076 | 422,333 |
The reconciliation between the profit before taxation and the tax charge for the periods ended 31 December 2016 and 2015 may be summarised as follows:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Valor incidência |
Valor imposto |
Valor incidência |
Valor imposto |
|
| Profit before income tax (1) | 24,494,970 | 1,818,686 | ||
| Income tax rate in Portugal | 21% | 21% | ||
| Theorical Income tax | 5,143,944 | 381,924 | ||
| Increases / (Reductions) to the taxable amount: | ||||
| Difference between accounting and tax treatment of capital gains/(losses) |
(59,195,383) | (12,431,030) | (56,568,878) | (11,879,464) |
| Share of results of associated companies | (350,193) | (73,541) | (3,976,671) | (835,101) |
| Provisions and impairment losses not accepted for tax purposes |
20,752,254 | 4,357,973 | 342,002 | 71,821 |
| Other permanent differences | (9,769,302) | (2,051,554) | (4,648,725) | (946,411) |
| Use of tax losses carried forward | (147,832) | (31,045) | (730,917) | (153,493) |
| Recognition of tax losses that have not originated deferred tax assets |
28,038,403 | 5,888,065 | 63,622,494 | 13,360,724 |
| Effect of different income tax rates in other countries | - | 16,033 | - | (413,104) |
| Effect of increases or decreases in deferred taxes from previous years |
- | -3,711,812 | - | 5,611,291 |
| Effect of increases or decreases in deferred taxes from current year |
- | 8,635,041 | - | (6,661,346) |
| Municipality tax | - | 728,811 | - | 892,520 |
| Under / (over) taxation estimates | - | (833,267) | - | 932,788 |
| Autonomous taxes and tax benefits | - | 164,374 | - | 60,184 |
| Others | - | 83 | - | - |
| Taxation (2) | 3,822,917 | 5,802,076 | (142,008) | 422,333 |
As at 31 December 2016 and 2015, the reconciliation of consolidated net profit can be analysed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Aggregated net profit | 60,882,158 | (24,013,556) |
| Harmonisation adjustments | (1,209,365) | (3,807,715) |
| Elimination of intragroup dividends | (456,894,269) | (39,204,648) |
| Share of gains/(losses) of associated undertakings | 62,953 | (9,366,260) |
| Elimination of intragroup capital gains/(losses) | - | 82,573,807 |
| Elimination of intragroup impairment | 444,423,881 | (57,304,713) |
| Adjustments of gains/(losses) on assets disposals | - | 4,142,033 |
| Adjustments of gains/(losses) of financial shareholdings sale | (28,572,463) | 48,377,405 |
| Others | ||
| Consolidated net profit for the year | 18,692,895 | 1,396,353 |
Balances and transactions during the periods ended 31 December 2016 and 2015 with related parties are detailed as follows:
| Sales and services Purchases and Sales and services Purchases and Transactions rendered services obtained rendered services obtained (Note 34) (Note 37) (Note 34) (Note 37) Parent company a) - - - - Associated companies 56,912 28,494 309,335 30,481 Andar-Sociedade Imobiliária,SA - - - 25 Feneralt - Produção de Energia, ACE 33,898 (1,714) 40,880 - Lidergraf - Artes Gráficas, Lda 22,449 30,208 87,276 30,434 Norscut - Concessionária de Scut Interior Norte, SA 565 - 181,179 - Vastgoed One - - - 11 Vastgoed Sun - - - 11 Other partners and Group companies 44,788,940 5,098,117 37,794,559 4,848,710 8ª Avenida - Centro Comercial, SA 18,476 - - - Águas Furtadas - Soc. Agricola, SA 2,442 - 2,705 - Alpêssego - Sociedade Agrícola, SA 4,250 (327) 3,524 7 Arrábidashopping - Centro Comercial, SA - - 2,241 - Azulino Imobiliária, S.A. - - 1,600 - BB Food Service, SA 670,222 (12,495) 832,167 (1,406) Bom Momento - Restauração, S.A. 10,850 (7,129) 68,406 (270) Cascaishopping Centro Comercial, SA 680,007 (884) 238,060 - Centro Colombo Centro Comercial, SA 1,139,096 231,646 966,832 191,857 Centro Vasco da Gama Centro Comercial,SA - 5,854 - - Chão Verde-Soc. de Gestão Imobiliária,SA - - 33,798 - Citorres - Sociedade Imobiliária, SA - - 8,916 - Contimobe - Imobiliária Castelo Paiva,SA 361,226 4,417 796,032 5,438 Continente Hipermercados, SA 1,209,406 4,432 684,227 (8,404) Digitmarket-Sistemas de Informação,SA 75 241,095 (4,468) 194,645 Discovery Sports, SA 14,204 (1,283) 17,969 (830) Ecociclo - Energia e Ambiente, SA - - 247 - Efanor Investimentos, SGPS, S.A. 46 - 153 (5,510) Efanor Serviços de Apoio à Gestão, S.A. 66,850 - 64,333 - Estação Viana Centro Comercial, SA 140 - - - Euroresinas-Indústrias Quimicas,SA - 17,756 - 10,097 Fashion Division, S.A. 4,184 - 46,792 - Fundo de Invest.Imobiliário Fec. Imosede 93,868 523,680 210,854 560,289 Fundo Invest. Imobiliário Imosonae Dois - - 638,336 - Gaiashopping I Centro Comercial, SA - - 5,281 - Gaiashopping II Centro Comercial, SA - - 10,022 - Guimarãeshopping Centro Comercial, SA - - 5,539 - Herco Consultoria de Risco, S.A. 11,262 3,597 3,829 3,397 Imoplamac Gestão de Imóveis, SA - - 105 - Imosistema - Sociedade Imobiliária, SA 9,628 (1,572) - - Infofield - Informática, SA 2,132 - 4,316 - Insco Insular de Hipermercados, S.A. 488,584 (11,189) 162,488 (2,077) LCC LeiriaShopping Centro Comercial SA 1,242 - 31,131 - Loureshopping-Centro Comercial, S.A. 37,216 - - (27) Madeirashopping Centro Comercial, SA 13,145 - 52,527 (63) Maiequipa - Gestão Florestal, SA - - 232 - MDS - Corretor de Seguros, SA 373,644 (9,289) 367,501 (34,682) MDS Affinity-Sociedade de Mediação Lda 1,163 - 1,268 - MDS Auto - Mediação de Seguros, SA 2,478 - 2,537 - MDS RE - Mediador de resseguros 472 - 142 - |
December 2016 | December 2015 | ||||
|---|---|---|---|---|---|---|
| MDS, SGPS, SA | 981 | - | 4,789 | - |
|---|---|---|---|---|
| Modalfa - Comércio e Serviços, SA | 82,192 | - | 112,021 | (27) |
| Modalloop - Vestuário e Calçado, SA | (5,829) | - | 20,667 | - |
| Modelo - Dist.de Mat. de Construção,S.A. | 93,855 | - | 3,960 | - |
| Modelo Continente Hipermercados, SA | 30,657,260 | 534,598 | 19,813,927 | 385,612 |
| Modelo Continente Hipermercados, Suc. | - | 9,600 | - | 9,600 |
| Modelo.com-Vendas por Correspondência,SA | - | - | 528 | - |
| Movelpartes-Comp.para Ind.Mobiliária,SA | 297 | - | 6,267 | 324 |
| Norteshopping Centro Comercial, SA | 5,615,113 | - | 2,064,605 | (697) |
| Nova Equador P.C.O. e Eventos | - | - | 6,874 | 2,122 |
| Paracentro - Gestão de Galerias Com., SA | 138,371 | 3,400 | - | - |
| Parklake Shopping, S.A. | - | - | 4,331,009 | - |
| Pharmacontinente - Saúde e Higiene, SA | 88,522 | 412 | 99,196 | 152 |
| Plaza Mayor Parque de Ocio, SA | - | - | - | - |
| Portimaoshopping C.Comercial SA | - | - | 502,179 | - |
| Project 4, Srl | - | - | 1,231 | - |
| Público - Comunicação Social, SA | 345 | 2,734 | (1,344) | 10,375 |
| QCE-Desenv. e Fabrico de Equipamentos,SA | - | - | - | (209,917) |
| Raso - Viagens e Turismo, S.A. | - | - | 285,075 | 292,039 |
| Rio Sul - Centro Comercial, SA | - | - | 133,540 | - |
| Saphety Level - Trusted Services, SA | - | 149,074 | - | 150,070 |
| SC For - Serviços de Formação e Desenv. de Recursos Humanos, Unipe., Lda |
- | - | - | (13,769) |
| SDSR - Sports Division SR, S.A. | 39,296 | 53,667 | 252,252 | 63,253 |
| Sempre à Mão - Sociedade Imobiliária, SA | 262,640 | - | - | - |
| Sesagest - Proj. Gestão Imobiliária, SA | - | - | 445,000 | - |
| Sierra Portugal, SA | 46,392 | 1,927,998 | 1,763,384 | 1,860,287 |
| Sierra Spain Shop. Centers Serv., S.A.U. | 198 | - | - | - |
| Soc.Ind.Radiodifusão Sonora,SA | 2,423 | 19,218 | 3,999 | 19,788 |
| Socijofra - Sociedade Imobiliária, SA | 38,645 | - | 34,051 | - |
| Sonae Arauco, S.A. | 9,331 | - | 10,973 | - |
| Sonae Center Serviços II, SA | 127,789 | 519,035 | 172,209 | 520,731 |
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 59,420 | (213) | 90,260 | (4,190) |
| Sonae Indústria - Management Services,SA | - | - | 2,634 | (41) |
| Sonae Industria de Revestimentos,SA | 404,227 | 390,923 | 544,209 | 269,471 |
| Sonae Indústria-SGPS,SA | 1,112 | - | 1,048 | - |
| Sonae MC - Modelo Continente, SGPS, SA | - | (713) | - | - |
| Sonae SGPS, SA | 13,928 | 50,000 | 9,924 | 50,000 |
| Sonaecenter Serviços, SA | - | - | 2,021 | - |
| Sonaecom - Serviços Partilhados, S.A | 93,603 | (131,729) | 90,300 | (213,723) |
| Sonaecom, SGPS, SA | - | 1,287 | - | 271 |
| Sonaegest-Soc.Gest.Fundos Investimentos | 5,616 | 225,400 | - | 220,864 |
| Sonaerp - Retail Properties, SA | 1,165,690 | 35,071 | 578,023 | 55,522 |
| SONAESR - Serviços e logistica, SA | 40,064 | (6,396) | 49,061 | - |
| Sondis Imobiliária, SA | - | - | 167,286 | - |
| Sysvalue-Consult.,Int. e Seg. em S.I.,SA | 538 | - | - | - |
| Tableros Tradema,S.L. | 8,593 | - | 8,759 | - |
| Têxtil do Marco, SA | 115,682 | - | 111,129 | - |
| Torre Ocidente, Imobiliária,SA | - | - | 6,777 | - |
| Viajens y Turismo de Geotur España, S.L. | - | - | 20,111 | 71 |
| We Do Consulting-Sist. de Informação, SA | - | 317,242 | (1,992) | 469,303 |
| Worten - Equipamento para o Lar, SA | 422,035 | 9,279 | 762,779 | (873) |
| Zippy - Comércio e Distribuição, SA | 44,303 | (79) | 26,196 | (369) |
| 44,845,852 | 5,126,611 | 38,103,894 | 4,879,191 |
| Transactions | Interest income (Nota 40) |
Interest expenses (Nota 40) |
Interest income (Nota 40) |
Interest expenses (Nota 40) |
|---|---|---|---|---|
| Parent company a) | - | - | - | - |
| Associated companies | 261,447 | - | 986,897 | - |
| Andar-Sociedade Imobiliária,SA | 57,432 | - | 56,609 | - |
| Norscut - Concessionária de Scut Interior Norte, SA | 204,015 | - | 930,288 | - |
| Other partners and Group companies | - | 96,645 | - | 110,567 |
| Plaza Mayor Parque de Ocio, SA | - | 96,645 | - | 110,567 |
| 261,447 | 96,645 | 986,897 | 110,567 |
| December 2016 | December 2015 | |||
|---|---|---|---|---|
| Balances | Accounts receivable (Notes 15 and 16) |
Accounts payable (Notes 28 and 29) |
Accounts receivable (Notes 15 and 16) |
Accounts payable (Notes 28 and 29) |
| Parent company a) | - | - | - | - |
| Associated companies | 112,744 | 3,074 | 79,083 | 6,302 |
| Andar-Sociedade Imobiliária,SA | 28,347 | - | 28,843 | - |
| Feneralt - Produção de Energia, ACE | 79,716 | - | 8,771 | - |
| Lidergraf - Artes Gráficas, Lda | 4,681 | 3,074 | 2,381 | 6,302 |
| Norscut - Concessionária de Scut Interior Norte, SA | - | - | 31,135 | - |
| Powercer - Soc.de Cogeração da Vialonga,SA | - | - | 7,953 | - |
| Other partners and Group companies | 10,717,353 | 1,480,910 | 10,106,073 | 8,946,752 |
| Águas Furtadas - Soc. Agricola, SA | 299 | - | 573 | - |
| Algarveshopping- Centro Comercial, SA | 16,479 | - | 16,479 | - |
| Alpêssego - Sociedade Agrícola, SA | 292 | - | 591 | - |
| BB Food Service, SA | 80,579 | - | 93,934 | - |
| Bom Momento - Restauração, S.A. | 4,055 | - | 1,435 | - |
| Centro Colombo Centro Comercial, SA | 139,374 | 16,545 | 304,786 | - |
| Contimobe - Imobiliária Castelo Paiva,SA | 77,223 | 1,500 | - | 2,519 |
| Continente Hipermercados, SA | 350,457 | 4,945 | 88,815 | 172 |
| Digitmarket-Sistemas de Informação,SA | 106,409 | 692 | 121,235 | 21,025 |
| Discovery Sports, SA | 2,010 | - | 1,597 | - |
| Ecociclo - Energia e Ambiente, SA | - | - | 101 | - |
| Efanor Investimentos, SGPS, S.A. | - | - | 12,038 | - |
| Efanor Serviços de Apoio à Gestão, S.A. | 6,923 | 5,451 | 14,197 | 5,422 |
| Estação Viana Centro Comercial, SA | 4,445 | - | 4,445 | - |
| Euroresinas-Indústrias Quimicas,SA | - | 12,926 | - | 5,214 |
| Fashion Division, S.A. | 1,364 | - | 1,537 | - |
| Fundo de Invest.Imobiliário Fec. Imosede | 43,665 | 44,556 | 68,255 | 115,639 |
| Fundo Invest. Imobiliário Imosonae Dois | - | - | - | (2,585) |
| Geotur Consolidada | - | - | - | 653 |
| Guimarãeshopping Centro Comercial, SA | 720 | - | 720 | - |
| Herco Consultoria de Risco, S.A. | - | 1,071 | 2,434 | 1,285 |
| Imoplamac Gestão de Imóveis, SA | - | - | 73 | - |
| Imosistema - Sociedade Imobiliária, SA | 11,842 | - | - | - |
| Infofield - Informática, SA | 1,683 | - | 512 | - |
| Insco Insular de Hipermercados, S.A. | 108,945 | - | - | 88,120 |
| LCC LeiriaShopping Centro Comercial SA | 2,628 | - | 5,957 | - |
| Loureshopping-Centro Comercial, S.A. | 37,216 | - | - | - |
| Madeirashopping Centro Comercial, SA | 42,432 | - | 52,527 | - |
| Maiequipa - Gestão Florestal, SA | - | - | 95 | - |
| MDS - Corretor de Seguros, SA | 33,098 | 129,892 | 15,729 | 62,806 |
| MDS RE - Mediador de resseguros | (530) | - | (838) | - |
| Modalfa - Comércio e Serviços, SA | 8,554 | - | 9,674 | - |
| Modalloop - Vestuário e Calçado, SA | - | 6,235 | 6,711 | - |
| Modelo - Dist.de Mat. de Construção,S.A. | 94,402 | - | 2,928 | - |
| Modelo Continente Hipermercados, SA | 6,961,465 | 260,677 | 3,915,357 | 515,088 |
| Norteshopping Centro Comercial, SA | - | 456,799 | 2,062,837 | 7,107,934 |
| Paracentro - Gestão de Galerias Com., SA | - | 1,700 | - | - |
| Parklake Shopping, SA | 1,924,623 | - | 857,862 | - |
| Pharmacontinente - Saúde e Higiene, SA | 7,000 | - | 58,588 | 133 |
| Plaza Mayor Parque de Ocio, SA | - | 40,300 | - | 40,300 |
| Portimaoshopping C.Comercial SA | - | - | 32,481 | - |
| Project 4, Srl | - | - | 52 | - |
| Público - Comunicação Social, SA | - | 780 | - | - |
| Raso - Viagens e Turismo, S.A. | - | - | 10,132 | 29,393 |
| RIOSUL - Rio Sul - Centro Comercial, SA | 6,334 | - | 6,349 | - |
| Saphety Level - Trusted Services, SA | - | 35,174 | - | 30,602 |
| SDSR - Sports Division SR, S.A. | 1,083 | 8,158 | 21,912 | 10,500 |
| SEKIWI, SGPS, S.A | 80 | - | - | - |
| Sempre à Mão - Sociedade Imobiliária, SA | 38,209 | - | - | - |
| Sierra Developments, SGPS, SA | - | - | 1,449,407 | - |
| Sierra Portugal, SA | 87,257 | 91,435 | 72,834 | 184,478 |
| Sierra Spain Shop. Centers Serv., S.A.U. | 210 | - | - | - |
SIRS-Soc.Ind.Radiodifusão Sonora,SA 1,997 3,953 1,796 11,080 Somit Imobiliária, SA 2,261 - - -
| Sonae Arauco, S.A. | 754 | - | 4,616 | - |
|---|---|---|---|---|
| Sonae Center Serviços II, SA | 9,808 | 77,314 | 159,205 | 141,974 |
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 14,398 | (130) | 54,166 | 2,264 |
| Sonae Industria de Revestimentos,SA | 137,810 | 106,546 | 236,108 | 172,713 |
| Sonae Indústria-SGPS,SA | 290 | - | 216 | - |
| Sonae SGPS, SA | 1,265 | 50,000 | 3,416 | 50,000 |
| Sonaecenter Serviços, SA | - | - | 25 | - |
| Sonaecom - Serviços Partilhados, S.A | 23,587 | 300 | 56,626 | - |
| Sonaecom, SGPS, SA | - | 250 | - | 271 |
| Sonaegest-Soc.Gest.Fundos Investimentos | - | 16,657 | - | 16,785 |
| Sonaerp - Retail Properties, SA | 5,341 | 58,919 | 82,332 | 156,293 |
| SONAESR - Serviços e logistica, SA | 33,944 | - | 110 | 33,758 |
| Spinarq, SA | 13,232 | - | - | - |
| Sport Zone España-Com.Art.de Deporte,SA | - | - | 525 | - |
| Tableros Tradema,S.L. | 811 | - | 4,443 | - |
| Têxtil do Marco, SA | 8,817 | 119 | 9,134 | - |
| We Do Consulting-Sist. de Informação, SA | - | 39,800 | - | 142,813 |
| Worten - Equipamento para o Lar, SA | 260,645 | 8,346 | 130,552 | 103 |
| Worten España Distribución, SL | - | - | 43,904 | - |
| Zippy - Comércio e Distribuição, SA | 1,568 | - | 4,548 | - |
| 10,830,097 | 1,483,984 | 10,185,156 | 8,953,054 |
| Balances | Loans obtained (Note 26) |
Loans granted (Note 13) |
Loans obtained (Note 26) |
Loans granted (Note 13) |
|---|---|---|---|---|
| Parent company a) | - | - | - | -- |
| Associated companies | - | 839,697 | - | 6,689,090 |
| Andar-Sociedade Imobiliária,SA | - | 839,697 | - | 777,690 |
| Feneralt - Produção de Energia, ACE | - | - | - | 5,911,400 |
| Other partners and Group companies | 1,825,274 | - | 1,928,510 | - |
| Plaza Mayor Parque de Ocio, SA | 1,825,274 | - | 1,928,510 | - |
| 1,825,274 | 839,697 | 1,928,510 | 6,689,090 |
a)The parent company is Efanor Investimentos, SGPS, SA;
Remunerations attributed in 2016 to key management staff of main companies of the Sonae Capital Group (excluding members of the Board of Directors of Sonae Capital, SGPS, SA) amounted to 1,193,592 euro (1,087,527 euro in 2015), of which 706,413 euro (563,392 euro in 2015) are fixed remunerations and 487,180 euro (524,135 euro in 2015) are performance bonuses.
Earnings per share for the periods ended 31 December 2016 and 2015 were calculated taking into consideration the following amounts:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Net profit | ||
| Net profit taken into consideration to calculate basic earnings per share (Net profit for the period ) |
17,594,199 | (294,678) |
| Net profit taken into consideration to calculate diluted earnings per share |
17,594,199 | (294,678) |
| Number of shares | ||
| Weighted average number of shares used to calculated basic earnings per share |
246,740,156 | 246,341,811 |
| Weighted average number of shares used to calculated diluted earnings per share |
246,740,156 | 246,341,811 |
| Earnings per share (basic and diluted) – continued operations | 0,071307 | 0,001215 |
| Earnings per share (basic and diluted) – discontinued operations | - | (0,002411) |
| Earnings per share (basic and diluted) | 0,071307 | (0,001196) |
There are no convertible instruments included in Sonae Capital, SGPS, SA's shares, hence there is no dilutive effect in earnings.
As at 31 December 2016 and 2015, cash receipts and cash payments related to investments can be analysed as follows:
| 31 December 2016 | 31 December 2015 | ||||
|---|---|---|---|---|---|
| Recebimentos | Pagamentos | Recebimentos | Pagamentos | ||
| Sale of units from Fundo de Investimento Imobi liário Fechado Imosede, |
- | - | 34,011,844 | - | |
| Income from Fundo de Investimento Imobiliário Fechado Imosede. |
- | - | 100,921 | - | |
| Sale of Norscut, S.A. | 35,226,649 | - | - | - | |
| Sale of Operscut, S.A. | 1,726,000 | - | - | - | |
| Sale of units from Fundo de investimento Imobiliario Imosonae Dois. |
100,466 | - | - | - | |
| Sale of Sear - Sociedade Europeia de Arroz, S.A. | - | - | - | - | |
| Sale of Saúde Atlantica - Gestão Hospitalar, S.A. and its affiliates |
- | - | 768,969 | - | |
| Acquisition of Suncoutim - Solar Energy, S.A. | - | 3,084,994 | - | - | |
| Acquisition of Acrobatic, S.A. | 5,000 | ||||
| Adjustment to the selling price of Box Lines Navegação. |
600,000 | - | 600,000 | - | |
| Other | 31,042 | 98,163 | 453,333 | 26,143 | |
| Cash and cash equivalents from Suncoutim and Acrobatic |
478,496 | ||||
| Total Operations | 38,162,653 | 3,188,157 | 35,935,067 | 26,143 |
In 31 December 2016 and 2015, the following were identified as segments:
The contribution of the business segments to the income statement of the periods ended 31 December 2016 and 31 December 2015 can be detailed as follows:
| 31 December 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Profit and Loss Account | Resorts | Hotels | Fitness | Energy | Refrigeration and HVAC |
Other Assets |
Intersegment Adjustments |
Consolidated |
| Turnover | 29,510,877 | 17,001,324 | 18,087,904 | 38,230,975 | 67,178,324 | 32,361,758 | (-11,044,252) | 191,326,910 |
| Other operational income |
38,653,460 | 603,897 | 343,411 | 1,205,013 | 748,900 | 757,210 | (-1,395,697) | 40,916,196 |
| Total operational income | 68,164,337 | 17,605,221 | 18,431,315 | 39,435,989 | 67,927,223 | 33,118,969 | (-12,439,950) | 232,243,104 |
| Operational cash-flow (EBITDA) |
17,214,585 | (-2,300,910) | 2,158,639 | 7,808,140 | 1,966,640 | 3,177,171 | (-199) | 30,024,066 |
| 31 Dezembro 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Profit and Loss Account | Resorts | Hotels | Fitness | Energy | Refrigeration and HVAC |
Other Assets |
Intersegment Adjustments |
Consolidated |
| Turnover | 25,123,883 | 14,482,117 | 15,191,172 | 50,584,114 | 60,603,990 | 16,080,636 | (-18,455,988) | 163,609,924 |
| Other operational income |
7,154,234 | 486,548 | 415,210 | 1,284,117 | 802,752 | 6,715,048 | 2,124,115 | 18,982,024 |
| Total operational income | 32,278,117 | 15,026,273 | 15,606,382 | 51,868,231 | 57,605,666 | 22,795,684 | (-12,588,406) | 182,513,039 |
| Operational cash-flow (EBITDA) |
2,848,138 | (-3,210,179) | 1,610,771 | 9,723,439 | 3,187,271 | 9,426,982 | - | 23,586,422 |
The contribution of the business segments to the Balance sheets as at 31 December 2016 and 31 December 2015 can be detailed as follows:
| 31 December 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Balance Sheet | Resorts | Hotels | Fitness | Energy | Refrigeration and HVAC |
Other Assets | Intersegment Adjustments |
Consolidated |
| Fixed Assets Tangible, Intangible and Goodwill |
115,857,957 | 12,729,785 | 9,145,613 | 29,695,898 | 9,853,707 | 131,504,913 | -24,546,482 | 284,241,391 |
| Investments | 46,712,016 | 10,693,538 | 11,573 | 98,948 | 9,691 | 342,388,894 | -398,200,905 | 1,713,755 |
| Other Assets | 60,237,499 | 9,948,572 | 2,537,855 | 7,882,427 | 44,978,632 | 538,990,283 | -450,152,835 | 214,422,433 |
| Total Assets | 222,807,472 | 33,371,895 | 11,695,041 | 37,677,273 | 54,842,030 | 1,012,884,090 | -872,900,222 | 500,377,579 |
| Total Liabi lities |
187,208,324 | 30,113,066 | 8,944,775 | 32,545,115 | 20,914,865 | 350,921,833 | -450,628,130 | 180,019,848 |
| Technical investment |
1,212,720 | 1,359,711 | 1,994,065 | 3,764,716 | 71,574 | 1,014,124 | -2,668 | 9,414,242 |
| Gross Debt | 11,715,949 | - | 158,972 | 9,658,175 | 515,200 | 76,687,376 | - | 98,735,673 |
| Net Debt | 10,844,588 | -102,001 | 83,404 | 8,830,431 | -110,543 | 46,442,585 | - | 65,988,465 |
| 31 December 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Balance Sheet | Resorts | Hotels | Fitness | Energy | Refrigeration and HVAC |
Other Assets | Intersegment Adjustments |
Consolidated |
| Fixed Assets Tangible, Intangible and Goodwill |
149,956,529 | 12,436,077 | 9,005,028 | 26,895,189 | 9,993,052 | 111,446,972 | -6,010 | 319,726,837 |
| Investments | 41,797,580 | 10,705,291 | 27,638 | 213,433 | 4,283 | 360,907,202 | -400,097,398 | 13,558,029 |
| Other Assets | 76,197,823 | 8,070,031 | 2,747,073 | 10,745,078 | 42,435,788 | 593,656,434 | -493,104,764 | 240,747,465 |
| Total Assets | 267,951,933 | 31,211,399 | 11,779,739 | 37,853,700 | 52,433,123 | 1,066,010,608 | -893,208,172 | 574,032,331 |
| Total Liabi lities |
231,646,193 | 29,764,342 | 9,121,409 | 35,009,190 | 18,086,642 | 433,849,763 | -493,580,059 | 263,897,480 |
| Technical investment |
1,437,829 | 575,136 | 1,312,420 | 6,242,443 | 191,289 | 4,805,144 | - | 14,564,262 |
| Gross Debt | 13,654,719 | - | 261,161 | 6,693,808 | 684,942 | 163,221,655 | - | 184,516,284 |
| Net Debt | 13,471,474 | -104,405 | 221,797 | 6,306,008 | -813,557 | 130,116,717 | - | 149,198,033 |
Contribution of the main business segments to the cash-flow statement for the periods ended 31 December 2016 and 2015 can be detailed as follows:
| 31 December de 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Resorts | Hotels | Fitness | Energy | Refrigeration and HVAC |
Other Assets | Consolidated | ||
| Operating activities | 11,335,626 | 5,294,061 | 3,869,228 | 8,719,751 | (6,497,674) | 1,541,887 | 24,262,879 | |
| Investment activities | 48,045,317 | (1,200,951) | (2,211,578) | (5,580,202) | (17,834) | 43,261,644 | 82,296,395 | |
| Financing activities | (2,086,157) | (1,490) | (319,877) | 1,588,225 | (467,237) | (107,544,424) | (108,830,960) | |
| Change in cash and cash equivalents |
57,294,799 | 4,091,620 | 1,337,772 | 4,727,776 | (6,982,745) | (62,740,907) | (2,271,686) |
| 31 December de 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Resorts | Hotels | Fitness | Energy | Refrigeration and HVAC |
Other Assets | Consolidated | ||
| Operating activities | 3,187,002 | 97,590 | 4,434,399 | 9,809,847 | 8,768,803 | 3,237,088 | 29,534,729 | |
| Investment activities | 4,076,010 | 14,342,499 | (725,437) | (6,182,647) | (24,964) | 54,456,420 | 65,941,881 | |
| Financing activities | (2,603,139) | (72,746) | (497,093) | (4,743,102) | (493,350) | (59,633,301) | (68,042,731) | |
| Change in cash and cash equivalents |
4,659,873 | 14,367,343 | 3,211,869 | (1,115,902) | 8,250,489 | (1,939,793) | 27,433,879 |
During the years ended 31 December 2016 and 2015, the following amounts have been paid to the company's external auditor:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Audit and Statutory Audit 1 | 178,002 | 96,74% | 189,635 | 76,87% |
| Other Assurance 2 | - | 0,00% | - | 0,00% |
| Tax Consultancy 2 | - | 0,00% | 1,700 | 0,69% |
| Other Services 2 | 29,180 | 4,1% | 55,374 | 22,45% |
| Total | 207,182 | 100,00% | 246,709 | 100,00% |
1 Fees agreed for the year. 2 Amounts already paid.
The amount of "Other Services" is related to assurance services (validation of a summary prepared by the Group and called "Summary of investment costs made up to 30 June 2016", that must be delivered to government body "Turismo de Portugal" free of material errors under the investment agreement dated on June 27, 2005).
No significant events, requiring further disclosure, have occurred after 31 December 2016.
These consolidated financial statements were approved by the Board of Directors and authorized for issue on 23 February 2016.
The Board of Directors
Duarte Paulo Teixeira de Azevedo Chairman
Maria Cláudia Teixeira de Azevedo CEO
Álvaro Carmona e Costa Portela Member of the Board of Directors Ivone Pinho Teixeira CFO
Francisco de La Fuente Sánchez Member of the Board of Directors Miguel Jorge Moreira da Cruz Gil Mata Member of the Board of Directors
Paulo José Jubilado Soares de Pinho Member of the Board of Directors
| Amounts expressed in euro | Notes | 31/12/2016 | 31/12/2015 |
|---|---|---|---|
| ASSETS | |||
| NON-CURRENT ASSETS | |||
| Tangible assets | 28,660 | 29,790 | |
| Investments | 4 | 308,580,096 | 352,789,105 |
| Deferred tax assets | 7 | 14,314,699 | 8,275,218 |
| Other non-current assets | 5 | 332,918,086 | 376,801,628 |
| Total non-current assets | 655,841,541 | 737,895,741 | |
| CURRENT ASSETS | |||
| Taxes recoverable | 6 | 2,163,794 | 1,525,643 |
| Other current assets | 6 | 43,498,510 | 49,145,079 |
| Cash and cash equivalents | 8 | 27,861,181 | 30,562,977 |
| Total Current Assets | 73,523,485 | 81,233,698 | |
| TOTAL ASSETS | 729,365,026 | 819,129,439 | |
| EQUITY AND LIABILI TIES |
|||
| EQUITY | |||
| Share capital | 9 | 250,000,000 | 250,000,000 |
| Own Shares | 9 | (1,404,226) | (1,426,791) |
| Legal reserve | 10 | 10,073,164 | 9,463,225 |
| Other reserves | 10 | 306,815,095 | 309,676,446 |
| Profit/(Loss) for the year | 8,738,316 | 12,198,782 |
| LIABILI TIES |
|||||||
|---|---|---|---|---|---|---|---|
| NON-CURRENT LIABILI TIES: |
|||||||
| Bank Loans 11 |
19,579,665 | 45,125,994 | |||||
| Bonds 11 |
57,107,711 | 42,123,598 | |||||
| Other non current liabilities 13 |
360,486 | 107,760 | |||||
| Total Non-Current Liabilities | 77,047,862 | 87,357,352 | |||||
| CURRENT LIABILI TIES: |
|||||||
| Trade creditors 13 |
92,536 | 101,559 | |||||
| Bank Loans 11 |
- | 25,990,000 | |||||
| Other creditors 12 |
76,808,940 | 124,763,497 | |||||
| Other current liabilities 13 |
1,193,340 | 1,005,369 | |||||
| Total Current Liabilities | 78,094,816 | 151,860,425 | |||||
| TOTAL LIABILI TIES |
155,142,678 | 239,217,777 | |||||
| TOTAL EQUITY AND LIABILI TIES |
729,365,026 | 819,129,439 |
TOTAL EQUITY 574,222,348 579,911,662
The accompanying notes are part of these financial statements.
Board of Directors
| SONAE CAPITAL, SGPS, SA — INDIVI DUAL INCOME STATEMENTS BY NATURE FOR THE TWELV E MONTHS ENDED 31 DECEMB ER 2016 AND 2015 |
||||||
|---|---|---|---|---|---|---|
| Amounts expressed in euro | Notes | 31/12/2016 | 31/12/2015 | |||
| Operational profit | ||||||
| Other operating income | 18 | 119,998 | 27,805 | |||
| Operational profit total | 119,998 | 27,805 | ||||
| Operational loss | ||||||
| External supplies and services | 14 | (1,019,054) | (1,038,486) | |||
| Staff costs | 16 | (1,600,084) | (1,284,716) | |||
| Depreciation and amortisation | (1,586) | (1,935) | ||||
| Other operating expenses | 18 | (68,472) | (106,621) | |||
| Operational expenses total | (2,689,196) | (2,431,758) | ||||
| Operational profit/(loss) | (2,569,198) | (2,403,953) | ||||
| Financial Expenses | 17 | (6,052,239) | (9,958,040) | |||
| Financial Income | 17 | 18,597,345 | 29,087,119 | |||
| Net financial income / (expenses) | 12,545,107 | 19,129,079 | ||||
| Investment income | 17 | (7,776,980) | (10,322,170) | |||
| Profit/(Loss) before taxation | 2,198,929 | 6,402,956 | ||||
| taxation | 19 | 6,539,387 | 5,795,826 | |||
| Profit/(Loss) for the year | 8,738,316 | 12,198,782 | ||||
| Profit/(Loss) per share | ||||||
| Basic and Diluted | 20 | 0,035415 | 0,049520 |
The accompanying notes are part of these financial statements.
Board of Directors
| Amounts expressed in euro | 4º Quarter 2016 (Unaudited) |
4º Quarter 2015 (Unaudited) |
|---|---|---|
| Operational profit | ||
| Other operating income | 34,966 | 10,362 |
| Operational profit total | 34,966 | 10,362 |
| Operational loss | ||
| External supplies and services | (252,921) | (266,502) |
| Staff costs | (486,587) | (268,241) |
| Depreciation and amortisation | (470) | (273) |
| Other operating expenses | 30,415 | (13,956) |
| Operational loss total | (709,563) | (548,972) |
| Operational profit/(loss) | (674,597) | (538,610) |
| Financial Expenses | (1,006,138) | (2,629,420) |
| Financial Income | 4,517,936 | 3,632,301 |
| Net financial income / (expenses) | 3,511,798 | 1,002,881 |
| Investment income | (36,601,150) | (7,928,013) |
| Profit/(Loss) before taxation | (33,763,949) | (7,463,742) |
| taxation | 6,175,335 | 3,595,657 |
| Profit/(Loss) for the year | (27,588,614) | (3,868,085) |
| Profit/(Loss) per share | ||
| Basic and Diluted | (0,111812) | (0,015702) |
The accompanying notes are part of these financial statements.
| Amounts expressed in euro | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Individual net profit/(loss) for the period | 8,738,316 | 12,198,782 |
| Items that may be reclassified subsequently to net profit / (loss): | ||
| Changes in the currency translation differences | ||
| Share of other comprehensive income of associates and joint ventures accounted for by the equity method (Note 5) |
||
| Change in the fair value of assets available for sale | ||
| Change in the fair value of cash flow hedging derivatives | ||
| Tax related to other comprehensive income captions | ||
| Other comprehensive income for the period | - | - |
| Total comprehensive income for the period | 8,738,316 | 12,198,782 |
O anexo faz Part integrante destas demonstrações financeiras.
Board of Directors
| Amounts expressed in euro | 4º Quarter 2016 (Unaudited) |
4º Quarter 2015 (Unaudited) |
|---|---|---|
| Individual net profit/(loss) for the period | (27,588,614) | (3,868,085) |
| Items that may be reclassified subsequently to net profit / (loss): | ||
| Changes in the currency translation differences | ||
| Share of other comprehensive income of associates and joint ventures accounted for by the equity method (Note 5) |
||
| Change in the fair value of assets available for sale | ||
| Change in the fair value of cash flow hedging derivatives | ||
| Tax related to other comprehensive income captions | ||
| Other comprehensive income for the period | - | - |
| Total comprehensive income for the period | (27,588,614) | (3,868,085) |
The accompanying notes are part of these financial statements.
| Amounts expressed in euro | ||
|---|---|---|
| -- | --------------------------- | -- |
| Share Capital (Note 9) |
Own Shares (Note 9) |
Fair Value Reserves (Note 10) |
Other Reserves (Note 10) |
Retained Earnings |
Sub total | Net Profit/ (Loss) |
Total Equity | |
|---|---|---|---|---|---|---|---|---|
| Balance as at 1 January 2015 | 250,000,000 | (1,486,301) | 8,611,464 293,493,001 | - 302,104,465 | 17,035,205 567,653,369 | |||
| Total individual comprehensive income for the period |
- | - | - | - | - | - | 12,198,782 | 12,198,782 |
| Appropriation of profit of 2014: | - | - | - | - | - | - | - | - |
| Transfer to legal reserves and retained earnings |
- | - | 851,760 | 16,183,445 | - | 17,035,205 (17,035,205) | - | |
| Dividends paid | - | - | - | - | - | - | - | - |
| (Acquisition)/Sales of own shares |
- | 59,510 | - | - | - | - | - | 59,510 |
| Other changes | - | - | - | - | - | - | - | - |
| Balance as at 31 December 2015 | 250,000,000 | (1,426,791) | 9,463,225 309,676,446 | - | 319,139,671 | 12,198,782 579,911,662 | ||
| Balance as at 1 January 2016 | 250,000,000 | (1,426,791) | 9,463,225 309,676,446 | - | 319,139,671 | 12,198,782 579,911,662 | ||
| Total individual comprehensive income for the period |
- | - | - | - | - | - | 8,738,316 | 8,738,316 |
| Appropriation of profit of 2015: | - | - | - | - | - | - | - | - |
| Transfer to legal reserves and retained earnings |
- | - | 609,939 | - | 11,588,843 | 12,198,782 | (12,198,782) | - |
| Dividends paid | - | - | - | (3,080,184) | (11,588,843) (14,669,027) | - (14,669,027) | ||
| (Acquisition)/Sales of own shares |
- | 22,565 | - | 218,832 | - | 218,832 | - | 241,397 |
| Other changes | - | - | - | - | - | - | - | - |
| Balance as at 31 December 2016 | 250,000,000 (1,404,226) | 10,073,164 306,815,095 | - 316,888,259 | 8,738,316 574,222,348 |
The accompanying notes are part of these financial statements.
| Amounts expressed in euro | Notes | 31/12/2016 | 31/12/2015 | 4º Quarter 2016 (Unaudited) |
4º Quarter 2015 (Unaudited) |
|---|---|---|---|---|---|
| OPERATING ACTIVITIES | |||||
| Cash receipts from trade debtors | 9,512 | - | - | ||
| Cash receipts from trade creditors | 1,044,697 | 983,732 | 249,189 | 212,714 | |
| Cash paid to employees | 942,598 | 1,305,748 | 252,656 | 191,440 | |
| Cash flow generated by operations | (1,977,783) | (2,289,480) | (501,845) | (404,154) | |
| Income taxes (paid) / received | 740,365 | (4,125,927) | 477,926 | (682,696) | |
| Other cash receipts and (payments) relating to operating activities |
(257,554) | (28,416) | (381,603) | 164,161 | |
| Net cash from operating activities (1) | (2,975,702) | 1,808,031 | (1,361,374) | 442,703 | |
| INVESTMENT ACTIVITIES | |||||
| Cash receipts arising from: | |||||
| Investments | 22 | 2,484 | 395,129,800 | - | 556,235 |
| Tangible assets | 5,000 | - | - | - | |
| Interest and similar income | 26,321,767 | 18,809,354 | 1,313,562 | 2,603,725 | |
| Dividends | 16 | 34,791,098 | 22,184,180 | - | - |
| Others | 17 | 2,745,546 | 1,019,649 | 1,967,613 | 1,019,649 |
| Loans granted | 5,6,11,12 | 61,586,657 | 402,834,502 | 61,586,657 | 402,240,063 |
| 125,452,552 | 839,977,485 | 64,867,832 | 406,419,672 | ||
| Cash Payments arising from: | |||||
| Investments | 22 | 1,107,100 | 3,137 | - | |
| Tangible assets | 1,706 | 11,003 | 456 | - | |
| Loans granted | 5,6,11,12 | 19,455,015 | 406,099,000 | 18,083,987 | 59,444,351 |
| 20,563,821 | 406,110,003 | 18,087,580 | 59,444,350 | ||
| Net cash used in investment activities (2) | 104,888,731 | 433,867,482 | 46,780,252 | 346,975,321 | |
| FINANCING ACTIVITIES: | |||||
| Cash receipts arising from: | |||||
| Sale of own shares | 144,043 | 72,435 | - | - | |
| Loans obtained | 5,6,11,12 | 93,850,000 | 16,100,000 | - | 7,000,000 |
| 93,994,043 | 16,172,435 | - | 7,000,000 | ||
| Cash Payments arising from: | |||||
| Interest and similar charges | 6,344,933 | 9,897,304 | 1,340,230 | 4,535,714 | |
| Dividends | 14,665,371 | - | - | ||
| Aquisition of own shares | - | 12,925 | - | 12,925 | |
| Loans obtained | 5,6,11,12 | 177,598,565 | 416,487,033 | 58,949,650 | 319,136,279 |
| 198,608,868 | 426,397,262 | 60,289,880 | 323,684,918 | ||
| Net cash used in financing activities (3) | (104,614,825) | (410,224,827) | (60,289,880) | (316,684,918) | |
| Net increase in cash and cash equivalents (4) = (1) + (2) + (3) |
(2,701,796) | 25,450,686 | (14,871,002) | 30,733,106 | |
| Cash and cash equivalents at the beginning of the period |
8 | 30,562,977 | 5,112,291 | 42,732,183 | (170,129) |
| Cash and cash equivalents at the end of the period | 8 | 27,861,181 | 30,562,977 | 27,861,181 | 30,562,977 |
The accompanying notes are part of these financial statements.
(Amounts expressed in euro)
Sonae Capital, SGPS, SA ("the Company" or "Sonae Capital") whose registered office is at Lugar do Espido, Via Norte, Apartado 3053, 4471-907 Maia, Portugal, was set up on 14 December 2007 by public deed, following the demerger from Sonae, SGPS, SA of the whole of the shareholding in the company formerly named Sonae Capital, SGPS, SA, now named SC, SGPS, SA, in compliance with paragraph a) of article 118 of the Commercial Companies Code.
The Company's financial statements are presented as required by the Commercial Companies Code. According to Decree-Law 158/2009 of 13 July of 2009, the Company's financial statements have been prepared in accordance with International Financial Reporting Standards
The main accounting policies adopted in preparing the accompanying individual financial statements are as follows:
The accompanying individual financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS" – previously named International Accounting Standards – "IAS"), issued by the International Accounting Standards Board ("IASB") and Interpretations issued by the "International Financial Reporting Interpretations Committee" ("IFRIC"), previously named "Standing Interpretations Committee" ("SIC"), beginning on 1 January 2016.
As at the date of the approval of these consolidated financial statements, the following standards have been endorsed by the European Union
| Accounting standards | Effective Date (Started on or after) |
|---|---|
| IAS 1 – Presentation of financial statements | January 1, 2016 |
| IAS 16 and IAS 38 – Calculation methods of depreciation and amortization |
January 1, 2016 |
| IAS 16 and IAS 41 – Agriculture: Bearer plants | January 1, 2016 |
| IAS 19 – Employee benefits | February 1, 2015 |
| IAS 27 – Separate financial statements | January 1, 2016 |
| Amendments to IFRS 10, 12 and IAS 28: Investments in associates and joint ventures – Application of the consolidation exception |
January 1, 2016 |
| IFRS 11 – Joint arrangements | January 1, 2016 |
| Annual amendments to International Financial Reporting Standards – 2010 - 2012 | February 1, 2015 |
| Annual amendments to International Financial Reporting Standards – 2012 - 2014 | January 1, 2016 |
| Accounting standards | Effective Date (Started on or after) |
|---|---|
| IFRS 9 – Financial instruments | January 1, 2018 |
| IFRS 15 – Revenue from contracts with customers | January 1, 2018 |
| Accounting standards | Effective Date (Started on or after) |
|---|---|
| IAS 7 – Statement of Cash Flows | January 1, 2017 |
| IAS 12 – Income taxes | January 1, 2017 |
| IAS 40 – Investment property | January 1, 2018 |
| IFRS 2 – Share-based payment | February 1, 2018 |
| IFRS 4 – Insurance contracts (amendments regarding the interaction of IFRS 4 and 9) | January 1, 2018 |
| Amendments to IFRS 15 - Revenue from contracts with customers | January 1, 2018 |
| IFRS 16 – Leases | January 1, 2019 |
| Annual amendments to International Financial Reporting Standards – 2014 – 2016 | January 1, 2017 and 2018 |
| IFRIC 22 – Foreign currency transactions and advance consideration | January 1, 2016 |
There will be no material impacts on future financial statements of the Group from adopting these standards.
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, which are stated at fair value (Note 2.4).
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 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 the lower of fair value and present value of minimum lease payments up to the end of the lease. 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.
Tangible fixed assets acquired through finance leases are depreciated by the lower of the two criteria - useful life of the asset or the period of the lease (when the Group has no option to purchase at the end of the lease), or estimated useful life (when the Group Intends to acquire the assets at the end of the contract).
Lease payments under operating lease contracts are recognised as an expense on a straight line basis over the lease term.
Where the Group acts as a lessor in operating leases, the value of assets leased is maintained in the Group's balance sheet and related rents (net of any incentives granted to the lessee) are taken to the profit and loss account on a straight line basis over the period of the lease.
Financial charges connected with loans contracted are generally recognised as a cost in accordance with the accruals principle, using for this purpose the effective interest rate method.
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 Company 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 investments. Available-for-sale investments are classified as noncurrent assets.
Investments measured at fair value through profit and loss include investments held for negotiation, which the company acquires with a view to disposal within a reasonable period of time and are classified in the balance sheet as current investments.
The Company classifies as available for sale investments those, which are not classified as investments measured at fair value through profit and loss nor as investments held to maturity. These investments are classified as non current assets, unless there is an intention to dispose of them within 12 months of the balance sheet date.
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, in the case of available for sale investments.
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 and 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 its fair value is lower than its carrying amount and that corresponds to an impairment loss, at which time the cumulative gain or loss previously recognised in equity is transferred to net profit or loss for the period.
Gains and losses resulting from changes to the fair value of derivatives valued at fair value are shown in the financial statements in the caption net financial charges/ income.
Held to maturity investments are carried at amortised cost using the effective interest rate, net of capital reimbursements and interest income received.
In accordance with IAS 27, investments in affiliated and associated undertakings are stated at acquisition cost, less impairment losses.
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 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 2.5. 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 only to hedge such risks, and/or to optimize funding costs, in accordance with the interest rate risk policy stated in Note 3.1.
The derivatives used by the Company defined as cash-flow hedge instruments relate mainly to interest rate hedge instruments on loans contracted. The indices, calculation methods, dates for re-fixing interest rates and the reimbursement plans for the interest rate hedge instruments are all identical to the conditions established for the underlying contracted loans, and thus qualify as perfect hedges. Inefficiencies that may exist are shown in the caption Net financial income/expenses in the income statement.
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 rates of its loans are initially accounted for at cost, if any, 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 reserves, 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.
In cases in which derivative instruments, in spite of having been negotiated in accordance with the interest rate risk policy stated in Note 3.1, in relation to which the Company did not apply hedge accounting, are initially recorded at cost, if any, and subsequently measured at fair value. Changes in value resulting from the measurement at fair value, calculated using especially designed software tools, are included in Net financial charges in the income statement.
When embedded derivatives exist, they are accounted for as separate derivatives when the risks and characteristics are not closely related to economic risks and characteristics of the host contract, and this is not stated at fair value, and unrealized gains or losses arising from these derivatives recorded in the income statement.
In specific situations, the Company may use interest rate derivatives with the goal of obtaining fair value hedging. In these situations, derivatives are booked at their fair value in the profit and loss account. In situations in which the derivative involved is not measured at fair value (in particular borrowings measured at amortised cost), the effective share of hedging will be adjusted to the accounting value of the derivative hedged through the profit and loss account.
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 cash-flow statement, cash and cash equivalents also include bank overdrafts, which are included in the balance sheet caption current bank loans
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.
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 were based on the best information available at the date of the preparation of the financial statements and on the best knowledge and experience of past and/ or current events. These estimates may, however, be affected by subsequent events which are not foreseeable at the present day. Changes to these estimates, which take place after the date of the financial statements, will be recognized prospectively in the income statement, in accordance with IAS 8.
The main estimates and assumptions concerning future events included in the financial statements are described in the corresponding notes to the accounts, when applicable.
Provisions are recognised when, and only when, the Group 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.
Provisions for future operating losses are not recognized.
Restructuring provisions are recorded by the Group whenever a formal and detailed restructuring plan exists and that plan has been communicated to the parties involved.
The subjectivity inherent in determining the probability and amount of domestic resources required to pay the obligations may lead to significant adjustments, either by varying the assumptions used or by the future recognition of provisions previously disclosed as contingent liabilities.
Current income tax is determined in accordance with tax rules in force in Portugal, considering the profit for the period.
The Company is subject to a special fiscal regime applicable to Group companies, according article 69 and next of the IRC code (RETGS), being part of a fiscal perimeter whose mother company is Sonae Capital SGPS, SA. Companies being part of the perimeter of the Group of companies subject to this regime calculate and account for Tax Income as on a stand-alone basis. The tax savings attributed to the RETGS is accounted for at the mother company.
Deferred taxes are calculated using the balance sheet liability method. Deferred tax assets are recognised only when their use is probable.
The main objective of financial risk management is to support the Company in the pursuit of long-term strategy of Sonae Capital, reducing unwanted financial risk, volatility associated and mitigate any negative impacts on the Group's results of such risks. The attitude of Sonae Capital in relation to financial risk management is conservative and prudent, and when used derivative instruments to hedge certain risks related to operating activities of Sonae Capital, does not contract, by policy, derivatives or other financial instruments for speculative purposes or they are not related to the Company's operations.
As a result of maintaining its debt in the consolidated balance sheet at variable rates, and the resulting cash flows from interest payments, the Group is exposed to a Euro interest rate risk.
In view of the fact that:
In view of the above, the Group policy concerning this issue defines a case by case review of each potential transaction, such that any contract for derivatives must follow the following principles:
Interest rate sensitivity is based on the following assumptions:
Given the above mentioned assumptions, if interest rates of financial instruments denominated in euro had been 0.75 percentage points higher/lower, the consolidated net profit before tax of the Group as at 31 December 2016 would have been higher/ lower by 2,408,506 euro (as at 31 December 2015 they would have been higher/lower by 2,008,425 euro).
Sonae Capital is not exposed to an exchange risk.
The Company is exposed to risks arising from the value of investments made in financial shareholdings. However, these investments are in general made with strategic objectives in mind and not for current trading.
Credit risk is defined as the probability of a financial loss resulting from failure to meet contractual payment obligations of a counterparty. Sonae is a holding company and has no commercial activity in addition to the normal activities of a portfolio manager participation and providing services to its subsidiaries. As such a regular basis, the Company is only exposed to credit risk arising from financial instruments (investments and deposits in banks and other financial institutions or resulting from derivative financial instruments entered into in the normal course of its hedging activities) or loans to subsidiaries.
Credit risks at Sonae Capital arises mainly from (i) its relationships with financial institutions in the course of its day to day business activity, and (ii) the risk of non compliance by business counterparts in portfolio transactions.
(i) Financial Institutions: The credit risk is linked to possible non compliance by Financial Institutions, from which the Company, in its normal operational activity, contracted term deposits, cash balances and derivatives.
To mitigate this risk, the Company:
The ratings (S & P rating, except in the case of Montepio Geral - Fitch) of the main institutions of credit where Sonae Capital had deposits and other investments at 31 December 2016 can be detailed as follows:
| Rating | Deposits % |
|---|---|
| B+ | 100,00% |
The ratings (S & P rating, except in the case of Montepio Geral - Fitch) of the main institutions of credit where Sonae Capital had deposits and other investments at 31 December 2016 can be detailed as follows:
(ii) Shareholding Buy/Sale transactions: In the course of its business, the Company is exposed to the credit risk of counterparts with whom it agrees transactions concerning investments in shareholdings. In these cases, the means used to mitigate risks are determined on a one on one basis, in order to take into account the specifics of the transaction, with the constant supervision of the Board of Directors. Despite the wide range of means used, there exists always the possibility of using normal market methods, namely carrying out due diligence, obtaining financial information concerning the counterpart in question, or the pledging of an asset which is released when the financial transaction has been completed.
In view of the above, as well as the fact that the balances receivable are mainly from group companies, credit risk appears to be very low.
Sonae Capital has a regular need for external funds to finance its current operations and its expansion plans holding a diversified loan portfolio, which consists mainly of long-term bonds, but also includes a variety of short-term financing transactions, in the form of commercial paper and credit lines.
The objective of liquidity risk management is to ensure at any given moment that the Company has the financial capability under favourable market conditions to: (i) comply with its payment obligations when these fall due and (ii) ensure in a timely manner the appropriate financing for the development of its businesses and strategy.
To that end, the Company aims at maintaining a flexible financial structure, so that the process of managing liquidity within the Company includes the following key aspects:
Sonae Capital maintains a liquidity reserve in the form of credit lines with its relationship banks, in order to ensure the ability to meet its commitments without having to refinance in unfavourable conditions. Additionally at the end of the year Sonae Capital had a liquidity reserve consisting of cash and cash equivalent.
Sonae Capital believes that it has access to all the necessary financial resources and expects thus meet its short-term commitments, whether through release of funds generated by the business, whether using their financial applications, or if necessary by the existing credit lines or contracting new financing.
Although the Working Capital Fund is negative, liquidity risk is low since the main receivables payable are with group companies, so the payment obligation will be adequate to the availability of Sonae Capital.
As at 31 December 2016 and 31 December 2015 Investments are detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Investments in affiliated and associated undertakings | 361,971,915 | 360,864,815 |
| Investments in other companies | ||
| Sonae RE - (0,04%) | 1,200 | 1,200 |
| Fundo Invest. Imob. Imosonae Dois - (0,001%) | - | 2,546 |
| Matadouro Alto Alentejo, SA - (0,89%) | 1 | 1 |
| NET Novas Tecnologias, SA - (0,98%) | 23,034 | 23,034 |
| Fundo F HITEC - (6,48%) | 250,950 | 250,950 |
| 362,247,100 | 361,142,546 | |
| Impairment | (53,667,004) | (8,353,441) |
| 308,580,096 | 352,789,105 |
As at 31 December 2016 and 31 December 2015, the detail of Investments in Affiliated and Associated Companies is as shown in the table below
| 31.12.2016 | ||||||
|---|---|---|---|---|---|---|
| Company | % Held | Fair Value | Book Value | Fair Value Reserve |
Equity | Profit / (Loss) for the period |
| CAPWATT, S.G.P.S., S.A. | 100,00% | 2,725,000 | 8,022,003 | 5,294,092 | ||
| Fundo Esp de Invest. Imob Fechado WTC | 59,87% | 42,271,519 | 71,389,116 | 3,137,593 | ||
| Troiaresort, SGPS, S.A. | 100,00% | 167,132,793 | 79,543,780 | (2,001,159) | ||
| Interlog - SGPS, S.A. | 98,94% | 21,658,210 | 21,852,988 | 30,161 | ||
| Lidergraf - Artes Gráficas, SA. | 24,50% | 1,125,301 | 7,558,348 | 1,233,982 | ||
| SC Assets S.G.P.S., SA | 100,00% | 25,577,659 | 27,432,273 | 10,133,800 | ||
| SC Hospitality, S.G.P.S., S.A. | 100,00% | 5,857,175 | 6,746,620 | 305,336 | ||
| SC Finance B.V. | 100,00% | 263,698 | (10,836,784) | (964,510) | ||
| SC-Eng. e Promoção imobiliária, S.G.P.S., S.A. | 100,00% | 34,575,100 | 13,873,988 | 12,673,988 | ||
| Sistavac, SGPS, S.A. | 70,00% | 32,492,436 | 40,650,733 | (239,599) | ||
| Solinca - Health & Fitness, S.A. | 100,00% | 14,446,494 | 975,503 | (244,941) | ||
| Spred, S.G.P.S., S.A. | 100,00% | 13,846,529 | 227,094 | 84,120 | ||
| Total | 361,971,915 | |||||
| Impairment | ||||||
| SC Assets S.G.P.S., SA | 21,565,892 | |||||
| Interlog - SGPS,S.A. | 36,864 | |||||
| Troiaresort, SGPS, S.A. | 19,344,286 |
Spred, S.G.P.S., S.A. 12,719,962 Total 53,667,004
| 31.12.2015 | ||||||
|---|---|---|---|---|---|---|
| Company | % Held | Fair Value |
Book Value | Fair Value Reserve |
Equity | Profit / (Loss) for the period |
| CAPWATT, S.G.P.S., S.A. | 100,00% | 2,725,000 | 2,727,911 | 22,523 | ||
| Fundo Esp de Invest. Imob Fechado WTC | 59,57% | 42,057,274 | 71,930,258 | 2,803,517 | ||
| Troiaresort, SGPS, S.A. | 100,00% | 167,132,793 | 81,544,939 | (1,267,436) | ||
| Interlog - SGPS, S.A. | 98,94% | 21,658,210 | 21,822,827 | 69,173 | ||
| Lidergraf - Artes Gráficas, SA. | 24,50% | 1,125,301 | 5,657,875 | 920,936 | ||
| SC Assets S.G.P.S., SA | 100,00% | 25,577,659 | 17,298,473 (2,965,535) | |||
| SC Hospitality, S.G.P.S., S.A. | 100,00% | 5,857,175 | 6,441,284 (8,964,192) | |||
| SC Finance B.V. | 100,00% | 263,698 | (9,872,274) (10,166,776) | |||
| SC-Eng. e Promoção imobiliária, S.G.P.S., S.A. | 100,00% | 34,575,100 | 28,471,076 | 1,353,511 | ||
| Sistavac, SGPS, S.A. | 70,00% | 32,492,436 | 41,890,333 | 742,129 | ||
| Solinca - Health & Fitness, S.A. | 100,00% | 13,553,639 | 327,590 | (892,854) | ||
| Spred, S.G.P.S., S.A. | 100,00% | 13,846,529 | 6,887,774 | (1,923,514) | ||
| Total | 360,864,815 | |||||
| Impairment | ||||||
| SC Assets S.G.P.S., SA | 3,469,412 | |||||
| Spred, S.G.P.S., S.A. | 4,884,029 | |||||
| Total | 8,353,441 |
Investments carried at cost correspond to those in unlisted companies and for which a fair value cannot be reliably estimated.
Impairment tests on financial investments were performed, based on external valuations of the real estate of group companies or DCF methodology, to assess the fair value of such investments.
These assessments use discount rates that correspond to the weighted average rates of the cost of capital (WACC), calculated on the basis of the business type in which they operate and s target capital structures, and are in the range [7.9% - 8.6%]. 5 years projections were considered and growth rates in perpetuity were considered void.
As a result of this impairment tests as at 31 December 2016 and 31 December 2015, the detail of Impairments on Investments in Affiliated and Associated Companies is as shown in the table below.
| 31 December 2016 | 31 December 2015 | Variation (Note 17) | |
|---|---|---|---|
| Spred, SGPS, SA | (12,719,962) | (4,884,029) | (7,835,933) |
| Interlog - SGPS,S.A. | (36,864) | - | (36,864) |
| Troiaresort, SGPS, S.A. | (19,344,286) | - | (19,344,286) |
| SC Assets, SGPS, SA | (21,565,892) | (3,469,412) | (18,096,480) |
| (53,667,004) | (8,353,441) | (45,313,563) |
As at 31 December 2016 and 2015, other non-current assets are detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Loans granted to group companies: | (Nota 21) | (Nota 21) |
| SC Assets, SGPS, SA | 177,691,228 | 181,059,991 |
| Troiaresort, S.G.P.S., SA | 135,742,637 | 186,861,637 |
| SC Finance BV | 5,885,000 | 5,885,000 |
| Solinca - Health & Fitness, SA | 2,940,222 | 2,995,000 |
| SC Hospitality SGPS SA | 9,971,000 | - |
| SC Engª. Promoção Imobiliária, SA | 688,000 | - |
| 332,918,086 | 376,801,628 |
As at 31 December 2016, loans granted matured as follows:
| 3 years | 4 years | 5 years | Total |
|---|---|---|---|
| 109,435,086 | 206,093,000 | 17,390,000 | 332,918,086 |
These assets were not due or impaired as at 31 December 2016. The fair value of loans granted to Group companies is basically the same as their book value.
Loans to group companies interest at market rates and are repayable within a period exceeding one year. The interest rate as at 31 December 2016 stood, in average, at approximately 4.677%.
As at 31 December 2016 and 2015, other current assets and Income tax are made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Trade debtors | - | 9,512 |
| Other Debtors – Group (Note 21) | 1,417,349 | 1,097,451 |
| Loans granted | 33,034,900 | 31,283,000 |
| Other Debtors | 55,192 | 28,188 |
| Accrued income | 8,608,007 | 16,240,101 |
| Deferred costs | 383,062 | 486,827 |
| 43,498,510 | 49,145,079 | |
| Income tax withheld | 2,163,794 | 1,525,643 |
| 45,662,304 | 50,670,722 |
The balance registered at Shareholding, other Operations is related to the values transferred from subsidiaries under the IRC regime (RETGS).
As at 31 December 2016 and 2015, the item Loans Granted is related to financial operations with the following subsidiaries:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Loans to group companies | (Nota 21) | (Nota 21) |
| SC Assets, SGPS, SA | 59,000 | 10,000 |
| SC Sociedade de Consultadoria, SA | - | 5,000 |
| SC Hospitality, SGPS, SA | - | 5,341,000 |
| CAPWATT, SGPS, S.A. | 13,225,200 | 16,711,000 |
| Inparvi SGPS, SA | 68,000 | 108,000 |
| SC Finance BV | - | 5,748,000 |
| SC, SGPS, S.A. | 13,943,600 | - |
| Solinca - Health & Fitness, SA | 703,400 | 1,147,000 |
| Spred SGPS SA | 2,523,500 | - |
| Troiaresort, S.G.P.S., SA | 2,512,200 | 2,213,000 |
| 33,034,900 | 31,283,000 |
Loans to group companies interest at market rates and are repayable within a period inferior to one year. The interest rate as at 31 December 2016 stood, in average, at approximately 3.130%.
The item Other Debtors includes as at 31 December 2016 the amount 46,211 euro with the company SC SGPS, SA concerning the payment of stamp duty (Note 21).
The amount recorded in the accrued income includes 8,497,878 euro relating to interest on loans granted to subsidiaries as well as 110,128 euro relating to commissions of guarantees given to subsidiaries (Note 21).
Deferred costs include 347,040 euro relating to bank charges, which are deferred over the loan period.
Under current legislation, tax returns are subject to review and correction by the tax authorities for a period of four years (five years for Social Security), except if there have been tax losses or tax benefits, or ongoing tax inspections or claims. In these cases, and depending on the circumstances, the time limits are extended or suspended. In this way the Company tax return, from the years 2013 to 2016, could still be subject to review. However, in the opinion of the Company's Board of Directors, it is not expected that any correction relating to the said financial years will be significant for the consolidated financial statements as at 31 December 2016.
As mentioned in 2.9 note the Company is subject to the special regime for the taxation of groups of companies (RETGS) provided for in Article 69 and following of the IRC Code, integrating the taxation group, which is the mother company.
In the fiscal year 2016, the Company is subject to taxation on Corporate Income Tax at the normal rate of 21%, plus municipal taxes at a maximum rate of 1.5%.
In addition, on the part of the taxable profit of more than 1,500,000 euros subject to and not exempt from Corporate Income Tax, the following state levy fees are levied: 3% over 1,500,000 euros and less than 7,500,000 euros; 5% on the upper part to 7,500,000 euros and up to 35,000,000 euros; and 7% that is levied on the part of the taxable income that exceeds 35,000,000 euros.
Under the terms of Article 88 of the Portuguese Income Tax Code, the company is also subject to autonomous taxation on a set of charges at the rates provided for in the mentioned article.
The Corporate income tax rate in force for 2017 is 21%.
As at 31 December 2016 and 2015, the item Income tax is made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Income tax withheld | 1,325,486 | 576,441 |
| Income tax (advanced payment) | 1,374,287 | 1,570,680 |
| Income tax | (535,979) | (621,478) |
| 2,163,794 | 1,525,643 |
Deferred tax assets and liabilities as at 31 December 2016 and 2015 can be detailed as follows, split between the different types of temporary differences:
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 31 December 2016 |
31 December 2015 |
30 Setembro 2016 |
31 December 2015 |
|
| Tax losses carried forward | 14,314,699 | 8,275,218 | - | - |
In accordance with the tax statements presented by companies that recorded deferred tax assets arising from tax losses carried forward, as at 31 December 2016 and 2015, tax losses carried forward can be summarized as follows:
| 31 December 2016 | 31 December 2015 | |||||
|---|---|---|---|---|---|---|
| Prejuízo fiscal |
Deferred tax assets |
To be used until |
Prejuízo fiscal |
Deferred tax assets |
To be used until |
|
| Generated in 2013 | 61,175 | 12,847 | 2018 | 61,175 | 12,847 | 2018 |
| Generated in 2014 | 13,536,168 | 2,842,595 | 2026 | 11,725,573 | 2,462,371 | 2026 |
| Generated in 2015 | 47,663,128 | 10,009,257 | 2028 | 27,619,048 | 5,800,000 | 2028 |
| Generated in 2016 | 6,904,762 | 1,450,000 | 2029 | - | - | |
| 68,165,233 | 14,314,699 | 39,405,796 | 8,275,218 |
The constitution of deferred tax assets was based on the analysis of the relevance of its recognition, notably as regards the possibility of their recovered, given the prospects for medium and long term of the company.
The deferred tax assets recognized resulting from fiscal losses are recorded to the extent that it is probable that taxable profit will occur in the future.
The valuation of deferred tax assets is based on the business plans of the Group companies, periodically reviewed and updated.
Since fiscal year 2014, most of the Group's subsidiaries, based in Portugal, are part of the perimeter of the taxed Corporate Group in accordance with the Special Taxation Regime for Company Groups (RETGS), whose parent company is the Sonae Capital, SGPS, SA. Gains generated by the application of this tax regime are allocated to Sonae Capital SGPS.
The analysis carried out on 31 December 2016, resulted that there is reasonable expectation of recovery of deferred tax assets recorded before their date of expiry.
As at 31 December 2016 and 2015, cash and cash equivalents can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Cash | - | - |
| Bank deposits | 27,861,181 | 30,562,977 |
| Cash and cash equivalents in the balance sheet | 27,861,181 | 30,562,977 |
| Bank overdrafts | - | - |
| Cash and cash equivalents in the cash flow statement | 27,861,181 | 30,562,977 |
The share capital of Sonae Capital SGPS, SA both in December 2016 and 2015 is represented by 250,000,000 ordinary shares, which do not have the right to a fixed remuneration, with a nominal value of 1 euro each.
As at 31 December 2016, Sonae Capital SGPS, SA holds 5,516,226 own shares representing 2.206% of the share capital (5,914,571 shares at 31 December 2015), recorded by 1,404,226 euros (1,426,791 euros at 31 December 2015) (Note 10).
As at 31 December 2016, and 31 December 2015 the caption Other Reserves can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Free reserves | 172,772,616 | 175,611,402 |
| Demerger reserve | 132,638,253 | 132,638,253 |
| Own shares reserve | 1,404,226 | 1,426,791 |
| 306,815,095 | 309,676,446 |
Free Reserves: These reserves result from the transfer of the positive results obtained in retained exercises and can be distributed to shareholders provided they are not required to cover losses.
The overall value of the demerger reserve (Note 1), representing the difference between the book value of the stake in SC, SGPS, SA (382,638,252 euros) which was highlighted Sonae, SGPS, SA for the Company and the amount of capital social Society (250,000,000 euros) which is comparable to the legal Reserve, according to the Companies Code, may not be distributed to the shareholders except in the event of liquidation of the Company, but may be used to absorb accumulated losses, after other reserves are exhausted, or can be incorporated into capital.
Legal Reserve: Under the law, at least 5% of annual net profit is positive, should be allocated to the legal reserve until it represents 20% of the share capital. This reserve is not distributable except in the event of liquidation of the company, but can be used to absorb losses after the other reserves, or increase capital. On 31 December 2016 the value of this item amounts to 10,073,164 Euros (2015: 9,463,225 Euros).
Reserve own shares: This reserve, established in accordance with article 342 of the CSC, is the same amount of the own shares value held by the company. This reserve is unavailable while the own shares are in possession of the company.
As at 31 December 2016 and 31 December 2015 this caption included the following loans:
| 31 December 2016 | 31 December 2015 | ||
|---|---|---|---|
| Current Non Current |
Current | Non Current | |
| Bank loans | |||
| Sonae Capital SGPS - commercial paper a) |
- - |
8,250,000 | - |
| Sonae Capital SGPS - commercial paper b) |
- - |
- | 30,000,000 |
| Sonae Capital SGPS - commercial paper c) |
- - |
3,250,000 | 1,500,000 |
| Sonae Capital SGPS - commercial paper d) |
- - |
1,200,000 | 4,800,000 |
| Sonae Capital SGPS - commercial paper e) |
- 20,000,000 |
- | - |
| Sonae Capital SGPS f) |
- - |
3,290,000 | 9,047,500 |
| Up-front fees not yet charged to income statement |
- (420,335) |
- | (221,506) |
| - 19,579,665 |
15,990,000 | 45,125,994 | |
| Bank overdrafts (Note 8) | - - |
- | - |
| - 19,579,665 |
15,990,000 | 45,125,994 | |
| Bond Loans | |||
| Sonae Capital 2011/2016 Bonds g) |
- - |
10,000,000 | - |
| Sonae Capital 2016/2021 Bonds h) |
- 15,000,000 |
- | - |
| Sonae Capital 2014/2019 Bonds i) |
- 42,500,000 |
- | 42,500,000 |
| Up-front fees not yet charged to income statement |
- (392,289) |
- | (376,402) |
| - 57,107,711 |
10,000,000 | 42,123,598 | |
| - 76,687,376 |
25,990,000 | 87,249,592 | |
| - 76,687,376 |
25,990,000 | 87,249,592 |
c) Commercial paper programme, with subscription guarantee, issued on 7 May 2014 and valid for a 3 year period, with semi-annual payments.
d) Commercial paper programme, with subscription guarantee, issued on 18 March 2015 and valid up to March 2020, with annual payments.
The interest rate on bank loans and bonds in force on 31 December 2016 was on average 2.88%
Bank loans pay interest rates that are indexed to the Euribor market rates of the period, and its fair value is considered close to its book value.
In case of any Bank institution or commercial paper investor do not renew, at the maturity date, its respective loans, the Group has credit lines available to overcome such renewables
There are no derivative instruments.
The repayment schedule of the nominal value of borrowings may be summarised as follows:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Capital | Interest | Capital | Interest | |
| N+1 | - | (2,119,111) | 25,990,000 | (4,056,941) |
| N+2 | 5,000,000 | (1,970,493) | 35,990,000 | (3,256,774) |
| N+3 | 47,500,000 | (1,149,176) | 4,490,000 | (2,046,106) |
| N+4 | 5,000,000 | (343,125) | 46,167,500 | (1,007,463) |
| N+5 | 20,000,000 | (342,188) | 1,200,000 | (67,513) |
| After N+5 | - | - | - | (109,720) |
| 77,500,000 | (5,924,094) | 113,837,500 | (10,544,518) |
As at 31 December 2016 and 31 December 2015, available credit lines may be summarised as follows:
| 31 December 2016 | 31 December 2015 | |||||
|---|---|---|---|---|---|---|
| Commitments | Commitments | |||||
| less than 1Y | over 1 Y | less than 1Y | over 1 Y | |||
| Amounts of credit lines available | 63,850,000 | 30,000,000 | 53,799,398 | 24,400,000 | ||
| Amounts of credit lines contracted | 63,850,000 | 50,000,000 | 62,049,398 | 54,400,000 |
As at 31 December 2016 and 2015 other creditors can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Other creditors | ||
| Group companies - Short term loans | 75,502,700 | 122,913,765 |
| Other creditors | 1,306,240 | 1,849,732 |
| 76,808,940 | 124,763,497 |
As at 31 December 2016 and 2015 the caption loans granted is relative to financial operations granted to the following subsidiaries:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Group companies - Short term loans: | (Note 21) | (Note 21) |
| Interlog-SGPS,SA | 21,856,000 | 21,836,500 |
| SC Finance BV | - | 5,885,051 |
| SC, SGPS, SA | - | 48,703,000 |
| SC-Eng. e Promoção Imobiliária,SGPS,S.A. | 37,421,000 | 21,292,214 |
| SC For - Serv. de For. e Desenv. de Recur. Hum., Unipe., Lda | 19,700 | 14,000 |
| Sistavac, SGPS, S.A. | 13,074,500 | 21,002,000 |
| SC Hospitality SGPS SA | 3,131,500 | - |
| Spred, SGPS, SA | - | 4,181,000 |
| 75,502,700 | 122,913,765 |
Loans obtained from group companies bear interest at market rates and are repayable within one year. The interest rate as at 31 December 2016 was, in average, approximately 1.549%.
The item Other Creditors - other, there are included 1,289,810 euros (Note 21) regarding transfers from subsidiaries of tax estimates under the special regime RETGS.
As at 31 December 2016 and 2015 these items were as follows:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Current | Non Current | Current | Non Current | |
| Trade creditors | 92,536 | - | 101,559 | - |
| Taxes payable - income tax | - | - | - | - |
| Taxes payable - other taxes | 70,975 | - | 58,272 | - |
| Other current liabilities | ||||
| Accruals: | ||||
| Staff costs | 664,870 | 360,486 | 378,224 | 107,760 |
| Interest payable | 379,457 | - | 449,038 | - |
| Other accruals | 73,119 | - | 115,543 | - |
| Deferred income | 4,919 | - | 4,292 | - |
| 1,193,340 | 360,486 | 1,005,369 | 107,760 |
As at 31 December 2016 and 2015 interest payable can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Interest payable | ||
| Bank Loans | 371,182 | 428,359 |
| Group companies - Short term loans (Note 21) | 8,275 | 20,679 |
| 379,457 | 449,038 |
As at 31 December 2016 and 2015 the Income tax and Other taxes can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Income taxation | ||
| Income taxation - amounts withheld | 42,921 | 39,568 |
| VAT | 55 | 462 |
| Social security contributions | 27,998 | 18,242 |
| Stamp tax | - | - |
| 70,975 | 58,272 |
As at 31 December 2016 and 2015 External Supplies and services can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Operational rents | (24,229) | (17,418) |
| Insurance costs | (41,141) | (50,218) |
| Travelling expenses | (35,773) | (26,709) |
| Services obtained | (877,016) | (922,527) |
| Other services | (40,894) | (21,614) |
| (1,019,054) | (1 038,486) |
In services obtained, stands out the amounts in heading fee of shared services, of 261,944 euros (2015: 246,964 euros) and heading Holding cost with the amount of 432,840 euros (2015: 391,576 euros), invoiced by subsidiary SC Consultancy Company, SA (Note 21).
As at 31 December 2016 and 2015, the Group had operational lease contracts, as a lessor, whose minimum lease payments (fixed income) had the following payment schedule:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| N+1 | 17,605 | 10,937 |
| N+2 | - | 10,937 |
| N+3 | - | - |
| 17,605 | 21,874 |
As at 31 December 2016 and 2015, staff costs were made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Governing bodies' remunerations | (1,234,273) | (1,125,602) |
| Staff and other sectors remunerations | (168,227) | - |
| Social security contributions | (173,514) | (122,708) |
| Other staff costs | (24,070) | (36,407) |
| (1,600,084) | (1,284,716) |
In 2016 the average number of employees was 1 (one) (2015:0 zero).
As at 31 December 2016 and 31 December 2015, Net Financial Expenses and Investment Income can be detailed as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Interest payable and similar expenses | ||
| Interest arising from: | ||
| Bank loans | (1,776,799) | (2,783,730) |
| Bonds | (1,845,854) | (2,221,283) |
| Other | (162,237) | (2,437,766) |
| Other financial expenses | (2,267,348) | (2,515,261) |
| (6,052,239) | (9,958,040) | |
| Interest receivable and similar income | ||
| Interest income | 18,597,345 | 29,087,119 |
| 18,597,345 | 29,087,119 | |
| Net financial expenses | 12,545,107 | 19,129,079 |
| Reversal of /and Impairment losses (Note 4.1) | (45,313,563) | 52,299,706 |
| Dividends received | 34,791,098 | 22,184,180 |
| Losses on finantial investments | (444) | (85,826,563) |
| Other income | 2,745,929 | 1,020,507 |
| Investment income | (7,776,980) | (10,322,170) |
As at 31 December 2016, the amount mentioned in "Interest arising from other" includes interest on current loans obtained from group companies amounting to 162,220 euros (2015: 2,437,766 euros) (Note 21).
As at 31 December 2016, the amount mentioned in "interest receivable and similar income" includes interest on loans granted to group companies amounting to 18,587,414 euros (Note 21).
As at 31 December 2016, the amount mentioned in "Other financial expenses" refers to commissions incurred with the assembly and management of bank loans and bonds.
As at 31 December 2016, the amount of dividends received from affiliated companies was as follows (Note 21):
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Lidergraf, SA | 75,222 | 56,152 |
| SC EPI SGPS, SA | 27,271,077 | - |
| Sistavac SGPS, SA | 700,000 | - |
| Spred SGPS | 6,744,800 | 22,128,028 |
| 34,791,098 | 22,184,180 |
As at 31 December 2016, the amount recorded under "Other income" relates essentially to income obtained from the WTC Fund.
As at 31 December 2015, the amount registered as losses on financial investments is related to the capital loss driven by the reductions in share capital of the following subsidiaries:
| 85,826,562 | ||
|---|---|---|
| Spred SGPS, SA | 35,769,387 | |
| SC HOSPITALITY SGPS SA | 50,057,175 |
As at 31 December 2016 and 2015 these items were as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Operational profit | ||
| Other supplementary income - guarantees commissions (Note 21) |
111,106 | 17,974 |
| Others | 8,892 | 9,831 |
| 119,998 | 27,805 | |
| Operational expenses | ||
| Indirect taxes | 68,272 | 102,023 |
| Others | 200 | 4,599 |
| 68,472 | 106,621 |
As at 31 December 2016 and 2015, Taxation was made up as follows:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Current tax (Note 6) | 499,905 | 1,590,3361 |
| Deferred tax (Note 7) | 6,039,482 | 4,205,490 |
| 6,539,387 | 5,795,826 |
The reconciliation between profit before income tax and taxation for the periods ended 31 December 2016 and 31 December 2015 is made up as follows:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Basis of incidence | Tax amount | Basis of incidence | Tax amount | |
| Profit before income tax (1) | 2,198,929 | 6,402,956 | ||
| Tax Charge | 21% | 21% | ||
| Tax Charged | (461,775) | (1,344,621) | ||
| Increases or (decreases) in taxable profit: | ||||
| Reversal of Impairment losses (Note 17) | - | - | (79,496,316) | 16,694,226 |
| Dividends received (Note 17) | (34,791,098) | 7,306,131 | (22,184,180) | 4,658,678 |
| Payment based on shares | 242,478 | (50,920) | 421,251 | (88,463) |
| Impairment losses (Note 17) | 45,313,563 | (9,515,848) | 27,196,610 | (5,711,288) |
| Losses on finantial investments (Note 17) | - | - | 81,204,211 | (17,052,884) |
| Others | (6,203) | 1,303 | - | - |
| Deduction of tax losses | (61,175) | 12,847 | (1,226,264) | 257,515 |
| Tax losses that did not give rise to deferred tax assets |
- | - | - | - |
| tax savings (RETGS) | 4,984,893 | 4,785,224 | ||
| Municipality and state tax | (569,502) | (604,127) | ||
| Autonomous taxes | (3,508) | (3,924) | ||
| Under/Over taxation estimates | (1,203,713) | - | ||
| Effect of increases or decreases in deferred taxes (a) |
6,039,482 | 4,205,490 | ||
| Taxation (2) | 12,896,494 | 6,539,387 | 12,318,268 | 5,795,826 |
| Effective rate (2) / (1) | - | - |
a) Includes deferred taxes related to tax losses generated in 2016 in the amount of 1,450,000 euros.
As stated in Note 2.9, the Company is taxable according to the RETGS.
Earnings per share for the periods ended 31 December 2016 and 2015 were calculated taking into consideration the following amounts:
| 31 December 2016 | 31 December 2015 | |
|---|---|---|
| Net profit | ||
| Net profit taken into consideration to calculate basic earnings per share (Net profit for the period ) |
8,738,316 | 12,198,782 |
| Effect of dilutive potential shares | - | - |
| Net profit taken into consideration to calculate diluted earnings per share |
8,738,316 | 12,198,782 |
| Number of shares | ||
| Weighted average number of shares used to calculate basic earnings per share |
246,740,156 | 246,341,811 |
| Weighted average number of shares used to calculate diluted earnings per share |
246,740,156 | 246,341,811 |
| Earnings per share (basic and diluted) | 0,035415 | 0,049520 |
Balances and transactions during the periods ended 31 December 2016 and 2015 with related parties are detailed as follows:
| Expenses (Notes 14 and 17) |
(Notes 17 and 18) | Income | ||
|---|---|---|---|---|
| Transactions | 31 December 2016 | 31 December 2015 | 31 December 2016 | 31 December 2015 |
| Parent company | - | - | - | - |
| Group and associated companies | 881,021 | 88,926,067 | 53,489,618 | 51,282,755 |
| 881,021 | 88,926,067 | 53,489,618 | 51,282,755 | |
| Accounts payable (Notes 12,13 and 18) |
Accounts receivable (Note 6) |
|||
| Balances | 31 December 2016 | 31 December 2015 | 31 December 2016 | 31 December 2015 |
| Parent company | - | - | - | - |
| Group and associated companies | 1,298,085 | 1,937,997 | 10,071,566 | 17,340,213 |
| 1,298,085 | 1,937,997 | 10,071,566 | 17,340,213 | |
| Loans obtained (Note 12) |
Loans granted (Notes 5 and 6) |
|||
| Balances | 31 December 2016 | 31 December 2015 | 31 December 2016 | 31 December 2015 |
| Parent company | - | - | - | - |
| Group and associated companies | 75,502,700 | 122,913,765 | 365,952,986 | 408,084,628 |
| 75,502,700 | 122,913,765 | 365,952,986 | 408,084,628 |
In 2015, the expenses include 85.826.563 euro with financial investments (Note 17).
In 2016, the income include dividends received from group companies in the amount of 34,791,098 euro (2015: 22.184.180 euro).
Cash receipts and payments related to investments during the periods ended 31 December 2016 and 2015 are detailed as follows:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Amount received | Amount paid | Amount received | Amount paid | |
| Fundo Esp de Invest. Imob IMOSONAE II |
2,484 | - | 858 | - |
| Fundo Esp de Invest. Imob WTC | - | 214,246 | - | - |
| Saude Atlantica - Gestão Hospitalar, SA |
- | - | 768,969 | - |
| SC, S.G.P.S., S.A. | - | - | 346,559,973 | - |
| Solinca - Health & Fitness, S.A. | - | 892,854 | - | - |
| SC HOSPITALITY SGPS SA | - | - | 37,800,000 | - |
| Spred, S.G.P.S., S.A. | - | - | 10,000,000 | - |
| 2,484 | 1,107,100 | 395,129,800 | - |
Art 5 nr 4 of Decree-Law nr 495/88 of 30 December changed by art 1 of Decree-Law nr 318/94 of 24 December.
In the period ended 31 December 2016 shareholders' loan contracts were entered into with the companies SC Engenharia Promoção Imobiliária, SGPS, SA, SC Hospitality, SGPS, SA, Troiaresort SGPS, SA e Solinca Health and Fitness, SA.
In the period ended 31 December 2016 short-term loan contracts were entered with the companies SC Engenharia Promoção Imobiliária, SGPS, SA, SC Hospitality, SGPS, SA, Troiaresort SGPS, SA, Solinca Health and Fitness, SA, Companhia Térmica Tagol, Lda., CAPWATT MAIA-HEAT POW.,SA, CAPWATT MARTIM Longo -S.P.,SA, CAPWATT VALE CAIMA-H.P,SA, CAPWATT, SGPS, S.A, CAPWATT ACE, SOLTROIA-Socied.Imobil. SA. SC-Sociedade de Consultadoria, SA, SC Assets, SGPS, SA, SC Finance BV, SPRED, SGPS, SA, QCE-D.FAB.EQUIPAMENTOS,SA, SISTAVAC, SA, SOBERANA Invest.Imobil. SA, Sotáqua-S.Em.Tu.Quarteira, SA, Troiamarket, SA, SC For - Serv. de For. e Desenv. de Recur. Hum., Unipe., Lda, INPARVI, SGPS, SA, SC SGPS, SA, UP Invest. SGPS, SA, The House Ribeira Hotel, SA, Soternix-Prod.Energia,ACE, Porto Palacio Hotel Exploração Hoteleira, SA, Enerlousado-R.E.Unipessoal, Lda. And Imohotel-Emp.Tur.Imob., SA.
As at 31 December 2016 amounts due by affiliated companies can be summarized as follows:
| Loans and Short term loans granted (Note 21) | |
|---|---|
| Companies | Closing Balance |
| SC Assets, SGPS, SA | 177,750,228 |
| SC Hospitality, SGPS, SA | 9,971,000 |
| CAPWATT, SGPS, S.A. | 13,225,200 |
| Inparvi SGPS, SA | 68,000 |
| SC Finance BV | 5,885,000 |
| SC, SGPS, S.A. | 13,943,600 |
| Solinca - Health & Fitness, SA | 3,643,622 |
| Troiaresort, S.G.P.S., SA | 138,254,837 |
| SC - Engª e Prom. Imobiliária SA | 688,000 |
| Spred SGPS SA | 2,523,500 |
| 365,952,986 |
As at 31 December 2016 amounts due to affiliated companies can be summarized as follows:
| Short term loans obtained (Note 21) | |
|---|---|
| Companies | Closing Balance |
| SC For - Serv. de For. e Desenv. de Recur. Hum., Unipe., Lda | 19,700 |
| SC - Engª e Prom. Imobiliária SA | 37,421,000 |
| Sistavac, SGPS, S.A. | 13,074,500 |
| SC Hospitality, SGPS, SA | 3,131,500 |
| Interlog-SGPS,SA | 21,856,000 |
| 75,502,700 |
No significant events, requiring further disclosure, have occurred after 31 December 2016.
These financial statements were approved by the Board of Directors and authorized for issue on 23 February 2017.
The Board of Directors
Duarte Paulo Teixeira de Azevedo Chairman of the Board of Directors Maria Cláudia Teixeira de Azevedo CEO
Álvaro Carmona e Costa Portela Member of the Board of Directors
Ivone Pinho Teixeira CFO
Francisco de La Fuente Sánchez Member of the Board of Directors Miguel Jorge Moreira da Cruz Gil Mata Member of the Board of Directors
Paulo José Jubilado Soares de Pinho Member of the Board of Directors
31 december 2016
In accordance with applicable legislation and the mandate given to the Fiscal Board, we hereby submit our Report and Opinion which covers the report of the Board of Directors and the consolidated and individual financial statements of Sonae Capital, S.G.P.S., SA for the year ended 31 December 2016, which are the responsibility of the Company's Board of Directors.
During the year, we have monitored the management of the Company, reviewed the development of the operations of the Company and of its main affiliates, and held meetings whenever considered necessary and with the appropriate scope. In face of the subject under review, these meetings were attended by key staff of the finance department, namely the Chief Financial Officer, of the planning and control department and of internal audit and risk management. We have also followed up closely the work of the statutory auditor and external auditor of the Company who kept us informed of the scope and conclusions of the audit work performed. In performing these tasks, the Fiscal Board has obtained from the Board of Directors, Company staff and affiliated companies' staff and from the statutory auditor all the necessary information and explanations, for a proper understanding and assessment of business developments, financial performance and position, as well as of risk management and internal control systems.
We have also reviewed the preparation and disclosure of financial information, as well as the statutory audit performed on the individual and consolidated accounts of the Company, having obtained from the statutory auditor all information and explanations requested. Additionally, within the scope of the mandate given to the Fiscal Board, we examined the individual and consolidated balance sheets as at 31 December 2016, the individual and consolidated statements of profit and loss by nature, statements of cash flows, statements of comprehensive income and statements of changes in equity for the year ended on that date and related notes.
We have also reviewed the report of the Board of Directors and the Corporate Governance Report for the year 2016, issued by the Board of Directors, and the Statutory Auditor's Report issued by the External Auditor of the Company, whose content we agree with.
Considering the above, we are of the opinion that the consolidated and individual financial statements referred to above were prepared in accordance with applicable accounting, legal and statutory standards and give a true and fair view of the assets and liabilities, financial position and results of Sonae Capital, S.G.P.S., SA and of its main affiliates, and that the report of the Board of Directors faithfully describes business developments, performance and financial position of the Company and of its affiliates and the main risks and uncertainties they face. We hereby inform that the Corporate Governance report issued complies with article 245-A of the Portuguese Securities Code.
The Fiscal Board would like to express its gratitude to the Company's Board of Directors and staff for their cooperation.
In face of the above mentioned, we are of the opinion that the Shareholders' General Meeting can approve:
Under the terms of Article 245, paragraph 1, c) of the Portuguese Securities Code, the members of the Fiscal Board hereby declare that, to their knowledge, the information disclosed in the Report of the Board of Directors and other accounting documents, was prepared in accordance with applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and results of the Company and of its affiliates.
Moreover, members of the Fiscal Board consider that the Report of the Board of Directors faithfully describes business developments, the performance and the position of the Company and of its affiliates and the main risks and uncertainties they face.
Maia, 23 February 2017
The Fiscal Board,
António Monteiro de Magalhães
Manuel Heleno Sismeiro
Carlos Manuel Pereira da Silva
31 december 2016
We have audited the consolidated financial statements of Sonae Capital S.G.P.S., S.A. (the Group), which comprise the consolidated balance sheet as at 31 December 2016 (which shows total assets of Euro 500.377.576 and total shareholders' equity of Euro 320.357.729 including a net profit of Euro 18.692.895), the consolidated statement of income by nature, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly in all material respects, the consolidated financial position of Sonae Capital S.G.P.S., S.A. as at 31 December 2016, and their consolidated financial performance and their consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union.
We conducted our audit in accordance with International Standards on Auditing (ISAs) and other technical and ethical standards and recommendations issued by the Institute of Statutory Auditors. Our responsibilities under those standards are described in the "Auditor's responsibilities for the audit of the consolidated financial statements" section below. In accordance with the law we are independent of the entities that are included in the Group and we have fulfilled our other ethical responsibilities in accordance with the ethics code of the Institute of Statutory Auditors.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
As disclosed in Notes 10 and 14 of the notes to the consolidated financial statements, the balance sheet presents real estate assets recorded under Property, Plant and Equipment and under Inventory (in a total of Euro 243,313,677).
The relevance of the amounts in question and the degree of judgment associated with the assessment of the recoverability of these assets justify that it has been considered a key audit matter.
As disclosed in Notes 2.3 and 2.10 of the notes to the consolidated financial statements, the evaluation of the recoverability of this type of asset requires the use of assumptions that always involve some uncertainty, namely cash flow forecasts, estimates of recoverable amounts, obtain market comparable, growth rates, discount rates and sensitivity assumptions.
Our auditing procedures were differentiated to each different type of asset, in terms of its recoverability:
Real estate assets in operation, such as hotel units - we analyze the discounted cash flow model elaborated by the Group, in terms of the reasonableness of the assumed assumptions, comparing them with the historical performance of the Group and evaluating the historical accuracy of the Group in the preparation of budgets, verifying if they have been materialized in subsequent years. We also appreciate the adequacy of the discount rate considered through the use of market comparable and other information in the market. We performed the calculations of the model and verified the sensitivity analysis to the main assumptions considered, including the growth rate and discount rate considered. We have recourse to our internal experts to help us validating the assumptions and methodologies used in the model.
Real estate assets held for future disposition we obtained real estate appraisals prepared by independent entities, critically analyzed them, in particular the reasonableness of the main assumptions used, and discussed them with the group services whenever deemed necessary. We also obtained the confirmation of independence by the external entities involved. We have verified the adequacy of the disclosures in the consolidated financial statements with respect to these assets.
As disclosed in Note 12 of the notes to the consolidated financial statements, the balance sheet presents a Goodwill value of Euro 37.841 thousand. See Note 2.2 c) about the accounting policy applicable to the Goodwill. Considering the relevance of the amount and the complexity and level of judgment inherent in the model adopted for the calculation of impairment In order to evaluate the recoverability of these assets, we obtained and analyzed the impairment tests prepared by the Group. Considering the identification and aggregation of CGUs, we have analyzed the reasonableness of the assumptions used in the forecasts, the market conditions, the sensitivity analyzes and the historical accuracy of the Group in the
and the identification and aggregation of cashgenerating units (CGUs), this issue was a key audit matter.
preparation of forecasts and budgets. We also analyzed the reasonableness of the discount rates used, as well as the perpetuity growth rates, using market comparable and other information in the market, and we reexecuted the model calculations.
As disclosed in Note 34 of the notes to the consolidated financial statements, the Construction Contracts revenue amounts to Euro 69.447.836.
The work map that supports the recognition of revenue based on the percentage of completion of construction contracts has several assumptions, essentially as regards the overall budget for construction expenses, already incurred expenses and expenses to be incurred. Given the uncertainty inherent in estimates of this nature, and the inherent assumptions, they must be continually reviewed and, as such, we consider a key audit matter (See Note 2.16 - Policies).
As disclosed in Note 19 of the notes to the consolidated financial statements, the balance sheet presents Deferred tax-assets value of Euro 27.380.258.
The relevance of the amounts in question and the degree of judgment associated with the assessment of the recoverability of deferred tax assets, which requires the use of estimates in the projection of future taxable income and the determination of the taxes required for their recovery, justify that it has been considered a key audit matter.
As disclosed in Note 32 of the notes to the consolidated financial statements, there are tax contingencies for which no provisions have been We reconcile the work maps with the values of the balance sheet and the income statement. We reviewed the contracts supporting the work maps, analyzed the reasonableness of the percentage of completion considered taking into account the underlying assumptions and compared the results obtained with the recorded revenue. In order to validate Management's assumptions regarding the recognized margin, we analyze the information available, essentially as it relates to the terms in the contracts signed, the latest projections, the current state of the works, the invoicing made and the reasonableness of the budgets In the past, compared to actual values.
In order to evaluate the Group's ability to recover these assets, we have analyzed the budgeting models and Management's assumptions and estimates in relation to the Group's probability of generating sufficient future taxable profits to support the estimated recovery of deferred tax assets. We also evaluate the Group's historical accuracy in the preparation of forecasts and budgets, namely by comparing the tax results obtained with those previously forecast. We have reexecuted the calculations of budgeting models.
The audit procedures we have carried out in this area included: a) understanding of tax and legal contingency assessment procedures; b) getting
recorded, since Management understands that these events will not result in losses for the Group.
The complexity and the degree of judgment inherent in the tax matters in question, as well as the level of uncertainty associated with the outcome, justify that it was a key audit matter.
and analysis of disputes affecting the Group; c) analysis of communications with external experts; d) obtaining and analysis of the answers obtained to the requests for confirmation of the processes carried out by external lawyers; e) inquiry to the management and to the legal and tax responsible over the estimates and judgments; f) obtaining and analyzing the opinion of internal specialists; f) verification of the assumptions used by Management for non-provisioning. We discussed with the Management and with the legal and tax responsible about the estimates, judgments and decisions taken in order to assess the reasonableness of the probability of outcome for each proceeding in in accordance with IAS 37, supporting the disclosures made and the non-provisioning.
Management is responsible for:
a) the preparation of the consolidated financial statements, which present fairly the financial position, the financial performance and the cash flows of the Group in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union;
b) the preparation of the Directors' Report, including the Corporate governance Report, in accordance with the applicable law and regulations;
c) the creation and maintenance of an appropriate system of internal control to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error;
d) the adoption of appropriate accounting policies and criteria;
e) the assessment of the Group's ability to continue as a going concern, disclosing, as applicable, events or conditions that may cast significant doubt on the Group's ability to continue its activities.
The supervisory board is responsible for overseeing the process of preparation and disclosure of the Group's financial information.
Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
a) identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
b) obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control;
c) evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
d) conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern;
e) evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
f) obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion;
g) communicate with those charged with governance, including the supervisory board, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit;
h) of the matters we have communicated to those charged with governance, including the supervisory board, we determine which one's were the most important in the audit of the consolidated financial statements of the current year, these being the key audit matters. We describe these matters in our report, except when the law or regulation prohibits their public disclosure;
i) confirm to the supervisory board that we comply with the relevant ethical requirements regarding independence and communicate all relationships and other matters that may be perceived as threats to our independence and, where applicable, the respective safeguards.
Our responsibility also includes verifying that the information included in the Directors' report is consistent with the consolidated financial statements and the verification set forth in paragraphs 4 and 5 of article No. 451 of the Portuguese Company Law.
In compliance with paragraph 3 e) of article No. 451 of the Portuguese Company Law, it is our understanding that the Director's report has been prepared in accordance with applicable requirements of the law and regulation, that the information included in the Directors' report is consistent with the audited consolidated financial statements and, taking into account the knowledge and assessment about the Group, no material misstatements were identified.
In compliance with paragraph 4 of article No. 451 of the Portuguese Company Law, it is our understanding that the Corporate governance report includes the information required under article No. 245-A of the Portuguese Securities Market Code, that no material misstatements were identified in the information disclosed in this report and that it complies with paragraphs c), d), f), h), i) and m) of that article.
In accordance with article No. 10 of Regulation (EU) 537/2014 of the European Parliament and of the Council, of April 16, 2014, and in addition to the key audit matters referred to above, we also provide the following information:
a) We were first appointed auditors of the Entity in the Shareholders' General Meeting of 31 March 2011 for the period from 2011 to 2012, having remained in functions until the current period. Our last appointment was in the Shareholders' General Meeting of 31 March 2015 for the period from 2015 to 2017.
b) The management has confirmed to us it has no knowledge of any allegation of fraud or suspicions of fraud with material effect in the financial statements. We have maintained professional scepticism throughout the audit and determined overall responses to address the risk of material misstatement due to fraud in the consolidated financial statements. Based on the work performed, we have not identified any material misstatement in the consolidated financial statements due to fraud.
c) We confirm that our audit opinion is consistent with the additional report that was prepared by us and issued to the Group's supervisory board as of 23 February 2017.
d) We declare that we did not provide any prohibited non-audit services referred to in paragraph 8 of article No. 77 of the by-laws of the Institute of Statutory Auditors ("Estatutos da Ordem dos Revisores Oficiais de Contas") and that we remain independent of the Group in conducting our audit.
23 February 2017
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. represented by:
Hermínio António Paulos Afonso, R.O.C.
We have audited the financial statements of Sonae Capital S.G.P.S., S.A. (the Entity), which comprise the balance sheet as at 31 December 2016 (which shows total assets of Euro 729.365.026 and total shareholders' equity of Euro 574.222.348 including a net profit of Euro 8.738.316), the statement of income by nature, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly in all material respects, the financial position of Sonae Capital S.G.P.S., S.A. as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union.
We conducted our audit in accordance with International Standards on Auditing (ISAs) and other technical and ethical standards and recommendations issued by the Institute of Statutory Auditors. Our responsibilities under those standards are described in the "Auditor's responsibilities for the audit of the financial statements" section below. In accordance with the law we are independent of the Entity and we have fulfilled our other ethical responsibilities in accordance with the ethics code of the Institute of Statutory Auditors.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
As referred on Note 4.1 of the notes to the individual financial statements, at 31 December 2016, Sonae Capital, S.G.P.S., S.A. holds financial investments on group companies in the amount of Euro 309 million, which are measured at cost. The valuation of financial investment is considered a key audit matter, because changes caused by events or circumstances that adversely affect the performance of the investees may lead to nonrecoverability of the book value of these assets.
Impairment tests are performed on the financial investments whenever an event or change in circumstances is identified that indicates that the asset may not be recovered. The valuation model used is the discounted cash flow model. To build this model, management incorporates judgments based on assumptions about cash flow projections, real estate fair value differentials, perpetuity growth rates and discount rate to be applied.
Key Audit Matter Summary of the Audit Approach
In order to validate the assumptions and judgments made by management in the valuation of financial investments, we perform the following procedures: a) assessment of whether or not there is evidence of impairment in financial investments; and b) obtaining and analyzing the impairment tests of the financial investments, in the applicable cases. The analysis of impairment tests, based on discounted cash flow models, involved the following procedures: a) evaluate the reasonableness of the projections of future cash flows, comparing with historical performance; and b) appreciation of the estimates and judgments made by the management body, underlying the relevant assumptions that support the model. The analysis of impairment tests, based on the fair value of real estate, involved the following procedures: a) obtain real estate appraisals prepared by independent entities; c) critical analysis of the real estate appraisals obtained; d) discussion of the evaluations with the group services; and d) obtaining the confirmation of independence by the external entities involved. We compare the recoverable amount obtained in the valuations with the book value of the financial investments and appreciate the reasonableness of the impairments recorded by
the Entity.
Management is responsible for:
a) the preparation of the financial statements, which present fairly the financial position, the financial performance and the cash flows of the Entity in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union;
b) the preparation of the Directors' Report, including the Corporate governance Report, in accordance with the applicable law and regulations;
c) the creation and maintenance of an appropriate system of internal control to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error;
d) the adoption of appropriate accounting policies and criteria;
e) the assessment of the Entity's ability to continue as a going concern, disclosing, as applicable, events or conditions that may cast significant doubt on the Entity's ability to continue its activities.
The supervisory board is responsible for overseeing the process of preparation and disclosure of the Entity's financial information.
Our responsibility is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
a) identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
b) obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control;
c) evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
d) conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Entity to cease to continue as a going concern;
e) evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
f) communicate with those charged with governance, including the supervisory board, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit;
g) of the matters we have communicated to those charged with governance, including the supervisory board, we determine which one's were the most important in the audit of the financial statements of the current year, these being the key audit matters. We describe these matters in our report, except when the law or regulation prohibits their public disclosure;
h) confirm to the supervisory board that we comply with the relevant ethical requirements regarding independence and communicate all relationships and other matters that may be perceived as threats to our independence and, where applicable, the respective safeguards.
Our responsibility also includes verifying that the information included in the Directors' report is consistent with the financial statements and the verification set forth in paragraphs 4 and 5 of article No. 451 of the Portuguese Company Law.
In compliance with paragraph 3 e) of article No. 451 of the Portuguese Company Law, it is our understanding that the Director's report has been prepared in accordance with applicable requirements of the law and regulation, that the information included in the Directors' report is consistent with the audited financial statements and, taking into account the knowledge and assessment about the Entity, no material misstatements were identified.
In compliance with paragraph 4 of article No. 451 of the Portuguese Company Law, it is our understanding that the Corporate governance report includes the information required under article No. 245-A of the Portuguese Securities Market Code, that no material misstatements were identified in the information disclosed in this report and that it complies with paragraphs c), d), f), h), i) and m) of that article.
In accordance with article No. 10 of Regulation (EU) 537/2014 of the European Parliament and of the Council, of April 16, 2014, and in addition to the key audit matters referred to above, we also provide the following information:
a) We were first appointed auditors of the Entity in the Shareholders' General Meeting of 31 March 2011 for the period from 2011 to 2012, having remained in functions until the current period. Our last appointment was in the Shareholders' General Meeting of 31 March 2015 for the period from 2015 to 2017.
b) The management has confirmed to us it has no knowledge of any allegation of fraud or suspicions of fraud with material effect in the financial statements. We have maintained professional scepticism throughout the audit and determined overall responses to address the risk of material misstatement due to fraud in the financial statements. Based on the work performed, we have not identified any material misstatement in the financial statements due to fraud,
c) We confirm that our audit opinion is consistent with the additional report that was prepared by us and issued to the Entity's supervisory board as of 23 February 2017.
d) We declare that we did not provide any prohibited non-audit services referred to in paragraph 8 of article No. 77 of the by-laws of the Institute of Statutory Auditors ("Estatutos da Ordem dos Revisores Oficiais de Contas") and that we remain independent of the Entity in conducting our audit.
23 February 2017
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. represented by:
Hermínio António Paulos Afonso, R.O.C.
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