Management Reports • Apr 17, 2008
Management Reports
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Head Office: R. João Mendonça, 529 - 4464-501 SENHORA DA HORA
Porto Commercial Registry and Fiscal Number 501 532 927
31 DECEMBER 2007
To the Shareholders,
In accordance with Portuguese Law and the company's articles of association, we hereby present the management report of Sonae Distribuição - S.G.P.S., S.A. (previously called Modelo Continente, SGPS, S.A.) for the year ending 31 December 2007.
During 2007 the consolidated turnover of Sonae Distribuição amounted to 3,385 million Euro. This was equivalent to an increase of 10% over 2006, and was based on a highly positive performance of stores on a like for like basis (growth of 4%) as well as an important organic growth plan which involved 130 new stores (about 70,000 extra m2).
Looking at the company's business portfolio in more detail, we can see that the food retail brands reached turnover of 2,368 million Euro, equal to an increase of 7%. This figure demonstrates the strength and popularity of the value proposal of these formats (which had an increase higher than 3% on a like for like basis), and benefited strongly from the success of the customer loyalty programme launched at the beginning of the year through the Continente Card and Modelo Card.
This new form of relationship with customers has resulted in a high level of involvement and commitment among Portuguese people (equal to 2.2 million cards(1) which are used for 80% of purchases), and has altered the benchmark for customer loyalty in the retail sector in Portugal and is also significant in this respect at an international level.
In addition to this programme, other initiatives were developed in the food segment, which sought to fine tune the value proposal offered and thus better meet the expectations of our customers. In this respect, a highlight was the implementation of the product offer segmentation project completed in the perishables area, and the creation of product ranges in line with the growing concerns relating to healthy food.
Also in food retail, the year was marked by the strong pace of store openings. In terms of organic growth, and during the 12 months of 2007, Sonae Distribuição opened 21 new food retail stores, equal to an increase of 23,000 m2 and +6% in sales area – exceeding the targets announced for the year. The company also continued to demonstrate its concern for the upgrade and
(1) Corresponding to around 2.2 million customer families.
refurbishment of its older assets to the modern and attractive standards for which it is recognised. It undertook 30 major refurbishments, and changed the brand names of two units of the Modelo chain to the Continente format. Also launched during the year was the "Outlet Continente", a store concept with a very specific role in the offer of opportunities.
The non food retail formats of the company also performed well in the year with the 10 current formats seeing the worth of their value proposals confirmed independently of the different stages of maturity and development of each. In particular, these formats showed a very significant 16% growth in turnover to a total above 1,000 million Euro.
This fine performance, driven by strong growth on a like for like store basis (higher than 4%), was also due to the notable organic growth undertaken (+46.000 extra m2, or 24% more sales area for a total of 109 new stores). The achievement of this ambitious plan consolidated the clear leadership position of the main non food retail brands of Sonae Distribuição in the Portuguese market, and contributed decisively towards increasing the popularity and strengthening the potential of the most recent brands, namely Zippy and the Área Saúde.
In consolidated terms, and in relation to the 12 months of 2007, the company's operational cash flow reached 299 million Euro. This value represents an increase of 45 million Euro compared to 2006 or of a significant 18%, driven by the implementation of projects of operational efficiency improvement.
We would point out however that this growth was positively influenced by a non recurrent capital gain of 12 million Euro from the sale of the real estate assets of the Albufeira and Portimão(2) shopping galleries. If this transaction had not taken place, consolidated operational cash flow would have totalled 287 million Euro. This figure corresponds to a very positive increase of 13% compared to 2006, and to an increase of 0.3 p.p. in the company's operational profitability margin.
Improvement in productivity indices, which are the basis of the high levels of profitability achieved, has been a major area of focus in the continuing efforts to rationalise and modernise the company. In 2007, these efforts were reflected in the multiple projects undertaken across the company, among which should be especially highlighted the development of the programme of own brands, the broadened programme of stock management optimisation, and the significant strengthening of competencies in international procurement.
2 This amount is considered in the analysis segment "Fixed Assets with income"
Another area seen as key by Sonae Distribuição to increase productivity and service quality concerns the investment made in the training of employees. In this area and during the year 2007, the company gave more than 1,300,000 hours of training, more than four times the number of hours in 2004. This investment gives the company, as the biggest private sector employer in Portugal, an unequalled role in terms of responsibility and involvement in professional training carried out in the country.
Focusing now in a little more detail on the performance shown by the different analysis segments of the company, we note that the contribution of the food retail brands to the consolidated operational cash flow of the company was 208 million Euro. This is equal to an increase of 8.8% in related turnover, and an increase of 0.2 p.p. compared to 2006.
In the non food retail brands, the year in question was also marked by important achievements with the contribution to the operational cash flow of the company reaching 71 million Euro. This amount corresponds to an increase of 33% compared to 2006. It undoubtedly reflects the strong popularity and growing maturity of the company's non food retail brands, factors which combined during the period to produce strong growth with an increase of around 0.9 p.p. in operating profits to sales which rose to 7.1%.
Also in consolidated terms and for the same period, the company's net profits totalled 169 million Euro, 9 million Euro above the figure for the previous year – still considering the acquisition at the end of 2006 of 100 million own shares for the overall sum of 205 million Euro. The company's overall fine performance was reflected in an increase of 15% in net profits per share, once again confirming the progress made and the validity of the defined strategy.
The Portuguese retail market was marked in 2007 by the strong organic growth of the main operators and by processes of consolidation begun during the period.
In the year, the main formats which make up the food retail sector opened more than 200,000 new m2 of sales area, equal to an increase of approximately 12% on the installed base. Non food retail also had significant development with the opening of various commercial centres across the country. Looking at the Portuguese market globally, it can be seen that the increase in supply(3) once again exceeded the nominal rate of increase in demand(4). This trend is all the more significant when it is noted that the overall growth in sales area in the market, since the change in the sector
3 Calculated as m2 of sales area.
4 Measured by the sales of the main market operators.
regulatory framework took place in 2004, reached the impressive figure of 35%, equal to more than 500,000 m2 of sales area.
In 2007, Sonae Distribuição reached an all time high figure, investing an amount of 972 million Euro in organic growth and acquisitions.
In terms of organic growth and in the food retail sector, the company strengthened its presence in the Portuguese market, opening 21 new stores and converting the Ovar and São João da Madeira Modelo units into Continente units. Thus, the company added some 25,000 extra m2 of sales area to its store network, equal to an increase of 7%. In the non food retail segment, the company continued its strong pace of opening new stores, inaugurating 46,000 new m2 in 109 stores, with a particular highlight for the strong growth rate of the Health Area brand with 38 stores, and the Zippy brand, which made its presence felt in the main shopping centres in Portugal.
Efforts to modernise those stores already in operation were also not neglected, as has been the case in previous years. At the same time, efforts continued to develop business support infrastructures, with a special focus on logistics infrastructure.
At the end of year, Sonae Distribuição concluded its acquisition of the Carrefour (Portugal) operation, thus immediately adding an extra 95,000 m2 of sales area in the country. This transaction strengthened Sonae Distribuição's leadership of the Portuguese food based retail market and at the same time allowed it to leverage the programme of organic growth of the company for the next few years by incorporating projects under development in the company acquired.
As at 31 December 2007, the consolidated net debt of Sonae Distribuição totalled 1,082 million Euro. This figure, which compares with 377 million Euro at the end of 2006, was directly impacted by the acquisition of Carrefour (Portugal) on the last day of 2007, and which involved an investment of 664 million euro totally financed by debt.
In spite of this increase, the company continues to have a perfectly appropriate capital structure in view of its strong cash flow generation capability. The average debt maturity of the company is higher than 5 years (1 year longer than 2006) while the ratio of average debt/EBITDA for the year was ~2x(5). The interest cover(6) indicator was ~10x.
No significant changes took place in the year that are worthy of mention, and the guidelines set out in the Consolidated Management Report for the year 2006, concerning Corporate Governance remained unchanged.
Information concerning Corporate Governance is presented in a specific annexe to this report.
The strategic path of Sonae Distribuição focuses on growth and strengthening the value proposal, and is based on continued investment in efficiency and innovation. This positioning, followed in a consistent manner by the company over more than twenty years of operation, has allowed strong growth rates to be combined with notable profitability indices, and will again be the basis of the company's performance over the future.
In this respect, the company will continue its strong pace of organic growth as a means of consolidating its leadership of the Portuguese market. During 2008, Sonae Distribuição expects to open around 60,000 new m2, equal to an increase of around 10% in sales area compared to the average in 2007. Half of this investment will be in food based retail with the remaining 30.000 m2 of sales area in the non food retail brands.
As a consequence of this strategic path, Sonae Distribuição has already integrated the operation of the twelve units previously run by the Carrefour brand, which represents an immediate increase of 85,000 m2 of sales area in the food retail segment and 10.000 m2 in the non food segment. This operation is being carried out respecting scrupulously the commitments made
5 This ratio increased at the end of the year to 3.6x (1.082/299). However, the ratio is not the most appropriate in this case since it includes the additional debt resulting from the Carrefour (Portugal) acquisition transaction but does not include any contribution to operational cash flow from the stores involved.
6 Operational cash flow / net interest.
to the Competition Authority, and which ensured non-opposition to this concentration transaction.
Still on the subject of growth, the company will continue to be attentive to possible acquisition opportunities that may arise in the market and which will enable the competitive positions of the businesses to be improved, always with the goal of creating value for the company.
The year 2008 will also be marked by the entry of Sportzone into the Spanish market. The company plans to open 4 new units in the country, based on the solid progress of the brand in Portugal, in which it is the benchmark leader in its specific market segment. However, Sonae Distribuição believes the international expansion plan of Sportzone will not end-up in the Spanish market, as well as it still projects space to grow in this market with other formats.
With a view to driving productivity gains and thus operational profitability, the company will also implement in the short term a range of cutting edge projects in the areas of architectural logistics infrastructure, the stock management optimisation and store operation.
In 2008 and keeping its strong stamp of innovator, Sonae Distribuição will extend its activity to 2 new businesses: insurance broking (with "Seguros Continente") and a new casual footwear brand.
At the same time, the company will continue to invest in building partnerships which aim at improving the value proposal offered to customers. In this respect, and already at the beginning of 2008, Sonae Distribuição ceased to GALP the operation of eight petrol stations acquired in the subject of the purchase of Carrefour (Portugal). This operation allowed both companies to strength even more their value proposals to clients, as well as the partnership which has been highly beneficent to consumers.
As has been the case to date, Sonae Distribuição will continue to focus on the sustained development of its business activities, scrupulously following the principles of social and corporate responsibility that it has defined. In respect of these guidelines, the company will proceed with this orientation ensuring the sustainability in the generation and sharing of wealth, a continuous policy of environmental protection and a unique involvement in several social initiatives, which "Missão Sorriso" and "Causa Maior" are just examples.
A dividend distribution of 85 million Euro will be proposed at the Shareholders' Annual General Meeting for shares not held directly or indirectly by Sonae Distribuição – S.G.P.S., S.A., which corresponds to a dividend pay-out ratio of approximately 50% of the consolidated net profits for the year.
The net profits for the year of Sonae Distribuição – S.G.P.S., S.A. as a stand alone holding company, totaled 84,137,774.42 Euro, for which the Board of Directors propose the following distribution
| Legal reserve ______ | 4,300,000.00 Euro | |
|---|---|---|
| Dividends _________ | 79,837,774.42 Euro | |
| Total _______ | 84,137,774.42 Euro |
In view of the fact that a dividend distribution of 85,000,000.00 Euro is proposed, 5,162,225.58 Euros of Free Reserves will be used for this purpose.
We thank all our customers, suppliers, financial institutions and shareholders for their support and their preference during the year. We also thank the external auditors and statutory auditors for all their co-operation throughout the year. And finally, a special word of thanks to all of Sonae Distribuição's employees for the enthusiasm, dedication and competence that they demonstrated once again in 2007.
Matosinhos, 5 March 2008 The Board of Directors
This appendix gives a brief description of the Corporate Governance practices of Sonae Distribuição SGPS, S.A.. Given that this is an appendix to the Board of Directors' Report, it should be read together with and as a complement to that document. Certain aspects in this appendix are cross referenced to the main body of the report as it was felt that it was more appropriate to deal with them in the main body of the report to avoid repetition.
It has been prepared in accordance with Regulation 7/2001 of 20 December 2001 of the CMVM (Portuguese Stock Exchange Commission) together with those changes made in Regulation 11/2003 of 19 November 2003, Regulation 10/2005 of 3 November 2005 and Regulation 3/2006 of 30 May 2006. In view of the fact that Sonae Distribuição SGPS, S.A. lost its status as a publicly quoted company and is now not listed on the Euronext Lisbon stock Exchange since 22 September 2006, the date on which Sonae SGPS, S.A acquired total control of the company, this report has been prepared on a voluntary basis with the aim of better informing the financial markets.
The adoption of the recommendations of the CMVM on corporate governance is explicit in this report and in each of the chapters into which it is divided.
As at 31 December 2007, the Board of Directors of Sonae Distribuição SGPS, S.A. was made up of four members, as shown below.
The members of the Board of Directors have collective duties of co-ordination and management of various functional departments. During 2007, the functional organisation of the company was as follows:
| Board of Directors |
|---|
| Functional Departments |
| Operations |
| Commercial |
| Logistics |
| Procurement |
| Store development |
| Marketing |
| Human resources |
| Information systems |
| Finance |
| Management Planning and Control |
| Audit and Risk management |
| Legal |
| Environment |
| Lost prevention |
The company also has a Remuneration Committee, as described in section 1.9 and a Fiscal Council as mentioned in section 1.11.
At Sonae Distribuição, risk management is part of the company's culture, and is present in all functional areas. It is the responsibility of each manager to identify, evaluate and manage the risks that might compromise the achievement of the goals of the business. The analysis and management of strategic and external risks is carried out by the Board of Directors of the company as part of the annual planning cycle. At the same time, the general principles of risk management are approved by the Board of Directors.
In terms of business processes, the main risks are identified and actions to mitigate them are planned and monitored by the different functional units. The analysis and cover of financial risks are dealt with by Sonae Distribuição's financial department. For those risks that have an impact across the organisation, in particular large scale change projects and those involving the preparation of contingency and business recovery plans, structured risk management programmes are developed with the involvement of the management of the units involved.
Financial Risk Management is dealt with in a more operational way by the financial team, with its implementation and follow up being the responsibility of a broad based multi functional committee, supervised by the Group's Treasury department. Risk Management activity is supported in a more direct manner by the Risk Management and Audit functions, whose main areas of action are described below:
As part of the process of evaluating relevant business risks for the company, the risk management and audit function defined a matrix of risks (BRM – "Business Risk Model"). This process is a part of the international standard "Enterprise Risk Management – Integrated Framework" of the COSO ("The Committee of Sponsoring Organizations of the Treadway Commission"), and includes identifying and systematising the risks that affect the organisation, prioritising them according to their impact and probability of occurrence and identifying their most relevant causes.
In relation to managing the risks concerning the physical security of people and critical business assets, a periodic process of self-control has been implemented in stores with the goal of preparing a diagnostic check on exposure to physical safety risks, identifying their main causes and implementing corrective actions. At the same time, audits are carried out to check to what extent these measures have been implemented. For the remaining assets that are required for the main activities of the company (warehouses, manufacturing centres and administrative buildings), physical safety risk analyses are periodically carried out, with preventive and corrective actions implemented for the risks identified.
Concerning business continuity, the company has prepared crisis management manuals and business continuity plans for stores, warehouses and information systems with the main goals being, in the case of a high impact disaster incident, to guarantee the continuity of operations, and minimise financial and brand image losses. The financial cover of insurable risks is regularly reviewed.
In relation to processes of higher operational risk for the company, the process and compliance audit function carries out a systematic monitoring of risk transactions, in particular sales, sales returns and the purchase of goods.
The information systems audit function analyses and checks the computer controls that ensure the running and efficiency of the company, especially in relation to the confidentiality, integrity and availability of data. In this area, the company has adopted the international standard ISO27001 ("British Standard") and is currently in the process of finalizing the implementation of COBIT ("Control Objectives for IT" of the ISACA), which covers the life cycle of the management of information systems.
As part of this activity, among others, specific audits on data bases and critical business applications, on servers and communications infrastructure, tests on intrusion to commercial web sites and on the physical security of computer centres, are carried out. In relation to business continuity, scenarios for the recovery of computer systems and operational contingency plans have been defined.
Interest rate and Exchange rate risks are of particular importance in the area of market risk management. The Group uses derivatives in the management of the market risks to which it is exposed as a means of ensuring their cover, not with the objective of negotiation or speculation.
Group exposure to interest rates arises mainly from long term loans, which are made up in large part by debt indexed to Euribor. The objective of the Group is to limit the volatility of cash flows and profits, given the profile of its operational activity, through the use of the appropriate combination of fixed rate and variable rate debt. The group policy allows the use of interest rate derivatives to reduce exposure to variations in the Euribor and not for speculative purposes.
The derivatives used by the group to manage interest rate risks are defined as cash flow cover instruments since they provide perfect cover. The indices, the calculation methods, dates for re-fixing interest rates and repayment schedules for the interest rate cover derivatives, are exactly the same as the conditions established for the underlying loans contracted.
The impact on the financial statements of variations in exchange rates is limited, given that the majority of operational cash flows are based in euros. The Group is only exposed to exchange rate risks in relation to transactions for goods from international markets in dollars.
Exchange rate risk management aims at providing a solid basis for taking decisions on the purchase of goods to establish cost prices that are stable and known. The cover embraces the entire purchasing decision from the time of choosing suppliers up to formal negotiation of purchase.
Exposure is controlled through a programme of forward purchases of foreign currencies with the goal of minimising the negative impact from the company's responsibilities as a result of imports in currencies other than the Euro.
The main goal of liquidity risk management is to ensure that at any time the group has the financial resources available in order for it to meet its responsibilities and follow its defined strategies, honouring all of its commitments to third parties at the time they fall due, through an appropriate management of the cost and maturity factors relating to financing.
The group thus follows an active policy of refinancing, focused on maintaining a high level of free cash flow and its immediate availability to meet short term needs, and on extending or maintaining debt maturity dates, in accordance with forecast cash flows and the leverage capacity of its balance sheet.
Another important tool for dealing with liquidity risks is limiting the scope for contractual clauses which can affect the due dates for payments on loans. The group also ensures that it has a highly varied contact with financial institutions which allows it flexibility to negotiate new loans and limit the negative impact of any relationship which is terminated.
The group is exposed to credit risks in its relationships with financial institutions concerning the application of funds, placing of debt instruments, derivatives, among others. The credit risk is limited by managing the concentration of risks, and through a rigorous selection of alternatives, which have high prestige and international and Portuguese recognition with minimum A- ratings, issued by an international rating agency or equivalent.
The Group is also exposed to the credit risk of its daily operational activities. This risk is controlled through a system of financial and qualitative information gathering, provided by recognised entities which provide risk information, which allows the ability of customers to meet their obligations to be evaluated, aiming at reducing the risk of granting credit.
In 2007, the main concerns in this area were as follows:
As at 31 December 2007, the share capital, which was wholly subscribed and paid up, was made up of 1,100,000,000 ordinary shares, each with a nominal value of 1 Euro. As at 31 December 2007, the share capital of the company was held by the following entities:
| Entity | % |
|---|---|
| Sonae, SGPS, S.A.(1) | 74,98 |
| Sonae Investments, B.V. | 15,93 |
| Soflorin, B.V.(2) | 9,09 |
(1) As at 31 December 2006, Efanor, SGPS, S.A and its affiliates owned 52.94% of the share capital of Sonae, SGPS, S.A.
(2) As at 31 December 2007, Soflorin, B.V. was wholly owned by Sonae Distribuição, SGPS, S.A. The 100,000,000 shares held by Soflorin, B.V. are thus considered to be own shares according to Portuguese law.
With the acquisition of total control of Sonae Distribuição, SGPS, SA (previously named Modelo Continente SGPS, S.A.) by Sonae, SGPS, SA, the company lost its status as a publicly quoted company, and was excluded from the official Lisbon Euronext stock exchange as from 22 September 2006. However, up to the above mentioned date, the shares of Modelo Continente, SGPS, S.A were traded on the Euronext Lisbon stock exchange with the following key technical information:
| Company name: | Sonae Distribuição, SGPS, SA |
|---|---|
| Former company name: | Modelo Continente, SGPS, SA |
| Share capital: | 1,100,000,000 Euro |
| Nominal value of shares: | 1 Euro |
| Number of shares: | 1,100,000,000 |
| Stock exchange: | Euronext Lisbon |
| ISIN/Euronext Code: | PTMOC0AE0007 |
| Reuters: | MDCT.IN1 |
| Bloomberg: | MCON PL |
| Central Code: | MOCAE |
A dividend distribution of 0.05 Euro per share in relation to year 2005 was made, totalling 55 million Euro. In 2006, a distribution of 75 million Euro was made. In relation to 2007, a dividend distribution of 85 million Euro will be proposed at the Shareholders' General Meeting for those shares not held directly or indirectly by Sonae Distribuição, SGPS, S.A., which corresponds to a dividend pay-out ratio of approximately 50% of the consolidated net profits for the year.
The Remuneration Committee of Sonae Distribuição SGPS, S.A. approved on 16 March 2005 the rules defining the conditions of the granting of a deferred compensation plan. The goal of this plan is to give the opportunity to managers to share in the value created by their direct involvement in the definition of strategy and management of the businesses. Those eligible are directors and managers of the Company whose involvement has the most impact on the performance of the businesses.
Deferred compensation is awarded by the management body concerning managers and by the Remuneration Committee concerning directors, as a percentage of the value of the annual performance premium awarded.
The amount of the deferred compensation varies in direct proportion to a portfolio of shares of Sonae, SGPS, SA. The compensation plans are valued on the date they are awarded at the share prices quoted on the Portuguese stock exchange of those shares making up the basket. For this, the lower of the following share prices is used: that at the close of business on the first working day after the Shareholders' General Meeting or the average closing price for the 30 days prior to the Shareholders' General meeting.
The Director/manager can choose to:
In either case, the acquisition can be made between exactly three years after the date of the award and the end of that year. The company reserves the right to give the equivalent value in cash instead of shares. The right to deferred compensation expires when the Director/manager leaves Sonae Distribuição group but continues up to the date of payment in the case of retirement. In case of death or permanent disability, the deferred compensation plan is valued at market prices and given to the individual or his/her heirs.
The company did not have business dealings with any member of the Board of Directors. The only
transactions with the Statutory Auditor were those related to his official duties and his fees were paid as described in paragraph 1.10 below. Transactions with group companies or those controlled by Sonae Distribuição were made at arms length, were part of the normal business activity of the company.
Up until 21 September 2006, the company was a publicly quoted company listed on the Euronext Lisbon stock Exchange. As such, the company always followed the rule of expeditiously informing the capital markets of all relevant facts about the company, thus ensuring equal treatment to all parties involved and equal access to information by investors.
To that end, it used the normal channels of communication, putting special emphasis on using new information technologies. Here, the main highlight is the company website (www.sonaedistribuicao.pt) that acts as a focal point for a wide range of questions put by investors and the general public, as well as being a repository of historical information about the company, in particular financial statements, earnings announcements and the most important corporate presentations.
Although the company was de-listed from the Lisbon stock exchange on 22 September 2006 following a public sales offer for the entire share capital of the company by its majority shareholder, Sonae, SGPS, S.A, such practices of transparency and information sharing have continued unchanged. Also continuing its work unchanged is the Investor Relations Office, which is technically well equipped and has a dedicated team, acting as a focal point for the Portuguese and international investment community.
The Office helps a wide range of parties involved with the capital markets, in particular small private investors and the university community, as well as the main financial analysis teams in the Portuguese and international retail sector. Contact information is as follows:
Rua João Mendonça, 529 – 6ºDto 4464-501 Senhora da Hora (Matosinhos – Portugal) Telefone: +351.22.9561958 Fax: +351.22.9561318 Email: [email protected]
The Shareholders' General Meeting appoints a Remuneration Committee with the same term of office as the statutory bodies. Its mission, in accordance with paragraph 2 of Article twenty-six of the company's articles of association, is to approve the remuneration of members of the Board of Directors. At Sonae Distribuição SGPS, SA, the current Remuneration Committee is made up of Sonae SGPS, SA represented by Duarte Paulo Azevedo, and by Bruno Walter Lehmann.
The company's auditors are Deloitte & Associados, SROC, who, in 2007, billed the company and its affiliated and associated companies included in the consolidation, a total of 1,240,557 Euro (of which 103,780 Euro related to affiliates abroad). Of the total, 30.7% were audit and statutory audit fees, and 69.3% were for other services. These other services are provided by different specialists than those who are involved in audit, so that we believe that the independence of the auditor is assured.
To carry out its functions, the Fiscal Council of the company (elected by the Shareholders' General Meeting on 2 May 2007) was paid a total fixed remuneration of 33,000 Euro.
The articles of association of the company only allow participation in the Shareholders' General Meeting to
shareholders with voting rights who can provide proof of their title as shareholders up to five days before the date of the meeting, in accordance with the terms of the law.
The presence of preferential shareholders without voting rights at shareholders' general meetings and their participation in discussion concerning items on the meeting's agenda, depends on authorisation from the Shareholders' General Meeting.
Each share corresponds to one vote.
Shareholders who are private individuals can be represented at Shareholders' General Meetings by sending a letter to the Chairman of the Board of the Shareholders' Meeting, stating the name and address of the representative and the date of the meeting.
Corporate entities will be represented by a person nominated by them by written letter whose authenticity will be verified by the Chairman of the Board of the Shareholders' General Meeting.
If the company is a publicly quoted company, shareholders can vote by correspondence, but only in relation to changes to the company's statutes and the election of statutory entities.
Correspondence votes will only be taken into account when received at the company's headquarters by registered mail addressed to the Chairman of the Board of the Shareholders' General Meeting, and received at least three days before the meeting, subject to proof of title of the related shares.
The voting declaration should be signed by the holder of the shares or by his legal representative and, in the case of a private individual should be accompanied by an authenticated copy of his identity card, and in the case of a corporate entity, the signature should be authenticated by a notary public testifying to his/her status and powers.
Written voting papers shall only be considered valid when they clearly set out in an unambiguous manner: a) the agenda item or items to which they refer;
b) the specific proposal to which they relate with an indication of the respective proposer or proposers;
c) the precise and unconditional voting intention on each proposal.
Nonetheless, a shareholder is permitted to include in a written voting paper, in relation to an identified proposal, the intention to vote against all alternative proposals, in relation to the same item on the agenda, without further specification.
It is assumed that shareholders have abstained from any proposals that are not specifically included in their written voting papers.
Nonetheless, a shareholder is permitted to include in a written voting paper, in relation to an identified proposal, the intention to vote against all alternative proposals, in relation to the same item on the agenda, without further specification.
It is assumed that shareholders have abstained from any proposals that are not specifically included in their written voting papers.
Correspondence votes do not count concerning decisions to be taken which were presented after the date on which these same votes were emitted.
It is the responsibility of the Chairman of the Board of the Shareholders' General Meeting, or the person substituting him, to verify correspondence voting declarations, eliminating any votes relating to declarations that are not accepted.
It is the company's responsibility to ensure the confidentiality of correspondence votes until voting takes place.
All shareholders must provide the necessary proof of ownership of the shares that they hold by at least five
days before the date of the General Meeting.
The individual company and consolidated financial statements and other documents required by law, as well as the proposals made by the Board of Directors for approval by the General meeting, will be available for consultation by shareholders at the head office and on the company's website (www.sonaedistribuicao.pt) as from fifteen days prior to the date of the Shareholders' Annual General Meeting, unless the General Meeting is constituted under the terms of article 54 of the Companies' Commercial Code.
The General Meeting may pass resolutions at the first meeting as long as shareholders representing over fifty percent of the share capital of the company are present or represented, unless the law demands a different quorum.
The Shareholders' General Meeting can be held using electronic means of communications, as long as the means, the authenticity of the voting slips and the security of the communications can be ensured.
With the publication of Decree Law number 76 A/2006 of 29 March, and within the time period legally stipulated, Sonae Distribuição, SGPS, S.A. made partial changes to its articles of association, from which resulted some adjustments to voting rights following Portuguese law and the recommendations of the CMVM.
Sonae Distribuição, SGPS, S.A. values and principles are widely spread and deeply rooted in the company's culture. The key aspects are a business culture (leadership, openness to change, loyalty and rigour, transparency), responsibility towards employees (equal treatment, professional development, safety), social responsibility (social and environmental awareness, openness to society, trust and ethics) and political independence. Employees act scrupulously to comply with their duties of diligence and confidentiality in dealings with third parties, protecting the company's position in situations of conflict of interest. In this area, no written code of conduct for management bodies or other internal regulation relating to this subject exists.
Over and above the statutory duties for exercising voting rights and the representation of shareholders, referred to in Chapter 2, there are no other limitations on exercising voting rights. The company has not taken any preventative measures to stop any hostile take over.
As at 31 December 2007, the Board of Directors of Sonae Distribuição SGPS, S.A. was made up as follows:
| Executive* | Non Executive* |
Not Independent |
Date first elected |
End of Mandate |
|
|---|---|---|---|---|---|
| · Duarte Paulo Teixeira de Azevedo (Chairman) | x | x | 31.03.2006 | 2009 | |
| · Nuno Manuel Moniz Trigoso Jordão (CEO) | x | x | 31.03.1989 | 2009 | |
| · Ângelo Gabriel Ribeirinho dos Santos Paupério | x | x | 29.08.1995 | 2009 | |
| · Álvaro Carmona e Costa Portela | x | x | 31.03.2006 | 2009 |
* as defined in Regulation 10/2005 of the CMVM (Portuguese Stock Exchange Commission)
The mandate of this Board of Directors is four years and ends in 2009. The directors were elected from a single list. No alternative list was presented by any shareholder. During 2007, the Board met 20 times, and the respective minutes were written up in the minute book. In the business executive decision making process, Nuno Jordão has broad overall coordination duties in the company, in line with the traditional duties of a CEO.
A brief curriculum vitae of each director now follows, with details of the most significant companies in which they hold directorships.
Duarte Paulo Teixeira de Azevedo: Place of birth: Porto Date of birth: 31-12-1965 Marital status: married Children: 3 University degree in Chemical Engineering - Ecole Polytechnique Féderále de Lausanne, 1986 Masters in Business Administration - MBA (ISEE), 1989 Executive Retailing Program - Babson College, 1994 Strategic Uses of Information Technology Program - Stanford Business School, 1996 IMD - Breakthrough Program for Senior Executives – Lausanne, 2002 CEO of Sonae, SGPS, SA and chairman of the Board of Directors of most of the companies controlled or in which Sonae SGPS has a majority shareholding (listed in the Notes to the Financial Statements of the companies concerned).
Nuno Manuel Moniz Trigoso Jordão Place of birth: Lisbon Date of birth: 27-04-1956 Marital status: married Children: 4 University degree in Economics – ISCTE (University of Lisbon), 1978 CEO of Sonae Distribuição, SGPS, SA and chairman of the Board of Directors of most of the companies controlled or in which this company has a majority shareholding (listed in the Notes to the Financial Statements of the companies concerned). Member of the Board of Directors of Sonae, SGPS, SA.
Ângelo Gabriel Ribeirinho dos Santos Paupério: Place of birth: Vila Nova de Gaia Date of birth: 14-09-1959 Marital status: married Children: 4 University degree in Civil Engineering (FEUP), 1982 Masters in Business Administration - MBA (ISEE), 1988 CEO of Sonaecom, SGPS, SA and chairman of the Board of Directors of most of the companies controlled or in which this company has a majority shareholding (listed in the Notes to the Financial Statements of the companies concerned). Member of the Board of Directors of Sonae, SGPS, SA.
Álvaro Carmona e Costa Portela Place of birth: Porto Date of birth: 04-07-1951 Marital status: married Children: 3
University degree in Mechanical Engineering (FEUP), 1974 Masters in Business Administration - MBA (Universidade Nova de Lisboa), 1983 AMP / ISMP - Harvard Business School, 1997 CEO of Sonae Sierra, SGPS, SA and chairman of the Board of Directors of most of the companies controlled or in which this company has a majority shareholding (listed in the Notes to the Financial
Statements of the companies concerned). Member of the Board of Directors of Sonae, SGPS, SA.
There now follows a summary of the history of each of the above mentioned directors as members of the Board of Directors of Sonae Distribuição, SGPS, S.A.:
In addition, there exists no Executive Committee or any other Committee with management competencies. No internal control committees were set up to evaluate the company governance or structure, since this evaluation is carried out during meetings of the Board of Directors. No list of incompatibilities was defined nor the maximum number of cumulative duties of directors in the management bodies of other companies. This was because directors of the company generally exercise management duties in companies belonging to Sonae Distribuição. None of the Board Directors mentioned above directly hold shares in Sonae Distribuição, SGPS, SA.
In 2007, the members of the Board of Directors of Sonae Distribuição were paid a total of 3,434,423 Euros, of which 2,900,903 Euros were performance bonuses. The performance bonus is indexed to a group of financial indicators that best align the interests of Directors with those of the company and its shareholders. Half of this bonus is deferred and will only be paid in 2011, and may increase or decrease, depending on share price performance. The Chairman of the Board of Directors was paid a fixed amount of 37,333 Euros.
In 2007, the remuneration of staff with responsibilities for the strategic management of the main companies of the Group (excluding members of the Board of Directors) was 4,302,137Euros, divided between 1,957,929 Euros of fixed remuneration and 2,344,208 Euros of performance bonuses.
The Board of Directors believes that the information given above concerning remunerations is sufficient and that to give details for each director goes beyond the general principles governing the duty to inform and is of marginal usefulness to shareholders' interests. In the same way, and because it would involve supplying information on an individual basis, no separate analysis is provided of remuneration paid to executive/non executive directors.
Sonae Distribuição pays very special attention to detecting, taking responsibility for and correcting in a timely manner irregularities that may occur within its organisation. The most frequent issues are concerned with mistakes from time to time in store operations (concerning customer attendance, the range of products or equipment, among others). The main way in which these are detected are through customers of the stores of the company in Portugal. Many of these customers make a complaint or leave a suggestion with the team of the store where the irregularity took place.
Sonae Distribuição values very highly these contacts since the customer is giving the company an opportunity to resolve a problem and identify areas of improvement that directly benefit that particular customer and others who are also affected.
In order to deal with these issues in a just and timely manner, the company developed some ten years ago a Suggestions and Complaints System, with a decentralised structure of contact persons in various departments of the organisation and under the direct responsibility and follow up of the Board of Directors. The Marketing department is responsible for the central coordination and control of the entire process, although the issues are dealt with and answers given to the customer by the unit directly concerned, with the knowledge and coresponsibility of the specific areas involved (e.g. Quality Control, Legal Department etc).
In 2006, with the Decree Law 156/2005 of 1 January 2006 coming into effect, which made a complaints book mandatory in commercial establishments, the system described above was strengthened.
At the same time, Sonae Distribuição SGPS, S.A. (as part of the Sonae Group) has an Ombudsman available to its employees and to the public in general. The Ombudsman functions as an entity that complements the suggestions and complaints procedure. He/she reports directly to the Chairman of the Sonae Group, and his/her mission is to ensure that claims, complaints and suggestions that are made by customers, suppliers and employees of the company are appropriately dealt with.
The post of the Ombudsman affirm and promote in an appropriate way the legally protected rights and interests of customers, users or suppliers of the company, ensure that justice is done, wrongs righted and improve the quality and efficiency of services provided by the company. He/she can be contacted at the following e mail address [email protected], or at the following address:
Lugar do Espido, Via Norte Apartado 1011 - 4471-909 Maia - Portugal Tel: +351 22 010 4631 - Fax: +351 22 010 4784
Matosinhos, 5 March 2008
The signatories individually declare that, to their knowledge, the Management Report, the Consolidated and Individual Financial Statements and other accounting documents required by law or regulation were prepared meeting the standards of the applicable International Financial Reporting Standards, giving a truthful (fairly) and appropriate image, in all material respects, of the assets and liabilities, financial position and the consolidated and individual results of the issuer and that the Management Report faithfully describes the business evolution and position of the issuer and of the companies included in the consolidation perimeter and contains a description of the major risks and uncertainties that they face.
Matosinhos, 5 March 2008
______________________________________ Duarte Paulo Teixeira de Azevedo (Presidente)
______________________________________ Nuno Manuel Moniz Trigoso Jordão (CEO)
______________________________________ Ângelo Gabriel Ribeirinho dos Santos Paupério
_______________________________________
Álvaro Carmona e Costa Portela
| Shares | Date | Aquisitions | Disposals | Held at 31.12.2007 |
||
|---|---|---|---|---|---|---|
| Quantity | Average value € |
Quantity | Average value € |
Quantity | ||
| THE BOARD OF DIRECTORS | ||||||
| Duarte Paulo Teixeira de Azevedo | ||||||
| Efanor Investimentos, SGPS, SA (1) | 1 | |||||
| Migracom, SGPS, SA (3) | ||||||
| Share capital increase | 20.11.2007 | 20,000 | 76.45 | 69,996 | ||
| Imparfin, SGPS, SA (4) | ||||||
| Sale | 10.12.2007 | 150,000 | 25.75 | 0 | ||
| Sonae, SGPS, SA | ||||||
| Sale | 22.05.2007 | 593,616 | 2.03 | |||
| Shares atributed under a Share | ||||||
| Based Compensation Plan | 01.06.2007 | 147,376 | 0 | |||
| Sale | 01.06.2007 | 147,376 | 2.17 | 3,293 | ||
| Ângelo Gabriel Ribeirinho dos Santos Paupério Sonae, SGPS, SA |
4,564 | |||||
| Alvaro Carmona e Costa Portela Sonae, SGPS, SA |
25,934 | |||||
| Notes: | ||||||
| (1) Efanor Investimentos, SGPS, SA | ||||||
| Sonae, SGPS, SA | ||||||
| Purchase | 31.12.2007 | 14 | 1.98 | 658,804,424 | ||
| Pareuro, BV (2) | 20,000 | |||||
| (2) Pareuro, BV | ||||||
| Sonae, SGPS, SA | 400,000,000 | |||||
| (3) Migracom, SGPS, SA | ||||||
| Sonae, SGPS, SA | ||||||
| Purchase | 22.05.2007 | 593,616 | 2.03 | |||
| Purchase | 01.06.2007 | 147,376 | 2.17 | |||
| Purchase | 31.12.2007 | 549,008 | 1.98 | 1,290,000 | ||
| Imparfin, SGPS, SA (4) | ||||||
| Purchase | 23.07.2007 | 150,000 | 25.75 | 150,000 | ||
| (4) Imparfin, SGPS, SA | ||||||
| Sonae, SGPS, SA | 4,105,273 |
Shares held by shareholders
| Shareholders | Number of shares at 31.12.2007 |
|---|---|
| Sonae, SGPS, SA (1) | 824,780,810 |
| Sonae Investments, BV | 175,219,190 |
| Notes: | |
| (1) Efanor Investimentos, SGPS, SA | |
| Sonae, SGPS, SA | 658,804,424 |
| Pareuro, BV (2) | 20,000 |
| (2) Pareuro, BV | |
| Sonae, SGPS, SA | 400,000,000 |
| Shareholders | Number of shares | % Voting rights | |
|---|---|---|---|
| Sonae, SGPS, SA | 824,780,810 | 74.98% | |
| Sonae Investments, BV | 175,219,190 | 15.93% | |
| Soflorin, BV (1) | 100,000,000 | 9.09% | |
| Total attributable | 1,100,000,000 | 100.00% |
Note:
(1) Own shares as Soflorin,BV is 100% held by Sonae Distribuição, SGPS, SA
31 DECEMBER 2007
| IFRS | |||
|---|---|---|---|
| ASSETS | Notes | 31-12-2007 | 31-12-2006 |
| NON CURRENT ASSETS | |||
| Tangible assets | 8 | 1,624,215,706 | 1,245,522,480 |
| Goodwill | 9 | 563,903,201 | 61,141,604 |
| Intangible assets | 8 | 154,559,265 | 149,164,529 |
| Investments in associated companies | 5 | 39,082,244 | 17,823,351 |
| Other investments | 10 | 999,170 | 34,230,053 |
| Deferred tax assets | 17 | 22,286,220 | 23,413,248 |
| Other non-current assets | 11 | 1,820,126 | 1,825,831 |
| Total non-currents assets | 2,406,865,932 | 1,533,121,096 | |
| CURRENT ASSETS | |||
| Inventory | 12 | 457,866,661 | 340,651,297 |
| Trade accounts receivable | 13 | 32,409,579 | 30,300,343 |
| Other accounts receivable | 14 | 121,819,762 | 75,878,963 |
| Taxes recoverable | 15 | 51,067,860 | 58,282,812 |
| Other currents assets | 16 | 23,492,179 | 12,315,265 |
| Investments | 10 | 57,208,737 | 33,261,362 |
| Cash and cash equivalents | 18 | 67,853,490 | 359,415,148 |
| Total current assets | 811,718,268 | 910,105,190 | |
| Non current assets held for sale | 8 | 6,006,580 | |
| TOTAL ASSETS | 3,224,590,780 | 2,443,226,286 | |
| EQUITY AND LIABILITIES | |||
| EQUITY | |||
| Share Capital | 19 | 1,100,000,000 | 1,100,000,000 |
| Own Shares | 19 | (205,000,000) | (205,000,000) |
| Reserves and retained earnings | 19 | (223,444,442) | (307,971,049) |
| Net profit for the year attributable to the shareholders of Parent company | 167,492,214 | 158,079,602 | |
| Total equity attributable to the Shareholders of Parent company | 839,047,772 | 745,108,553 | |
| Minority interests | 20 | 12,096,474 | 10,930,910 |
| TOTAL EQUITY | 851,144,246 | 756,039,463 | |
| LIABILITIES | |||
| NON-CURRENT LIABILITIES | |||
| Bonds | 21 | 1,100,672,731 | 593,166,278 |
| Obligations under finance leases | 21,22 | 5,554,636 | 8,051,112 |
| Other Loans | 21 | 276,330 | 313,779 |
| Other non-current liabilities | 24 | 12,702,606 | 13,001,800 |
| Deferred tax liabilities | 17 | 36,423,318 | 36,985,189 |
| Provisions | 29 | 16,278,593 | 21,978,393 |
| Total non-current liabilities | 1,171,908,214 | 673,496,551 | |
| CURRENT LIABILITIES | |||
| Bank Loans | 21 | 83,834,903 | 163,539,818 |
| Obligations under finance leases | 21,22 | 6,783,670 | 4,195,233 |
| Other Loans | 21 | 317,352 | 128,328 |
| Trade accounts payable | 26 | 835,856,284 | 637,520,855 |
| Other accounts payable | 27 | 80,848,547 | 77,110,117 |
| Taxes and contributions payable | 15 | 44,222,307 | 44,717,120 |
| Other current liabilities | 28 | 147,467,643 | 86,339,698 |
| Provisions | 29 | 2,207,614 | 139,103 |
| Total current liabilities | 1,201,538,320 | 1,013,690,272 | |
| TOTAL LIABILITIES | 2,373,446,534 | 1,687,186,823 | |
| TOTAL EQUITY AND LIABILITIES | 3,224,590,780 | 2,443,226,286 |
The accompanying notes are part of these consolidated financial statements
| IFRS | |||||
|---|---|---|---|---|---|
| 2007 | 2006 | ||||
| Notes | 4th Quarter 07 (1) | 31-12-2007 | 4th Quarter 06 (1) | 31-12-2006 | |
| Operational income | |||||
| Sales | 35 | 956,306,560 | 3,238,947,595 | 863,287,660 | 2,959,534,901 |
| Services rendered | 35 | 34,476,166 | 145,720,912 | 30,046,529 | 131,025,942 |
| Other operational income | 36 | 94,931,305 | 317,911,045 | 88,094,984 | 268,460,965 |
| Total operational income | 1,085,714,031 | 3,702,579,552 | 981,429,173 | 3,359,021,808 | |
| Operational expenses | |||||
| Cost of sales | 12 | (729,296,975) | (2,517,317,555) | (673,146,983) | (2,323,628,133) |
| External supplies and services | (130,624,744) | (458,137,503) | (107,115,180) | (396,209,755) | |
| Staff costs | (101,314,911) | (376,092,288) | (88,937,904) | (336,614,501) | |
| Depreciation and amortisation | 8 | (22,613,472) | (87,048,798) | (20,985,151) | (80,340,741) |
| Provisions and impairment losses | 29 | (1,206,500) | (1,737,549) | 49,223 | (4,591,593) |
| Other operational expenses | 37 | (19,816,594) | (51,286,979) | (14,694,982) | (42,651,395) |
| Total operational expenses | (1,004,873,196) | (3,491,620,672) | (904,830,977) | (3,184,036,118) | |
| Operational profit/(loss) | 80,840,835 | 210,958,880 | 76,598,196 | 174,985,690 | |
| Financial income | 38 | 9,596,429 | 19,471,969 | 5,665,144 | 14,350,125 |
| Financial expenses | 38 | (18,350,145) | (54,153,947) | (10,885,527) | (32,911,158) |
| Net financial expenses | 38 | (8,753,716) | (34,681,978) | (5,220,383) | (18,561,033) |
| Profit/(loss) related to associated companies | 147,455 | 247,316 | 344,266 | 836,951 | |
| Profit/(loss) related to investments | - | (587,173) | (820,407) | 12,709,145 | |
| Profit/(loss) before income tax | 72,234,574 | 175,937,045 | 70,901,672 | 169,970,753 | |
| Income Tax | 39 | (2,976,589) | (7,121,200) | (1,511,965) | (9,709,157) |
| Consolidated proft/(loss) for the period | 69,257,985 | 168,815,845 | 69,389,707 | 160,261,596 | |
| Attributable to: | |||||
| Equity holders of Parent Company | 68,764,950 | 167,492,214 | 68,882,978 | 158,079,602 | |
| Minority interests | 493,035 | 1,323,631 | 506,728 | 2,181,994 | |
| Profit/(Loss) per share (Basic and Diluted) | 40 | 0.07 | 0.17 | 0.06 | 0.15 |
(1) Unaudited Income Statements
| Att ribu tab le t o S har eho lde f Pa t C rs o ren om pan y |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Cu rren cy |
Oth ers |
||||||||||
| Not es |
Sh are |
Ow n |
Leg al |
Tra nsla tion |
He dg ing |
Re d ser ves an |
Ne t |
Min orit y |
Tot al |
||
| Ca ital p |
Sh are s |
Re ser ves |
Re ser ve |
Re ser ve |
Re tain ed Ear nin gs |
Pro fit/( Los s) |
Tot al |
Inte ts res |
Eq uity |
||
| Bal t 1 Jan 200 6 anc e a s a uar y |
19 | 1,1 00, 000 ,00 0 |
- | 90, 200 ,00 0 |
125 ,38 9 |
- | ( 557 ,82 9,5 49) |
214 ,12 2,5 70 |
846 ,61 8,4 10 |
8,7 17, 734 |
855 ,33 6,1 44 |
| f co fit o f 20 Ap iatio lida ted 05 pro pr n o nso pro |
- | ||||||||||
| Tra nsf er t o le l re d re tain ed nin ga ser ves an ear gs |
- | - | - | - | - | 214 ,12 2,5 70 |
( 214 ,12 2,5 70) |
- | - | - | |
| Div ide nds dis trib ute d |
- | - | - | - | - | ( 000 ,00 0) 55, |
- | ( 000 ,00 0) 55, |
- | ( 000 ,00 0) 55, |
|
| Acq uis itio f ow har n o n s es |
19 | ( 205 ,00 0,0 00) |
- | - | - | - | - | ( 205 ,00 0,0 00) |
- | ( 205 ,00 0,0 00) |
|
| Ch in r ang es ese rve s |
- | - | |||||||||
| Ch in f air val ang es ue |
- | - | - | - | - | 22, 000 |
- | 22, 000 |
- | 22, 000 |
|
| Ge d in the ate ner ye ar |
- | - | - | 385 ,32 0 |
- | - | - | 385 ,32 0 |
- | 385 ,32 0 |
|
| New ani uire d co mp es acq |
20 | - | - | - | - | - | - | - | - | 31, 182 |
31, 182 |
| Oth ers |
- | - | - | - | - | 3,2 21 |
- | 3,2 21 |
- | 3,2 21 |
|
| Co fit f Net lida ted or t he iod nso pro per |
- | - | - | - | - | - | 158 ,07 9,6 02 |
158 ,07 9,6 02 |
2,1 81, 994 |
160 ,26 1,5 96 |
|
| Bal t 31 De ber 20 06 anc e a s a cem |
1,1 00, 000 ,00 0 |
( 205 ,00 0,0 00) |
90, 200 ,00 0 |
510 ,70 9 |
- | ( 398 ,68 1,7 58) |
158 ,07 9,6 02 |
745 ,10 8,5 53 |
10, 930 ,91 0 |
756 ,03 9,4 63 |
|
| Bal t 1 Jan 200 7 anc e a s a uar y |
19 | 1,1 00, 000 ,00 0 |
( 205 ,00 0,0 00) |
90, 200 ,00 0 |
510 ,70 9 |
- | ( 398 ,68 1,7 58) |
158 ,07 9,6 02 |
745 ,10 8,5 53 |
10, 930 ,91 0 |
756 ,03 9,4 63 |
| Ap iatio f co lida ted fit o f 20 06 pro pr n o nso pro |
- | ||||||||||
| Tra nsf er t o le l re d re tain ed nin ga ser ves an ear gs |
- | - | 4,8 00, 000 |
- | - | 153 ,27 9,6 02 |
( 158 ,07 9,6 02) |
- | - | - | |
| Div ide nds dis trib ute d |
41 | - | - | - | - | - | ( 75, 000 ,00 0) |
- | ( 75, 000 ,00 0) |
( 10, 256 ) |
( 75, 010 ,25 6) |
| Ch in r ang es ese rve s |
- | - | |||||||||
| Ch in f air val ang es ue |
- | - | - | - | 919 ,62 4 |
- | - | 919 ,62 4 |
- | 919 ,62 4 |
|
| Ge ate d in the ner ye ar |
- | - | - | 593 ,91 3 |
- | - | - | 593 ,91 3 |
- | 593 ,91 3 |
|
| Tra nsf to net inc ers om e |
- | - | - | - | ( 381 ,45 5) |
- | - | ( 381 ,45 5) |
- | ( 381 ,45 5) |
|
| Acq uis itio f su bsid iari n o es |
20 | - | - | - | - | - | - | - | - | 116 ,86 9 |
116 ,86 9 |
| Oth ers |
- | - | - | - | - | 314 ,92 3 |
- | 314 ,92 3 |
( 264 ,68 0) |
50, 243 |
|
| Net Co lida ted fit f or t he iod nso pro per |
- | - | - | - | - | - | 167 ,49 2,2 14 |
167 ,49 2,2 14 |
1,3 23, 631 |
168 ,81 5,8 45 |
|
| Bal t 31 De ber 20 07 anc e a s a cem |
1,1 00, 000 ,00 0 |
( 205 ,00 0,0 00) |
95, 000 ,00 0 |
1,1 04, 622 |
538 ,16 9 |
( 320 ,08 7,2 33) |
167 ,49 2,2 14 |
839 ,04 7,7 72 |
12, 096 ,47 4 |
851 ,14 4,2 46 |
The accompanying notes are part of these consolidated financial statements
| Notes | 31-12-2007 | 31-12-2006 | |
|---|---|---|---|
| OPERATING EXPENSES | |||
| Cash receipts from trade debtors | 3,379,348,706 | 3,162,265,711 | |
| Cash paid to trade creditors | (2,718,261,054) | (2,533,510,663) | |
| Cash paid to employees | (367,381,880) | (331,977,598) | |
| Cash flow generated by operations | 293,705,772 | 296,777,450 | |
| Income taxes paid/(received) | (5,664,945) | (18,178,530) | |
| Other cash receipts/payments from operating activities | 1,672,760 | 13,082,081 | |
| Net cash flow operating activities (1) | 289,713,587 | 291,681,001 | |
| INVESTMENTS ACTIVITIES | |||
| Cash receipts related to: | |||
| Investments | |||
| Disposal of subsidiaries | 6 | 10,137,318 | 12,564,414 |
| Other investments | 14 | 22,369,435 | 16,573,114 |
| Tangible and intangible assets | 44,005,165 | 22,268,037 | |
| Interest and similar income | 13,574,458 | 8,812,177 | |
| Dividends | 225,169 | 162,169 | |
| Loans granted | 33 | 359,425,000 | 1,102,358,000 |
| 449,736,545 | 1,162,737,911 | ||
| Cash payments related to: | |||
| Investments | |||
| Acquisition of subsidiaries | 6 | (612,720,553) | 235,751 |
| Capital increase in subsidiaries | 5 | (21,011,577) | - |
| Other investments | 27 | (24,870,137) | (43,275,936) |
| Tangible and intangible assets | (236,120,750) | (220,199,054) | |
| Loans granted | 33 | (359,433,190) | (1,089,388,739) |
| (1,254,156,207) | (1,352,627,978) | ||
| Net cash used in investment activities (2) | (804,419,662) | (189,890,067) | |
| FINANCING ACTIVITIES | |||
| Cash receipts related to: | |||
| Loans obtained | 2,297,644,251 | 1,639,076,000 | |
| Capital increases in subsidiaries | 50,036 | 16,000 | |
| 2,297,694,287 | 1,639,092,000 | ||
| Cash payments related to: | |||
| Loans obtained | (1,956,125,925) | (1,656,064,963) | |
| Interest and similar charges | (45,346,651) | (27,879,887) | |
| Dividends | (75,010,292) | (54,999,980) | |
| Acquisition of own shares | - | (205,000,000) | |
| (2,076,482,868) | (1,943,944,830) | ||
| Net cash from/(used in) financing activities (3) | 221,211,419 | (304,852,830) | |
| Net increase/(decrease) in cash and equivalents (4) = (1) + (2) + (3) | (293,494,656) | (203,061,896) | |
| Effect of foreign exchange rate | (72,602) | 20,759 | |
| Cash and cash equivalents at the beginning of the year | 18 | (357,690,994) | (560,773,649) |
| Cash and cash equivalents at the end of the year | 18 | 64,268,940 | 357,690,994 |
The accompanying notes are part of these consolidated financial statements
(Translation of consolidated financial statements originally issued in Portuguese – Note 45)
SONAE DISTRIBUIÇÃO, SGPS, S.A. ("the Company" or "Sonae Distribuição"), formerly known as Modelo Continente, SGPS, S.A., is a Portuguese Corporation, holds its headoffice in Rua João Mendonça nº 529, 4464-501 Senhora da Hora, Portugal is the Parentcompany of a group of companies, as detailed in Notes 4 and 5 ("Sonae Distribuição Group") which main activities are detailed in Note 42.
The attached financial statements are presented in Euro as it is the preferentially used currency in the economic environment where the Group operates. The foreign operations which functional currency is not the Euro are included in the final statements according to the policy described in Note 2.2.d).
The principal accounting policies adopted in preparing the accompanying consolidated financial statements are as follows:
The accompanying consolidated financial statements have been prepared from the books and accounting records of the companies included in the consolidation (Notes 4 and 5) on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") applicable on 1 January 2007, as adopted by the European Union.
Interim financial statements are presented quarterly, in accordance with IAS 34 – "Interim Financial Reporting".
During 2007 the Group adopted for the first time IFRS 7 "Financial Instruments: Disclosures" and consequential amendments to IAS 1-"Presentation of Financial Statements", which are effective for years beginning on or after 1 January 2007. The impact of the adoption of this standard was to expand the disclosures provided in these financial statements regarding the financial instruments used by the Group.
On 1 January 2007, the following interpretations came into effect: IFRIC 7 - "Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies"; IFRIC 8 - "Scope IFRS 2"; IFRIC 9 - "Reassessment of Embedded Derivatives" and IFRIC 10 - "Interim Financial Reporting and Impairment. The adoption of these Interpretations has not led to any material changes in the Group's accounting policies and financial statements as at 31 December 2007.
As at 31 December 2007 the following standards and interpretations were in issue: IAS 23 Revision "Borrowing Costs", IFRS 8 - "Operating segments", IFRIC 13 - "Customer Loyalty Programmes", IFRIC 11 IFRS 2 - "Group and Treasury Share Transactions" and IFRIC 12 - "Service Concession Arrangements". At the issuance date of these financial statements, these Standards and Interpretations were in issue but not yet effective, and therefore have not been applied in these financial statements. The application of these changes will not produce material changes in the future financial statements of the Group with the exception of changes in segment disclosures required by IFRS 8, which will result in an increase of segment disclosure and information to the segments analyses. Its application only is compulsory for year beginning on or after 1 January 2009.
At 31 December 2007, the endorsement process by the European Union has not yet been completed for the following standards or interpretations: IAS 23 revision, IFRS8, IFRIC12 and IFRIC13.
These consolidated financial statements have been prepared under the historical cost convention, except for some financial instruments which are measured at fair value (Note 2.11).
The consolidation methods adopted by the Group are as follows:
a) Investments in Group companies
Investments in companies in which the Group owns, directly or indirectly, more than 50% of the voting rights at Shareholders' General Meetings or is able to govern the financial and operational policies so as to benefit from its activities (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 Minority interests, in the consolidated balance sheet and in the consolidated income statement, respectively. Companies included in the consolidated financial statements are listed in Note 4.
When losses attributable to minority interests exceed the minority interest in the equity of the Group company, the excess, and any further losses attributable to minority interests, are charged against the equity holders of the Group except to the extent that minority shareholders have a binding obligation and are able to cover such losses. If the Group Company subsequently reports profits, such profits are allocated to the equity holders of the Group until the minority's share of losses previously absorbed by the equity holders of the Group has been recovered.
Assets and liabilities of each Group company are measured at their fair value at the date of acquisition. 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 recognised as income in profit or loss for the period of acquisition, after reassessment of the estimated fair value. Minority interests include their proportion of the fair value of net identifiable assets and liabilities recognised.
The results of Subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Adjustments to the financial statements of Group companies are performed, whenever necessary, in order to adapt accounting policies to those used by the Group. All intragroup transactions, balances, income and expenses and distributed dividends are eliminated on consolidation.
Whenever the Group has, in the 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.
Investments in associated companies (companies where the Group holds a significant influence but does not hold the control or the joint control over the decisions, through the participation in the financial and operating decisions – usually corresponding to holdings between 20% and 50% in a company's share capital) are accounted for in accordance with the equity method.
Under the equity method, investments are recorded at cost, adjusted by the amount corresponding to the Group's share of changes in equity (including net profit) of the associated companies and to 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 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 under the caption Share of profit of associates.
An assessment of investments in associated companies is performed when there is an indication that the asset might be impaired. Any impairment loss is recorded in the income statement. Impairment losses recorded in prior years that are no longer justifiable are reversed.
When the Group's share of losses exceeds the carrying amount of the investment, the investment is reported at nil value, unless the Group is committed beyond the associate, in which case a provision is recorded on that amount.
The Group's share in unrealized gains arising from transactions with associated companies is eliminated, proportionately to the Group's interest in the associated companies against the carrying amount of the investment in the same associated company. Unrealized losses are similarly eliminated, but only to the extent that there is no evidence of impairment of the asset transferred.
Investments in associated companies are disclosed in Note 5.
c) Goodwill
The excess of the cost of acquisition of investments in subsidiaries, jointly controlled 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 or as Investments in associated companies (Note 8). 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 Reserves and Retained Earnings.
Goodwill is not amortised, but it is subject to impairment tests on an annual basis. Impairment losses recognized in the period are recorded in the income statement under the caption Provisions and impairment losses.
Impairment losses related with goodwill cannot be reversed.
Any excess of the Group's share in the fair value of identifiable assets and liabilities in group and associated companies over cost, is recognised as income in the profit or loss for the period, at the date of acquisition, after reassessment of the fair value of the identifiable assets and liabilities acquired.
Goodwill arising from acquisitions made prior to the date of transition to IFRS (1 January 2004) is stated using the carrying amounts, net of accumulated amortisation, calculated in accordance with generally accepted accounting principals in Portugal, adjusted for intangible assets which do not meet IFRS criteria, and is subject to impairment tests. Impacts of these adjustments were recorded in Retained earnings, in accordance with IFRS 1. Goodwill arising from foreign companies was recalculated retrospectively using the functional currency of each such company. Exchange rate differences generated in the translation were also recorded against Retained earnings (IFRS 1).
Assets and liabilities denominated in foreign currencies in the financial statements of foreign companies are translated to euro using exchange rates at the balance sheet date. Profit and loss and cash flows are converted to euro using the average exchange rate for the period. Exchange rate differences originated after 1 January 2004 are recorded as equity under Currency translation reserves in Reserves and retained earnings. Exchange rate differences that were originated prior to 1 January 2004 (date of transition to IFRS) were written-off through Retained Earnings.
Goodwill and fair value adjustments arising from the acquisition of foreign companies are recorded as assets and liabilities of those companies and translated to euro using exchange rates at the balance sheet date.
Whenever a foreign company is sold, accumulated exchange rate differences are recorded in the income statement as a gain or loss from the disposal of financial investments.
Exchange rates used on translation of foreign group and associated companies are listed below:
| 31.12.07 | 31.12.06 | |||||
|---|---|---|---|---|---|---|
| End of Period | Average of Period |
Average of Period |
||||
| Brazilian real | 0.38516 | 0.37577 | 0.35564 | 0.36658 |
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 that date are recorded at acquisition cost, net of depreciation and accumulated impairment losses.
Depreciation is calculated on a straight line basis, as from the date the asset becomes ready for use, over the expected useful life for each class of assets and recorded in "Depreciation and Amortisation" on the consolidated financial statements.
Impairment losses detected on tangible assets are recorded in the year estimated against the income statement caption "Provisions and impairment losses".
The depreciation rates used correspond to the following estimated useful lives:
| Years | |
|---|---|
| Buildings | 50 |
| Basic equipment | 10 a 15 |
| Transport equipment | 5 |
| Tools and containers | 4 |
| Fixture and fittings | 10 |
| Other tangible assets | 5 |
Maintenance and repair costs related to tangible assets are recorded directly as costs in the year they are incurred.
Tangible assets in progress represent fixed assets still in course of construction/promotion and are stated at acquisition cost net of eventual impairment losses. These assets are depreciated from the date they are completed or become ready for use.
Gains or losses on sale or disposal of tangible assets are calculated as 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 losses".
Intangible assets are stated at acquisition cost, net of depreciations and accumulated impairment losses. Intangible assets are only recognized if, inherent to these, it is probable those future economic benefits will flow for the Group, 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 to the maintenance and development of software are recorded as an expense in the period in which they are incurred. Only the costs directly attributable to projects for which the existence of future economic benefits is probable are capitalized as intangible assets.
Depreciation is computed, starting from the date of completion or from the date the assets are available for use, on a straight line basis in accordance with the estimated useful life, usually 5 years and recorded in "Depreciation and Amortisation" on the consolidated financial statements.
Brands and patents with undefined useful lives are not amortised, but are subject to impairment tests on an annual basis.
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 as operating lease depends on the substance of transaction rather than the form of the contract.
Tangible assets acquired through finance lease agreements 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. Both the finance charge and the depreciation expenses for depreciable assets are recorded in the income statement in the period in which they are incurred.
Lease payments under operating lease agreements are recognised as an expense on a straight line basis over the lease term.
For operating lease agreements where the Group is lessor, assets remain recorded in the Group's balance sheet, and the revenue is recognized on a straight line basis during the period of the agreement.
Government grants are recorded 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. Grants related to depreciable assets are disclosed as "Other non-current liabilities" and are recognised as income on a straight line basis over the expected useful lives of those underlying assets.
Grants related to incurred costs are recorded as profit in the extent there is a reasonable assurance that these will be received, that the granted costs have already been incurred and that the Company will comply with the conditions necessary for its grant.
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 recorded in the income statement under Provisions and impairment losses.
The recoverable amount is the higher of an asset's net sale price less costs to sell and its value in use. Net sale price less costs to sell is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash-generating unit to which the asset belongs.
Reversal of impairment losses recognised in prior years is only recorded when it is concluded that the impairment losses recognised for the asset no longer exist or have decreased. This analysis is performed whenever there is an indication that the impairment loss previously recognised has been reversed. The reversal is recorded in the income statement as Operational income. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognised to the extent it does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for that asset in prior years.
Borrowing costs are usually recognized as an expense in the period in which they are incurred.
Borrowing costs relating directly to the acquisition, construction or production of fixed assets are capitalized as part of the cost of the qualified asset. Borrowing costs are capitalized from the time of preparation of the activities to construct or develop the asset to the time the production or construction is completed or when the asset is suspended. Any eventual financial income derived from a loan obtained and allocable to a qualifying asset, are deducted to the financial expenses that qualify for capitalization.
Inventories held by the group are stated at acquisition cost, deducted from quantity discounts received or to be received from suppliers, which is lower than their market value. Inventories are valued at the last purchase price. Considering the rotation level of inventories at the stores this method is not materially different from FIFO or weighted average cost.
The difference between the inventory cost and its net realizable value, if negative, is recorded as an operating expense under Cost of sales.
Provisions are recognized 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 to reflect the best estimate as of that date.
Restructuring provisions are recorded by the Group whenever a formal and detailed restructuring plan exists and that plan has been communicated to the involved parties.
The Group classifies the financial instruments in the categories presented and conciliated with the Consolidated Balance Sheet as disclosed in Note 21.
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.
The investments measured at the fair value through profit or loss include the investments held for trading that the Group acquires with the purpose of trading in the short term. They are classified in the consolidated balance sheet as current assets.
The Company classifies an available-for-sale investment as non-current assets.
All purchases and sales of investments are recognised on the trade date, independently of the settlement date.
Investments are initially measured at fair value, which is the fair value of the consideration paid for them, including transaction costs in the case of available for sale assets and held to maturity investments.
Available-for-sale investments and investments measured at fair value through profit or loss are subsequently recorded at fair value excluding any deduction of transaction costs which may be incurred during its sale taking into consideration the stock market price at the balance sheet date. Investments in equity instruments that do not have a market price and whose fair value cannot be reliably measured are stated at cost less impairment losses.
Gains or losses arising from changes in fair value of available-for-sale investments are recorded directly under the Fair value reserve in Equity, until the investment is sold or otherwise disposed of, or until it is considered to be impaired, at which time the cumulative gain or loss previously recorded in equity is transferred to net profit or loss for the period.
Changes in the fair value of investments measured at fair value through profit or loss are included in the consolidated income statement for the period under financial expenses or gains.
Held to maturity investments are carried at amortized cost using the effective interest rate method, net of capital reimbursements and interest income received.
Trade accounts receivables and other accounts receivable are recorded at their nominal value and presented in the consolidated balance sheet net of eventual impairment losses, recognised under the allowance account Impairment losses on accounts receivable , in order to reflect its net realisable value.
Impairment is recognised if there is objective and measurable evidence that, as a result of one or more events that occurred, the balance will not be fully received. For this purpose, each group company take into consideration market information that evidences that the client is not accomplishing its responsibilities as well as historic information about due and not received balances.
Recognized Impairment losses equal the difference between the carrying amount of the receivable and the corresponding present value of the estimated future cashflows, discounted at the initial effective interest rate. The initial effective interest rate is considered null when the collection is expected within one year.
Financial liabilities and equity instruments are classified and accounted for based upon their contractual substance, independently from the legal form they assume.
d) Loans
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 accrual basis, in accordance with the accounting policy defined in Note 2.8. The portion of the interest charge regarding up-front fees and commissions, if not paid in the period, is added to the book value of the loan.
Trade and other accounts payable are stated at their nominal value.
f) Derivatives
The Group uses derivatives in the management of its financial risks, only to hedge such risks. Derivatives are not used by the Group for trading purposes.
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 the interest rates of its loans are initially accounted for at value and subsequently adjusted to the corresponding fair value. Changes in fair value of these cash flow hedge instruments are recorded in equity under the caption Hedging reserves, and then recorded in the income statement over the same period in which the hedged instrument affects the income statement.
The fair value of these instruments is estimated by the Group using specific software based on the discounted cash flow of the difference between the fixed interest rate of the fixed leg and the indexed variable interest rate inherent to the variable leg.
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 and deferred in equity under the caption Hedging reserve are transferred to profit and loss of the year or in 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 those cases in which the derivatives, despite being negotiated to hedge financial risks inherent to the business (essentially, currency "forwards" to hedge future imports), do not fulfil the criteria for hedge accounting under IAS 39, changes in the fair value are recorded directly in the 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 when these are not stated at fair value. Gains and losses which are not realizable are recorded in the Income statement.
Additionally, the Group also negotiates, in specific situations, interest rate derivatives and foreign exchange rate derivatives directed to hedge fair values. In these cases, the derivatives are stated at fair value through the Income statement. When the hedged instrument is not measured at fair value (i.e. loans which are recorded at amortized cost) the book value is adjusted by the amount which is effectively hedged through the profit and loss.
Equity instruments are those that represent a residual interest upon the Group's net assets and are recorded by the amount received, net of costs incurred with their issuance.
Cash and cash equivalents includes cash on hand, cash at banks, term deposits and other treasury applications which mature in less than three months and that are subject to insignificant risk of changes in value.
In the consolidated statement of cash flows, cash and cash equivalents also include bank overdrafts, which are included in the consolidated balance sheet caption Borrowings.
Own shares are recorded at acquisition cost as a deduction to equity. Profit or losses resulting from disposal of own shares are recorded directly in equity not affecting the profit or loss for the period.
Share based payments result from Deferred Performance Bonus Plans that are referenced to the evolution of the Sonae SGPS, SA shares' price.
Share based payments liabilities are measured at fair value on the date they are granted (usually in March each year) and are subsequently remeasured at the end of each reporting period based on the number of shares granted and the corresponding fair value at the closing date. These obligations are stated as staff costs and other current and non-current liabilities, and are recorded on a straight line basis, between the date the shares are granted and their vesting date, taking into consideration the time elapsed between these dates when referring to shares or call options which can be net settled through down payment. In the case of equity-settled share-based payment transactions, these obligations are stated as Personnel expenses and Reserves and are recorded on a straight line basis between the date the shares are granted and their vesting date.
Contingent liabilities are not recorded in the consolidated financial statements, being disclosed, unless the probability of a cash outflow is remote, in which case, no disclosure is made.
Contingent assets are not recorded in the consolidated financial statements but disclosed when the existence of future economic benefit is probable.
The tax charge for the year is determined based on the taxable income of each company included in the consolidation perimeter taking into consideration deferred taxes when applicable.
Current income tax is determined based on the taxable income of companies included in the consolidation, in accordance with the tax rules in force in their respective country of incorporation, considering the interim period income and using the estimated effective average annual income tax rate.
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 expected to apply in the periods when the temporary differences are expected to reverse.
Deferred tax assets are recognized 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 recognized and expected to reverse in the same period.
Deferred tax assets and liabilities are not recognized when the temporary differences arise from goodwill or from the initial recognition of assets and liabilities except if the referred assets and liabilities are recognized in result of a business combination.
At each balance sheet date a review is made of the deferred tax assets recognized, being reduced whenever their future use is no longer probable.
Deferred tax assets and liabilities are recorded in the income statement, except if they relate to items directly recorded in equity. In these cases the corresponding deferred tax is recorded in Equity.
Revenue from the sale of goods is recognized in the consolidated 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 recorded 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 recorded in the consolidated income statement taking into consideration the stage of completion of the transaction at the balance sheet date.
Revenue related to services rendered by travel agencies is recognized with the issuance of invoice. At balance sheet date, adjustments are made under Other current assets and Other current liabilities in order to accrue for revenue of the services already rendered but whose billing had not occurred yet, as well as for the associated expenditures.
Dividends are recognized as income in the year in which they are attributed to the shareholders.
Income and expenses are recorded in the year to which they relate, independently of the date of the corresponding payment or receipt. Income and expenses for which their real amount is not known are estimated.
Other current assets and Other current liabilities include income and expenses of the reporting year which will only be invoiced in the future. Those captions also include receipts and payments that have already occurred but will only correspond to income or expenses in future years, thus being recorded in the income statement of the future period.
Transactions are recorded in the financial statements of each subsidiary based on the functional currency of that subsidiary using the exchange rates on the date of each transaction.
At each balance sheet date, all monetary assets and liabilities expressed in foreign currencies are translated to the functional currency of each entity at the foreign exchange rates prevailing as of 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 subsidiary, using the exchange rate at the date the fair value was determined.
Exchange gains and losses arising from differences between the historical foreign exchange rates and those prevailing at the date of collection, payment or the date of the balance sheet, are recorded as profits or loss for the period, except those related to non-monetary assets or liabilities, in which, the adjustments to the fair value are directly recorded under equity.
When exposure to currency risk is aimed to be minimized, the Group negotiates hedging currency derivatives (Note 2.11.f)).
Post-balance-sheet events that provide additional information about conditions that existed at the balance sheet date (adjusting events), are reflected in the consolidated financial statements. Post-balance-sheet events that are not adjusting events are disclosed in the notes to the consolidated financial statements when considered to be material.
The most significant accounting estimates reflected in the consolidated financial statements include:
Estimates used are based on the best information available during the preparation of consolidated financial statements and are based on best knowledge of past and present events. Although future events are neither controlled by the Group nor foreseeable, some could occur and have impact on the estimates. Changes to the estimates used by the management that occur after the date of these consolidated financial statements, will be recognised in net income, in accordance with IAS 8, using a prospective methodology.
In each year the segments applicable to the group are identified. As at 31 December 2007 no secondary segment was identified, considering that the Group operates mainly in Portugal, and that a business segment was chosen as a primary segment.
Information regarding business and geographic segments identified is included in Note 42.
Risk management general principles are approved by the Board of Directors, and its implementation is supervised by the group's finance department.
The interest and exchange rate risk have a decisive importance in the Group's market risk management.
The Group uses derivatives to hedge certain exposures related to its market risk and does not enter into derivatives or other financial instruments for trading or for speculative purposes.
The group exposure to the interest rate risk arises mainly from the long term loans which bear interests indexed to Euribor.
The group aim is to limit the cash-flow and net income volatility having in mind their operational activity profile by the use of an adequate combination of variable and fix rate debt. Group's policy allows interest rate derivates usage in order to reduce Euribor's variability exposure and not for speculative purposes.
Derivatives used by the group in interest rate risk management qualify as hedging instruments as they configure perfect hedging operations. Conditions established for these cash flow hedge instruments are identical to those of the corresponding loans in terms of base rates, calculation rules, rate setting dates and repayment schedules of the loans and for these reasons they qualify as perfect hedges.
The exposure to interest rate risk is estimated to be reduced as, if interest rates of euro denominated financial instruments had been 75 basis points higher/lower during 2007, the consolidated net profit before tax for the year ended 31 December 2007 would decrease/increase by approximately 4.1 million euro (2.0 million euro decrease/increase in 2006 consolidated net profit before tax), considering the contractual refixing dates and excluding other effects arising from the company operations.
The impact on the financial statement of changes in foreign exchange rates is reduced, as the most part of the operational cash-flows are denominated in Euro. The group is only exposed to foreign exchange rate risk due to purchases of inventories denominated in US Dollars.
The exchange risk management purpose is to provide a stable decision platform when deciding and negotiating the purchases of inventories establishing known and stable prices. The hedging accompanies all the purchase process, since procurement up to the formal agreement of purchase.
The exchange risk exposure is monitored through the purchase of forwards with the goal of minimising the negative impacts of volatility in exposure level as a consequence of changes of the amounts of imports denominated in other currencies rather than euro.
As at 31 December 2007 and 2006 the assets and liabilities denominated in a currency different from the subsidiary functional currency were the following (amounts in Euro):
| ASSETS | LIABILITIES | |||
|---|---|---|---|---|
| 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | |
| Brazilian real | 1,311,595 | 959,795 | 4,585,100 | 650,094 |
| British pound | - | 11,260 | 113,478 | 77,814 |
| US dollar | 877,150 | 1,059,536 | 3,574,320 | 1,118,970 |
| Hungarian Florins | 61,351 | 78,770 | - | - |
Considering the exposure above, which is considered immaterial, no sensitivity analysis is disclosed.
The purpose of liquidity risk management is to ensure, at all times, that the group has the financial capacity to fulfil its commitments as they become due and to carry on its business activities and strategy, through the management of the trade off cost and maturity of debt.
The group follows an active policy of re-financing its debts by maintaining a high level of unused and available on demand resources to face short term needs and by increasing or maintaining an adequate debt maturity, according to the estimated cash-flows, and to the capability of leveraging its balance sheet.
Negotiating contractual terms which reduce the possibility of the lenders being able to demand an early termination is also considered as an important mean of managing liquidity risk. The group also assures, in its relationship with financial institutions, a high level of diversification of financing sources and counterparties, in order to ease the ability of entering new loan agreements and to minimize the effects of any relationship discontinuance.
The liquidity analysis of each class of financial liabilities is presented in the corresponding notes.
The group is exposed to the credit risk in its current operational activity. The credit risk in the scope of its current operational activity is managed through a system of gathering financial and qualitative information from independent entities that supply risk information, in order to allow the assessment of credit risk from debtors. The credit risk from suppliers arises from advances made to or discounts billed to suppliers and is mitigated by the expectation of maintaining the commercial relationship. The amounts presented in the balance sheet are net of impairment losses, thus reflect its fair value.
The group is also exposed to the credit risk in its relationship with financial institutions, in result of bank deposits, debt instruments available facilities, derivates, among others.
The credit risk is limited by risk concentration management, and by a selection of counterparties, which have a high national and international prestige, with at least a credit rating of BBB or an equivalent rating issued by other international agencies.
The subsidiaries, its head offices and percentage of capital held as of 31 December 2007 and 2006 are as follows:
| Head | % held 31.12.2007 |
% held 31.12.2006 |
|||
|---|---|---|---|---|---|
| Company | Office | Direct | Total | Direct | Total |
| Parent Company | |||||
| Sonae Distribuição SGPS, S. A. Sonae Distribuição |
Matosinhos | ||||
| Best Offer – Prestação de Informações pela Internet, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Bertimóvel - Sociedade Imobiliária, S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| Bikini, Portal de Mulheres, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| g) Cacetinho – Comércio Retalhista e Expl. Centros Comerciais, S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| Canasta – Empreendimentos Imobiliários, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Carnes do Continente – Industria e Distribuição Carnes, S.A. | Santarém | 100.00% 100.00% 100.00% 100.00% | |||
| Chão Verde - Sociedade de Gestão Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Citorres - Sociedade Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Cumulativa - Sociedade Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Contibomba - Comércio e Distribuição de Combustíveis, S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| Contimobe - Imobiliária de Castelo de Paiva, S.A. | Castelo de Paiva | 100.00% 100.00% 100.00% 100.00% | |||
| j) Continente Hipermercados, S.A. | Lisbon | 99.86% | 99.86% | - | - |
| Difusão - Sociedade Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Distrifin - Comercio y Prestacion de Servicios, S.A. | Madrid(Spain) | 100.00% 100.00% 100.00% 100.00% | |||
| Efanor – Design e Serviços, S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| Efanor - Industria de Fios, S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| Equador & Mendes - Agencia de Viagens e Turismo, Lda | Lisbon | 75.00% | 67.50% | 75.00% | 67.50% |
| Estevão Neves - Hipermercados da Madeira, S.A. | Funchal | 100.00% 100.00% 100.00% 100.00% | |||
| Fozimo - Sociedade Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Fozmassimo - Sociedade Imobiliária, S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| b) Fundo Fechado de Investimento Imobiliário Efisa Imobiliário | Lisbon | 100.00% 100.00% 100.00% 100.00% | |||
| Fundo de Investimento Imobiliário Imosonae Dois | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Global S Hipermercado, Lda. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| IGI – Investimento Imobiliário, S.A. | Porto | 100.00% 100.00% 100.00% 100.00% | |||
| Igimo – Sociedade Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| e) Iginha – Sociedade Imobiliária, S.A. | Matosinhos | 100.00% 100.00% | - | - | |
| Imoconti – Sociedade Imobiliària, S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| Imoestrutura – Sociedade Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Imomuro – Sociedade Imobiliária, S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| f) Imoponte – Sociedade Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Imoresultado – Sociedade Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Imosistema – Sociedade Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Infofield – Informática, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Inventory - Acessórios de Casa, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Marcas MC, zRT | Budapest | 100.00% 100.00% 100.00% 100.00% | |||
| m) Maxoffice – Artigos e Serviços para Escritório, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| MJLF-Empreendimentos Imobiliários, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Modelo - Distribuição de Materiais de Construção, S.A. | Maia | 50.00% | 50.00% | 50.00% | 50.00% |
| Modalfa – Comércio e Serviços, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Modelo.Com - Vendas por Correspondência, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| a) Modelo – Sociedade Gestora de Participações Sociais, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| Modelo Continente Hipermercados, S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| Modelo Continente – Operações de Retalho, S.G.P.S., S.A. | Matosinhos | 100.00% 100.00% 100.00% 100.00% | |||
| h) Modelo Continente Seguros – Sociedade de Mediação, S.A. | Porto | 75.00% | 75.00% | - | - |
| Modelo Hiper Imobiliária, S.A. | Maia | 100.00% 100.00% 100.00% 100.00% | |||
| k) Modelo Hipermercados Trading, S.A. | Madrid(Spain) | 100.00% 100.00% | - | - |
| % of capital held | % of capital held 31.12.2006 |
||||
|---|---|---|---|---|---|
| Company | Head of Office |
31.12.2007 Direct |
Total | Direct | Total |
| g) Modis - Distribuição Centralizada, S.A. | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% |
| d) NA - Equipamentos para o Lar, S.A. | Matosinhos | 100.00% | 100.00% | - | - |
| d) NA - Comércio de Artigos de Desporto, S.A. | Matosinhos | 100.00% | 100.00% | - | - |
| Nova Equador Internacional - Agencia de Viagens e Turismo, Lda | Lisbon | 75.00% | 67.50% | 75.00% | 67.50% |
| l) Nova Equador P.C.O. E Eventos, Sociedade Unipessoal, Lda | Lisbon | 100.00% | 100.00% | - | - |
| g) Ok Bazar - Comércio Geral, S.A. | Ermesinde | 100.00% | 100.00% | 100.00% | 100.00% |
| a) Parcium Imobiliária, S.A. | Porto | 100.00% | 100.00% | 100.00% | 100.00% |
| c) Pharmacontinente-Saúde e Higiene, S.A. | Matosinhos | 100.00% | 100.00% | - | - |
| Predicomercial – Promoção Imobiliária, S.A. | Maia | 100.00% | 100.00% | 100.00% | 100.00% |
| Peixes do Continente-Indústria e Distribuição de Peixes, S.A. | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% |
| Solaris Supermercados, S.A. | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% |
| Selifa - Sociedade de Emprendimentos Imobiliários de Fafe, S.A. | Maia | 100.00% | 100.00% | 100.00% | 100.00% |
| Sempre à Mão - Sociedade Imobiliária, S.A. | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% |
| Sesagest – Projectos e Gestão Imobiliária, S.A. | Porto | 100.00% | 100.00% | 100.00% | 100.00% |
| Sociloures – Sociedade Imobiliária, S.A. | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% |
| Socijofra – Sociedade Imobiliária, S.A. | Gondomar | 100.00% | 100.00% | 100.00% | 100.00% |
| Soflorin, B.V. | Amsterdam (Holand) | 100.00% | 100.00% | 100.00% | 100.00% |
| Sonae Capital Brasil, Ltda | São Paulo (Brazil) | 100.00% | 100.00% | 100.00% | 100.00% |
| SM Empreendimentos Imobiliários, Ltda | Porto Alegre (Brazil) | 100.00% | 100.00% | 100.00% | 100.00% |
| Sonae Retalho España – Servicios Generales, S.A. | Madrid (Spain) | 100.00% | 100.00% | 100.00% | 100.00% |
| Sondis Imobiliária, S.A. | Maia | 100.00% | 100.00% | 100.00% | 100.00% |
| Sontária - Empreendimentos Imobiliários, S.A. | Maia | 100.00% | 100.00% | 100.00% | 100.00% |
| Sonvecap, B.V. | Amsterdam (Holand) | 100.00% | 100.00% | 100.00% | 100.00% |
| Sport Zone – Comércio de Artigos de Desporto, S.A. | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% |
| g) SRE - Projectos e Consultadoria, S.A. | Maia | 100.00% | 100.00% | 100.00% | 100.00% |
| Star-Viagens e Turismo, S.A. | Lisbon | 90.00% | 90.00% | 90.00% | 90.00% |
| Tlantic Sistemas de Informação, Ltda | Porto Alegre (Brazil) | 100.00% | 100.00% | 100.00% | 100.00% |
| Todos os Dias – Comércio Ret. E Explor.Centros Comerciais, S.A. | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% |
| i) Valor N, S.A. | Matosinhos | 100.00% | 100.00% | - | - |
| Worten – Equipamentos para o Lar, S.A. | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% |
| k) Worten España, S.A. | Madrid (Spain) | 100.00% | 100.00% | - | - |
These companies have been included in the consolidation by the integral consolidation method.
The associated companies, their head offices and the percentage of the share capital held as at 31 December 2007 and 2006 are as follows:
| % of Capital held | % of Capital held | Book Value | |||||
|---|---|---|---|---|---|---|---|
| Head | 31.12.2007 | 31.12.2006 | |||||
| Company | Office | Direct | Total | Direct | Total | 31.12.2007 | 31.12.2006 |
| Fundo de Investimento Imobiliário Fechado Imosede |
Maia | 42.16% | 42.16% | 33.81% | 33.81% | 34,616,937 | 13,734,183 |
| Mundo Vip - Operadores Turísticos, S.A. Sonaegest - Soc. Gestora de Fundos de |
Lisbon | 33.33% | 33.33% | 33.33% | 33.33% | 2,851,706 | 3,023,478 |
| Investimento,S.A. Sempre a Postos - Produtos Alimentares e |
Maia | 40.00% | 40.00% | 40.00% | 40.00% | 669,644 | 558,894 |
| Utilidades, S.A. | Lisbon | 25.00% | 25.00% | 25.00% | 25.00% | 943,957 | 506,796 |
| 39,082,244 | 17,823,351 |
Associated companies were included in the consolidation under the equity method, as referred to in Note 2.2.b).
Additionally, the aggregated amounts of main financial indicator's of these associated companies are as follows:
| Total Assets | Total liabilities Income Profit/loss for the year |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31.12.07 | 31.12.06 | 31.12.07 | 31.12.06 | 31.12.07 | 31.12.06 | 31.12.07 | 31.12.06 | |||
| Fundo de Investimento Imobiliário Fechado Imosede |
86,008,228 | 65,406,375 | 5,333,873 | 24,787,718 | 4,340,775 | 1,622,716 | (504,340) | 618,857 | ||
| Mundo Vip - Operadores Turísticos, S.A. a) |
7,742,898 | 8,845,246 | 7,265,602 | 8,213,892 | 62,864,853 | 66,756,878 | (154,058) | 132,389 | ||
| Sonaegest - Soc. Gestora de Fundos de Investimento,S.A. |
1,858,032 | 1,496,438 | 183,920 | 99,199 | 789,439 | 406,916 | 276,873 | 20,693 | ||
| Sempre a Postos - Produtos Alimentares e Utilidades, S.A. |
13,803,088 | 15,011,792 | 10,027,258 | 12,984,606 | 64,482,822 | 59,443,674 | 1,748,644 | 408,622 | ||
| 109,412,246 | 90,759,851 | 22,810,653 | 46,085,415 | 132,477,889 | 128,230,184 | 1,367,119 | 1,180,561 |
During the years ended 31 December 2007 and 2006, movements in Investments in associated companies, are as follows:
| 31.12.2007 | 31.12.2006 | |||
|---|---|---|---|---|
| Non-current | Current | Non-current | Current | |
| Investments in associated companies | ||||
| Balance as at 1 January | 17,823,351 | - | 8,080,761 | - |
| a) Increases | 21,011,577 | - | 16,383,901 | - |
| Transfers (Note 8) | - | - | (7,478,262) | - |
| Equity method effect | 247,316 | - | 836,951 | - |
| Balance as at 31 December | 39,082,244 | - | 17,823,351 | - |
a) In 2007 refers to capital increase of Fundo de Investimento Imobiliário Fechado Imosede, amounting to 21,011,577 Euro. In 2006 the increase includes the incorporation of Fundo de Investimento Imobiliário Fechado Imosede, as well as the acquisition cost of the Mundo Vip – Operadores Turísticos, S.A.
The main purchases and disposals of companies during the year ended 31 December 2007 were as follows:
| % of capital held | ||||
|---|---|---|---|---|
| Head | 31.12.2006 | |||
| Office | Direct | Total | Direct | Total |
| Matosinhos | ||||
| Porto | 75,00% | 75,00% | ||
| Matosinhos | ||||
| Lisbon | 99,86% | 99,86% | ||
| % of capital held 31.12.2007 100,00% 100,00% 100,00% 100,00% |
| Purchase date | ||||||
|---|---|---|---|---|---|---|
| Continente | ||||||
| Others | Others | Others | Hipermercados | Total | 31.12.2007 | |
| Book | Fair value | Book | ||||
| Value | Adjustments | Fair value | Value | |||
| Acquired net assets | ||||||
| Tangible and intangible | ||||||
| assets (Note 8) | 14,120,204 | 1,341,202 | 15,461,406 | 267,013,229 | 282,474,635 | 285,320,526 |
| Other current assets | 1,735,726 | 1,735,726 | 40,264,328 | 42,000,054 | 40,399,583 | |
| Cash and cash equivalents | 510,473 | 510,473 | 1,347,294 | 1,857,767 | 1,801,528 | |
| Deferred taxes | 8,808 | (355,418) | (346,610) | 1,845,583 | 1,498,973 | 1,564,950 |
| Loans | (6,821,755) | (6,821,755) | (83,038,919) | (89,860,674) | (83,038,919) | |
| Other liabilities | (8,696,570) | (8,696,570) | (150,218,081) | (158,914,651) | (167,654,589) | |
| 856,886 | 985,784 | 1,842,670 | 77,213,434 | 79,056,104 | 78,393,079 | |
| Goodwill (Note 9) | 377,371 | 504,847,714 | 505,225,085 | |||
| Minority interests | (12,476) | (104,393) | (116,869) | |||
| Aquisition price | 2,207,565 | 581,956,755 | 584,164,320 | |||
| Payments made | 9,029,320 | 611,200,000 | 620,229,320 | |||
| Amounts receivable as result of the price adjustment | (30,414,000) | (30,414,000) | ||||
| Financial debts up to the acquisition date | (6,821,755) | (6,821,755) | ||||
| Acquisitions costs | 1,170,755 | 1,170,755 | ||||
| 2,207,565 | 581,956,755 | 584,164,320 | ||||
| Net cash flow from acquisition | ||||||
| Payments made | 9,029,320 | 611,200,000 | 620,229,320 | |||
| Costs from acquisition | 1,170,755 | 1,170,755 | ||||
| Inter company loans at acquisition date | (6,821,755) | (6,821,755) | ||||
| Cash and cash equivalents | (510,473) | (1,347,294) | (1,857,767) | |||
| 1,697,092 | 611,023,461 | 612,720,553 |
The impact of the above mentioned acquisitions on the consolidated income statement is as follows:
| 791,800 | |
|---|---|
| (1,139,987) | |
| (605,994) | |
| Net profit before tax | (954,181) |
| 64,730 | |
| Net profit/(loss) for the period | (889,451) |
Had the above mentioned concentrations been reported to 1 January 2007, the operational income would have increased by 589,137,736 Euro.
The subsidiary Continente Hipermercados was acquired by the end of 2007, therefore no fair value allocation to acquired assets was made. The fair value estimate of acquired assets will be made during 2008. Consequently the value of the goodwill is considered to be provisional.
| % of capital held | % of capital held 31.12.2006 |
||||
|---|---|---|---|---|---|
| Head | Disposal date | ||||
| Company | Office | Direct | Total | Direct | Total |
| Imoponte-Sociedade Imobiliária, S.A. | Matosinhos | 100.00% | 100.00% | 100.00% | 100.00% |
Net assets of this subsidiary as at the date of disposal are as follows:
| Disposal of a | ||
|---|---|---|
| subsidiary | 31.12.2006 | |
| Net assets disposed of | ||
| Tangible assets | 9,928,909 | 9,700,630 |
| Deferred tax assets (note 17) | 910,761 | 871,296 |
| Other current assets | 150,897 | 150,544 |
| Cash and cash equivelents | 3,683 | 421 |
| Other non current liabilities | (4,316,000) | (11,837,000) |
| Deferred tax liabilities (note 17) | (12) | (16) |
| Other current liabilities | (10,396) | (920,356) |
| 6,667,842 | (2,034,481) | |
| Loss on disposal | (842,841) | |
| Disposal price | 5,825,001 | |
| Net cash inflow from the disposal | ||
| Cash received | 10,141,001 | |
| Cash and cash equivalents disposed of | (3,683) | |
| 10,137,318 | ||
| Intra-group loans at disposal date | (4,316,000) | |
| Enterprise Value | 5,821,318 |
The Intra-group loans above refers to inter company loans granted by the parent company of the disposed subsidiary, which is included in the cash received (10,141,001 Euro).
The net income of that subsidiary until its disposal is as follows:
| Disposal of a | |
|---|---|
| Subsidiary | |
| 2007 | |
| Services rendered | 57 |
| Other operational costs | 102 |
| Financial profit/(loss) | (265,584) |
| Net profit before tax | (265,425) |
| Income tax | 39,470 |
| Net profit/(loss) | (225,955) |
| (225,955) |
Main acquisitions and disposals during the year ended 31 December 2006 were as follows:
| % capital held | % capital held | ||||
|---|---|---|---|---|---|
| Head | 31.12.06 | 31.12.05 | |||
| Company | Office | Direct | Total | Direct | Total |
| Bertimóvel-Sociedade Imobiliária, S.A. | Matosinhos | 100.00% | 100.00% | ||
| Equador & Mendes-Agencia de Viagens e Turismo, Lda | Lisbon | 75.00% | 67.50% | 50.00% | 37.50% |
| Exit-Travel-Agencia de Viagens e Turismo On Line, S.A. | Maia | 100.00% | 90.00% | 50.00% | 25.00% |
| Nova Equador Internacional-Agencia de Viagens e Turismo, Lda | Lisbon | 75.00% | 67.50% | 50.00% | 37.50% |
| Star-Viagens e Turismo, S.A. | Lisbon | 90.00% | 90.00% | 50.00% | 50.00% |
| Parcium Imobiliária, S.A. | Porto | 100.00% | 100.00% |
The acquisitions referred to above, had the following impact on the consolidated financial statements as at 31 December 2006:
| Travel Agencies | Others | |||
|---|---|---|---|---|
| Book | Book | Total | ||
| Value | Value | Fair Value | Value | |
| Acquired net assets | ||||
| Tangible and intangible | ||||
| assets (note 8) | 5,497,807 | 12,393,731 | 17,891,538 | |
| Investments | 12,143 | 12,143 | ||
| Other current assets | 17,916,289 | 1,069,962 | 83,181 | 19,069,432 |
| Cash and cash equivalents | 974,431 | 7,339,573 | 8,314,004 | |
| Deferred taxes | 1,035,918 | (128) | 1,035,790 | |
| Loans | (1,256,399) | (21,496) | (1,277,895) | |
| Other liabilities | (27,157,208) | (12,766,211) | (39,923,419) | |
| (2,977,019) | 8,015,431 | 83,181 | 5,121,593 | |
| Goodwill (Note 9) | 8,685,939 | 651,388 | 9,337,327 | |
| Minority interests | 11,809 | 11,809 | ||
| Previous year provision as result of the equity method |
||||
| 775,929 | 775,929 | |||
| Acquisition price | 6,496,658 | 8,666,819 | 15,246,658 | |
| Payments made | 6,496,658 | 1,550,000 | 8,046,658 | |
| Future payments | - | 7,200,000 | 7,200,000 | |
| 6,496,658 | 8,750,000 | 15,246,658 | ||
| Net cash outflow from acquisition | ||||
| Payments made | 6,496,658 | 1,550,000 | 8,046,658 | |
| Cash and cash equivalents acquired | (974,431) | (7,339,573) | (8,314,004) | |
| 5,522,227 | (5,789,573) | (267,346) | ||
| Additional shareholdings in associated companies | 31,595 | |||
| (235,751) |
The impact of the above mentioned acquisitions on the consolidated income statement is as follows:
| 117,436,998 | |
|---|---|
| (116,039,874) | |
| (191,559) | |
| Net profit before tax | 1,205,565 |
| (786,528) | |
| Net profit/(loss) | 419,037 |
If the above mentioned purchases had been reported with reference to 1 January 2006, the net profit/(loss) would have increased by 288,357 and the operating income would have increased by 6,423,345 Euro.
| Notes | Loans and accounts receivable |
Available for sale |
Assets recorded at fair value through profit or loss |
Hedging derivates (Note 23) |
Sub-total | Assets not within scope of IFRS 7 |
Total | |
|---|---|---|---|---|---|---|---|---|
| Non current assets | ||||||||
| Other investments | 10 | 240,000 | 759,170 | 999,170 | 999,170 | |||
| Other non current assets | 11 | 1,820,126 | 1,820,126 | 1,820,126 | ||||
| 2,060,126 | 759,170 | 2,819,296 | 2,819,296 | |||||
| Current assets | ||||||||
| Trade accounts receivable | 13 | 32,409,579 | 32,409,579 | 32,409,579 | ||||
| Other debtors | 14 | 121,819,762 | 121,819,762 | 121,819,762 | ||||
| Other current assets | 16 | 11,829,490 | 11,829,490 | 11,662,689 | 23,492,179 | |||
| Investments | 10 | 56,093,108 | 1,971 | 1,113,658 | 57,208,737 | 57,208,737 | ||
| Cash and cash equivalents | 18 | 67,853,490 | 67,853,490 | 67,853,490 | ||||
| 290,005,429 | 1,971 | 1,113,658 | 291,121,058 | 11,662,689 | 302,783,747 | |||
| Total | 292,065,555 | 759,170 | 1,971 | 1,113,658 | 293,940,354 | 11,662,689 | 305,603,043 |
| Notes | Loans and accounts receivable |
Available for sale |
Assets recorded at fair value through profit or loss |
Hedging derivates (Note 23) |
Sub-total | Assets not within scope of IFRS 7 |
Total | |
|---|---|---|---|---|---|---|---|---|
| Non current assets | ||||||||
| Other investments | 10 | 900,000 | 33,330,053 | 34,230,053 | 34,230,053 | |||
| Other non current assets | 11 | 1,825,831 | 1,825,831 | 1,825,831 | ||||
| 2,725,831 | 33,330,053 | 36,055,884 | 36,055,884 | |||||
| Current assets | ||||||||
| Trade accounts receivable | 13 | 30,300,343 | 30,300,343 | 30,300,343 | ||||
| Other debtors | 14 | 75,878,963 | 75,878,963 | 75,878,963 | ||||
| Other current assets | 16 | 4,487,426 | 4,487,426 | 7,827,839 | 12,315,265 | |||
| Investments | 10 | 33,211,904 | 49,458 | 33,261,362 | 33,261,362 | |||
| Cash and cash equivalents | 18 | 359,415,148 | 359,415,148 | 359,415,148 | ||||
| 503,293,784 | 49,458 | 503,343,242 | 7,827,839 | 511,171,081 | ||||
| Total | 506,019,615 | 33,330,053 | 49,458 | 539,399,126 | 7,827,839 | 547,226,965 |
| As at 31 December 2007 | Liabilities at fair value through |
Other financial | Liabilities not within scope of |
|||
|---|---|---|---|---|---|---|
| Notes | profit or loss | liabilities | Sub-total | IFRS7 | Total | |
| Non current liabilities | ||||||
| Bank loans | ||||||
| Bonds | 21 | 1,100,672,731 | 1,100,672,731 | 1,100,672,731 | ||
| Obligations under financial leases | 22 | 5,554,636 | 5,554,636 | 5,554,636 | ||
| Other loans | 21 | 276,330 | 276,330 | 276,330 | ||
| Other non-current liabilities | 24 | 10,830,596 | 10,830,596 | 1,872,010 | 12,702,606 | |
| 1,117,334,293 | 1,117,334,293 | 1,872,010 | 1,119,206,303 | |||
| Current liabilities | ||||||
| Bank loans | 21 | 83,834,903 | 83,834,903 | 83,834,903 | ||
| Obligations under finance leases | 22 | 6,783,670 | 6,783,670 | 6,783,670 | ||
| Other loans | 21 | 281,123 | 36,229 | 317,352 | 317,352 | |
| Trade creditors | 26 | 835,856,284 | 835,856,284 | 835,856,284 | ||
| Other accounts payable | 27 | 80,848,547 | 80,848,547 | 80,848,547 | ||
| Other current liabilities | 28 | 144,777,374 | 144,777,374 | 2,690,269 | 147,467,643 | |
| 281,123 | 1,152,137,007 | 1,152,418,130 | 2,690,269 | 1,155,108,399 | ||
| Total | 281,123 | 2,269,471,300 | 2,269,752,423 | 4,562,279 | 2,274,314,702 |
| As at 31 december 2006 | Liabilities at fair | Liabilities not | |||||
|---|---|---|---|---|---|---|---|
| value through | Other financial | within scope of | |||||
| Notes | profit or loss | liabilities | Sub-total | IFRS7 | Total | ||
| Non-current liabilities | |||||||
| Bank loans | 21 | ||||||
| Bonds | 21 | 593,166,278 | 593,166,278 | 593,166,278 | |||
| Obligations under finance leases | 22 | 8,051,112 | 8,051,112 | 8,051,112 | |||
| Other loans | 21 | 313,779 | 313,779 | 313,779 | |||
| Other non-current liabilities | 24 | 10,767,334 | 10,767,334 | 2,234,466 | 13,001,800 | ||
| 612,298,503 | 612,298,503 | 2,234,466 | 614,532,969 | ||||
| Current liabilities | |||||||
| Bank loans | 21 | 163,539,818 | 163,539,818 | 163,539,818 | |||
| Bonds | 21 | ||||||
| Obligations under finance leases | 22 | 4,195,233 | 4,195,233 | 4,195,233 | |||
| Other loans | 21 | 116,043 | 12,284 | 128,327 | 128,327 | ||
| Trade creditors | 26 | 637,520,855 | 637,520,855 | 637,520,855 | |||
| Other accounts payable | 27 | 77,110,117 | 77,110,117 | 77,110,117 | |||
| Other current liabilities | 28 | 83,369,047 | 83,369,047 | 2,970,651 | 86,339,698 | ||
| 116,043 | 965,747,354 | 965,863,397 | 2,970,651 | 968,834,048 | |||
| Total | 116,043 | 1,578,045,857 | 1,578,161,900 | 5,205,117 | 1,583,367,017 |
As at 31 December 2007 and 2006, the financial instruments recorded at fair value through profit or loss are only derivatives that do not qualify for hedge accounting.
During the periods ended 31 December 2007 and 2006, movements in tangible and intangible assets as well as depreciation and accumulated impairment losses, were made up as follows:
| Other | Tangible | Advances on | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Land | Basic | Transport | Office | Tools | Reusable | tangible | assets | account of | Total | |
| and buildings | E quipment | Equipment | Equipment | and fittings | Containers | assets | in progress a) tangible assets | tangible | ||
| Gross cost | ||||||||||
| Opening balance | 1,027,788,651 | 479,043,575 | 15,346,401 | 96,146,283 | 8,319,375 | 80,429 | 2,006,122 | 29,402,940 | 17,147,599 | 1,675,281,375 |
| Changes in consolidation perimeter - Acquisitions | 249,123,401 | 38,721,989 | 1,580,910 | 6,937,941 | 18,401,874 | - | 57,869,991 | 372,636,106 | ||
| Changes in consolidation perimeter - Sales | (9,928,909) | - | - | (9,928,909) | ||||||
| Capital Expenditure | 19,776,057 | 1,356,472 | 193,909 | 1,887,220 | 36,629 | - | 176,083,396 | 20,475,574 | 219,809,257 | |
| Disposals c) | (20,919,134) | (12,825,079) | (685,495) | (5,638,660) | (117,645) | (13,862) | (296,020) | (537,922) | - | (41,033,817) |
| Exchange rate effet | 330,893 | 81,728 | 4,190 | 45,019 | - | - | 9,189 | - | 471,019 | |
| Transfers / writte-off d) | 54,910,980 | 80,114,113 | 1,085,925 | 1,909,329 | 3,196,795 | - | (384) | (137,260,170) | (23,218,797) | (19,262,209) |
| Ending balance | 1,321,081,939 | 586,492,798 | 17,525,840 | 101,287,132 | 29,837,028 | 66,567 | 1,709,718 | 125,567,424 | 14,404,376 | 2,197,972,822 |
| Amortisation and losses for | ||||||||||
| accum ulated impairment | ||||||||||
| Opening balance | 128,715,051 | 224,445,608 | 12,011,068 | 58,138,134 | 4,544,535 | 80,429 | 1,824,070 | - | - | 429,758,895 |
| Changes in consolidation perimeter - Acquisitions | 50,162,578 | 20,137,861 | 1,057,863 | 5,345,648 | 14,072,537 | - | - | - | 90,776,487 | |
| Period depreciation | 17,525,551 | 46,228,506 | 1,165,413 | 9,457,540 | 1,852,113 | - | 47,054 | - | - | 76,276,177 |
| Disposals | (2,366,778) | (9,411,081) | (654,067) | (4,682,029) | (100,334) | (13,862) | (295,921) | - | - | (17,524,072) |
| Exchange rate effet | 13,174 | 16,124 | 1,074 | 9,523 | - | - | - | 39,895 | ||
| Transfers / writte-off | (12,347) | (2,569,703) | (12,416) | (2,959,705) | (6,485) | - | (9,610) | - | - | (5,570,266) |
| Ending balance | 194,037,229 | 278,847,315 | 13,568,935 | 65,309,111 | 20,362,366 | 66,567 | 1,565,593 | - | - | 573,757,116 |
| Net book value | 1,127,044,710 | 307,645,483 | 3,956,905 | 35,978,021 | 9,474,662 | - | 144,125 | 125,567,424 | 14,404,376 | 1,624,215,706 |
| Industrial | Premium paid | Other | Intangible | Advances on | ||||
|---|---|---|---|---|---|---|---|---|
| Development costs |
property and other rights |
Software | for property occupation rights |
intangible assets |
assets in progress a) |
account of intangible assets b) |
Total intangible |
|
| Gross asset: | ||||||||
| Opening balance | 464,840 | 83,989,039 | 98,303,747 | 13,908,707 | - | 13,319,370 | 275,000 | 210,260,703 |
| Changes in consolidated perimeter - acquisitions | 1,300,626 | 1,300,626 | ||||||
| Capital expenditures | 1,217 | 1,076,817 | 71,056 | 14,762,392 | 15,911,482 | |||
| Disposals | (40,491) | (40,491) | ||||||
| Exchange rate effect | 10,652 | 10,652 | ||||||
| Transfers/writte-off | 3,450 | 3,538,097 | 7,875,520 | (44,892) | (11,777,932) | (275,000) | (680,757) | |
| Ending balance | 469,507 | 88,603,953 | 107,561,601 | 13,863,815 | - | 16,263,339 | - | 226,762,215 |
| Amortisation and losses for accumulated impairment |
||||||||
| Opening balance | 148,308 | 3,329,177 | 44,882,011 | 12,736,678 | - | - | - | 61,096,174 |
| Changes in consolidation perimeter - acquisitions | 685,610 | 685,610 | ||||||
| Period depreciation | 93,685 | 1,860,365 | 8,549,643 | 268,928 | 10,772,621 | |||
| Disposals | - | |||||||
| Exchange rate effet | 3,431 | 3,431 | ||||||
| Transfers/writte-off | (13,860) | (296,134) | (44,892) | (354,886) | ||||
| Ending balance | 241,993 | 5,175,682 | 53,824,561 | 12,960,714 | - | - | - | 72,202,950 |
| Net book value | 227,514 | 83,428,271 | 53,737,040 | 903,101 | - | 16,263,339 | - | 154,559,265 |
a) Most significant values included in "Tangible and intangible assets in progress" refer to the following projects:
| 31.12.2007 | 31.12.2006 | ||
|---|---|---|---|
| Remodelling and expansion of stores in Portugal Installation licenses Software projects |
122,900,793 4,467,338 11,726,539 |
27,214,918 3,352,407 8,752,631 |
|
| 139,094,670 | 39,319,956 |
The increase of the "Remodelling and expansion of stores in Portugal" caption is explained by the acquisition of Continente Hipermercados, S.A., which had contributed with an amount of 57,582,766 Euro.
This caption includes 2,400,000 Euro related to advances made in previous periods which were received as result of the contract annulment.
| Land and buildings |
Basic Equipment |
Transport Equipment |
Office Equipment |
Tools and fittings |
Reusable Containers |
Other tangible assets |
Tangible assets |
Advances on account of in progress a) tangible assets |
Total tangible |
|
|---|---|---|---|---|---|---|---|---|---|---|
| Gross asset: | ||||||||||
| Opening balance | 978,230,779 | 405,610,342 | 14,117,345 | 89,651,881 | 5,710,422 | 80,429 | 1,950,524 | 38,286,374 | 5,848,553 | 1,539,486,649 |
| Changes in consolidated perimeter - Acquis | 10,867,929 | 1,606,960 | - | 2,103,400 | 92,475 | - | 87,713 | 1,467,690 | 887,860 | 17,114,027 |
| Capital expenditure | 14,186,123 | 1,307,352 | 89,371 | 5,104,729 | 42,819 | - | 632,350 | 136,010,175 | 10,411,186 | 167,784,105 |
| Desinvestment | (20,839,853) | (16,162,273) | (510,542) | (1,477,901) | (81,621) | - | (32,657) | (133,308) | - | (39,238,155) |
| Exchange rate effect | (151,002) | (28,885) | (1,427) | (13,490) | - | - | 33 | (4,013) | - | (198,784) |
| Transfers/ writte-off | 45,494,675 | 86,710,079 | 1,651,654 | 777,664 | 2,555,280 | - | (631,841) | (146,223,978) | (9,666,467) | |
| Ending balance | 1,027,788,651 | 479,043,575 | 15,346,401 | 96,146,283 | 8,319,375 | 80,429 | 2,006,122 | 29,402,940 | 17,147,599 | 1,675,281,375 |
| Amortisation and losses by accumulated impairment |
||||||||||
| Opening balance | 111,186,506 | 198,616,711 | 11,511,048 | 53,769,753 | 3,401,061 | 80,429 | 1,758,334 | - | - | 380,323,842 |
| Changes in consolidation perimiter - Acquisi | 479,243 | 438,036 | 1,156,155 | 8,514 | - | 56,986 | - | - | 2,138,934 | |
| Period depreciation | 16,879,167 | 40,167,142 | 975,817 | 10,263,167 | 1,207,842 | - | 45,452 | - | - | 69,538,587 |
| Disposals | (156,148) | (12,249,774) | (456,175) | (1,108,825) | (75,916) | - | (32,657) | - | - | (14,079,495) |
| Exchange rate effect | (8,336) | (4,285) | (262) | (2,607) | - | - | - | (15,490) | ||
| Transfers/ writte-off | 334,619 | (2,522,222) | (19,360) | (5,939,509) | 3,034 | - | (4,045) | - | - | (8,147,483) |
| Ending balance | 128,715,051 | 224,445,608 | 12,011,068 | 58,138,134 | 4,544,535 | 80,429 | 1,824,070 | - | - | 429,758,895 |
| Net book value | 899,073,600 | 254,597,967 | 3,335,333 | 38,008,149 | 3,774,840 | - | 182,052 | 29,402,940 | 17,147,599 | 1,245,522,480 |
| Industrial | Premium paid | Other | Intangible | Advances on | ||||
|---|---|---|---|---|---|---|---|---|
| Development costs |
property and other rights c) |
Software | for property occupation rights |
intangible assets |
assets in progress a) |
account of intangible assets b) |
Total intangible |
|
| Gross asset: | ||||||||
| Opening balance | 369,198 | 3,930,825 | 86,413,655 | 11,679,303 | 7,374,640 | 109,767,621 | ||
| Changes in consolidated perimeter - Acquisitions | 26,400 | 1,498,648 | 3,051,103 | 626,982 | 5,203,133 | |||
| Investment | 75,307,566 | 114,140 | 50,000 | 19,144,076 | 459,500 | 95,075,282 | ||
| Desinvestment | (2,478) | (2,478) | ||||||
| Exchange rate effect | (3,113) | (3,113) | ||||||
| Transfers/ write-off | 95,642 | 4,724,248 | 10,282,895 | (871,699) | (13,826,328) | (184,500) | 220,258 | |
| Final balance | 464,840 | 83,989,039 | 98,303,747 | 13,908,707 | - | 13,319,370 | 275,000 | 210,260,703 |
| Amortisation and losses by accumulated impairment |
||||||||
| Opening balance | 71,896 | 1,813,564 | 35,776,724 | 10,390,161 | 48,052,345 | |||
| Changes in consolidation perimiter - Acquisitions | 19,670 | 797,700 | 1,469,318 | 2,286,688 | ||||
| Period depreciation | 76,412 | 910,988 | 8,882,504 | 932,250 | 10,802,154 | |||
| Investment | (826) | (826) | ||||||
| Exchange rate effect | (946) | (946) | ||||||
| Transfers/ writte-off | 584,955 | (573,145) | (55,051) | (43,241) | ||||
| Final balance | 148,308 | 3,329,177 | 44,882,011 | 12,736,678 | - | - | - | 61,096,174 |
| Net value | 316,532 | 80,659,862 | 53,421,736 | 1,172,029 | - | 13,319,370 | 275,000 | 149,164,529 |
e) the most significant amounts included in the captions "Tangible and intangible assets in progress" correspond to the following:
| 31.12.06 | 31.12.05 | |
|---|---|---|
| Remodelling and expansion of stores in Portugal Instalation licenses Software projects |
27,214,918 3,352,407 8,752,631 |
36,850,888 3,621,399 3,113,895 |
| 39,319,956 | 43,586,182 |
f) the most significant amounts under the caption "Advances on account of tangible assets" mainly refers to projects of Modelo and Continente stores for which advance payments were made;
g) During the first semester of 2006, the Group purchased to Sonae SGPS, SA a set of commercial brands, namely the brand Continent, for the total amount of 75,000,000 Euro.
This set of brands was classified as intangible asset with undefined expected useful life and for that reason not depreciated.
In the years ended 31 December 2007 and 2006, movements in goodwill, as well as in the corresponding impairment losses, are as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Gross value: | ||
| Opening balance | 63,980,187 | 47,164,598 |
| New companies in the consolidation perimeter (Note 6) | 505,225,085 | 9,337,327 |
| Transfers | - | 7,478,262 |
| Decreases | (3,927,845) | |
| Closing balance | 565,277,427 | 63,980,187 |
| Imparity accumulated | ||
| losses (note 19): | ||
| Opening balance | 2,838,583 | - |
| Increases | - | 2,838,583 |
| Decreases | (1,464,357) | - |
| Final balance | 1,374,226 | 2,838,583 |
| Net book value | 563,903,201 | 61,141,604 |
Goodwill is not depreciated. Impairment tests on the Goodwill are performed on an annual basis.
Decreasing amounts correspond to goodwill for which impairment losses have been recorded in previous years, as well as to consolidation differences written-off as a result of the selling by an associated company of tangible assets acquired before its acquisition date in the amount of 2,463,488 Euro, which was recorded in the caption "Other operational profits – Gains in tangible and intangible assets".
In the acquisition of Continente Hipermercados (Ex-Carrefour) there was no fair value allocation in 31 December 2007. Consequently the value of goodwill is provisional 504,847,714 Euros, and will be adjusted during 2008.
As at 31 December 2007 and 2006, goodwill is as follows:
| 31.12.2007 | 31.12.2006 | ||
|---|---|---|---|
| Food retail brands | 21,439,730 | 21,439,730 | |
| Non food retail brands | 27,351,895 | 27,351,895 | |
| Real estate assets with income | 9,886,491 | 9,886,491 | |
| Real estate assets without income | 377,371 | 2,463,488 | |
| 59,055,487 | 61,141,604 | ||
| Continente Hipermercados | 504,847,714 | ||
| Total | 563,903,201 | 61,141,604 | |
As at 31 December 2007 and 2006, this caption is as follows:
| 31.12.2007 | 31.12.2006 | ||||
|---|---|---|---|---|---|
| Non Current | Current | Non Current | Current | ||
| Other financial investments | |||||
| Opening balance at 1 January 2007 | 33,804,781 | 33,211,904 | 54,278,095 | 10,500,000 | |
| Purchases during the year | 4,988 | 6,444,626 | 11,335,309 | 1,512,346 | |
| Disposals during the year | (523,913) | (16,063,792) | (11,308,993) | (778,925) | |
| Increase/(decrease) in fair value | 1,921,716 | (442,863) | |||
| Transfers | (32,500,370) | 32,500,370 | (22,421,346) | 22,421,346 | |
| Closing balance at 31 December 2007 | 785,486 | 56,093,108 | 33,804,781 | 33,211,904 | |
| Accumulated impairment losses (Note 29) | (26,316) | - | (474,728) | - | |
| 759,170 | 56,093,108 | 33,330,053 | 33,211,904 | ||
| Derivative financial instruments | |||||
| Fair value at 1 January 2007 | - | 49,458 | - | 60,475 | |
| Purchases during the year | - | 1,971 | - | 49,458 | |
| Disposals during the year | - | (49,458) | - | (60,475) | |
| Increase/(decrease) in fair value | - | 1,113,658 | - | - | |
| Fair value at 31 December 2007 | - | 1,115,629 | - | 49,458 | |
| Advances on financial investments | |||||
| Opening balance at 1 January 2006 | 900,000 | - | - | - | |
| Purchases during the year | - | - | 900,000 | - | |
| Transfers | (660,000) | ||||
| Closing balance at 31 December 2007 | 240,000 | - | 900,000 | - | |
| Total in other financial investments | 999,170 | 57,208,737 | 34,230,053 | 33,261,362 |
The other financial investments can be detailed as follows:
As at 31 December 2007 and 2006, other non current assets are detailed as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Granted loans to associates | 1,015,475 | 1,006,538 |
| Trade accounts receivable and other debtors | 804,651 | 819,293 |
| 1,820,126 | 1,825,831 |
The amount recorded under granted loans to associates bears interest at market rates and do not have a fixed maturity.
The amount recorded under trade accounts receivable and other debtors mainly refer to legal deposits made by a Brazilian subsidiary, for which are recorded the correspondent liabilities in the caption "Other creditors" (Note 24), with no defined maturity.
As at 31 December 2007 and 2006, Inventories are as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Goods for resale | 473,962,389 | 352,193,769 |
| Accumulated impairment losses on Inventories (Note 29) | (16,095,728) | (11,542,472) |
| 457,866,661 | 340,651,297 |
Cost of goods sold as at 31 December 2007 and 2006 may be detailed as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Opening balance | 352,193,769 | 335,902,568 |
| Changes in consolidation perimeter - aquisitions | 37,274,615 | |
| Purchases | 2,604,690,994 | 2,346,937,968 |
| Adjustments | 4,633,499 | 7,864,634 |
| Closing balance | 473,962,389 | 352,193,769 |
| 2,515,563,490 | 2,322,782,133 | |
| Impairment losses (Note 29) | 1,754,065 | 846,000 |
| 2,517,317,555 | 2,323,628,133 | |
The amounts recorded under "Inventory adjustments" for the years ended 31 December 2007 and 2006 correspond mainly to adjustments made in discounts received or receivable from suppliers included in the acquisition cost of inventories.
As at 31 December 2007 and 2006, trade accounts receivable are detailed as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Current clients | 33,218,618 | 30,296,646 |
| Doubtful receivables | 11,962,348 | 11,170,837 |
| 45,180,966 | 41,467,483 | |
| Accumulated impairment losses on Trade Debtors (Note 29) | (12,771,387) | (11,167,140) |
| 32,409,579 | 30,300,343 |
Current clients caption includes 15,549,379 Euro (10,578,449 Euro as at 31 December 2006) related to travel agency clients, as well as 11,231,975 Euro (12,508,142 Euro as at 31 December 2006) related to gross sales to group companies.
The values presented abovemainly refer to debts originated by the group current activity. The amounts presented on the face of the balance sheet are net of impairment losses, do not bear interests and the discount effect is immaterial. As a result, amounts disclosed are considered to reflect their fair value.
| As at 31 December 2007 and 2006, the ageing of the trade receivables is as follows: | |
|---|---|
| -- | ------------------------------------------------------------------------------------- |
| Trade accounts receivable | ||
|---|---|---|
| 31.12.2007 | 31.12.2006 | |
| Not due | 20,174,169 | 6,922,610 |
| Due but not impaired | ||
| 0 - 30 days | 2,404,680 | 14,942,547 |
| 30 - 90 days | 4,932,343 | 6,225,758 |
| + 90 days | 4,493,884 | 1,629,619 |
| 11,830,907 | 22,797,924 | |
| Due and impaired | ||
| 0 - 90 days | 77,339 | 155,470 |
| 90 - 180 days | 204,254 | 116,578 |
| 180 - 360 days | 660,725 | 978,645 |
| + 360 days | 12,233,572 | 10,496,256 |
| 13,175,890 | 11,746,949 | |
| Total | 45,180,966 | 41,467,483 |
As at 31 December 2007 and 2006, Other debtors are as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Other debtors | ||
| a) Accounts receivable from suppliers |
66,725,484 | 27,974,728 |
| Sale of fixed assets | 747,614 | 8,148,867 |
| b) Credit sales sold to third parties |
5,536,607 | 4,226,904 |
| Grants related to incurred costs | 1,434,458 | 1,999,584 |
| Special regime for the Settlement of Debts to the Tax authorities ans | ||
| Social Security | 14,576,053 | 14,576,053 |
| VAT - Real Estate assets | 2,887,859 | 15,533,273 |
| Subsidiaries acquisitions - Price adjustments | 30,414,000 | |
| Others | 7,737,240 | 9,549,364 |
| Advances to fixed assets suppliers | 381,319 | 333,380 |
| 130,440,634 | 82,342,153 | |
| Accumulated Impairment losses (Note 29) | (8,620,872) | (6,463,190) |
| Total of Financial Instruments (Note 7) | 121,819,762 | 75,878,963 |
In December 2006 the caption "Others" is mainly composed by receivables related to the sale of the Brazilian subsidiaries amounting to 4,425,465 Euro. This amount was received during the period.
As at 31 December 2007 and 2006, the Other debtors aging is as follows:
| Current suppliers with debtor balances |
Other debtors | ||||
|---|---|---|---|---|---|
| 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | ||
| Not Due | 3,855,045 | 58,373 | 48,865,428 | 17,940,644 | |
| Due but not impaired | |||||
| 0 - 30 days | 19,872,653 | 16,967,675 | 4,203,042 | 1,775,200 | |
| 30 - 90 days | 30,218,156 | 5,196,294 | 8,784,758 | 8,628,502 | |
| + 90 days | 3,675,137 | 867,750 | 1,143,910 | 25,967,752 | |
| 53,765,946 | 23,031,719 | 14,131,710 | 36,371,454 | ||
| Due and impaired | |||||
| 180 - 360 days | 1,444,067 | 1,230,574 | 509,848 | 16,988 | |
| + 360 days | 7,660,426 | 3,654,062 | 208,164 | 38,339 | |
| 9,104,493 | 4,884,636 | 718,012 | 55,327 | ||
| 66,725,484 | 27,974,728 | 63,715,150 | 54,367,425 |
As at 31 December 2007 there is no indication that the debtors not due will not fulfil their obligations on usual conditions. The carrying amount of other debtors is estimated to be approximately its fair value.
The amount in the caption Special Regime for the Settlement of Debts to the Tax authorities and Social Security refers basically to taxes which were disputed and subject to reimbursement claims. The Board of Directors is confident of the arguments presented by the Group and expects court decisions to be in favour of the Group. As a result, impairment losses were not recorded.
The caption Grants, refers to an amount receivable from government as operational grants and is related to costs incurred with human resources training. During the year ended 31 December 2007, the Group recorded an income of 182,473 Euro related to these grants (Note 36).
As at 31 December 2007 and 2006, Taxes recoverable and taxes and contributions payable are made up as follows:
| Assets | 31.12.2007 | 31.12.2006 |
|---|---|---|
| Income taxation - advance payments and taxes withheld | 13,256,014 | 15,165,745 |
| Value Added tax | 36,910,417 | 42,325,229 |
| Other taxes | 901,429 | 791,838 |
| 51,067,860 | 58,282,812 | |
| Liabilities | ||
| Income tax | 6,388,566 | 7,875,537 |
| Value Added tax | 25,828,419 | 29,069,914 |
| Staff income taxes withheld | 3,055,163 | 1,444,148 |
| Social security contributions | 8,206,536 | 6,265,659 |
| Other taxes | 743,623 | 61,862 |
| 44,222,307 | 44,717,120 |
As at 31 December 2007 and 2006, Other current assets are made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Commercial income | 4,222,318 | 3,341,600 |
| Receivable taxes | 741,938 | 444,314 |
| Receivable commissions | 6,865,234 | 701,512 |
| Financial Instruments Total (Note 7) | 11,829,490 | 4,487,426 |
| Claims | 231,480 | 314,225 |
| Rents | 3,259,833 | 2,922,485 |
| Condominiums management fee's | 1,684,282 | 1,596,516 |
| Insurance premiums paid in advance | 2,058,068 | 969,948 |
| Others | 4,429,026 | 2,024,665 |
| 23,492,179 | 12,315,265 |
The caption "Others" includes 1,127,913 Euro related to VAT receivable arising from travel agencies operations, according to Decree Law 221/85.
The amounts identified as financial instruments refer to contractual based and not due and unbilled amounts.
Deferred tax assets and liabilities as at 31 December 2007 and 2006 are as follows, taking into consideration its temporary differences:
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | |
| Difference between fair value and acquisition cost | - | - | 1,943,455 | 1,588,037 |
| Harmonisation adjustments | 70,513 | 181,106 | 29,290,837 | 27,903,609 |
| Provisions and impairment losses not accepted for tax | ||||
| purposes | 4,320,121 | 4,270,132 | - | - |
| Writte-off of tangible and intangible assets | 9,517,092 | 9,340,215 | - | |
| Writte-off of deferred costs | 9,644 | 20,165 | 32,267 | 43,932 |
| Valuation of derivatives | 74,497 | 30,751 | 194,556 | 13,106 |
| Reinvested capital gains | - | - | 2,394,039 | 3,512,705 |
| Revaluation of tangible fixed assets | - | - | 2,523,410 | 2,328,427 |
| Exchange differences | - | 44,754 | 1,595,373 | |
| Tax losses carried forward | 8,010,720 | 9,570,879 | ||
| Others | 283,633 | - | ||
| 22,286,220 | 23,413,248 | 36,423,318 | 36,985,189 |
During the periods ended 31 December 2007 and 2006, movements in deferred tax assets and liabilities are made up as follows:
| 31.12.2007 | 31.12.2006 | |||
|---|---|---|---|---|
| Assets | Liabilities | Assets | Liabilities | |
| Opening balance | 23,413,248 | 36,985,189 | 24,126,376 | 37,487,973 |
| Effects in net income: | ||||
| Writte-off of intangible assets | 59,661 | - | (1,097,634) | - |
| Writte-off of tangible assets | (421,461) | - | (275,560) | - |
| Revaluations | - | (97,355) | - | (669,661) |
| Amortisation and Depreciation harmonisation adjustments | (110,591) | 1,384,243 | (67,181) | (155,031) |
| Accruals writte-off | (10,516) | (11,665) | (16,459) | 44,592 |
| Provisions and impairment losses not accepted for tax purposes | (760,889) | - | 1,461,770 | - |
| Impairment losses | - | - | - | - |
| Derivate financial instruments | 43,746 | (12,584) | (15,826) | (3,030) |
| Tax losses carried forward | (1,537,964) | - | (281,319) | - |
| Reinvestement of capital gains | - | (1,118,666) | - | (81,669) |
| Exchange differences on brazilian subsidiaries | (1,642,013) | 1,644,410 | ||
| Effects of tax rate change | - | - | (1,407,762) | (1,190,259) |
| Others | 276,716 | - | - | - |
| (2,461,298) | (1,498,040) | (1,699,971) | (410,648) | |
| Effects on equity: | ||||
| Valuation of hedging derivatives | - | 194,034 | - | - |
| Foreign exchange rate effect | 98,303 | 94,392 | (49,075) | (49,957) |
| Effects of tax rate change | - | - | - | (35,231) |
| Others | - | - | - | (7,076) |
| 98,303 | 288,426 | (49,075) | (92,264) | |
| Perimeter changes effect (Note 6) | ||||
| Acquisitions | 750,594 | 292,337 | 1,035,918 | 128 |
| Fair value adjustments related with acquired companies | 1,396,134 | 355,418 | - | - |
| Disposals | (910,761) | (12) | - | - |
| 1,235,967 | 647,743 | 1,035,918 | 128 | |
| Closing balance | 22,286,220 | 36,423,318 | 23,413,248 | 36,985,189 |
The profit or loss caption Deferred taxes includes the amount of 2,342,238 Euro (1,182,646 Euro as of 31 December 2006), related to income tax credit linked to income received from Investment Fund Participation Units.
Tax returns of the group companies that recorded deferred tax assets arising on tax losses carried forward (considering exchange rates effective at the time of recognition) and the expiry date of the referred losses existing as at 31 December 2007 and 2006 are as follows:
| 31-12-2007 | 31-12-2006 | |||||
|---|---|---|---|---|---|---|
| Tax | Deferred tax | Expiry | Tax | Deferred tax | Expiry | |
| losses | assets | Date | losses | assets | Date | |
| With limit time use | ||||||
| Originated in 2000 | 2006 | 16,638 | 4,160 | 2006 | ||
| Originated in 2001 | 2007 | 2,509,559 | 627,389 | 2007 | ||
| Originated in 2002 | 12,423,840 | 3,105,960 | 2008 | 12,905,938 | 3,226,484 | 2008 |
| Originated in 2003 | 9,065,672 | 2,266,418 | 2009 | 10,304,696 | 2,576,173 | 2009 |
| Originated in 2004 | 1,567,260 | 391,815 | 2010 | 3,172,510 | 793,128 | 2010 |
| Originated in 2005 | 7,341,505 | 1,835,377 | 2011 | 7,435,642 | 1,858,911 | 2011 |
| Originated in 2006 | 387,074 | 96,768 | 2012 | 362,870 | 90,718 | 2012 |
| Originated in 2007 | 1,257,531 | 314,383 | 2013 | - | - | |
| 32,042,882 | 8,010,721 | 36,707,853 | 9,176,963 | |||
| Without limit time use | 1,158,580 | 393,916 | ||||
| 32,042,882 | 8,010,721 | 37,866,433 | 9,570,879 |
Deferred tax assets recognized were assessed and only recognized to the extent it was probable that sufficient taxable profits will be available in the future against which the deferred tax assets can be used, or when taxable temporary differences are recognized by the same entity and expected to reverse in the same period. This assessment was based on business plans of Sonae Distribuição companies, which are periodically reviewed and updated, and on identified and available tax planning opportunities.
As at 31 December 2007 the Company had carried forward tax losses in the amount of 91,117,181 Euro (166,813,143 Euro as of 31 December 2006) for which no deferred tax asset were recognized for prudential reasons.
| 31-12-2007 | 31-12-2006 | |||||||
|---|---|---|---|---|---|---|---|---|
| Tax | Deferred tax | Expiry | Tax | Deferred tax | Expiry | |||
| Losses | assets not recognized | Date | Losses | assets not recognized | Date | |||
| With limit time use | ||||||||
| Originated in 2001 | 3,661,629 | 915,408 | 2007 | |||||
| Originated in 2002 | 1,814,987 | 453,747 | 2008 | 3,871,960 | 967,991 | 2008 | ||
| Originated in 2003 | 200,291 | 50,074 | 2009 | 1,675,290 | 418,823 | 2009 | ||
| Originated in 2004 | 329,687 | 82,422 | 2010 | 1,521,758 | 380,440 | 2010 | ||
| Originated in 2005 | 36,519,737 | 9,129,934 | 2011 | 146,488,121 | 36,622,030 | 2011 | ||
| Originated in 2006 | 161,837 | 40,459 | 2012 | 340,626 | 85,156 | 2012 | ||
| Originated in 2007 | 24,379,231 | 6,094,808 | 2013 | |||||
| 63,405,770 | 15,851,444 | 157,559,384 | 39,389,848 | |||||
| With limit time use different | ||||||||
| from the mentioned above | 19,571,433 | 5,619,101 | 9,250,041 | 3,237,514 | ||||
| Without limit time use | 8,139,978 | 2,767,592 | 3,718 | 1,264 | ||||
| 91,117,181 | 24,238,137 | 166,813,143 | 42,628,626 |
As at 31 December 2007 and 2006 cash and cash equivalents are as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Cash at hand | 5,723,805 | 3,396,197 |
| Bank deposits | 62,094,598 | 355,570,923 |
| Treasury investments | 35,087 | 448,028 |
| Cash and cash equivalents on the balance sheet | 67,853,490 | 359,415,148 |
| Bank overdrafts (Note 21) | (3,584,549) | (1,724,154) |
| Cash and cash equivalents on the statement of cash flows | 64,268,941 | 357,690,994 |
Bank overdrafts, are recorded in the balance sheet under the caption Current loans.
As at 31 December 2007, the share capital, which is fully subscribed and paid for, is made up by 1,100,000,000 ordinary shares which do not hold right to any fixed reimbursement, with a nominal value of 1 Euro each.
As at 31 December 2007, the subscribed share capital was held as follows:
| Entity | % |
|---|---|
| Sonae, SGPS, S.A. | 74,98 |
| Sonae Investments, BV (wholly owned subsidiary of Sonae SGPS, SA) | 15,93 |
| Own Shares | 9,09 |
As of 31 December 2007, Efanor Investimentos S.G.P.S., S.A. and its subsidiaries held 52.94% of the share capital of Sonae, SGPS, S.A.
As of 31 December 2007 and 2006, own shares are as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Own shares - nominal value | 100,000,000 | 100,000,000 |
| Own shares - prizes and discounts | 105,000,000 | 105,000,000 |
During 2006 the parent company purchased 100,000,000 own shares for the price of 2.05 Euro per share from its shareholders: Sonae SGPS, S.A. (52,800,000 shares) and Sonae Investments, BV (47,200,000 shares).
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Legal Reserves | 95,000,000 | 90,200,000 |
| Currency conversion reserves | 1,104,622 | 510,709 |
| Sub-total | 96,104,622 | 90,710,709 |
| Reserves under Article 324 of the CSC | 205,000,000 | 205,000,000 |
| Fair value reserves | - | 42,500 |
| Hedging reserves | (538,169) | - |
| Other Reserves and Retained Earnings | (524,010,895) | (603,724,258) |
| Sub-total | (319,549,064) | (398,681,758) |
| Total | (223,444,442) | (307,971,049) |
As at 31 December 2007, the company had legal reserves amounting to 95,000,000 Euro (90,200,000 Euro at 31 December 2006) These reserves cannot be distributed except upon dissolution of the company, but can be used to absorb losses after all the other reserves have been used up, or to increase capital.
As a result of the acquisition of own shares, free reserves in an amount equal to its acquisition cost were made unavailable in accordance with article 324 of Commercial Companies Code ("Código das Sociedades Comerciais"). This reserve cannot be used until the referred own shares are extinct or disposed to a Company outside the group.
The caption "Hedging Reserves" includes, the portion of cash flow hedging derivative instruments fair value considered to be effective, net of tax effect.
Movements in minority interests during the year ended 31 December 2007 and 2006 are as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Opening balance on 1 January 2007 | 10,930,910 | 8,717,734 |
| Acquisition of subsidiary | 116,869 | 31,182 |
| Dividends distributed | (10,256) | |
| Others | (264,680) | |
| Profit for the year attributable to minority interests | 1,323,631 | 2,181,994 |
| Closing balance on 31 December 2007 | 12,096,474 | 10,930,910 |
As at 31 December 2007 and 2006, loans are made up as follows:
| 31.12.2007 | 31.12.2006 | |||||||
|---|---|---|---|---|---|---|---|---|
| Book value | Nominal value | Book value | Nominal value | |||||
| Current | Non current | Current | Non current | Current | Non current | Current | Non current | |
| Bank loans | 80,250,354 | - | 80,250,354 | - | 161,815,664 | - | 161,815,664 | - |
| Bonds | - | 1,100,672,731 | - | 1,106,925,000 | - | 593,166,278 | - | 597,000,000 |
| Bank overdrafts (Note 18) | 3,584,549 | - | 3,584,549 | - | 1,724,154 | - | 1,724,154 | - |
| 83,834,903 | 1,100,672,731 | 83,834,903 | 1,106,925,000 | 163,539,818 | 593,166,278 | 163,539,818 | 597,000,000 | |
| Other loans | 36,229 | 276,330 | 36,229 | 276,329 | 12,285 | 313,779 | 12,285 | 313,779 |
| Derivatives financial instruments (Note 23) | 281,123 | - | - | - | 116,043 | - | - | - |
| 317,352 | 276,330 | 36,229 | 276,329 | 128,328 | 313,779 | 12,285 | 313,779 | |
| Obligations under finance leases | 6,783,670 | 5,554,636 | 6,783,670 | 5,554,636 | 4,195,233 | 8,051,112 | 4,195,233 | 8,051,112 |
| 90,935,925 | 1,106,503,697 | 90,654,802 | 1,112,755,965 | 167,863,379 | 601,531,169 | 167,747,336 | 605,364,891 |
The repayment schedule of nominal value of borrowing (including bank loans and obligations under finance leases) is summarized as follows:
| 2007 | 2006 | |||
|---|---|---|---|---|
| Capital | Interests | Capital | Interests a) | |
| 2007 | 167,747,336 | 27,957,604 | ||
| 2008 | 90,654,802 | 58,412,491 | 3,253,851 | 32,417,784 |
| 2009 | 103,146,003 | 54,804,262 | 102,610,174 | 29,178,403 |
| 2010 | 67,370,839 | 51,752,185 | 267,302,013 | 26,225,321 |
| 2011 | 82,065,244 | 48,381,029 | 82,029,992 | 12,478,150 |
| 2012 | 350,042,467 | 38,775,565 | 150,042,467 | 7,949,825 |
| 2013 | 155,036,229 | 25,634,467 | 36,229 | |
| +2014 | 355,095,183 | 35,317,289 | 90,165 | |
| 1,203,410,767 | 314,255,338 | 773,112,227 | 136,207,087 |
a) The 2006 comparable data related to interests, takes into consideration the available information at present date, therefore the interests amount presented for the year 2007 is the amount effectively paid during the period.
As of 31 December 2006 bond loans are made up as follows:
| Modelo Continente / 2003 | 82,000,000 EUR |
|---|---|
| Modelo Continente / 2004 | 100,000,000 EUR |
| Modelo Continente / 2005/2010 | 64,925,000 EUR |
| Modelo Continente / 2005/2012 | 150,000,000 EUR |
| Modelo Continente / 2007/2012 | 200,000,000 EUR |
| Sonae Distribuição, SGPS, S.A. / 2007/2015 | 200,000,000 EUR |
| Sonae Distribuição Setembro / 2007/2015 | 310,000,000 EUR |
1,640,000 bonds – Nominal Value: 50 euro. Maximum term: 8 (eight) years.
Annual interest rate: the interest rate which is variable is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.75% p.a. Interest Payment: half yearly in arrears, on 15 April and 15 October of each year. Redemption: at par, in one payment on 15 October 2011, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders.
10,000,000 bonds – Nominal Value: 10 euro.
Maximum term: 5 (five) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 1.15% p.a..
Interest Payment: half yearly in arrears, on 18 March and 18 September of each year.
Redemption: at par, in one payment on 18 March 2009, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders.
265,000 bonds – Nominal Value: 245 Euro.
Maximum term: 5 (five) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.70% p.a..
Interest Payment: half yearly in arrears, on 3 February and 3 August of each year.
Redemption: at par, in one payment on 5th year in one payment on 3 August 2010, the maturity date of the loan, except if it an early redemption occurs.
Early redemption (call-option): early redemption is possible by initiative of the issuer, either totally or partially (by reducing the nominal value of the bonds), on the 2nd, 3rd or 4th year of maturity. In this situation the issuer is obliged to pay a prize of 0.125% over de reimbursed value.
On the 3rd August 2007, the Company partially reimbursed the bonds, according to their Conditions. The amount reimbursed per bond was 755 Euro plus a premium of 0.94375 Euro.
After the reimbursement, the loan will be reduced to 64,925,000 Euro (265,000 bonds with a 245 Euro nominal value).
15,000,000 bonds – Nominal Value: 10 Euro.
Maximum term: 7 (seven) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.85% p.a..
Interest Payment: half yearly in arrears, on 2 February and 2 August of each year.
Redemption: at par, in one payment on 2 August 2012 the payment dates of the 14th coupon, except if it an early redemption occurs.
Early redemption (call-option): early redemption is possible by initiative of the issuer, either totally or partially (by reducing the nominal value of the bonds), on the reimbursed dates of 10th, 11th, 12th and 13th coupon, without the obligation of paying any prize.
4,000 bonds – Nominal Value: 50,000 Euro.
Maximum term: 5 (five) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.5% p.a..
Interest Payment: half yearly in arrears, on 30 April and 30 October of each year. Redemption: at par, in one payment on 30 April 2012 the payment date of the 10th coupon. Early redemption (call-option): early redemption is not possible.
4,000,000 bonds - Nominal Value: 50 Euro.
Maximum term: 8 (eight) years
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 monthrate on the second working day preceding the interest period, with a spread of 0.48% p.a..
Interest Payment: half yearly in arrears, on 10 February and 10 August of each year.
Redemption: at par, in one payment on 10 August 2015 the payment date of the 16th coupon.
Early redemption (call-option): early redemption is possible by initiative of the issuer, totally, on the payment date of the 10th, 12th or 14th coupons, without the obligation of paying any prize.
31,000,000 Bonds – Nominal Value: 10 Euro.
Maximum term: 8 (eight) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.25% p.a. in the first 3 interest payment dates and 0.55% p.a. from the 4th interest payment date on.
Interest Payment: half yearly in arrears, on 10 March and 10 September of each year. Redemption: at par in the following terms:
50% on the date of the 12th coupon payment (10 September 2013);
50% on the date of the 16th coupon payment (10 September 2015).
Early redemption (call-option): early redemption is possible by initiative of the issuer, either
totally or partially, on the payment dates of the 10th, 11th, 12th, 13th, 14th or 15th coupons, without the obligation of paying any prize.
Extraordinary early redemption (Call-Option): until the end of the 18th month of the loan, within the following conditions:
(i) the loan may be reimbursed total or partially, with no penalization, in each interest payment
date
ii) the loan may be reimbursed total or partially, subject to Breakage Costs, with a 30 previous
days notice during each interest period.
At 31 December 2007 this caption corresponded to repayable grants from IAPMEI under the Measure of Support to the Energy Potential and Rationalization (MAPE).These grants do not bear interests and had been attributed by a 12 years period, with a grace period of 3 years redemption after attribution. The grants will be redempted in half-yearly instalments, occurring the first six months after the grace period. 36,229 Euro are now classified in the caption "Other loans – currents".
This caption includes the issue of short term commercial paper in the amount of 80,000,000 Euro which bears interests at normal market rates, as well as a bank loan reimbursable in 2008 in the amount of 250,354 Euro.
As of 31 December 2007, the available credit facilities are as follows:
| 31.12.2007 | |||
|---|---|---|---|
| Commitments of Commitments of |
|||
| less than one year | more than one year | ||
| Unused credit facilities amounts | 317,737,441 | 400,000,000 | |
| Agreed credit facilities amounts | 401,572,344 | 400,000,000 |
The amount considered in financial instruments with a commitment of more than one year, is related to commercial paper programmes with a 7 year term.
As at 31 December 2007 and 2006, the accounting value of the financial liabilities is similar to their fair value.
| 31.12.2007 | 31.12.2006 | |||
|---|---|---|---|---|
| Net book value of assets acquired under finance leases |
||||
| Land and building | 19,649,684 | 13,598,069 | ||
| Office equipment | 4,274,323 | 5,682,069 | ||
| 23,924,007 | 19,280,138 | |||
| Minimun lease | Present value of | |||
| Leasing creditors | payments | minimum lease payments | ||
| Leasing payable amounts | 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 |
| 2007 | 4,571,267 | 4,195,233 | ||
| 2008 | 7,190,501 | 3,461,396 | 6,783,670 | 3,211,384 |
| 2009 | 3,280,731 | 2,717,797 | 3,111,462 | 2,573,945 |
| 2010 | 2,465,786 | 2,315,070 | 2,407,922 | 2,265,783 |
| 2011 | 35,921 | 35,252 | ||
| 12,972,939 | 13,065,530 | 12,338,306 | 12,246,345 | |
| Future finance charges | (634,633) | (819,185) | ||
| 12,338,306 | 12,246,345 | |||
| Amount due for settlement within 12 months (current liabilities) | 6,783,670 | 4,195,233 | ||
| Amount due for settlement after 12 months (non-current liabilities) | 5,554,636 | 8,051,112 |
As at 31 December 2007 and 2006, this caption is made up as follows:
Lease agreements bear interest at usual market rates, have defined life time lessee and the lessee has call options over the leased assets.
As of 31 December 2007 and 2006, the fair value of financial obligations under financial lease contracts is similar to its book value.
The Group's obligations under finance leases are secured by the lessors' title of the leased assets.
The Group uses exchange rate derivatives, essentially, according to its risk management policy.
As at 31 December 2007, the fair value of the exchange rate derivatives, calculated taking into consideration present market value of equivalent financial instruments, is estimated as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Assets (Note 10) | 1.971 | 49.458 |
| Liabilities (Note 23) | (281.123) | (116.043) |
| (279.152) | (66.585) |
Gains and losses for the year arising from changes in the fair value of instruments that did not qualify for hedging accounting treatment, amounting to (212,567) Euro (127,060 Euro as of 31 December 2006), were recorded directly in the income statement under financial profit/(loss).
The fair value of the derivatives is detailed as follows:
| Assets (note 10) | Liabilities (note 21) | |||
|---|---|---|---|---|
| 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | |
| Hedging derivatives | 1,113,658 | - | - | - |
| Other derivatives | 1,971 | 49,458 | 281,123 | 116,043 |
| 1,115,629 | 49,458 | 281,123 | 116,043 |
As at 31 December 2007, the derivatives used by the Group essentially refers to "swaps" ("cash flow hedges"). These were negotiated to hedge the interest rate risk inherent to bank loans by the Group.
The estimated fair value is as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Assets | 1,113,658 | |
| Liabilities | ||
| 1,113,658 | - |
These interest rate derivatives were valued at fair-value, at the balance sheet date, based on valuations performed within the Group using specific software and on external valuations when this software does not deal specific instruments. The fair value of the swaps was calculated, with reference to the balance sheet date, based upon the discounted cash flow of the difference between the fixed interest rate of the fixed leg and the indexed variable interest rate inherent to the variable leg.
As at 31 December 2007 and 2006 other non current liabilities were made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Participating companies (Note 33) | 10,000,000 | 10,000,000 |
| Other non current trade accounts payable | 830,596 | 767,334 |
| Share-based payments (Note 25) | 1,872,010 | 2,234,466 |
| 12,702,606 | 13,001,800 |
As at 31 December 2007 and 2006, the caption "Other non current liabilities" refers mainly to the estimated amounts to fulfil the legal and tax obligations of a Brazilian subsidiary which was considered appropriate to face future losses on lawsuits and for which legal deposits exist, which are recorded under the caption "Other non current trade accounts receivable" (Note 11), with no defined maturity.
The amount payable to participating companies refers to a shareholders' loan granted by a minority shareholder to a subsidiary that bears interest at usual market rate. The fair value of this loan is similar to its book value.
In 2007 and in previous years, Sonae Distribuição Group granted deferred performance bonuses to its directors and eligible employees. These are based on shares to be acquired at nil cost, three years after they were attributed to the employee. The purchase 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 its responsibilities in cash rather than through shares. The option can only be exercised if the employee still works for the Sonae Group at the vesting date.
Liabilities arising from deferred performance bonuses as at 31 December 2007 and 2006 are made up as follows:
| Year of | Vesting | Number of | fair value | ||
|---|---|---|---|---|---|
| grant | year | participants | 31.12.2007 | 31.12.2006 | |
| Shares | |||||
| 2004 | 2007 | 40 | - | 2,970,651 | |
| 2005 | 2008 | 38 | 2,690,269 | 2,454,762 | |
| 2006 | 2009 | 40 | 1,958,101 | 1,793,878 | |
| 2007 | 2010 | 40 | 1,699,820 | ||
| Total | 6,348,190 | 7,219,291 |
The amount recorded in the financial statements as at 31 December 2007 and 2006, that are related to the responsabilities incurred from the date in which each plan was granted to the period then ended, can be presented as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Recorded as Other non current liabilities (note 24) | 1,872,010 | 2,234,466 |
| Recorded as Other current liabilities (note 28) | 2,690,269 | 2,970,651 |
| Recorded in profit and loss in previous years | (628,007) | (1,093,837) |
| Recorded in Staff costs | 3,934,272 | 4,111,280 |
The share based payment plans costs are recognized during the years between the grant and vesting date as payroll costs.
As at 31 December 2007 and 2006 this caption can be detailed as follows:
| Payable | ||||
|---|---|---|---|---|
| 31.12.2007 | 0-90 dias | 90-180dias | >180 dias | |
| Suppliers - current account | 582,816,649 | 580,936,348 | 1,853,302 | 26,999 |
| Suppliers - invoices w aiting approval | 253,039,635 | 251,849,750 | 1,189,885 | |
| 835,856,284 | 832,786,098 | 3,043,187 | 26,999 | |
| Payable | ||||
| 31.12.2006 | 0-90 dias | 90-180dias | >180 dias | |
| Suppliers - current account Suppliers - invoices w aiting approval |
476,211,283 161,309,572 |
475,366,379 158,719,879 |
762,919 2,589,693 |
81,985 |
| 637,520,855 | 634,086,258 | 3,352,612 | 81,985 |
At 31 December 2007 and 2006 the caption Trade accounts payable resulted from usual group business. The Board of Directors understands that the book value of these accounts payable is similar to its fair value.
As at 31December 2007 and 2006 Other current liabilities were made up as follows:
| Payable | ||||
|---|---|---|---|---|
| 31.12.2007 | 0-90 days | 90-180days | >180 days | |
| Participated and participating companies | 408,665 | 408,665 | ||
| Suppliers of fixed assets | 42,158,108 | 39,529,576 | 1,965,146 | 663,386 |
| Other debts | 38,281,774 | 31,879,012 | 2,199,326 | 4,203,436 |
| 80,848,547 | 71,817,253 | 4,164,472 | 4,866,822 | |
| Payable | ||||
| 31.12.2006 | 0-90 days | 90-180days | >180 days | |
| Participated and participating companies | 319,071 | 319,071 | ||
| Suppliers of fixed assets | 40,549,692 | 35,398,007 | 3,687,660 | 1,464,025 |
| Other debts | 36,241,354 | 28,749,964 | 188,568 | 7,302,822 |
| 77,110,117 | 64,467,042 | 3,876,228 | 8,766,847 |
The caption Other accounts payables includes:
a) 12,263,128 euro of attributed discounts related to loyalty card "Cartão Cliente" and not yet used.
b) 6,085,151 euro (7,331,133 euro as of 31 December 2006) related to means of payments owned by clients, as vouchers, gift cards and discount tickets..
c) 7,944,600 euro (approximately 3 million euro as at 31 December 2006) related to payable amounts to Sonae Distribuição Brasil, S.A. buyer as a result of responsibilities assumed with that entity. These amounts were fully provided for.
d) as at 31 December 2006 included a put option granted to the shareholders of one Brazilian subsidiary amounting to 37,069,900 BRL, approximately 13 millions Euro, over the shares of that participated company, sold during 2005. This put option was exercised during 2007 (approximately Eur 14,2 millions) and the Group resold these shares acquired for the amount of 4,425,465 Euro, as defined in the sale agreements of that subsidiary (Note 14).
As at 31 December 2007 and 2006 "Other current liabilities" were made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Personnel costs | 65,890,374 | 53,750,630 |
| Share-based payments (Note 25) | 2,690,269 | 2,970,651 |
| Accrued interests | 18,887,751 | 9,493,077 |
| Advertising and promotion | 19,792,292 | 6,378,828 |
| Other external supplies and services | 29,607,645 | 9,074,673 |
| Rents | 5,146,700 | |
| Real Estate Municipality tax | 3,658,053 | 3,860,842 |
| Other liabilities | 1,794,559 | 810,997 |
| 147,467,643 | 86,339,698 |
The caption "Personnel costs" refers mainly to payroll amounts to be paid during next year as holiday and holiday pay.
Movements in provisions and impairment losses for the year ended 31 December 2007 are as follows:
| Opening | Perimeter | ||||
|---|---|---|---|---|---|
| Captions | balance | Increases | entry | Decreases | Final |
| Accumulated impairment losses on investments (Note 10) | 474,728 | - | - | (448,412) | 26,316 |
| Accumulated impairment losses on goodwill (Note 9) | 2,838,583 | - | - | (1,464,357) | 1,374,226 |
| Accumulated impairment losses on trade accounts receivable (Note 13) | 11,167,140 | 315,392 | 1,760,215 | (471,360) | 12,771,387 |
| Accumulated impairment losses on other debtors (Note 14) | 6,463,190 | 1,422,157 | 974,704 | (239,179) | 8,620,872 |
| Accumulated impairment losses - inventory (Note 12) | 11,542,472 | 3,988,050 | 2,799,191 | (2,233,985) | 16,095,728 |
| Provisions | 22,117,496 | 1,600,648 | 3,719,073 | (8,951,010) | 18,486,207 |
| 54,603,609 | 7,326,247 | 9,253,183 | (13,808,303) | 57,374,736 | |
a) Increases include 1,600,648 Euro of exchange rate effect over opening balances.
Impairment losses are deducted from the corresponding asset carrying amount.
Provisions caption includes 14,628,032 Euro (21,978,393 Euro as of 31 December 2006) relating to contingencies assumed by the company, when selling the subsidiary Sonae Distribuição Brasil, S.A. in 2005. This provision is being used as costs are incurred.
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Guarantees rendered: | ||
| related to tax claims awaiting outcome | 79,895,859 a) | 50,887,200 |
| related to local and municipal claims awaiting outcome | 11,687,093 | 8,568,362 |
| Others | 45,649,202 b) | 16,099,991 |
a) Includes guarantees amounting to 46,603,916 Euro (29,550,873 Euro in December 2006) and 27,869,675 Euro (18,110,885 Euro in December 2006) related to appeals against additional corporate income tax and VAT assessments, respectively.
During the period ended 31 December 2007, a Retail segment company Sonae Capital Brasil, Ltda granted a guarantee amounting to 25,255,265 euro (BRL 65,570,840) on a tax claim related to income tax, which is being judged by tax courts.
b) Includes guarantees of 35,800,646 Euro (8,083,055 Euro on 31 December 2006) related to VAT reimbursement processes.
As a consequence of the sale of a subsidiary company in Brazil, the Group guaranteed the buyer all the losses incurred by that company arising on unfavourable decisions not open for appeal, concerning tax lawsuits on transactions that took place before the sale date (13 December 2005) and that exceed 40 million euro. As at 31 December 2007, the amount claimed by the Brazilian Tax Authorities concerning the tax lawsuits still in progress, which the company's lawyers assess as having a high probability of loss, amount to near 24 million euro. Furthermore, there are other tax lawsuits totalling 80 million euro for which the Board of Directors, based on the lawyers' assessment, understand will not imply losses to the sold subsidiary above the referred 40 million euro.
No provision has been recorded for the liabilities that could arise from these processes, as the Board of Directors believes that they will be resolved without loss to the Company.
As at 31 December 2007 the Group did not hold any contractual commitments concerning fixed assets acquisition or other kind of financial commitments not reflected in the balance sheet.
As of 31 December 2007 an amount of 45,141,687 Euro (33,845,973 Euro on 31 December 2006) was recorded as cost for the period concerning born rents due to operational lease contracts, mainly referring to leased real estate.
Additionally, as at that date, the group held as lessee operational lease contracts whose minimum lease payments schedule is made up as follows:
| 31.12.2007 | 31.12.2006 |
|---|---|
| 19,734,050 | 22,739,347 |
| 25,737,279 | 14,932,536 |
| 23,645,115 | 12,521,761 |
| 21,104,187 | 12,009,459 |
| 17,632,325 | 9,631,641 |
| 14,529,304 | 6,865,087 |
| 66,535,895 | 8,212,621 |
| a) 188,918,155 |
86,912,453 |
a) Changes observed are partially explained by the acquisition of Continente Hipermercados, SA affiliated (ex - Carrefour) in the amount of 85 million euro.
During 2007 it was recognized as period income the amount of 8,116,056 Euro (2006: 10,582,457 Euro) related to received rents from operational leases, mainly connected with shopping centres explored by others in group property stores.
Additionally, as at balance sheet date, the group held as lessor operational lease contracts whose minimum lease payments schedule is made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Due in: | ||
| automatically renewal | 2,276,129 | 2,736,163 |
| N+1 | 5,000,076 | 7,312,065 |
| N+2 | 4,360,617 | 5,073,046 |
| N+3 | 4,093,186 | 3,568,130 |
| N+4 | 3,660,316 | 1,924,737 |
| N+5 | 3,064,699 | 1,030,393 |
| After N+5 | 2,755,955 | 611,824 |
| 25,210,978 | 22,256,358 | |
Balances and transactions with related parties as of 31 December 2007 and 2006 are detailed as follows:
| Sales and services rendered | Purchase and services attained | Interest income | Interest expense | |||||
|---|---|---|---|---|---|---|---|---|
| Transactions | 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 |
| Parent company | 375,401 | 316,826 | 761,892 | 568,403 | 2,793,622 | 3,800,147 | 2,459 | 101,300 |
| Associated companies | 679,597 | 478,368 | 11,269,555 | 318,286 | 239,377 | |||
| Participated companies | 51,527,903 | 48,047,084 | ||||||
| Participating companies | 500,841 | 78,659 | 408,597 | 318,967 | ||||
| Other related parties(1) | 16,252,754 | 19,263,062 | 92,913,740 | 95,527,343 | 155,711 | 2,431 | 41,969 | 24,596 |
| 69,336,496 | 68,105,340 | 105,023,846 | 96,414,032 | 3,188,710 | 3,802,578 | 453,025 | 444,863 | |
| Purchase of assets | Disposal of assets | |||||||
| Transactions of fixed assets | 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | ||||
| Parent company | 75,000,000 | 573,913 | ||||||
| Associated companies | 18,760 | 15,769,755 | ||||||
| Other related parties(1) | 93,163,597 | 60,718,044 | 37,896,448 | 66,644 | ||||
| 93,163,597 | 135,718,044 | 38,489,121 | 15,836,399 | |||||
| Loans | ||||||||
| Accounts receivable | Accounts payables | Payables | Receivable | |||||
| Balances | 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 |
| Parent company | 108,794 | 59,854 | 499,045 | 203,095 | ||||
| Associated companies | 919,474 | 683,776 | 692,339 | 391,909 | 1,000,000 | 1,000,000 | ||
| Participated companies | 12,090,910 | 12,804,052 | 155,357 | |||||
| Participating companies (Note 24) | 317,726 | 432,656 | 10,000,000 | 10,000,000 | 15,475 | 6,358 | ||
| Other related parties(1) | 8,945,791 | 10,526,303 | 29,801,268 | 19,711,625 | ||||
| 22,382,695 | 24,073,985 | 31,425,308 | 20,461,986 | 10,000,000 | 10,000,000 | 1,015,475 | 1,006,358 |
(1) The affiliated or jointly controlled companies of Grupo Efanor, not included in Sonae Distribuição Group are considered as "Other related parties
Other partners in Group companies include Sonae Industria, SGPS, SA and Sonae Capital, SGPS, SA affiliated, associated and jointly controlled companies, and also other shareholders of affiliated companies or jointly controlled companies of Sonae Group, as well as other affiliated companies of the parent company Efanor Investimentos, SGPS, SA.
Apart from the above mentioned transactions there are no other transactions with related companies.
As of 31 December 2007 and 2006, there were no transactions with key management staff or Directors of the Company, nor loans were granted to them,
During the period, short term loans were granted to Sonae SGPS, S.A. amounting to 359,425,000 Euro, which was received during the period.
The recorded amounts as Receivable Loans from participating companies, refer to loans conceded to subsidiaries by its shareholders, which bear interests at market rates.
During 2007 period, the total remuneration attributed to the members of the Board of Directors, amounted to 3,434,423 Euro from which 2,900,903 Euro relates to performance bonus. Additionally, the remuneration of the staff with responsibilities in the strategical management of the main group companies (excluding the Board Director members) amounted to 4,302,137 Euro, from which 1,957,929 Euro relates to fixed remuneration and 2,344,208 Euro to performance bonus.
Sales and Services rendered in 2007 and 2006 were as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Sales | 3,238,947,595 | 2,959,534,901 |
| Services rendered (a) | 145,720,912 | 131,025,942 |
| 3,384,668,507 | 3,090,560,843 |
a) Mainly corresponds to the travelling agencies contribution.
At 31 December 2007 and 2006 the caption "Other operational income" was made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Suplementary revenues | 288,997,874 | 252,388,286 |
| Benefits from contractual penalties | 104,032 | 471,638 |
| Subventions received ( Note 14) | 182,473 | 1,771,027 |
| Gains on disposals of tangible and intangible assets | 13,806,875 | 2,063,135 |
| Reversal of impairment losses (Note 29) | 710,540 | 6,188,014 |
| Exchange differences | 5,021,010 | 2,096,601 |
| Own work capitalised | 7,127,098 | 1,105,407 |
| Other income | 1,961,143 | 2,376,857 |
| 317,911,045 | 268,460,965 |
At 31 December 2007 and 2006 the caption "Other operational expenses" was made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Costs of Automatic payment terminals | 20,086,220 | 19,317,237 |
| Local government tax over Real Estate properties | 2,518,676 | 2,480,544 |
| Other tax | 1,808,327 | 1,428,392 |
| Losses on the Disposal of tangible assets | 6,054,799 | 4,537,311 |
| Losses on the Disposal of intangible assets | - | 8,927 |
| Donations | 5,962,769 | 5,363,772 |
| Fines and penalities | 257,289 | 428,467 |
| Uncollectible debts | 610,642 | 1,708,159 |
| Exchange differences | 5,501,787 | 2,203,812 |
| Other costs | 8,486,470 | 5,174,774 |
| 51,286,979 | 42,651,395 |
Net financial profit / (loss) for the years ended 31 December 2007 and 2006 are made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Expenses: | ||
| Interest payable | ||
| related with bank loans and overdrafts | (3,242,014) | (1,298,117) |
| related with non convertible bonds | (40,916,098) | (22,558,763) |
| related with financial leases | (413,827) | (379,914) |
| Others | (471,801) | (461,086) |
| (45,043,740) | (24,697,880) | |
| Exchange losses | (3,063,881) | (2,933,837) |
| Fair value adjustment of investments registered at fair value | ||
| on the income statement | (60,475) | |
| Other financial losses | ||
| Losses with debt emission | (1,941,330) | (1,176,609) |
| others | (4,104,996) | (4,042,356) |
| (6,046,326) | (5,218,965) | |
| Total | (51,090,066) | (29,977,320) |
| Income: | ||
| Interests receivable | ||
| related with bank deposits | 10,111,607 | 2,781,316 |
| related with loans to affiliated companies | 2,793,622 | 3,842,649 |
| others | 3,496,740 | 2,537,611 |
| 16,401,969 | 9,161,576 | |
| Exchange gains | 2,831,286 | 3,679,301 |
| Profits in the valuation of derivatives | 173,592 | |
| Other financial income | 238,714 | 1,335,656 |
| Total | 16,640,683 | 10,670,824 |
| Net financial expenses | (34,449,383) | (19,306,496) |
Income tax for period ended 31 December 2007 and 2006 is as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Current tax | 8,500,098 | 9,602,480 |
| Deferred tax | (1,378,897) | 106,677 |
| 7,121,201 | 9,709,157 |
The reconciliation between the profit before taxation and the tax charge for the periods ended 31 December 2007 and 2006 is summarised as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Profit before income tax | 175,937,046 | 169,970,776 |
| Income tax rate | 26.50% | 27.50% |
| 46,623,317 | 46,741,963 | |
| Provisions and impairment losses not accepted for tax purposes | 242,198 | (1,330,658) |
| Differences in profit/(loss) in the disposal of assets for tax and accounting purposes | (2,216,129) | (890,268) |
| Use of tax losses for which no deferred taxes assets were recognised in the past | (33,740,922) | (40,960,242) |
| Tax losses of the current year which did not give place to the recognition of deferred tax | ||
| assets | 2,788,320 | 1,865,633 |
| Tax rates different from portuguese tax rate | (3,331,800) | (978,719) |
| Effect of the change in tax rate used for purposes of calculation of deferred taxation | 182,272 | |
| Tax credit related to Imobiliary Investment Funds income | 2,342,238 | 1,186,933 |
| Use or reversal of deferred tax | (2,070,110) | (2,013,848) |
| Autonomous taxation and tax benefits | 571,618 | 267,122 |
| Shortage / (excess) of previous years income tax estimate | (1,123,987) | (68,341) |
| Others | (2,963,543) | 5,707,310 |
| Income tax | 7,121,200 | 9,709,157 |
Earnings per share for the years ended 31 December 2007 and 2006 were calculated taking into consideration the following amounts:
| 4th Quarter.2007 | 31.12.2007 | 4th Quarter.2006 | 31.12.2006 | |
|---|---|---|---|---|
| Net profit | ||||
| Net profit taken into consideration to calculate basic earnings per share (Net profit for the period) |
68,764,950 | 167,492,214 | 68,882,978 | 158,079,602 |
| Net profit taken into consideration to calculate diluted earnings per share | 68,764,950 | 167,492,214 | 68,882,978 | 158,079,602 |
| Number of shares | ||||
| Weighted average number of shares used to calculated basic Earnings per share |
1,000,000,000 | 1,000,000,000 | 1,089,315,068 | 1,089,315,068 |
| Weighted average number of shares used to calculated the diluted earnings per share |
1,000,000,000 | 1,000,000,000 | 1,089,315,068 | 1,089,315,068 |
| Earning per share (basic and diluted) | 0.07 | 0.17 | 0.06 | 0.15 |
As at 31 December 2007 and 2006 there are no diluting effects on the number of circulating shares.
In the Shareholders Annual General Meeting held on 2 May 2007, the payment of a gross dividend of 75,000,000 was approved.
The contribution of the main segments for the years ended 31 December 2007 and 2006 can be detailed as follows:
| 31 December 2007 | Turnover | EBITDA | EBIT | Net capital employed |
Sales area ['.000m2] |
|---|---|---|---|---|---|
| Food retail brands | 2,368,424,461 | 207,733,018 | 145,411,650 | 786,500,777 | 374 |
| Non food retail brands | 1,009,076,913 | 71,410,251 | 47,246,242 | 318,902,896 | 239 |
| Real estate assets with income | 7,167,133 | 19,571,890 | 18,044,840 | 44,388,494 | |
| Real estate assets without income | 292,688 | 229,356 | 50,370,475 | ||
| Other | 26,842 | 26,792 | 69,086,206 | ||
| 3,384,668,507 | 299,034,689 | 210,958,880 | 1,269,248,848 | 613 | |
| Continente Hipermercados [ex-Carrefour] | 663,752,773 | ||||
| 3,384,668,507 | 299,034,689 | 210,958,880 | 1,933,001,621 | 613 |
| 31.12.2006 | Turnover | EBITDA | EBIT | Net capital employed |
Sales area ['.000m2] |
|---|---|---|---|---|---|
| Food retail brands | 2,209,467,419 | 188,461,490 | 132,939,906 | 726,657,263 | 349 |
| Non food retail brands | 869,243,426 | 53,637,322 | 32,499,501 | 240,022,035 | 194 |
| Real estate assets with income | 11,849,998 | 10,594,800 | 8,625,188 | 69,201,566 | |
| Real estate assets without income | 192,469 | 77,639 | 58,028,475 | ||
| Other | 843,929 | 843,455 | 48,161,093 | ||
| 3,090,560,843 | 253,730,010 | 174,985,689 | 1,142,070,432 | 543 |
Includes the contribution of the business activity of the company related to food retail brands.
Includes the contribution of the business activity of the company related to non food retail brands.
Includes the contribution of real estate assets managed by Sonae Distribuição, in particular commercial galleries near to Continente and Modelo units.
Includes the contribution of real estate assets which in most cases will be useful to accommodate the organic growth of Sonae Distribuição.
Includes the net capital employed of the Company which was subject to acquisition on 31 December 2007. Therefore, their contributions to the segment information were not yet classified.
Amounts that, by their nature, do not fit in any of the other categories, such as financial investments, that represent almost 100% of the net capital employed.
Operational income – amortisations and depreciations – provisions and impairment losses – impairment losses reversion.
Consolidated profit – income tax + profit/(loss) related to investments + profit/(loss) related to associated companies – net financial income.
Gross fixed assets [includes Ex-Carrefour] + other gross fixed assets + amortisations and impairment losses + financial investments + working capital
In the Shareholders General Meeting it will be proposed the payment of a gross dividend on a total amount of 85 million Euro to shares not held directly or indirectly by Sonae Distribuição SGPS, S.A., corresponding to a dividend pay-out ratio of approximately 50% of the consolidated profit for the period.
The accompanying consolidated financial statements were approved by the Board of Directors and authorized for issue on 5 March 2008, nevertheless they are still subject to approval at the Shareholders Annual General Meeting as defined in Portuguese Commercial Law.
These consolidated financial statements are a translation of financial statements originally issued in Portuguese in accordance with International Financial Reporting Standards. In the event of discrepancies, the Portuguese language version prevails.
Matosinhos, 5 March 2008
31 DECEMBER 2007
| IFRS | |||
|---|---|---|---|
| ASSETS | Notes | 31-12-07 | 31-12-06 |
| NON CURRENT ASSETS | |||
| Intagible assets | 7 | 140,483 | 695,668 |
| Tangible fixed assets | 7 | 7,296 | 10,043 |
| Investments | 6 | 2,009,050,391 | 1,350,118,831 |
| Deferred tax assets | 8 | 304 | 1,649 |
| Loans granted to group companies | 9 | 774,196,909 | 457,114,129 |
| Total non current assets | 2,783,395,383 | 1,807,940,320 | |
| CURRENT ASSETS | |||
| Trade accounts receivable | 10 | 3,540,891 | 21,191,886 |
| Group companies | 11 | 734,444,255 | 897,398,511 |
| Other accounts receivable | 13 | 7,101,105 | 2,709,977 |
| Taxes recoverable | 12 | 9,916,188 | 10,954,848 |
| Other currents assets | 14 | 2,051,090 | 3,521,868 |
| Derivatives | 15 | 1,113,658 | - |
| Cash and cash equivalent | 16 | 48,033 | 50,033,177 |
| Total currents assets | 758,215,220 | 985,810,267 | |
| TOTAL ASSETS | 3,541,610,603 | 2,793,750,587 | |
| EQUITY AND LIABILITIES | |||
| EQUITY | |||
| Share Capital | 17 | 1,100,000,000 | 1,100,000,000 |
| Own Shares | 18 | - | (205,000,000) |
| Legal Reserves | 19 | 95,000,000 | 90,200,000 |
| Other Reserves | 19 | 825,514,961 | 905,536,702 |
| Net Profit for the year | 33 | 84,137,774 | 80,335,955 |
| TOTAL EQUITY | 2,104,652,735 | 1,971,072,657 | |
| LIABILITIES | |||
| NON-CURRENT ASSETS | |||
| Bonds | 20 | 1,100,672,731 | 593,166,278 |
| Deferred tax liabilities | 8 | 233,406 | 115,282 |
| Total non-current liabilities | 1,100,906,137 | 593,281,560 | |
| CURRENT ASSETS | |||
| Short term portion of non-current bonds | 20 | - | 161,400,000 |
| Bank loans | 20 | 2,809 | 2,594 |
| Suppliers | 21 | 104,307 | 81,620 |
| Group Companies | 11 | 310,274,622 | 41,033,321 |
| Other accounts payable | 22 | 3,965,364 | 11,165,157 |
| Taxes payable Other current liabilities |
12 23 |
1,184,698 20,519,931 |
3,932,935 11,780,743 |
| Total current liabilities | 336,051,731 | 229,396,370 | |
| TOTAL LIABILITIES | 1,436,957,868 | 822,677,930 | |
| TOTAL EQUITY AND LIABILITIES | 3,541,610,603 | 2,793,750,587 |
The accompanying notes are part of these financial statements
| IFRS | IFRS | |||||
|---|---|---|---|---|---|---|
| 31-12-07 | 31-12-06 | |||||
| Notes | 4th Quarter 07 | YTD | 4th Quarter 06 | YTD | ||
| Unaudited | Unaudited | |||||
| Operatinal Income: | ||||||
| Services rendered | 27 | 775,579 | 3,128,682 | 4,223,332 | 17,614,059 | |
| Other operational income | 28 | 920,225 | 3,179,931 | 974,025 | 1,944,050 | |
| Total Operational income | 1,695,804 | 6,308,613 | 5,197,357 | 19,558,109 | ||
| Operational expenses: | ||||||
| External supplies and services | (327,133) | (1,373,646) | (328,362) | (1,354,948) | ||
| Staff costs | (982,494) | (2,548,664) | (594,656) | (2,005,299) | ||
| Amortisation and depreciation | (70,631) | (283,101) | (70,721) | (282,307) | ||
| Other operational expenses | 29 | (955,966) | (3,289,754) | (1,040,382) | (1,918,594) | |
| Total operational expenses | (2,336,224) | (7,495,165) | (2,034,121) | (5,561,148) | ||
| Net Operational profit / (loss) | (640,420) | (1,186,552) | 3,163,236 | 13,996,961 | ||
| Financial income | 30 | 21,298,447 | 70,793,951 | (4,594,956) | 50,410,643 | |
| Financial expenses | 30 | (20,566,945) | (57,734,847) | (7,215,560) | (25,584,832) | |
| Financial profit/(loss) | 30 | 731,502 | 13,059,104 | (11,810,516) | 24,825,811 | |
| Profit/(loss) related to investments | 31 | - | 49,345,485 | - | 17,891,933 | |
| Profit/(loss) before taxes | 91,082 | 61,218,037 | (8,647,280) | 56,714,705 | ||
| Income tax | 32 | 17,783,674 | 22,919,737 | 20,320,220 | 23,621,250 | |
| Net profit/(loss) for the year | 33 | 17,874,756 | 84,137,774 | 11,672,940 | 80,335,955 | |
| Profit/(loss) per share (basic and diluted) | 33 | 0.02 | 0.084 | 0.011 | 0.074 |
The accompanying notes are part of these financial statements
(Translation of financial statements originally issued in Portuguese - Note 36)
| Balance at 1 January 2006 | Notes 17 |
Share Capital 1,100,000,000 |
Own Shares - |
Legal Reserves 90,200,000 |
Other Reserves 1,192,586,414 |
Hedging Reserves - |
Retained earnings (4,364,162) |
Net profit/loss (227,707,550) |
Total Equity 2,150,714,702 |
|---|---|---|---|---|---|---|---|---|---|
| Appropriation of net profit of 2005 Appropriation of net profit/(loss) of 2005 Distributed dividends Changes in reserves |
- - |
- - |
- - |
(55,000,000) | (227,707,550) - |
227,707,550 - |
- (55,000,000) |
||
| Changes in fair value Acquisition of own shares Net profit/(loss) for the year |
- - |
- (205,000,000) |
- - |
22,000 - |
- - |
- - |
- - |
22,000 (205,000,000) |
|
| ended 31 December 2006 Others Balance at 31 December 2006 |
- - 1,100,000,000 |
- - (205,000,000) |
- - 90,200,000 |
- (232,071,712) 905,536,702 |
- - |
- 232,071,712 - |
80,335,955 - 80,335,955 |
80,335,955 - 1,971,072,657 |
|
| Balance at 1 January 2007 Appropriation of net profit of 2006 |
17 | 1,100,000,000 | (205,000,000) | 90,200,000 | 905,536,702 | - | - | 80,335,955 | 1,971,072,657 |
| Appropriation of net profit/(loss) of 2006 Distributed dividends |
33 | - - |
- - |
4,800,000 - |
535,955 - |
- | - | (5,335,955) (75,000,000) |
- (75,000,000) |
| Changes in reserves Changes in fair value Outros |
30 | - - |
- - |
- - - |
- - |
919,625 (381,455) |
- - |
- - |
919,625 (381,455) |
| Delivery of own shares | - | 205,000,000 | - | - | - | - | - | 205,000,000 | |
| Merging by incorporation Net profit/(loss) for the year |
2 | - | - | - | (81,095,866) | - | - | (81,095,866) | |
| ended 31 December 2007 Others |
33 | - - |
- - |
- - |
- | - | - | 84,137,774 - |
84,137,774 - |
| Balance at 31 December 2007 | 1,100,000,000 | - | 95,000,000 | 824,976,791 | 538,170 | - | 84,137,774 | 2,104,652,735 |
The accompanying notes are part of these financial statements
| Notes | 31-12-07 | 31-12-06 | |
|---|---|---|---|
| OPERATING ACTIVITIES: | |||
| Cash receipts from trade debtors | 20,733,278 | 16,469,639 | |
| Cash payments to trade suppliers | 1,657,683 | 1,324,072 | |
| Cash paid to employees | 3,157,405 | 3,602,512 | |
| Net cash flow generated by operations | 15,918,190 | 11,543,055 | |
| Income taxes paid/(received) | (25,983,895) | (8,477,708) | |
| Other cash receipts/payments from operating activities | -4,195,902 | 4,135,255 | |
| Net cash flow from operating activities (1) | 37,706,183 | 24,156,018 | |
| INVESTING ACTIVITIES | |||
| Cash receipt related to: | |||
| Financial investments | 97,058,064 | 16,199,520 | |
| Intangible assets | 275,000 | 184,500 | |
| Interests and similar income | 53,873,687 | 55,885,884 | |
| Dividends | 18,193,658 | 14,200,887 | |
| Other | 75,000,000 | ||
| Loans granted | 3,191,397,022 | 4,588,519,463 | |
| 3,435,797,431 | 4,674,990,254 | ||
| Cash payments related to: | |||
| Financial investments | (274,741,772) | (34,276,524) | |
| Intangible assets | (42) | (1,137) | |
| Other | (616,169,473) | (459,500) | |
| Loans granted | (3,129,991,937) | (4,755,736,910) | |
| (4,020,903,224) | (4,790,474,071) | ||
| Net cash used in investing activities (2) | (585,105,793) | (115,483,817) | |
| FINANCING ACTIVITIES | |||
| Cash receipt related to: | |||
| Loans obtained | 3,255,876,455 | 1,256,298,793 | |
| 3,255,876,455 | 1,256,298,793 | ||
| Cash payments related to: | |||
| Loans obtained | (2,631,418,155) | (1,281,665,612) | |
| Interests and similar charges | (50,742,069) | (22,989,891) | |
| Dividends | (75,000,036) | (54,999,980) | |
| Purchase of own shares | - | (205,000,000) | |
| (2,757,160,260) | (1,564,655,483) | ||
| Net cash used in financing activities (3) | 498,716,195 | (308,356,690) | |
| Net increase/(decrease) in cash and equivalents (4) = (1) + (2) + (3) | (48,683,415) | (399,684,489) | |
| Cash and cash equivalents at the beginning of the year | 16 | 50,030,583 | 449,715,072 |
| Cash and cash equivalents - Merger with subsidiaries | (1,301,944) | ||
| Cash and cash equivalents at the end of the year | 16 | 45,224 | 50,030,583 |
The accompanying notes are part of these financial statements
(Translation of Notes to the company financial statements originally issued in Portuguese – Note 36)
SONAE DISTRIBUIÇÃO, SGPS, S.A. ("the Company" or "Sonae Distribuição"), formerly known as Modelo Continente, SGPS, S.A., is a Portuguese Corporation, with head-office in Rua João Mendonça nº 529, 4464-501 Senhora da Hora, Portugal.
The Company's main activity is the management of shareholdings (Note 5).
The company financial statements are presented as required by Commercial Companies Code. According to Decree-Law 35/2005 of 17 February 2007, the Company financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.
During the year ended 31 December 2007, the company's subsidiaries Modelo, SGPS, S.A. and Parcium Imobiliária, S.A. were merged into the Company, with the assets and liabilities of these two companies transferred at their carrying amount, as these companies were under common control.
The merger produced accounting effects since 1 January 2007 and the carrying amount of the assets and liabilities merged, as at that date, were as follows:
| Investments (Note 6 and 24) | 457,860,106 |
|---|---|
| Other non-current assets | 230,072,099 |
| Other current assets | 75,274,153 |
| Cash and cash equivalents | 45,046 |
| 763,251,404 | |
| Liabilities | |
| Other current liabilities | (625,615,353) |
| Incorporated net assets | 137,636,051 |
| Own shares atributed to the shareolders of the incorporated company (Note 18) | 205,000,000 |
| Consideration paid to the incorporated company's shareholders (Note 18) | 4,969,473 |
| Carrying amount of investments in the incorporated companies | 8,762,444 |
| Merger effect on equity | |
| Other reserves (Note 19) | (81,095,866) |
| 137,636,051 |
As a consequence, the financial statements for the period ended 31 December 2007 are not directly comparable with 2006 financial statements.
The principal accounting policies adopted in preparing the accompanying financial statements are as follows:
The accompanying financial statements have been prepared in accordance with the International Financial Reporting Standards ("IFRS") applicable on 1 January 2007, as adopted by the European Union.
Interim financial statements are presented quarterly, in accordance with IAS 34 – "Interim Financial Reporting".
During 2007 the Company adopted for the first time IFRS 7 "Financial Instruments: Disclosures" and consequential amendments to IAS 1-"Presentation of Financial Statements", which are effective for years beginning on or after 1 January 2007. The impact of the adoption of this standard was to expand the disclosures provided in these financial statements regarding the financial instruments used by the Group.
On 1 January 2007, the following interpretations came into effect: (i) IFRIC 7 - "Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies"; (ii) IFRIC 8 - "Scope IFRS 2"; (iii) IFRIC 9 - "Reassessment of Embedded Derivatives"; (iv) IFRIC 10 - "Interim Financial Reporting and Impairment. The adoption of these Interpretations has not led to any material changes in the Company's accounting policies as at 31 December 2007.
These financial statements have been prepared from the books and accounting records under a going concern assumption and under the historical cost convention, except for some financial instruments which are measured at their fair value (Note 3.5).
As at 31 December 2007 the following standards and interpretations were in issue: IAS 23 Amendments "Borrowing costs", IFRS 8 - "Operating segments", IFRIC 13 - "Customer Loyalty Programmes", IFRIC 11 IFRS 2 - "Group and Treasury Share Transactions" and IFRIC 12 - "Service Concession Arrangements". These Standards and Interpretations were in issue but not yet effective, and therefore have not been applied in these financial statements. The application of these changes will not produce material changes in the future financial statements of the entity.
At 31 December 2007, the following Standards and Interpretations were in issue but have not yet been endorsed by European Union: IAS 23 amendments, IFRS 8, IFRIC 11, IFRIC 12 and IFRIC 13.
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 that date are recorded at acquisition cost, net of depreciation and accumulated impairment losses.
Depreciation is computed on a straight line basis, as from the date the asset is first used, over the expected useful life for each class of assets.
The depreciation rates used correspond to the following estimated useful lives:
| Years | |
|---|---|
| Buildings | 50 |
| Basic equipment | 10 a 15 |
| Transport equipment | 5 |
| Tools and containers | 4 |
| Fixture and fittings | 10 |
| Other tangible assets | 5 |
Intangible assets are stated at acquisition cost, net of depreciations and accumulated impairment losses. Intangible assets are only recognized if, inherent to these, it is probable future economic benefits will flow for the Company, are controlled by the Company and if their cost can be reliably measured.
Depreciation is provided on a straight line basis, as from the date the asset is available for use, taking into consideration the estimated useful life for each class of assets.
Borrowing costs are usually recognized as expense in the period in which they are incurred on accrual basis.
The Company classifies the financial instruments in the presented categories conciliated with the Balance Sheet as disclosed in Note 5.
a) Investments in subsidiaries and associated companies
Investments in subsidiaries and associated companies are recorded according to IAS 27, at acquisition cost net impairment losses if any.
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 the fair value through profit or loss include the investments held for trading that the Company acquires with the purpose of trading in the short term. They are classified in the balance sheet as current investments. The Company classifies the available-for-sale investments as non-current assets.
All purchases and sales of investments are recognised at the trade date, independently of the settlement date.
Investments are initially measured at cost, which is its fair value at acquisition date, including transaction costs if related to Held to maturity and Available-for-sale investments.
Available-for-sale investments and investments measured at fair value through profits or loss are subsequently recorded at fair value excluding any deduction of transaction costs which may be incurred during its sale taking into consideration the market price at the balance sheet date. Investments in equity instruments that do not have a market price and whose fair value cannot be reliably measured are stated at cost less impairment losses.
Gains or losses arising from changes in fair value of available-for-sale investments are recorded directly under the Fair value reserve in Equity, until the investment is sold or otherwise disposed of, or until it is considered to be impaired, at which time the cumulative gain or loss previously recorded in equity is transferred to net profit or loss for the period.
Gains or losses arising from change in fair value of investments measured at fair value through profit and loss are recorded directly in the income statement.
Held to maturity investments are carried at amortized cost using the effective interest rate method, net of capital reimbursements and interest income received.
Loans and non current accounts receivables are measured at amortised cost using the effective interest rate method, less any impairment.
Interest income is recognised by applying the effective interest rate, except for short-term receivables as the recognition of interest would be immaterial.
These financial instruments arise when the Company provides funds or renders services to its subsidiaries and associated companies with no intention of trading the receivables.
Loans and receivables are recorded as current assets, except when its maturity is greater than 12 months from the balance sheet date, when they are classified as non-current assets. Loans and receivables are included in the captions presented in Note 9.
Other accounts receivable are stated in the balance sheet at their nominal value net of impairment losses, recognised under an allowance account "Impairment losses on accounts receivable", in order to reflect its net realizable value.
Impairment losses are recorded in sequence of events occurred that indicate, objectively and in a quantifiable way, that the total or part of the account receivable will not be received.
Recognized impairment losses correspond to the difference between the carrying amount of the receivable and the present value of the estimated future cash-flows, discounted at the initial effective interest rate that, in those cases where it is estimated to be received in the short term (less than 1 year), it is considered to be null.
Financial liabilities and equity instruments are classified and accounted for based upon their contractual substance, independently from the legal form they assume.
f) Loans
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 accrual basis, in accordance with the accounting policy defined in Note 3.8. The portion of interest regarding up-front fees and commissions, if not paid in the period, is added to the book value of the loan.
Trade and other accounts payable are stated at their nominal value.
h) Derivatives
The Company enters into derivatives in order to manage its financial risks, as hedging instruments.
Derivatives used by the group that qualify as cash flow hedging instruments relate, mainly, with interest rate and foreign exchange instrument to hedge the risks arising on loans obtained. Derivatives classified as cash flow hedge instruments are used by the Company mainly to hedge interest risks on loans obtained. Conditions established for these cash flow hedge instruments are identical to those of the corresponding loans in terms of base rates, calculation rules, rate setting dates and repayment schedules of the loans and for these reasons they qualify as perfect hedges. The inefficiency of the hedging, in case of existence, is recorded in 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 the interest and exchange rates of its loans are initially accounted for at fair value, if any, and subsequently at fair value. Changes in fair value of these cash flow hedge instruments are recorded in equity under the caption Hedging reserves, and then transferred to the income statement over the same period in which the hedged instrument affects profit or loss.
The fair value of these instruments is estimated by the Company using specific software based on the discounted cash flow of the difference between the fixed interest rate of the fixed leg and the indexed variable interest rate inherent to the variable leg.
Hedge accounting of derivative instruments is discontinued when the instrument matures or is sold. Whenever a derivative instrument can no longer be qualified as an hedging instrument, the fair value differences recorded in equity under the caption Hedging reserve are transferred to profit or loss of the year or to the carrying amount of the asset that have been recognized as a result of the hedged forecast transaction, if applicable. Subsequent changes in fair value are recorded in the 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 when these are not stated at fair value. Gains and losses which are not realizable are recorded in the Income statement.
Own shares are recorded at acquisition cost as a deduction to equity. Profit or losses resulting from disposal of own shares are recorded directly in equity.
Cash and cash equivalents includes cash at hand, cash at banks by means of in demand and term deposits and other treasury applications which mature in less than three months and that are subject to insignificant risk of changes in its value.
For the preparation of the statement of cash flows, cash and cash equivalents caption also includes bank overdrafts, which are included in the balance sheet caption Loans.
Share based payments result from Deferred Performance Bonus Plans that are referenced to the evolution of the Sonae SGPS, SA shares' price. (Parent company of Sonae Distribuição, SGPS, S.A.)
Share based payments liabilities are measured at fair value on the date they are granted (usually in March each year) and are subsequent re-evaluated at the end of each reporting period based on the number of shares granted and the corresponding fair value at the closing date. The obligations are recorded under personnel costs and other current and non-current liabilities, under a straight line basis, between the date the shares were granted and their vesting date, taking into a consideration the time elapsed between these dates.
Contingent liabilities are not recorded in the financial statements, being disclosed, unless the probability of a cash outflow is remote, in which case, no disclosure is made.
Contingent assets are not recorded in the financial statements but disclosed when the existence of future economic benefit is probable.
Revenue from services rendered is recorded in the income statement taking into consideration the stage of completion of the transaction at the balance sheet date.
Dividends are recognized as income in the year in which they are attributed to the shareholders.
Income and expenses are recognized 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 in future years, thus being recorded in the income statement of the future period.
Post-balance-sheet events that provide additional information about conditions that existed at the balance sheet date (adjusting events), are reflected in the financial statements. Postbalance-sheet events that are not adjusting events are disclosed in the notes to the financial statements when considered to be material.
The most significant accounting estimates reflected in the income statements include:
Estimates used are based on the best information available during the preparation of financial statements and are based on best knowledge of past and present events. Although future events are neither controlled by the Company nor foreseeable, some could occur and have impact on the estimates. Changes to the estimates used by the management that occur after the date of these financial statements, will be recognised in net income, in accordance with IAS 8, prospectively.
Sonae Distribuição is taxed in accordance with Special Regime of Taxing Groups of Companies (Parent company). Each company included in this regime records income tax for the year in its individual accounts in the caption "Group companies". When a subsidiary contributes with a tax loss, it reflects, in its individual accounts, the amount of tax corresponding to the loss to be compensated by the profits of the other companies covered by this regime.
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 expected to apply in the periods when the temporary differences are expected to reverse.
Deferred tax assets are recognized 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 recognized and expected to reverse in the same period. At each balance sheet date an assessment of the deferred tax assets recognized is made, being reduced whenever their future use is no longer probable.
Deferred tax assets and liabilities are recorded in the income statement, except if they relate to items directly recorded in equity. In these cases the corresponding deferred tax is recorded in Equity.
Risk management general principles are approved by the Board of Directors, and its implementation is supervised by group's finance department.
a) Market risk
The interest and exchange rate risk have a decisive importance in the Company's market risk management.
1) Interest rate risk
The Company uses derivative instruments in its market risk management in order to guarantee its hedging, not being used for trading or speculative purposes.
The Group exposure to the interest rate risk arises from the long term loans which are build up, in their majority, by debts indexed to Euribor.
The Company aim is to limit the cash-flow and net income volatility having in mind the operational activity profile by the use of an adequate combination of variable and fixed rate debt. Company's policy allows interest rate derivates use in order to reduce Euribor's variability exposure and not for speculative purposes.
The derivatives used by the Company in interest rate risk management qualify as hedging instruments of cash flow as they configure perfect hedging relations. 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.
The exposure to interest rate risk is estimated to be reduced as, if interest rates of euro denominated financial instruments had been 75 basis points higher/lower during 2007, the consolidated net profit before tax for the year ended 31 December 2007 would decrease/increase by an amount not higher than 0.7 million euro (1.5 million euro decrease/increase in 2006 consolidated net profit before tax).
Sonae Distribuição, SGPS, S.A. is not directly exposed to the foreign exchange rate risk.
The purpose of liquidity risk management is to ensure, at all times, that the group has the financial capacity to fulfil its commitments as they become due and to carry on its business activities and strategy, through the management of the trade off cost and maturity of debt.
The Company follows an active active policy of re-financing its debt by maintaining a high level of unused and available on demand resources to face short term needs and by increasing or maintaining an adequate debt maturity, according to the estimated cash-flows, and to the capability of leveraging its balance sheet.
Negotiating contractual terms which reduce the possibility of the lenders being able to demand an early termination is also considered as an important mean of managing liquidity risk. The group also assures, in its relationship with financial institutions, a high level of diversification of financing sources and counterparties, in order to ease the ability of entering new loan agreement and to minimize the effects of any relationship discontinuance.
c) Credit risk
The company is exposed to the credit risk in its relationship with financial institutions, in result of bank deposits, debt instruments available facilities, derivates, among others.
The credit risk is limited by risk concentration management, and by a selection of counterparties, which have a high national and international prestige, with at least a credit rating of BBB or an equivalent rating issued by other international agencies.
Sonae Distribuição, SGPS, S.A. is also exposed to the credit risk as result of the loans granted to participated companies.
The accounting policies disclosed in Note 3.5 have been applied to the line items bellow:
| Note | Loans and accounts receivable |
Hedging derivatives |
Subtotal | Assets not within IFRS 7 scope |
Total | |
|---|---|---|---|---|---|---|
| NON-CURRENT ASSETS | ||||||
| Loans granted to group companies | 9 | 774,196,909 | 774,196,909 | 774,196,909 | ||
| 774,196,909 | 774,196,909 | 774,196,909 | ||||
| CURRENT ASSETS | ||||||
| Trade receivables | 10 | 3,540,891 | 3,540,891 | 3,540,891 | ||
| Group companies | 11 | 734,444,255 | 734,444,255 | 734,444,255 | ||
| Other debtors | 13 | 7,101,105 | 7,101,105 | 7,101,105 | ||
| Other current assets | 14 | 1,451,118 | 1,451,118 | 599,972 | 2,051,090 | |
| Derivatives | 15 | 1,113,658 | 1,113,658 | 1,113,658 | ||
| Cash and cash equivalents | 16 | 48,033 | 48,033 | 48,033 | ||
| 746,585,402 | 1,113,658 | 747,699,060 | 599,972 | 748,299,032 | ||
| FINANCIAL LIABILITIES | |
|---|---|
| ----------------------- | -- |
| Note | Loans and accounts receivable |
Assets not within IFRS 7 scope |
Total | |
|---|---|---|---|---|
| NON-CURRENT LIABILITIES | ||||
| Bonds | 20 | 1,100,672,731 | 1,100,672,731 | |
| 1,100,672,731 | 1,100,672,731 | |||
| CURRENT LIABILITIES | ||||
| Bank loans | 20 | 2,809 | 2,809 | |
| Trade creditors | 21 | 104,307 | 104,307 | |
| Group companies | 11 | 310,274,622 | 310,274,622 | |
| Other creditors | 22 | 3,965,364 | 3,965,364 | |
| Other current libilities | 23 | 19,613,486 | 906,445 | 20,519,931 |
| 333,960,588 | 906,445 | 334,867,033 |
According to the accounting policies described in note 3.5 as at 31 December 2006, the financial instruments were classified as follows:
| Loans and | Assets not | ||||
|---|---|---|---|---|---|
| Note | accounts | Subtotal | within IFRS 7 | Total | |
| receivable | scope | ||||
| NON-CURRENT ASSETS | |||||
| Loans granted to group companies | 9 | 457,114,129 | 457,114,129 | 457,114,129 | |
| 457,114,129 | 457,114,129 | 457,114,129 | |||
| CURRENT ASSETS | |||||
| Trade receivables | 10 | 21,191,886 | 21,191,886 | 21,191,886 | |
| Group companies | 11 | 897,398,511 | 897,398,511 | 897,398,511 | |
| Other debtors | 13 | 2,709,977 | 2,709,977 | 2,709,977 | |
| Other current assets | 14 | 3,462,276 | 3,462,276 | 59,592 | 3,521,868 |
| Cash and cash equivalents | 16 | 50,033,177 | 50,033,177 | 50,033,177 | |
| 974,795,827 | 974,795,827 | 59,592 | 974,855,419 |
| Note | Loans and accounts payable |
Assets not within IFRS 7 scope |
Total | |
|---|---|---|---|---|
| NON-CURRENT LIABILITIES | ||||
| Bonds | 20 | 593,166,278 | 593,166,278 | |
| 593,166,278 | 593,166,278 | |||
| CURRENT LIABILITIES Short term part of the long term bank |
||||
| loans | 20 | 161,400,000 | 161,400,000 | |
| Bank loans | 20 | 2,594 | 2,594 | |
| Trade creditors | 21 | 81,620 | 81,620 | |
| Group companies | 11 | 41,033,321 | 41,033,321 | |
| Other creditors | 22 | 11,165,157 | 11,165,157 | |
| Other current liabilities | 23 | 10,084,675 | 1,696,068 | 11,780,743 |
| 62,367,367 | 1,696,068 | 64,063,435 | ||
As at 31 December 2007 and 2006, the investment caption is made up as follows:
| euros | ||||
|---|---|---|---|---|
| 31.12.2007 | 31.12.2006 | |||
| Company | % held | Final balance | % held | Final balance |
| Investimentos em partes de capital | ||||
| Bertimóvel - Sociedade Imobiliária, S.A. (1) | 100.00% | 875,000 | - | - |
| Canasta - Empreendimetos Imobiliários, S.A. (1) | 100.00% | 1,579,375 | - | - |
| Chão Verde - Sociedade de Gestão Imobiliária, S.A. (1) | 100.00% | 2,244,591 | - | - |
| Citorres - Sociedade Imobiliária, S.A. (1) | 100.00% | 477,848 | - | - |
| Contibomba - Comércio e Distribuição de Combustíveis, S.A. | 100.00% | 372,000 | 100.00% | 372,000 |
| Contimobe - Imobiliária Castelo Paiva, S.A. (1) | 100.00% | 231,318,722 | 10.00% | 10,728,063 |
| Cumulativa - Sociedade Imobiliária, S.A. (1) | 100.00% | 2,095,191 | - | - |
| Difusão - Sociedade Imobiliária, S.A. (1) | 100.00% | 50,000 | - | - |
| Fozimo - Sociedade Imobiliária, S.A. | 100.00% | 24,940 | 100.00% | 24,940 |
| Fozmassimo - Sociedade Imobiliária, S.A. (1) | 100.00% | 6,264,902 | - | - |
| Fundo de Investimento Imobiliário Imosonae Dois | 100.00% | 182,228,145 | 100.00% | 117,425,732 |
| Fundo Fechado de Investimento Imobiliário Efisa Imobiliário | 0.00% | - | 100.00% | 43,913,700 |
| Fundo de Investimento Imobiliário Fechado Imosede | 42.16% | 34,536,577 | 33.81% | 13,525,000 |
| IGI - Investimento Imobiliário, SA (1) | 100.00% | 114,495,350 | - | - |
| Igimo - Sociedade Imobiliária, S.A. | 100.00% | 220,000 | 100.00% | 220,000 |
| Iginha - Sociedade imobiliária, S.A. | 100.00% | 109,000 | ||
| Imoconti - Sociedade Imobiliária, S.A. | 100.00% | 50,000 | 100.00% | 50,000 |
| Imoestrutura - Sociedade Imobiliária,S.A. (1) | 100.00% | 24,940 | - | - |
| Imomuro - Sociedade Imobiliária, S.A. | 100.00% | 539,940 | 100.00% | 439,940 |
| Imoresultado - Sociedade Imobiliária, S.A. | 100.00% | 109,736 | 100.00% | 109,736 |
| Imosistema - Sociedade Imobiliária, S.A. (1) | 100.00% | 280,000 | - | - |
| Infofield - Informática, S.A. | 10.00% | 530,459 | 10.00% | 530,459 |
| Marcas MC zRt | 100.00% | 72,784,761 | 100.00% | 79,545 |
| MJLF - Empreendimetos Imobiliários, S.A. (1) | 100.00% | 1,719,397 | - | - |
| Modalfa - Comércio e Serviços, S.A. (1) | 10.00% | 27,933 | - | - |
| Modelo Continente - Operações de Retalho, SGPS, S.A. | 100.00% | 1,050,000,000 | 100.00% | 1,000,000,000 |
| Modelo Continente Hipermercados, S.A. | 56.00% | 174,990,240 | 46.20% | 2,304,446 |
| Modelo Continente Seguros - Sociedade de Mediação, Lda | 75.00% | 161,250 | - | - |
| Modelo, SGPS, S.A. (2) | - | - | 0.15% | 562,444 |
| Modelo-Com - Vendas por Correspondência, S.A. | 100.00% | 12,637,016 | 100.00% | 12,637,016 |
| Ok Bazar - Comércio Geral, S.A. | - | - | 100.00% | 1,953,945 |
| Parcium Imobiliária, S.A. (2) | - | - | 100.00% | 8,200,000 |
| Predicomercial - Promoção Imobiliária, S.A. (1) | 100.00% | 6,372,293 | 10.00% | 187,548 |
| Selifa - Sociedade de Empreendimentos Imobililiários, S.A. (1) | 100.00% | 1,408,379 | - | - |
| Sempre à Mão - Sociedade Imobiliária, S.A. | 100.00% | 125,000 | 100.00% | 50,000 |
| Sempre a Postos - Produtos Alimentares e Utilidades, Lda | 25.00% | 249,399 | 25.00% | 249,399 |
| Sesagest - Projectos e Gestão Imobiliária, S.A. | 100.00% | 36,677,088 | 100.00% | 36,677,088 |
| Socijofra - Sociedade Imobiliária, S.A. (1) | 100.00% | 550,000 | - | - |
| Sociloures - Sociedade Imobiliária, S.A. | 100.00% | 10,000,000 | 100.00% | 10,000,000 |
| Soflorin, B.V. | 100.00% | 57,309,037 | 100.00% | 57,309,037 |
| Sonae Capital Brasil, S.A. | 37.00% | 23,334,858 | 37.00% | 23,334,858 |
| Sonae Retalho España, S.A. | 100.00% | 2,549,831 | 100.00% | 2,549,831 |
| Sonae, SGPS, S.A. | - | - | 0.003% | 75,500 |
| Sonaegest - Soc. Gest. de Fundos de Investimentos, S.A. (1) | 20.00% | 159,615 | - | - |
| Sondis Imobiliária, S.A. (1) | 100.00% | 49,940 | - | - |
| Sontária - Empreendimentos Imobiliários, S.A. (1) | 100.00% | 10,600,000 | - | - |
| Sonvecap, B.V. | 100.00% | 3,000,000 | 100.00% | 3,000,000 |
| Sportzone - Comércio de Artigos de Desporto, S.A. | 10.00% | 706,326 | 10.00% | 706,326 |
| SRE - Projectos de Consultadoria, S.A. | - | - | 100.00% | 1,259,784 |
| Todos os Dias-Comércio Ret. e Expl. de Centros Comerciais, S.A. | 100.00% | 1,180,000 | 100.00% | 1,180,000 |
| Tlantic Portugal - Sistemas de Informação, S.A. | 100.00% | 50,000 | ||
| Valor N, S.A. | 100.00% | 2,087,315 | ||
| Worten - Equipamentos para o Lar, S.A. | 10.00% | 462,494 | 10.00% | 462,494 |
| 2,047,618,888 | 1,350,118,831 | |||
| Impairment of Investments (Note 24) | (38,568,497) | |||
| 2,009,050,391 | 1,350,118,831 | |||
(1) – Investments recognized as a result of the merger (Note 2)
(2) – Investments extinguished as a result of the merger (Note 2)
During periods ended 31 December 2007 and 2006, the movements of the caption Investments are as follows:
| Investments | ||
|---|---|---|
| 31.12.2007 | 31.12.2006 | |
| Non-current | Non-current | |
| Investments in group companies | ||
| Opening balance | 1,163,752,000 | 1,180,747,775 |
| Purchases | 83,712,782 | 8,203,592 |
| Disposals | (12,148,502) | |
| Recognition of investments as result of the merger | 493,563,316 | |
| Investments estinguished as a result of the merger | (8,762,444) | (24,750,954) |
| Final balance | 1,720,117,152 | 1,164,200,413 |
| Accumulated impairment losses (Note 24) | (38,568,497) | (448,413) |
| 1,681,548,655 | 1,163,752,000 | |
| Investments in associated companies | ||
| Opening balance | 249,399 | 249,399 |
| Purchases | - | - |
| Disposals | - | - |
| Recognition of investments as result of the merger | 159,615 | - |
| Final balance | 409,014 | 249,399 |
| Accumulated impairment losses | - | - |
| 409,014 | 249,399 | |
| Suplementary capital | ||
| Opening balance | 2,480,000 | 2,480,000 |
| Additions | - | - |
| Reductions | - | - |
| Fair value increase/(decrease) | - | - |
| Others | - | - |
| Final balance | 2,480,000 | 2,480,000 |
| Investment Funds | ||
| Opening balance | 174,864,432 | 159,611,020 |
| Increases | 85,813,990 | 31,452,932 |
| Reductions | - | - |
| Liquidation of Fundo de Investimento Imobiliário Fechado Efisa | (43,913,700) | (16,199,520) |
| 216,764,722 | 174,864,432 | |
| Final balance | - | - |
| Accumulated impairment losses | 216,764,722 | 174,864,432 |
| Contributions of capital | ||
| Opening balance | 8,773,000 | 6,953,000 |
| Additions | 98,675,000 | 1,820,000 |
| (2,075,000) | - | |
| Reductions | ||
| Recognition of investments as result of the merger | 2,475,000 | |
| Final balance | 107,848,000 | 8,773,000 |
| Accumulated impairment losses | - | - |
| 107,848,000 | 8,773,000 | |
| Advances on financial investments acquisition | ||
| Opening balance | - | - |
| Purchases | 660,000 | - |
| Recognition of investments as result of the merger | 660,000 | - |
| Advances regularization | (1,320,000) | - |
| - | - | |
| 2,009,050,391 | 1,350,118,831 |
The increase of 83.712.782 Euro in the caption Investments on Group companies includes the share capital increases in Marcas MC, ZRT amounting to 72,705,216 Euro; share capital increase in Imoponte – Sociedade Imobiliária, S.A. amounting to 8,700,000 Euro and the acquisition of 100% of Valor N, S.A., amounting 2,087,315 Euro.
The decrease of 12,073,002 Euro of Investments on group companies includes the sale of 100% investment on several subsidiaries (Note 31).
The increase of 85,813,990 Euro recorded in the caption Investment Funds relates: to the acquisition of "Fundo de Investimento Imobiliário Imosonae Dois" units by a total consideration of 64,802,413 Euro; as well as to the capital increase amounting to 21,011,577 Euro made in Fundo de Investimento Imobiliário Imosede with an increase of the Company's shareholding up to 42,16%.
During the year ended 31 December 2007, movements in tangible and intangible assets as well as depreciation and accumulated impairment losses, are as follows:
| Opening balance | Increases | Decreases | Merger | Closing balance | |
|---|---|---|---|---|---|
| Acquision cost: | 31.12.2006 | Effect | 31.12.2007 | ||
| Industrial property and other rights | 1,401,602 | 1,401,602 | |||
| Software | 479 | 479 | |||
| Intangible assets in progress | 136 | 136 | |||
| Advanced payments for intagible assets | 275,000 | 275,000 | - | ||
| 1,676,602 | 136 | 275,000 | 479 | 1,402,217 | |
| Opening balance | Increases | Decreases | Merger | Closing balance | |
| Amortisations and accumulated impairment losses | 31.12.206 | Effect | 31.12.2007 | ||
| Industrial property and other rights | 980,934 | 280,321 | 1,261,255 | ||
| Software | 479 | 479 | |||
| 980,934 | 280,321 | 479 | 1,261,734 | ||
| Tangible assets: | |||||
| Opening balance | Increases | Decreases | Merger | Closing balance | |
| Acquision cost: | 31.12.2006 | Effect | 31.12.2007 | ||
| Machinery and equipment | 2,464 | 2,464 | |||
| Transport equipment | 19,062 | 19,062 | |||
| Office equipment | 16,653 | 33 | 8,119 | 24,805 | |
| Other tangible assets | 679 | 679 | |||
| 38,858 | 33 | 8,119 | 47,010 | ||
| Opening balance | Increases | Decreases | Merger | Closing balance | |
| Amortisations and accumulated impairment losses | 31.12.2006 | Effect | 31.12.2007 | ||
| Machinery and equipment | 411 | 246 | 657 | ||
| Transport equipment | 19,062 | 19,062 | |||
| Office equipment | 8,663 | 2,534 | 8,119 | 19,316 | |
| Other tangible assets | 679 | 679 | |||
| 28,815 | 2,780 | 8,119 | 39,714 |
| Opening balance | Final balance | |||
|---|---|---|---|---|
| Total net assets | 31.12.2006 | Increases | Decreases | 31.12.2007 |
| Intangible assets | 695.668 | (280.185) | 275.000 | 140.483 |
| Tangible assets | 10.043 | (2.747) | 7.296 |
During the year ended 31 December 2006, movements in tangible and intangible assets as well as depreciation and accumulated impairment losses, are made up as follows:
| Intangible assets: | ||||
|---|---|---|---|---|
| Opening balance | Increases | Decreases | Closing balance | |
| Acquisition cost: | 31.12.2005 | 31.12.2006 | ||
| Industrial property and other rights | 1,401,602 | 1,401,602 | ||
| Advanced payments for intangible assets | 459,500 | 184,500 | 275,000 | |
| 1,401,602 | 459,500 | 184,500 | 1,676,602 | |
| Opening balance | Increases | Decreases | Closing balance | |
| Amortisations and accumulated impairment losses | 31.12.2005 | 31.12.2006 | ||
| Industrial property and other rights | 700,614 | 280,320 | 980,934 | |
| 700,614 | 280,320 | 980,934 | ||
| Tangible assets: | ||||
| Opening balance | Increases | Decreases | Closing balance | |
| Acquisition cost: | 31.12.2005 | 31.12.2006 | ||
| Machinery and equipment | 2,464 | 2,464 | ||
| Transport equipment | 19,062 | 19,062 | ||
| Office equipment | 15,474 | 1,179 | 16,653 | |
| Other tangible assets | 679 | 679 | ||
| 37,679 | 1,179 | 38,858 | ||
| Opening balance | Increases | Decreases | Closing balance | |
| Amortisations and accumulated impairment losses | 31.12.2005 | 31.12.2006 | ||
| Machinery and equipment | 164 | 247 | 411 | |
| Transport equipment | 19,062 | 19,062 | ||
| Office equipment | 6,923 | 1,740 | 8,663 | |
| Other tangible assets | 679 | 679 | ||
| 26,828 | 1,987 | 28,815 | ||
| Opening balance | Final balance | |||
| Total net assets | 31.12.2005 | Increases | Decreases | 31.12.2006 |
|---|---|---|---|---|
| Intangible assets | 700,988 | 179,180 | 184,500 | 695,668 |
| Tangible assets | 10,851 | (808) | 10,043 |
Deferred tax assets and liabilities as at 31 December 2007 and 2006 are as follows, split between the different types of temporary differences:
| Assets | Liabilities | |||
|---|---|---|---|---|
| 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | |
| Financial instruments | 194,034 | |||
| Write off of intangible assets | 304 | 1,649 | ||
| Differences between amortizations for accounting and tax purposes | 39,372 | 115,282 | ||
| 304 | 1,649 | 233,406 | 115,282 |
During the periods ended 31 December 2007 and 2006, movements in deferred tax assets and liabilities are as follows:
| Assets | Liabilities | ||||
|---|---|---|---|---|---|
| 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | ||
| Opening balance | 1,649 | 75,490 | 115,282 | 157,879 | |
| Effects on income: | |||||
| Write off of intangible assets (Note 32) | (1,345) | (26,040) | |||
| Harmonised adjustments (Note 32) | (75,910) | (38,247) | |||
| Financial instruments valuation | (47,738) | ||||
| Exchange rate effect | (63) | (4,350) | |||
| (1,345) | (73,841) | (75,910) | (42,597) | ||
| Effects on equity | |||||
| Financial instruments valuation | 194,034 | ||||
| Final balance | 304 | 1,649 | 233,406 | 115,282 |
As at 31 December 2007 there was tax losses carried forward amounting to 36,519,737 Euro (145,243,801 Euro as at 31 December 2006) for which no deferred tax assets were recognized, by prudential reasons:
| 31.12.2007 | ||||||
|---|---|---|---|---|---|---|
| Tax | Deferred tax | Limit use | Tax | Deferred tax | Limit use | |
| loss | not recognized | date | loss | not recognized | date | |
| Originated in 2005 | 36,519,737 | 9,129,934 | 2011 | 145,243,801 | 36,310,950 | 2011 |
| 36,519,737 | 9,129,934 | 145,243,801 | 36,310,950 |
According to Portuguese law, tax assessments are subject to review and change by tax authorities during a four-year period (10 year for Social Security and five since 2001) except when there were tax losses carried forward, have been granted tax credits, or there are on going inspections or claims. In these cases the four year period is enlarged or suspended.
It is the Board of Directors understanding that eventual claims by the Tax Authorities will not result in any liabilities for the company.
As at 31 December 2007 and 2006 the non-current assets were as follows (Note 35):
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Loans to group companies | 774,196,909 | 457,114,129 |
These loans earn interests at market rate and their fair value is similar to their carrying amount. The loans refer to loans granted to subsidiaries with no defined maturity.
The amount of trade accounts receivable refers to Management Fee's and royalties, invoiced, mainly, to Sonae Distribuição, SGPS, S.A. Group companies.
Up to the balance sheet date there are no due accounts receivable and there were no impairment losses recorded, as there are no indications that clients will not fulfil their obligations.
As at 31 December 2007 and 2006, this caption is as follows:
Assets:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Short term loans (Note 35) | 61,473,000 | 779,656,609 |
| Interest charged but not received | 32,629,586 | 16,441,477 |
| Taxes - Special Regime for Taxation of Groups of Companies (a) | 29,141,669 | 26,088,132 |
| Credits assignement (c) | 75,000,000 | |
| Others (b) | 611,200,000 | 212,293 |
| 734,444,255 | 897,398,511 | |
| Liabilities: | ||
| 31.12.2007 | 31.12.2006 | |
| Short term loans (Note 35) | 308,140,500 | 39,919,201 |
| Interest charged but not paid | 2,732 | |
| Taxes - Special Regime for Taxation of Groups of Companies (a) | 2,134,122 | 1,111,388 |
| 310,274,622 | 41,033,321 |
There were no past due assets thus no impairment loss was recognized as at 31 December 2007 and 2006. The fair value of loans granted is similar to its carrying amount.
As at 31 December 2007 and 2006 this caption is detailed as follows:
| Assets: | ||
|---|---|---|
| 31.12.2007 | 31.12.2006 | |
| Income tax | 9,916,188 | 10,954,848 |
| 9,916,188 | 10,954,848 | |
| Liabilities: | ||
| 31.12.2007 | 31.12.2006 | |
| VAT | 565,698 | 3,704,733 |
| Social security | 2,110 | 2,894 |
| Withholding tax - Capital gains | 413,455 | 5,266 |
| Other | 203,435 | 220,042 |
| 1,184,698 | 3,932,935 |
As of 31 December 2007 and 2006 this caption is detailed as follows:
| Other debtors | ||
|---|---|---|
| 31.12.2007 31.12.2006 |
||
| Not due | 7,101,105 | 2,709,977 |
The caption Other debtors includes, approximately, 5,790,887 Euro (2,650,000 in 2006) related to taxes claimed from tax authorities, being an understanding by the Sonae Distribuição Board of Directors that the results of such claims will favour the company, so there were no impairment was recognized to face any eventual loss. The amount increase results from the merger of Modelo, SGPS, S.A. (Note 2). The remainder amounts refer to accounts receivable from Sonae Distribuição Group companies, not due and without any indication of impairment.
As at 31 December 2007 and 2006, the caption Other current assets can be detailed as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Deferred costs | 599,972 | 59,591 |
| Accrued income | 1,451,118 | 3,462,277 |
| 2,051,090 | 3,521,868 |
As at 31 December 2007 the heading Deferred costs is made up as follows: (i) 230.856 Euro related to insurance premiums paid in advance. (ii) 369.116 Euro related to debt issuance costs paid in advance.
The caption of accruals corresponds mainly to interests earned on group companies' loans.
As at 31 December 2007, the fair value of the derivatives, estimated taking into consideration present market value of equivalent financial instruments, is estimated as follows:
31.12.2007 31.12.2006 Assets 1,113,658 -
Gains and losses for the year arising from changes in the fair value of totalled a net gain of 1,113,658 Euro, excluding the effect of the register of the respective deferred liability and were recorded in Equity.
As at 31 December 2007 and 2006 cash and cash equivalents can be detailed as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Bank deposits | 13,036 | 50,033,177 |
| Treasury applications | 34,997 | - |
| Cash and cash equivalents on the balance sheet | 48,033 | 50,033,177 |
| Bank overdrafts (Note 20) | (2,809) | (2,594) |
| Cash and cash equivalents on the cash flow statement | 45,224 | 50,030,583 |
Bank overdrafts are disclosed in the balance sheet in the caption Loans.
As at 31 December 2007 and 2006, the share capital, which is fully subscribed and paid for, is made up by 1,100,000,000 ordinary shares which do not hold right to any fixed dividend, with a nominal value of 1 Euro each
As at 31 December 2007, the subscribed share capital was held as follows:
| __ Entity |
% |
|---|---|
| Sonae, SGPS, S.A. | 74.98 |
| Sonae Investments, B.V. | 15.93 |
| Soflorin, B.V. | 9.09 |
Sonae SGPS, S.A. is owned by Efanor Investimentos, SGPS, S.A. and its affiliated companies on 52.94%.
As of 31 December 2007 and 2006, own shares are detailed as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Own shares - nominal value | - | 100,000,000 |
| Own shares - prizes and discounts | - | 105,000,000 |
| - | 205,000,000 |
The merger of Modelo, SGPS, S.A. and Parcium Imobiliária, S.A. in Sonae Distribuição, SGPS, S.A., led to an exchange ratio in the following terms: Each share of Modelo SGPS, S.A., gave right to 7,327 Sonae Distribuição shares. Consequently the Company delivered, to Soflorin, B.V., former owner of Modelo, SGPS, S.A., 100,000,000 own shares, with the nominal value of 1 Euro, with fair value of 205,000,000 Euro, as well as an additional cash payment of 4,969,473 Euro.
In accordance with article 324 of Commercial Companies Code ("Código das Sociedades Comerciais"), the referred shares are still considered own shares once Soflorin, B.V. is a wholly owned subsidiary of Sonae Distribuição, SGPS, S.A..
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Legal reserves | 95,000,000 | 90,200,000 |
| 95,000,000 | 90,200,000 | |
| Reserves and Retained earnings: | ||
| Reserves under the artº324 CSC | 205,000,000 | 205,000,000 |
| Fair value reserves | - | 42,500 |
| Hedging reserves | 538,170 | - |
| Other reserves | 619,976,791 | 700,494,202 |
| 825,514,961 | 905,536,702 | |
| 920,514,961 | 995,736,702 |
As of 31 December 2007 the company held 95.000.000 Euro of legal reserves. According to Commercial Companies Code ("Código das Sociedades Comerciais") these reserves cannot be distributed except upon dissolution of the company, but can be used to absorb retained losses after all the other reserves have been used, or to increase capital.
As a result of the acquisition of own shares, free reserves in the same amount as their acquisition cost were made unavailable in accordance with article 324 of Commercial Companies Code ("Código das Sociedades Comerciais"). This reserve cannot be used until the referred own shares are extinct or disposed to a Company outside the Group (Note 18).
As at 31 December 2007 and 2006, loans are made up as follows:
| 31.12.2007 | 31.12.2006 | |||||||
|---|---|---|---|---|---|---|---|---|
| Book value | Nominal value | Book value | Nominal value | |||||
| Current | Non current | Current | Non current | Current | Non current | Current | Non current | |
| Bank loans | 161,400,000 | 161,400,000 | ||||||
| Bank overdrafts | 2,809 | 2,809 | 2,594 | 2,594 | ||||
| Bonds | 1,100,672,731 | 1,106,925,000 | 593,166,278 | 597,000,000 | ||||
| 2,809 | 1,100,672,731 | 2,809 | 1,106,925,000 | 161,402,594 | 593,166,278 | 161,402,594 | 597,000,000 |
The borrowing and interests beared shall be reimbursed as follows:
| 31.12.2007 | 31.12.2006 | |||
|---|---|---|---|---|
| Capital | Interests | Capital | Interests a) | |
| 2007 | - | - | 161,402,594 | 27,484,627 |
| 2008 | 2,809 | 57,954,762 | - | 32,135,507 |
| 2009 | 100,000,000 | 54,619,895 | 100,000,000 | 29,014,995 |
| 2010 | 64,925,000 | 51,688,373 | 265,000,000 | 26,168,458 |
| 2011 | 82,000,000 | 48,380,361 | 82,000,000 | 12,478,150 |
| 2012 | 350,000,000 | 38,775,565 | 150,000,000 | 7,949,825 |
| 2013 | 155,000,000 | 25,634,467 | - | - |
| +2014 | 355,000,000 | 35,317,289 | - | - |
| 1,106,927,809 | 312,370,710 | 758,402,594 | 135,231,562 |
a) The 2006 comparable data related to interests, takes into consideration the available information at present date, therefore the interests amount presented for the year 2007 is the amount effectively paid during the period.
As of 31 December 2007 bonds are made up as follows:
| Modelo Continente - 2003 | 82,000,000 |
|---|---|
| Modelo Continente - 2004 | 100,000,000 |
| Modelo Continente - 2005/2010 | 64,925,000 |
| Modelo Continente - 2005/2012 | 150,000,000 |
| Modelo Continente - 2007/2012 | 200,000,000 |
| Sonae Distribuição - 2007/2015 | 200,000,000 |
| Sonae Distribuição Setembro - 2007/2015 | 310,000,000 |
1,640,000 bonds – Nominal Value: 50 euro.
Maximum term: 8 (eight) years.
Annual interest rate: the interest rate which is variable is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.75% p.a. Interest Payment: half yearly in arrears, on 15 April and 15 October of each year. Redemption: at par, in one payment on 15 October 2011, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders.
10,000,000 bonds – Nominal Value: 10 euro.
Maximum term: 5 (five) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 1.15% p.a.. Interest Payment: half yearly in arrears, on 18 March and 18 September of each year.
Redemption: at par, in one payment on 18 March 2009, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders.
265,000 bonds – Nominal Value: 245 Euro.
Maximum term: 5 (five) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.70% p.a..
Interest Payment: half yearly in arrears, on 3 February and 3 August of each year.
Redemption: at par, in one payment on 5th year in one payment on 3 August 2010, the maturities date of the loan, except if it an early redemption occurs.
Early redemption (call-option): early redemption is possible by initiative of the issuer, either totally or partially (by reducing the nominal value of the bonds), on the 2nd, 3rd or 4th year of maturity. In this situation the issuer is obliged to pay a prize of 0.125% over de reimbursed value.
On the 3rd August 2007, the Company partially reimbursed the bonds, according to their Conditions. The amount reimbursed per bond was 755 Euro plus a premium of 0.94375 Euro.
After the reimbursement, the loan will be reduced to 64,925,000 Euro (265,000 bonds with a 245 Euro nominal value).
15,000,000 bonds – Nominal Value: 10 Euro.
Maximum term: 7 (seven) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.85% p.a..
Interest Payment: half yearly in arrears, on 2 February and 2 August of each year.
Redemption: at par, in one payment on 2 August 2012 the payments date of the 14th coupon, except if it an early redemption occurs.
Early redemption (call-option): early redemption is possible by initiative of the issuer, either totally or partially (by reducing the nominal value of the bonds), on the reimbursed dates of 10th, 11th, 12th and 13th coupon, without the obligation of paying any prize.
4,000 bonds – Nominal Value: 50,000 Euro.
Maximum term: 5 (five) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.5% p.a.. Interest Payment: half yearly in arrears, on 30 April and 30 October of each year. Redemption: at par, in one payment on 30 April 2012 the payments date of the 10th coupon. Early redemption (call-option): early redemption is not possible.
4,000 bonds – Nominal Value: 50 Euro.
Maximum term: 8 (eight) years.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day preceding the interest period, with a spread of 0.48% p.a.. Interest Payment: half yearly in arrears, on 10 February and 10 August of each year. Redemption: at par, in one payment on 10 August 2015 the payments date of the 16th coupon. Early redemption (call-option): early redemption is possible by initiative of the issuer, either totally or partially (by reducing the nominal value of the bonds), on the reimbursed dates of 10th, 12th and 14th, without the obligation of paying any prize.
31,000,000 bonds – Nominal Value: 10 Euro.
Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day proceeding the interest period, with a spread of 0.25% p.a. in the first three interest payment dates and 0.55% from the 4th interest payment date.
Interest Payment: half yearly in arrears, on 10 March and 10 September of each year.
Redemption: at par, in two payments: 50% on 10 September 2013 the payment date of the 12th coupon, and 50% on 10 September 2015 the payment date of the 16th coupon.
Early redemption (call-option): early redemption is possible by initiative of the issuer, either totally or partially (by reducing the nominal value of the bonds), on the reimbursed dates of 10th, 11th, 12th, 13th, 14th and 15th, without the obligation of paying any prize.
Extraordinary early redemption (call-option): until the end of the 18th bond life month in the following conditions:
i) the bond can be reimbursed total or partially, without the obligation of paying any prize, in each interest payment date;
ii) the bond can be reimbursed total or partially, subject to breakage costs, with a pre-advise of 30 days during each interest period.
The amount of the available credit facilities in order to manage liquidity risk can be summarized as follows:
| 31.12.2007 | |||
|---|---|---|---|
| Commitments of less than one year |
Commitments of more than one year |
||
| Unused amounts | 257,280,525 | 400,000,000 | |
| Available credit facilities | 260,870,074 | 400,000,000 |
The commitments of more than one year refer to commercial paper programmes available for 7 years.
As at 31 December 2007 and 2006 the trade accounts payable caption presents amounts payable within 90 days, arising on the normal course of activity.
As at 31December 2007 and 2006 Other current liabilities were made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Olther account payables | 3,965,364 | 11,165,157 |
As at 31 December 2006 the caption Other accounts payables includes an amount of 7,200,000 Euro related to the purchase of Parcium Imobiliária, S.A. which was settled in 7 monthly payments, beginning on 31 January 2007. Additionally the other debts are payable on demand.
As at 31 December 2007 and 2006 Other current liabilities were made up as follows:
| Accruals | 31.12.2007 | 31.12.2006 |
|---|---|---|
| Personnel costs | 302,466 | 536,706 |
| Accrued interests | 19,220,778 | 9,517,966 |
| Deferred performance bonuses | 906,445 | 1,696,068 |
| Others | 90,242 | 30,003 |
| 20,519,931 | 11,780,743 |
In 2007 and in previous years, the Company granted Deferred Performance Bonuses to its directors and eligible employees. These are based on shares to be acquired at nil cost, three years after they were attributed to the employee. The purchase 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 its responsibilities in cash rather than through shares. The option can only be exercised if the employee still works for the Group at the vesting date. Liabilities arising from deferred performance bonuses are valued in accordance with that referred to in Note 3.6. On the Notes to the consolidated financial statements a full description of the programme is made.
Movements in provisions and impairment losses for the year ended 31 December 2007 are as follows:
| Caption | Opening balance | Incrases | Decreases | Final balance |
|---|---|---|---|---|
| Investments impairment | 448,413 | 42,420,331 | 4,300,247 | 38,568,497 |
From the recorded increase, 38,997,825 Euro were recognized gains Other reserves as result of the merger (Note 2). The remainder were recognized on the income statement - Investments related income (Note 31).
As at 31 December 2007 and 2006 the contingent assets and liabilities were made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Guarantees rendered: | ||
| related to tax claims awaiting outcome | 18,821,550 | 22,595,842 |
| related to local and municipal claims awaiting outcome | 289,380 | |
| 19,110,930 | 22,595,842 |
No provision has been recognized for these tax additional assessments as the Board of Directors expects them to be decided with no additional liability to the company.
As sequence of the selling of a Brazilian subsidiary company, the group guaranteed to that subsidiary company buyer all the losses it will have as consequence of tax additional assessments as it is described in the Note 30 of the Notes of the consolidated financial statements. The Board of Directors believes that from the resolution of the mentioned claims will not result any liabilities for the Company.
Balances and transactions with related parties as of 31 December 2007 and 2006 are detailed as follows:
| Transactions | Services rendered | Other operating profits | ||
|---|---|---|---|---|
| 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | |
| Parent company | ||||
| Subsidiaries and Associated companies | 3,128,682 | 17,614,059 | 3,170,758 | 1,802,394 |
| 3,128,682 | 17,614,059 | 3,170,758 | 1,802,394 | |
| Transactions | Interest income | Interest incurred | ||
| 31.Dezembro.2007 | 31.Dezembro.2006 | 31.Dezembro.2007 | 31.Dezembro.2006 | |
| Parent company | 2,787,374 | 3,560,871 | ||
| Subsidiaries and Associated companies | 60,102,568 | 45,125,812 | 11,235,553 | 479,520 |
| 62,889,942 | 48,686,683 | 11,235,553 | 479,520 | |
| Transactions | Received dividends | |||
| 31.12.2007 | 31.12.2006 | |||
| Parent company | ||||
| Subsidiaries and Associated companies | 18,193,658 | 14,200,887 | ||
| 18,193,658 | 14,200,887 | |||
| Balances | Accounts receivable | Accounts payable | ||
| 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | |
| Parent company | 1,068 | |||
| Subsidiaries and Associated companies | 678,868,933 | 142,886,611 | 3,386,950 | 1,184,714 |
| Other related parties | 8,735 | 4,646 | 1,434 | |
| 678,877,668 | 142,886,611 | 3,391,596 | 1,187,216 |
| Balances | Granted loans | Obtained loans | ||
|---|---|---|---|---|
| 31.12.2007 | 31.12.2006 | 31.12.2007 | 31.12.2006 | |
| Parent company | ||||
| Subsidiaries and Associated companie Other related parties |
835,669,909 | 1,236,770,738 | 308,140,500 | 39,919,201 |
| 835,669,909 | 1,236,770,738 | 308,140,500 | 39,919,201 |
Sonae SGPS, S.A. and Efanor Investimentos, S.A. are considered related parties included in the parent company category. All the companies within the consolidation perimeter of Sonae Distribuição, SGPS, S.A. as it is described in the notes to the consolidated financial statements are considered in Subsidiaries and associated companies' category. In the Other related parties are included the subsidiaries and entities under common control of Sonae SGPS, S.A. and Efanor Investimentos, SGPS, S.A.
Apart from the above mentioned transactions there are no other transactions with related companies.
During the period, the Company granted loans to Sonae SGPS, S.A. amounting 359,425,000 Euro, which were reimbursed during the year.
In 2007 and 2006 did not occur any transactions, including granted loans, with the Company's Directors.
As at 31 December 2007 and 2006 there were no balances with Company's Directors.
The amount related to services rendered in 2007 and 2006 relate with services rendered to Sonae Distribuição group companies in Portugal.
The caption "Other operational income" for the years 2007 and 2006 is as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Charges retrieve (a) | 3,170,758 | 1,802,394 |
| Other operating income | 9,173 | 141,656 |
| 3,179,931 | 1,944,050 |
a) Income related to costs paid by the Company on behalf of participated companies (Note 29) and billed back to those companies.
The caption "Other operating costs" for the years 2007 and 2006 is as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Indirect taxes | 3,164,210 | 1,799,327 |
| Bank seervices | 110,964 | 104,853 |
| Others | 14,580 | 14,414 |
| 3,289,754 | 1,918,594 |
The indirect tax amounts supported in the year ended as at 31 December 2007 and 2006 includes, mainly, costs and opening retail stores taxes which were then billed back to the group companies which owns those new stores' operations (Note 28).
Net financial profit / (loss) for the years ended 31 December 2007 and 2006 is made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Losses: | ||
| Interests beared | ||
| Bank overdrafts and Loans | 3,080,111 | 1,212,532 |
| Bonds | 40,916,098 | 22,558,762 |
| Loans obtained from Group Companies | 11,235,553 | 479,520 |
| Others | 5,586 | |
| 55,237,348 | 24,250,814 | |
| Other financial losses: | ||
| Debt issuing charges (Note 20) | 1,941,330 | 1,176,609 |
| Others | 556,169 | 157,409 |
| 57,734,847 | 25,584,832 | |
| Net financial income | 13,059,104 | 24,825,811 |
| 70,793,951 | 50,410,643 | |
| Income: | ||
| Interests earned | ||
| Bank deposits | 7,418,942 | 1,106,844 |
| Investment funds units | 6,779,673 | |
| Loans granted to Group Companies | 56,110,269 | 48,686,683 |
| Others | 484,982 | 439,760 |
| Profits in the valuation of derivatives | 173,592 | |
| Other financial income | 85 | 3,764 |
| 70,793,951 | 50,410,643 |
As at 31 December 2007 and 2006 investment income are as follows:
| 2007 | 2006 | |||
|---|---|---|---|---|
| 4th quarter | Accumulated | 4th quarter | Accumulated | |
| Dividends | 18,193,658 | - | 14,200,887 | |
| Gains on disposal of investments | 35,728,616 | - | - | |
| Losses on disposal of investments | (5,454,530) | - | (24,750,954) | |
| Impairment losses on Investments (Note 24) | (3,422,506) | - | - | |
| Reversal of impairment losses on investments (Note 24) | 4,300,247 | - | 28,442,000 | |
| 49,345,485 | 17,891,933 |
During the year ended 31 December 2007 the company sold 100% of OK Bazar – Comércio Geral, S.A., of SRE – Projectos de Centros Comerciais, S.A. and 10% of Cacetinho – Comércio Retalhista e Exploração de Centros Comerciais, S.A. to its subsidiary Modelo Continente Hipermercados, S.A., having recognized a capital gain of 35,668,833 Euro.
Additionally, the company sold to a Sonae SGPS, S.A. 100% of its shareholding in Imoponte – Sociedade Imobiliária, having recorded a gross capital loss of 4.976.834 Euro not considering the reversal of the impairment loss amounting to 3,851,834 Euro, which had been recognized through the merger of Modelo, SGPS, S.A. (Note 2).
During the period the Company sold the shares that held in Sonae SGPS, S.A., to that company, being recorded a loss of 417.913 Euro gross of the reversal of the impairment loss that had been recognized.
Income tax charge for the year ended 31 December 2007 and 2006 is made up as follows:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Income tax estimate | (135,073) | (2,189) |
| Excess / (Shortage) of last year estimative | (9,245,971) | (3,990,568) |
| Others | 1,087,487 | - |
| Current income tax | (8,293,557) | (3,992,757) |
| Intangible assets write off | (1,345) | (26,103) |
| Difference of amortisation for accounting and tax purposes (Note 8) | 75,910 | 42,597 |
| Financial instruments | - | (47,738) |
| Tax losses (used at RETGS level) | 31,138,729 | 26,462,606 |
| Others | - | 1,182,645 |
| Deferred tax | 31,213,294 | 27,614,007 |
| 22,919,737 | 23,621,250 |
The reconciliation of net profit before tax with the income tax charge for the year ended 31 December 2007 and 2006 is as follow:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Profit/(loss) before income tax | 61,218,037 | 56,714,705 |
| Income tax rate | 26.50% | 27.50% |
| 16,222,780 | 15,596,544 | |
| Use of tax losses for which no deferred taxes assets were recognised in the past | (35,390,551) | (37,812,931) |
| Impairment losses not accepted for tax purposes | 232,601 | (7,821,550) |
| Shortage / (excess) of income tax estimate | 9,245,971 | 3,990,568 |
| Differences between gains and losses on disposal of assets for tax and accouting purposes | (8,070,333) | 4,916,177 |
| Dividends receive exempt from taxation | (4,821,319) | (3,905,244) |
| Others | (338,886) | 1,415,187 |
| Income tax | (22,919,737) | (23,621,250) |
Earning per share for the years ended 31 December 2007 and 2006 were calculated taking into consideration the following amounts:
| 31.12.2007 | 31.12.2006 | |
|---|---|---|
| Net profit | ||
| Net profit taken into consideration to calculate basic earnings per share (Net | ||
| profit for the period) | 84,137,774 | 80,335,955 |
| Net profit taken into consideration to calculate diluted earnings per share | 84,137,774 | 80,335,955 |
| Number of shares | ||
| Weighted average number of shares used to calculated basic Earnings per | ||
| share | 1,000,000,000 | 1,089,315,068 |
| Weighted average number of shares used to calculated the diluted earnings per | ||
| share | 1,000,000,000 | 1,089,315,068 |
| Earning per share (basic and diluted) | 0.084 | 0.074 |
In the Annual General Meeting held on 2 May of 2007 were attributed 75,000,000 Euro dividends.
These financial statements were approved by the Board of Directors and authorized for issue on 5 March 2008, but are subject to final approval of the Shareholders General Meeting as defined in Portuguese Commercial Law.
The Sonae Distribuição, SGPS, S.A. net profit was 84,137,774.42 Euro, and the Board of Directors proposed the following distribution:
| Legal reserve | 4,300,000.00 Euro |
|---|---|
| Dividends | 79,837,774.42 Euro |
Once it is proposed 85,000,000 Euro dividends distribution to the shares not held directly or indirectly by Sonae Distribuição, SGPS, S.A., 5,162,222.58 Euro of Free Reserves will be used for distribution.
Decree-Law 3318/94 art. 5º nº 4
In the twelve months ended 31 December 2007 shareholders' loan contracts were entered into with the following companies:
Bertimóvel – Sociedade Imobiliária, S.A. Canasta – Empreendimentos Imobiliários, S.A. Chão Verde – Sociedade de Gestão Imobiliária, S.A. Citorres – Sociedade Imobiliária, S.A. Contimobe – Imobiliária Castelo Paiva, S.A. Cumulativa – Sociedade Imobiliária, S.A. Difusão – Sociedade Imobiliária, S.A. Fozimo – Sociedade Imobiliária, S.A. IGI – Investimento Imobiliário, S.A. Igimo – Sociedade Imobiliária, S.A. Iginha – Sociedade Imobiliária, S.A. Imoconti – Sociedade Imobiliária, S.A. Imoestrutura – Sociedade Imobiliária, S.A. Imomuro – Sociedade Imobiliária, S.A. Imoponte – Sociedade Imobiliária, S.A. Imoresultado – Sociedade Imobiliária, S.A. Imosistema – Sociedade Imobiliária, S.A. Infofield – Informática, S.A. MJLF – Empreendimentos Imobiliários, S.A. Modelo Continente Hipermercados, S.A. Modelo Continente Seguros – Sociedade de Mediação, Lda Predicomercial – Promoção Imobiliária, S.A. Selifa – Sociedade de Empreendimentos Imobiliários, S.A. Sempre à Mão – Sociedade Imobiliária, S.A. Sesagest – Projectos e Gestão Imobiliária, S.A. Socijofra – Sociedade Imobiliária, S.A. Sociloures – Sociedade Imobiliária, S.A. Soflorin, B.V. Sonae Retalho España, S.A. Sondis Imobiliária, S.A. Sontária – Empreendimentos Imobiliários, S.A. Sonvecap, B.V. Sportzone – Comércio de Artigos de Desporto, S.A. Worten – Equipamentos para o Lar, S A.
In the twelve months ended 31 December 2007 short-term loan contracts were entered into with the following companies:
Bertimóvel – Sociedade Imobiliária, S.A. Canasta – Empreendimentos Imobiliários, S.A. Carnes do Continente – Indústria e Distribuição de Carnes, S.A. Chão Verde – Sociedade de Gestão Imobiliária, S.A. Citorres – Sociedade Imobiliária, S.A. Contibomba – Comércio e Distribuição de Combustíveis, S.A. Contimobe – Imobiliária Castelo Paiva, S.A. Cumulativa – Sociedade Imobiliária, S.A. Difusão – Sociedade Imobiliária, S.A. Efanor – Indústria de Fios, S.A. Equador & Mendes – Agência de Viagens e Turismo, S.A. Fozimo – Sociedade Imobiliária, S.A. Global S – Hipermercados, S.A. IGI – Investimento Imobiliário, S.A. Igimo – Sociedade Imobiliária, S.A. Iginha – Sociedade Imobiliária, S.A. Imoconti – Sociedade Imobiliária, S.A. Imoestrutura – Sociedade Imobiliária, S.A. Imomuro – Sociedade Imobiliária, S.A. Imoresultado – Sociedade Imobiliária, S.A. Imosistema – Sociedade Imobiliária, S.A. Infofield – Informática, S.A. Marcas MC, zRt MJLF – Empreendimentos Imobiliários, S.A. Modalfa – Comércio e Serviços, S.A. Modelo Continente Hipermercados, S.A. Modelo Continente Seguros – Sociedade de Mediação, Lda. Nova Equador Internacional – Agência de Viagens e Turismo, Lda. Pharmacontinente – Saúde e Higiene, S.A. Predicomercial – Promoção Imobiliária, S.A. Selifa – Sociedade de Empreendimentos Imobiliários, S.A. Sesagest – Projectos e Gestão Imobiliária, S.A. Socijofra – Sociedade Imobiliária, S.A. Sociloures – Sociedade Imobiliária, S.A. Solaris – Supermercados, S.A. Sonae, SGPS, S.A. Sondis Imobiliária, S.A. Sontária – Empreendimentos Imobiliários, S.A. Sportzone – Comércio de Artigos de Desporto, S.A. Star – Agência de Viagens e Turismo, S.A. Tlantic Portugal – Sistemas de Informação, S.A. Todos os Dias – Comércio Retalhista e Exploração de Centros Comercias, S.A. Worten – Equipamentos para o Lar, S A.
Current loans granted (Note 11) and non-current (Note 9):
| COMPANIES | 31.12.2007 | 31.12.2006 |
|---|---|---|
| Bertimóvel - Sociedade Imobiliária, S.A. | 15,934,000 | - |
| Canasta - Empreendimentos Imobiliários, S.A. | 3,006,000 | - |
| Chão Verde - Sociedade de Gestão Imobiliária, S.A. | 2,791,584 | - |
| Citorres - Sociedade Imobiliária, S.A. | 3,973,000 | - |
| Contibomba - Comércio e Distribuição de Combustíveis, S.A. | 214,000 | 172,000 |
| Contimobe - Imobiliária Castelo Paiva, S.A. | 75,909,000 | 35,000,000 |
| Cumulativa - Sociedade Imobiliária, S.A. | 3,056,000 | - |
| Difusão - Sociedade Imobiliária, S.A. | 25,527,000 | - |
| Efanor - Indústria de fios, S.A. | 1,253,000 | - |
| Equador & Mendes - Agência Viagens e Turismo, Lda | 213,000 | - |
| Fozimo – Sociedade Imobiliária, S.A. | 1,932,000 | 2,050,000 |
| Global S - Hipermercados, Lda | 735,000 | - |
| IGI - Investimento Imobiliário, S.A, | 183,902,000 | - |
| Igimo – Sociedade Imobiliária, S.A. | 595,000 | 654,000 |
| Iginha – Sociedade Imobiliária, S.A. | 14,277,500 | - |
| Imoconti – Sociedade Imobiliária, S.A. | 18,761,222 | 19,763,401 |
| Imoestrutura - Sociedade Imobiliária, S.A. | 621,000 | - |
| Imomuro - Sociedade Imobiliária, S.A. | 4,106,897 | 4,175,897 |
| Imoresultado – Sociedade Imobiliária, S.A. | 388,000 | 357,000 |
| Imosistema - Sociedade Imobiliária, S.A. | 4,565,000 | - |
| Infofield - Informática, S.A. | 5,000,000 | - |
| MJLF - Empreendimentos Imobiliários, S.A. | 3,981,000 | - |
| Modalfa - Comércio e Serviços, S.A. | 11,139,000 | |
| Modelo , SGPS, S.A. | - | 575,286,000 |
| Modelo Continente Hipermercados, S.A. | 103,322,000 | 225,418,500 |
| Modelo Continente Seguros - Sociedade de Mediação, Lda | 1,400,000 | |
| Nova Equador Internacional - Agência de Viagens e Turismo, Lda | 176,000 | |
| Ok Bazar - Comércio Geral, S.A. | - | 10,044,000 |
| Parcium Imobiliária, S.A. | - | 41,259,000 |
| Pharmacontinente - Saúde e Higiene, S.A. | 4,854,000 | - |
| Predicomercial - Promoção Imobiliária, S.A. | 10,950,000 | 11,219,000 |
| Selifa - Sociedade de Empreendimentos Imbiliários, S.A. | 4,189,000 | - |
| Sempre à Mão - Sociedade Imobiliária, SA | 17,128 | 93,000 |
| Sesagest - Projectos e Gestão Imobiliária, S.A. | 47,354,000 | 50,169,000 |
| Socijofra - Sociedade Imobiliária, S.A. | 8,131,000 | - |
| Sociloures - Sociedade Imobiliária, S.A. | 31,635,347 | 39,281,000 |
| Soflorin, B.V. | 34,276,568 | 38,157,330 |
| Solaris Supermercados, S.A. | 1,171,000 | - |
| Sonae , S.G.P.S., S.A. | - | - |
| Sonae Retalho España, S.A. | 13,002 | 60,001 |
| Sondis Imobiliária, S.A. | 20,278,159 | - |
| Sontária - Empreendimentos Imobiliários, S.A. | 3,639,502 | - |
| Sonvecap, B.V. | 150,976,000 | 158,701,000 |
| Sportzone - Comércio de Artigos de Desporto, S.A. | 23,336,000 | 3,411,000 |
| Tlantic Portugal - Sistemas de Informação, S.A. | 4,000 | - |
| Todos os Dias - Comércio Ret. e Expl. de Centros Comerciais, S.A. | 1,067,000 | 1,027,000 |
| Worten - Equipamentos para o Lar, S A. | 7,000,000 | 20,472,609 |
| 835,669,909 | 1,236,770,738 |
From the above mentioned balances 774,196,909 Euro (457,114,129 Euro in 2006) are recorded as non-current assets.
The amounts due to group companies as at 31 December 2007 and 2006 related to the mentioned contracts were the following:
Current loans obtained (Note 11):
| COMPANY | 31.12.2007 | 31.12.2006 |
|---|---|---|
| Bikini - Potal de Mulheres, S.A. | (3,250,000) | - |
| Carnes Continente - Indústria e Distribuição de Carnes, S.A. | (526,000) | - |
| Efanor - Design e Serviços, S.A. | (701,000) | - |
| Estevão Neves - Hipermercados da Madeira, S.A. | (6,448,000) | - |
| Fozmassimo - Sociedade Imobliária, S.A. | (4,670,000) | - |
| Infofield - Informática, S.A. | (2,076,000) | - |
| Inventory - Acessórios de Casa, S.A. | (1,161,000) | - |
| Marcas MC ZRT | (10,178,000) | - |
| Modalfa - Comércio e Serviços, S.A. | - | (1,878,000) |
| Modelo Continente - Operações de Retalho, SGPS, SA | (216,459,000) | (35,615,000) |
| Modelo Continente Hipermercados, S.A. | (25,124,500) | - |
| Modelo Hiper - Imobiliária, S.A. | (40,000) | (2,040,000) |
| Modelo.Com - Vendas por Correspondência, S.A. | - | (194,201) |
| Peixes Continente - Indústria e Distribuição de Peixes, S.A. | (639,000) | - |
| SRE - Projectos de Consultoria, S.A. | - | (192,000) |
| Worten - Equipamentos para o Lar, S.A. | (36,868,000) | |
| (308,140,500) | (39,919,201) |
These financial statements are a translation of financial statements originally issued in Portuguese in accordance with International Financial Reporting Standards. In the event of discrepancies, the Portuguese language version prevails.
Matosinhos, 5 March 2008
(This is a translation of a report originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.)
Page 2 of 2
Porto, 5 March 2008
DELOITTE & ASSOCIADOS, SROC S.A. Represented by António Manuel Martins Amaral
(Translation of a Report and Opinion originally issued in Portuguese. In case of discrepancy the Portuguese version prevails)
To the Shareholders of Sonae Distribuição, SGPS, S.A.
In compliance with the applicable legislation and our mandate we hereby submit our Report and Opinion which covers our work and the consolidated and individual documents of account of Sonae Distribuição, S.G.P.S., S.A. for the year ended 31 December 2007, which are the responsibility of the Company's Board of Directors.
We accompanied the operations of the Company and its principal affiliated companies, the timely writing up of their accounting records and their compliance with statutory and legal requirements, and the internal control and risk management systems and procedures, having met with the periodicity considered adequate under the circumstances, and having always obtained from the Boards of Directors and personnel of the Company all the information and explanations required necessary for a proper understanding of the changes on financial position and results of operations.
In furtherance of its duties, the Statutory Audit Board examined and issued a favourable opinions on the issuance of Bonds in accordance with art. 349 of Comercial Companies Code and examined the consolidated and individual Balance sheets as of 31 December 2007, the consolidated and individual Statements of profit and loss by nature, of cash flows and of changes in equity for the year then ended and the related notes.
Additionally, the Statutory Audit Board examined the Report of the Board of Directors for the year 2007 and reviewed the Statutory Audit and Auditors' Report issued by the Statutory Auditor and agreed with its content.
Considering the above, in the opinion of the Statutory Audit Board the Management Report, the consolidated and individual financial statements, and the profit appropriation proposal presented by the Board of Directors, are in accordance with the accounting, legal and statutory requirements and consequently be approved by the Shareholders' General Meeting.
We wish to thank the Company's Board of Directors and personnel of the Company for the assistance provided to us.
In accordance with article 245, paragraph 1, c) of the Securities Code ("Código dos Valores Mobiliários") we inform that, to our knowledge, the information contained in the Consolidated and Individual Financial Statements were prepared in accordance with applicable accounting principles, giving a true and fair view, in all material respects, of the assets and liabilities, financial position and the results of Sonae Distribuição, SGPS, S.A. and companies included in the consolidation perimeter and that the Management Report faithfully describes the business evolution, performance and financial position of Sonae Distribuição SGPS, S.A. and of the companies included in the consolidation perimeter and contains a description of the major risks and uncertainties that they face.
Matosinhos, 14 March 2008
The Statutory Audit Board
Jorge Manuel Felizes Morgado
Arlindo Dias Duarte Silva
Óscar José Alçada da Quinta
1 – The following proposal of the Board of Directors has been approved by unanimity:
It is proposed the approval of the Report of the Board of Directors and the consolidated and company's financial statements for the year 2007, as presented. The consolidated net profit for the year amounts to 168,815,845 Euro"
2 – The following proposal of the Board of Directors has been approved by unanimity:
It is proposed to the Shareholders' General Meeting, the distribution of dividends amounting to 85,000,000 Euro by the shares not owned directly or indirectly by Sonae Distribuição – S.G.P.S., S.A., corresponding to a dividend pay-out ratio of approximately 50% of the consolidated net profit for the year.
The company net profit of Sonae Distribuição – S.G.P.S., S.A. amounts to 84,137,774.42 Euro, for which the following appropriation is proposed:
| Legal reserves | 4,300,000.00 |
|---|---|
| Dividends: | 79,837,774.42 |
As it is proposed a distribution of dividends amounting to 85,000,000 Euro, 5,162,225.58 Euro of Free reserves will be used"
Matosinhos, 31 March 2008
The Secretary of the Company
Alice da Assunção Castanho Amado
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