Quarterly Report • Nov 30, 2020
Quarterly Report
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The Covid-19 outbreak continues to impact our activities. With the end of the initial lockdown and the gradual reopening of the economy since May, Sonae's businesses were less impacted in the 3Q when compared to the 2Q. Still, the pandemic left a number of significant impacts, such as changes in consumption patterns, a decrease in tourism and restrictions in gatherings/physical distancing, all of which continued to affect several of our businesses in this quarter.
Nine months into the year, the World continues to fight the Covid-19 pandemic. After a difficult second quarter marked by the lockdown measures, this third quarter was still a period in which many restrictions subsisted and impacted our day-to-day lives.
During these last few months, we have done everything in our power to protect the health and safety of our people, customers and partners. I remain grateful and humbled by the resilience and dedication of our teams, who have really gone the extra mile to continue to provide essential services to our customers and have shown great grit and resourcefulness in times of constant change.
In this pandemic context, Sonae continued to show a very resilient performance, driven by a unique knowledge of our customers, the digital readiness of our businesses and a Group-wide ability to quickly innovate and adapt to changing circumstances.
Sonae MC strengthened its leadership position in Portugal, leveraging the strength of the Continente loyalty program (which continued to provide new benefits and functionalities in an increasingly digital and personalized offering), and also the ability to rapidly scale its e-commerce delivery capacity and reinforce its position as the reference online grocery retailer in the country. Worten also continued to gain market share in Portugal underpinned by a world-class omnichannel approach and multiple new digital initiatives, having reached, for the first time ever, a higher market share online than offline. At Sonae Sierra, shopping centres remained under pressure but started to recover footfall and tenant sales, while the team worked together with tenants to find creative solutions to maximize their offline and online sales. Sonae Fashion and ISRG stores reopened and showed encouraging signs, while online sales remained at record levels – particularly at Mo, where the innovative MOxAd-Tech masks boosted e-commerce and international sales. Sonae FS resumed normalized levels of credit production and Universo reached 400 thousand digital clients. Sonae IM's solid operational performance was highly driven by the cybersecurity companies in the portfolio, and Arctic Wolf reached the unicorn status in Q4. Finally, NOS showed the resilience of its core telecommunications business and executed important deals that improve the company's financial strength and will enable a faster, more efficient and environmentally sustainable deployment and operation of mobile networks.
Overall, in the third quarter Sonae was able to grow turnover by 6% and improved its underlying EBITDA by more than 8% versus last year, which enabled us to surpass last year's underlying EBITDA at the end of September. We continued to preserve our balance sheet by deploying multiple cash preservation initiatives across businesses and also by refinancing important debt facilities. In total, the Group's consolidated net debt decreased €287 M to €1,233 M in the last 12 months and all businesses remain with conservative leverage levels.
During this pandemic context, we also decided to reinforce our commitment to our People and our Planet. We published a revised gender equality plan, with specific and ambitious goals for women in managerial positions. And, already in November, we committed to reach carbon neutrality by 2040, anticipating our previous pledge by ten years.
As I write these words, and since the beginning of October, we have witnessed an increase in Covid-19 infections all over the World, and governments are again resuming harsher restrictions, including renewed lockdowns in some countries. This new surge will certainly test us again. But, having endured the first wave as we did and given the extensive preparation of our teams in the last few months, I am certain that our businesses will be able to meet our customers' needs and that Sonae will continue to create value for all its stakeholders.
Cláudia Azevedo
CEO, Sonae
During 3Q20: (i) Sonae announced the agreement to terminate the partnership at ZOPT and the acquisition of a 7.38% stake in NOS; and (ii) NOS concluded the agreement to sell NOS Towering to Cellnex.
Already in 1H20, Sonae Sierra created Sierra Prime, and Sonae Fashion announced the acquisition of the remaining 50% stake in Salsa.
| Sonae corporate structure | ||
|---|---|---|
| Stake | Consolidation method | |
| Sonae MC | 100% | Full consolidation |
| Sonae Sierra | 70% | Full consolidation |
| NOS | 31% | Equity method |
| Worten | 100% | Full consolidation |
| ISRG | 30% | Equity method |
| Sonae Fashion | 100% | Full consolidation |
| Sonae FS | 100% | Full consolidation |
| Sonae IM | 90% | Full consolidation |
Note: 23% stake in NOS is consolidated by equity method and 7.38% acquired by Sonae is a financial investment.
From a statutory point of view, Sonae's consolidated turnover and underlying EBITDA strongly increased in the 3Q20, more than offsetting the lower figures in the 2Q. In a period with relevant restrictions and poor tourism activity, Sonae's businesses were quick to adapt to this unprecedented environment and were able to increase their market shares.
In the 3Q20, consolidated turnover grew 6% yoy, to €1,773 M supported by the strong contributions from Sonae MC and Worten, leading also to a 6% growth in the 9M20 to €4,908 M. In terms of underlying EBITDA, Sonae ended the 3Q20 with a margin of 10%, representing an 8.6% yoy growth to €177 M. This performance, was once again explained by the strong results of both Sonae MC and Worten, which enabled Sonae to maintain last year's underlying EBITDA figure at the end of 9M20, in spite of the deconsolidation of two core shopping centres (consequence of the Prime transaction) in Sonae Sierra's
| Sonae consolidated results | ||||||
|---|---|---|---|---|---|---|
| Million euros | 9M19 9M20 | yoy | 3Q19 | 3Q20 | yoy | |
| Turnover | 4,634 4,908 | 5.9% 1,674 1,773 | 5.9% | |||
| Underlying EBITDA | 404 | 406 | 0.3% | 163 | 177 | 8.6% |
| margin | 8.7% | 8.3% -0.5 p.p. | 9.7% 10.0% 0.2 p.p. | |||
| Equity method results (1) | 76 | 23 | -69.9% | 27 | 10 | -64.0% |
| Non-recurrent items | 5 | 8 | 56.8% | 16 | -7 | - |
| EBITDA | 486 | 436 | -10.1% | 206 | 180 | -12.6% |
| margin | 10.5% | 8.9% -1.6 p.p. 12.3% 10.2% -2.2 p.p. | ||||
| D&A | -155 | -159 | -2.4% | -53 | -53 | 0.0% |
| D&A - RoU | -91 | -95 | -4.4% | -31 | -31 | -0.9% |
| Provisions and impairments | -11 | -55 | - | -8 | -1 | - |
| EBIT | 229 | 128 | - | 115 | 96 | - |
| Net fin. res. - lease liabilities | -54 | -55 | -2.8% | -18 | -18 | -1.6% |
| Net fin. res. - financing | -32 | -27 | 13.9% | -11 | -9 | 12.4% |
| EBT | 143 | 45 | -68.4% | 86 | 68 | -21.2% |
| Taxes | -10 | -6 | - | -9 | -9 | - |
| Direct results | 133 | 40 | -70.2% | 77 | 59 | -23.6% |
| Indirect results | -2 | -76 | - | -10 | -11 | -6.8% |
| Net income | 131 | -36 | - | 67 | 48 | - |
| Non-controlling interests | -43 | 12 | - | -17 | 3 | - |
| Net income group share | 88 | -24 | - | 50 | 51 | 1.6% |
(1) Equity method results: includes direct income by equity method results from Sonae Sierra statutory accounts, income related to investments consolidated by the equity method (mainly NOS/Zopt and ISRG) and discountinued operations results.
statutory accounts in the 1Q20 and the lockdown period's negative impact in the 2Q. On a pro-forma basis, excluding Sierra Prime assets in 3Q19, Sonae's underlying EBITDA would have increased by 14% yoy in 3Q20.
3Q20 consolidated EBITDA, decreased by 13% yoy to €180 M, and consequently, consolidated EBITDA fell 10% yoy to €436 M in the 9M20, due to the lower equity method results from Sonae Sierra and ISRG, both due to Covid-19 impacts, and significant non-recurrent items both last year and this year related with Sonae IM's portfolio management activity. Sonae's Indirect Results were once again mainly impacted by Sonae Sierra's asset revaluations as a result of the pandemic. Sonae's Net result (group share) in the 3Q stood 2% above last year's figure and reached €51 M, although still below last year in the 9M20, mainly influenced by non-cash contingencies registered in the 1Q and Sonae Sierra's portfolio devaluation in the 2Q, both directly related to Covid-19.
In what concerns Sonae's capital structure, total net debt decreased €287 M to €1,233 M over the last 12 months and €25 M when compared to the end of 1H20. This evolution was driven by the strong cash generation profile of Sonae's portfolio of businesses, even under the pandemic context, and also by a number of important events: (i) in the 1Q20, the cash-in from Sonae Sierra's Prime transaction (€188 M, net of dividends paid to Grosvenor), and the consequent debt deconsolidation of these assets from Sonae's balance sheet; (ii) in the 2Q, the distribution of €93 M in dividends; and (iii) in the 3Q20, the acquisition of a 7.38% stake in NOS and the remaining 50% stake in Salsa, as well as the sale-and-leaseback transactions of several food retail assets at Sonae MC (in the total amount of €49 M in the 9M20).
The group's gearing at book value stood at 0.4x and market value gearing at 0.9x, similar levels to 3Q19, as the negative share price performance during the last 12 months offset the decrease in average net debt during the same period.
Financing conditions remained practically unchanged in the 3Q20, with a cost of debt of ca. 1.2% during 9M20 (ca. 1.0% excluding Sonae Sierra), and the average maturity profile kept above 4 years. Since the end of 2019, Sonae has already refinanced more than €650 M in long term facilities.
Moreover, all the companies in the portfolio continued to hold conservative and solid balance sheets: Sonae MC's registered a 3.0x net debt to underlying EBITDA ratio; NOS' capital structure was further strengthened by the towers sale and reached a ratio of 1.4x; Sonae Sierra's loan-to-value stood at 26% and, at the holding level, loan-to-value stood at 12%.
In terms of capex, Sonae's companies continued to spend less in operational terms when compared to last year, while in the 3Q20 there were two important portfolio moves: the acquisition of the remaining 50% stake in Salsa and the acquisition of a 7.38% stake in NOS.
| Sonae net invested capital | |||
|---|---|---|---|
| Million euros | 9M19 | 9M20 | yoy |
| Net invested capital | 5,753 | 4,798 | -16.6% |
| Shareholders funds | 3,039 | 2,372 | -22.0% |
| Net debt (exc. lease liabilities) | 1,519 | 1,233 | -18.9% |
| Total Net Debt | 2,714 | 2,426 | -10.6% |
| Lease liabilities | 1,194 | 1,193 | -0.1% |
NOS
| 9M19 | 9M20 | |
|---|---|---|
| Sonae Capex | |||
|---|---|---|---|
| Million euros | 9M19 | 9M20 | yoy |
| Total capex | 275 | 376 | 36.5% |
| Operational capex | 201 | 165 | -17.8% |
| Sonae MC | 164 | 138 | -16.0% |
| Worten | 16 | 14 | -12.2% |
| Sonae Fashion | 12 | 9 | -31.6% |
| Sonae IM | 2 | 2 | -13.2% |
| Sonae FS | 0 | 1 | - |
| Sonae Sierra | 1 | 1 | - |
| Financial/M&A capex | 75 | 211 | - |
During the 3Q, Sonae MC continued to show a strong top line performance, including the sustained good momentum of its online business, being able to once again improve its market leadership in the Portuguese food retail sector. In a quarter with the market returning to more normal levels in terms of growth, Sonae MC has outperformed and once again proved that the clear recognition of its strong value proposition, coupled with its rapid response to quickly and effectively adjust its operating model to such a challenging and disruptive environment, were key to a strong performance.
Sonae MC's turnover grew by 10% yoy to €3.8 bn and LfL surpassed 7% in the 9M20, mainly fuelled by the effects of stockpiling early in the period and the shift away from out-of-home consumption during the lockdown, as sales growth in the 3Q were penalised by a weaker summer, although still performing at a very solid pace: 7.4% and 4.8%, on a yoy basis and in LfL terms, respectively. This performance was mainly explained by the robust performance in both hypers and supers coupled with the unprecedented behaviour of the leading online business, which already registers high double digit yoy growth at the end of 9M20.
9M20 underlying EBITDA increased to €374 M, implying a double-digit growth and being able to reach a broadly stable margin of 9.9%, as incremental Covid-19-related direct costs (ca. €20 M in 9M) were more than offset by the contribution from a higher top line, and from operational improvements achieved during the same period. In the 3Q, the dilution of fixed costs contributed to an improved operating profitability by 40 b.p. to 11.1%.
After the general lockdown in 2Q, Sonae Sierra recorded generally positive operating trends during 3Q, albeit still below pre-pandemic levels. Both tenant sales and footfall showed signs of recovery over the 3Q period, with September sales being 14% below 2019 levels and footfall 22% below last year, with Italy and Spain recording the strongest performances across the portfolio. Additionally, the occupancy rate in the European portfolio continued to be stable at 96.4% (vs. 96.6% in June).
Similarly to 2Q, Direct Result in the period was negative by €2.8 M,
reflecting the impact from the rental law introduced in Portugal and agreements around discounts reached with tenants in the other geographies, which was the main driver for the YTD rental income reduction of 40%. Additionally, and given the uncertain market environment, Sonae Sierra conducted external valuations to its European assets in September, having recorded a €9 M negative impact. All in all, the 9M20 net results stood at -€20 M.
1 For more information please see Sonae MC 9M20 results report in www.sonae.pt.
Regarding NAV, Sonae Sierra ended the 3Q with €918 M, 3% down when compared to the end of 1H20, mainly reflecting the decline in asset valuations and FX losses from its Brazilian and Colombian investments.
NOS published its 3Q20 results on November 4th. For NOS, the third quarter was still a period marked by the impacts of the pandemic on both operational and financial results, although less significant compared to the second quarter.
During 3Q the impacts from restrictions imposed were felt in the telco business, with the decline in roaming revenues due to travel limitations, but mostly in the cinema and audiovisuals business, with the still low number of spectators as the re-opening of movie theatres only occurred in July. This scenario resulted in a revenue decrease of 6% yoy in the 3Q and 7% in accumulated terms, to €347
M and €1,014 M respectively. Regarding profitability, EBITDA followed the top line trend decreasing 7% yoy to €161 M in the 3Q and 6.5% in the 9M. Net results were down 7.9% to €44.1 M in 3Q20 but FCF before dividends amounted to €382 M in the quarter and €470 M at the end of 9M, mainly impacted by the cash-in from the tower sale deal to Cellnex which contributed to further reinforce the company's financial situation.
Already in 4Q20, NOS signed a set of agreements with Vodafone regarding the sharing of mobile network support infrastructure and active mobile network elements. These pioneer agreements will allow NOS to invest more efficiently and capture value through synergies.
During 3Q20, Worten posted a very robust performance, growing 8.5% in total top line and more than 10% in LfL terms.
By leveraging both physical and online stores, to deliver convenient omnichannel solutions, and its marketplace, to further extend its product offer, Worten delivered outstanding online sales growth, more than doubling the volume versus last year. Stores sales also showed resilience as, despite some pressure on footfall, conversion and average ticket were successfully improved. With such sound results online, while maintaining a good performance
Turnover and underlying EBITDA margin (€M)
offline, Worten's leadership in Portugal was further reinforced, with its online market share already surpassing its offline market share. Similar to the previous quarter, IT and small domestic appliances continued on high demand, driving sales growth. In Spain, Worten continues to persistently implement its plan to reach positive profitability in the near term, closing three additional loss-making stores in 3Q20 in the mainland.
All in all, strong sales performance in the quarter enabled Worten to reach a 9M20 turnover of €775 M, +4.3% versus last year. Worten performed clearly ahead of last year, posting an underlying EBITDA increase of €7 M (+48% yoy) in the quarter and €11 M in 9M20 (+39% yoy), to reach a margin of 6.9% and 5.2%, respectively.
For ISRG, the 2Q20 was marked by the reopening of all the stores across Iberia from mid-May onwards and by the focus in trying to recover from the lockdown impact.
With physical stores still facing some restrictions, total turnover posted a 7% decline in the quarter, in spite of the impressive performance from the online operation with 3x growth versus same period of last year. In terms of profitability, EBITDA followed the sales trend, by falling in the quarter, and implied that the company's equity method contribution to Sonae's results was almost nil in the quarter.
Turnover and EBITDA margin (€M)
After a very difficult 2Q, marked by the lockdown, the third quarter was still very challenging, limited by the pandemic evolution and the deterioration of macroeconomic conditions. Despite this context, and in a quarter with still strong downward pressure on sales in the sector, Sonae Fashion was able to increase its market share.
Sales performance across brands and categories was distinct, reflecting different price positionings, dependency of shopping centres' footfall and demand for essential items. The online channel Turnover and underlying EBITDA margin (€M)
kept the strong momentum witnessed in the 2Q and more than doubled its performance in 3Q20 vs 3Q19.
All in all, Sonae Fashion has clearly showed that its reaction and flexible adaption to the new context empowered its brand engagement across all of its brands and registered an impressive LfL sales growth of 12% and only a 3% decrease of its turnover in the 3Q. At the end of 9M20, Sonae Fashion's turnover was €232 M, 16.6% below last year. Regarding profitability, Sonae Fashion recorded a positive underlying EBITDA of €12 M in the 3Q20, surpassing the negative figure registered in the 2Q, and allowing underlying EBITDA to recover in accumulated terms to €2 M.
After a smooth 2Q due to the lockdown, Sonae FS was able to show some signs of recovery in the 3Q, although still impacted by the limitations of the pandemic and the consequent impact in private consumption.
Turnover and underlying EBITDA margin (€M)
In particular, the Universo card performance was encouraging during the 3Q with card production already staying above historical figures and the activity rate reaching pre-pandemic values in September. In addition, the digital journey of Universo accelerated and an important milestone was reached at the end of September, with the number of customers using homebanking or the Universo app already surpassing 400 k (+51% yoy). In terms of market share,
Universo continues to be in the top3 of the overall credit market with 13.4% at the end of 9M20, more than 1% above last year's figure.
Overall, regarding top line performance, Sonae FS turnover stood at €9 M in the 3Q20, ending the 9M20 with a turnover of €26 M, almost in line with last year's figure. This slight drop in top line in the 3Q was compensated by significant cost savings and Sonae FS was able to post an underlying EBITDA of €2.9 M in the 3Q, +€0.4 M vs 3Q19, and a 9M20 figure of €6.3M and a margin of 24.3%.
Sonae IM recorded a very solid quarter with positive performances across controlled companies and with important evolutions in other portfolio companies.
In the 3Q, Sonae IM's turnover grew by 11% yoy allowing turnover to reach €89 M in accumulated terms and staying almost flat when compared to 9M19. Importantly, the underlying EBITDA, despite still in negative ground, presented a relevant yoy progress. In particular, the cybersecurity companies continued to present a top line double-digit growth, coupled with a sustainable positive EBITDA, and were the main drivers for the consolidated figures' positive evolution.
Turnover (€M)
Regarding the investment activity and, on top of follow-on investments on its portfolio of companies, Sonae IM entered in the 3Q in the share capital of two new companies, one cybersecurity company and one early stage venture. Also in the 3Q Sonae IM received a gross capital distribution of €21 M as a result of the redemption of participation units held in the AVP II Fund, which represents a value improvement of 37% when compared to the distribution occurred in 2018, and increases the cumulative return on Armilar Funds to 2.3x cash on cash.
Already in the 4Q, Arctic Wolf, a leader in cybersecurity operations, announced it has raised USD200 M in Series E funding at a valuation of USD1.3 bn. This funding round was led by Viking Global Investors, with additional participation from DTCP and existing investors, and allowed Sonae IM to record a capital gain of almost €29 M, accounted directly in its equity.
Sonae informed about bond issue and refinancing of medium and long-term debt.
Sonae informed about sale and leaseback operation.
Sonae informed about an agreement to dissolve the partnership at ZOPT and a shareholding in NOS SGPS, SA
Sonae informed about on Plan for gender equality 2021
Sonae informed on Cash Settled Equity Swap extension.
| Sonae statement of financial position | |||
|---|---|---|---|
| Million euros | 9M19 | 9M20 | yoy |
| TOTAL ASSETS | 8,773 | 7,968 | -9.2% |
| Non current assets | 7,010 | 6,251 | -10.8% |
| Net fixed assets | 2,042 | 2,075 | 1.6% |
| Net Rights of Use | 1,070 | 1,040 | -2.8% |
| Goodwill | 784 | 671 | -14.4% |
| Investment properties | 975 | 332 | -66.0% |
| Other investments | 2,002 | 1,748 | -12.7% |
| Deferred tax assets | 69 | 332 | - |
| Others | 66 | 54 | -19.0% |
| Current assets | 1,764 | 1,717 | -2.7% |
| Stocks | 657 | 589 | -10.4% |
| Trade debtors | 124 | 131 | 5.2% |
| Liquidity | 666 | 687 | 3.3% |
| Others | 317 | 311 | -2.0% |
| SHAREHOLDERS' FUNDS | 3,039 | 2,372 | - -22.0% |
| Equity holders | 2,037 | 1,920 | -5.7% |
| Attributable to minority interests | 1,003 | 452 | -55.0% |
| LIABILITIES | 5,734 | 5,596 | -2.4% |
| Non-current liabilities | 3,555 | 3,412 | -4.0% |
| Bank loans | 1,430 | 1,106 | -22.7% |
| Lease liabilities | 1,095 | 1,087 | -0.7% |
| Other loans | 562 | 620 | 10.2% |
| Deferred tax liabilities | 326 | 467 | 43.2% |
| Provisions | 33 | 33 | 2.3% |
| Others | 109 | 100 | -8.4% |
| Current liabilities | 2,179 | 2,184 | 0.2% |
| Bank loans | 230 | 205 | -11.1% |
| Lease liabilities | 99 | 107 | 7.6% |
| Other loans | 6 | 17 | 183.9% |
| Trade creditors | 1,247 | 1,236 | -0.8% |
| Others | 596 | 619 | 3.8% |
| SHAREHOLDERS' FUNDS + LIABILITIES | 8,773 | 7,968 | -9.2% |
The consolidated financial information contained in this report was prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union. The financial information regarding quarterly and semi-annual figures was not subject to audit procedures.
Note: Sonae implemented the following changes in its reporting structure:
(i) Adoption of the IFRS16 accounting standard in 2019;
(ii) Discontinued operations: Saphety and WeDo following the sale from Sonae IM in 1Q19 and 3Q19, respectively; Temasa following the sale from Sonae Fashion and Deeply as an asset available for sale.
| Sonae Sierra consolidated results | ||
|---|---|---|
| Million euros | 3Q20 | 9M20 |
| Turnover | 23 | 72 |
| Underlying EBITDA | 3 | 10 |
| margin | 14% | 14% |
| Equity method results | 2 | 12 |
| Non-recurrent items | 0 | 57 |
| EBITDA | 5 | 80 |
| Provisions and impairment losses | -5 | -10 |
| D&A | -1 | -2 |
| EBIT | -1 | 68 |
| Net financial results | -2 | -7 |
| EBT | -3 | 61 |
| Taxes | 0 | -1 |
| Direct results | -3 | 60 |
| Indirect results | -9 | -81 |
| Net income | -12 | -21 |
| Non-controlling interests | 1 | 1 |
| Net income group share | -12 | -20 |
| Capex | Investments in tangible and intangible assets and investments in acquisitions. For NOS it includes right of use. |
|---|---|
| Direct results | Results before non-controlling interests excluding contributions to indirect results. |
| (Direct) EBIT | Direct EBT - financial results. |
| EBITDA | Underlying EBITDA + equity method results + non-recurrent items. |
| EBITDA margin | EBITDA / turnover. |
| (Direct) EBT | Direct results before taxes. |
| EoP | End of period. |
| Financial net debt | Net debt excluding shareholders' loans. |
| Gearing (book value) | Average of the last four quarters considering, for each quarter, total net debt (EoP) / total shareholders' funds (EoP). |
| Gearing (market value) | Average of the last four quarters considering, for each quarter, total net debt (EoP) / equity value considering the closing price of Sonae shares on the last day of each quarter. |
| Indirect results | Includes Sonae Sierra's results, net of taxes, arising from: (i) investment property valuations; (ii) capital gains (losses) on the sale of financial investments, joint ventures or associates; (iii) impairment losses of non-current assets (including goodwill) and (iv) provision for assets at risk. Additionally and concerning Sonae's portfolio, it incorporates: (i) impairments in retail real estate properties; (ii) reductions in goodwill; (iii) provisions (net of taxes) for possible future liabilities and impairments related with non-core financial investments, businesses, assets that were discontinued (or in the process of being discontinued/repositioned); (iv) results from mark to market methodology of other current investments that will be sold or exchanged in the near future; and (v) other non-relevant issues. |
| Investment properties | Shopping centres in operation owned and co-owned by Sonae Sierra. |
| Lease Liabilities | Net present value of payments to use the asset. |
| Like for Like sales (LfL) | Sales made by stores that operated in both periods under the same conditions. Excludes stores opened, closed or which suffered major upgrade works in one of the periods. |
| Loan to Value (LTV) - Holding |
Holding net debt (average) / NAV of the investment portfolio plus Holding net debt (average). |
| Loan to Value (LTV) – Sonae Sierra |
Net debt / (Investment properties + properties under development), on a proportional basis. |
| INREV Net asset value (NAV) Sonae Sierra |
Open market value attributable to Sonae Sierra - net debt - minorities + deferred tax liabilities. |
| Net debt | Bonds + bank loans + other loans + financial leases + shareholder loans - cash - bank deposits - current investments - other long-term financial applications. |
| Net invested capital | Total net debt + total shareholders' funds. |
| Online sales | Total e-commerce sales, including online marketplaces. |
| Open Market Value (OMV) | Fair value of properties in operation (% of ownership), provided by independent international entities and book value of development properties (% of ownership). |
| Other loans | Bonds, leasing and derivatives. |
| Right of use (RoU) | Lease liability at the beginning of the lease adjusted for, initial direct costs, advance rent payments and possible lease discounts. |
| RoIC | Return on invested capital. |
| Underlying EBITDA | Recurrent EBITDA from the businesses consolidated using the full consolidation method. |
| Underlying EBITDA margin | Underlying EBITDA / turnover. |
Condensed Consolidated Financial Statements
(Amounts expressed in euro)
(Translation of consolidated financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails.)
| ASSETS | Notes | 30 Sep 20 | 30 Sep 19 | 31 Dec 2019 |
|---|---|---|---|---|
| NON-CURRENT ASSETS: | ||||
| Property, plant and equipment | 7 | 1,679,045,111 | 1,691,845,513 | 1,688,284,139 |
| Intangible assets | 8 | 395,589,424 | 350,490,395 | 401,667,381 |
| Right of use assets | 9 | 1,040,332,256 | 1,070,200,574 | 1,060,191,250 |
| Investment properties | 331,952,680 | 975,205,484 | 347,859,459 | |
| Goodwill | 670,901,347 | 783,779,852 | 678,895,512 | |
| Investments in joint ventures and associates | 10 | 1,514,113,367 | 1,935,180,979 | 1,607,581,376 |
| Other investments | 11 | 233,429,746 | 67,282,852 | 79,248,786 |
| Deferred tax assets | 12 | 331,780,385 | 69,257,469 | 331,385,376 |
| Other non-current assets | 53,716,830 | 66,295,989 | 53,982,880 | |
| Total Non-Current Assets | 6,250,861,146 | 7,009,539,107 | 6,249,096,159 | |
| CURRENT ASSETS: | ||||
| Inventories | 588,781,831 | 657,429,554 | 663,919,735 | |
| Trade receivables and other current assets | 359,442,263 | 343,343,182 | 309,556,149 | |
| Income tax assets | 36,817,454 | 55,431,283 | 42,283,336 | |
| Other tax assets | 39,167,186 | 40,891,622 | 42,600,020 | |
| Investments | 11 | 800,335 | 3,870,614 | 665,213 |
| Cash and bank balances | 686,401,036 | 661,692,401 | 609,830,153 | |
| Total Current Assets | 1,711,410,105 | 1,762,658,656 | 1,668,854,606 | |
| Assets classified as held for sale | 5 | 5,682,379 | 1,201,493 | 1,126,364,434 |
| TOTAL ASSETS | 7,967,953,630 | 8,773,399,256 | 9,044,315,199 | |
| EQUITY AND LIABILITIES | ||||
| EQUITY: | ||||
| Share capital | 2,000,000,000 | 2,000,000,000 | 2,000,000,000 | |
| Own shares | (93,340,758) | (99,861,142) | (99,806,645) | |
| Legal reserve | 277,452,299 | 268,028,145 | 268,028,145 | |
| Reserves and retained earnings | (240,135,496) | (219,563,511) | (201,594,204) | |
| Profit/(Loss) for the period attributable to the equity holders of the Parent Company | (23,977,357) | 87,938,979 | 165,221,904 | |
| Equity attributable to the equity holders of the Parent Company | 1,919,998,688 | 2,036,542,471 | 2,131,849,200 | |
| Equity attributable to non-controlling interests | 13 | 451,645,719 | 1,002,878,998 | 974,714,342 |
| TOTAL EQUITY | 2,371,644,407 | 3,039,421,469 | 3,106,563,542 | |
| LIABILITIES: | ||||
| NON-CURRENT LIABILITIES: | ||||
| Loans | 14 | 1,725,451,186 | 1,992,525,165 | 1,592,307,452 |
| Lease liabilities | 9 | 1,086,616,214 | 1,094,814,025 | 1,088,290,449 |
| Other non-current liabilities | 100,019,132 | 109,143,533 | 89,970,758 | |
| Deferred tax liabilities | 12 | 466,730,850 | 325,887,343 | 472,289,494 |
| Provisions | 15 | 33,402,694 | 32,637,207 | 42,652,254 |
| Total Non-Current Liabilities | 3,412,220,076 | 3,555,007,273 | 3,285,510,407 | |
| CURRENT LIABILITIES: | ||||
| Loans | 14 | 221,706,568 | 236,341,361 | 196,268,470 |
| Lease liabilities | 9 | 106,875,111 | 99,299,029 | 102,781,525 |
| Trade payables and other current liabilities | 1,730,425,303 | 1,723,549,956 | 1,847,952,492 | |
| Income tax liabilities | 18,819,740 | 35,132,351 | 13,464,954 | |
| Other tax liabilities | 80,565,972 | 77,462,395 | 100,751,716 | |
| Provisions | 15 | 24,416,453 | 7,185,422 | 4,405,596 |
| Total Current Liabilities | 2,182,809,147 | 2,178,970,514 | 2,265,624,753 | |
| Liabilities directly associated with assets classified as held for sale | 5 | 1,280,000 | - | 386,616,497 |
TOTAL LIABILITIES 5,596,309,223 5,733,977,787 5,937,751,657 TOTAL EQUITY AND LIABILITIES 7,967,953,630 8,773,399,256 9,044,315,199
The accompanying notes are part of these condensed consolidated financial statements.
(Translation of consolidated financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails.)
| (Amounts expressed in euro) | Notes | 3rd Quarter 2020 | 3rd Quarter 2019 Restated |
30 Sep 20 | 30 Sep 19 Restated Note 4 |
|---|---|---|---|---|---|
| Sales | 6 | 1,695,228,818 | 1,581,317,436 | 4,685,436,149 | 4,354,909,981 |
| Services rendered | 6 | 77,352,627 | 92,437,920 | 222,967,907 | 279,164,494 |
| Changes in value of investment properties | (3,804,051) | 209,860 | (15,819,504) | 6,670,995 | |
| Income or expense rela>ng to investments | 16 | 171,627 | (915,726) | 22,110,883 | (17,970,073) |
| Financial income | 13,771,579 | 3,507,048 | 31,232,331 | 9,472,760 | |
| Other income | 17 | 39,237,299 | 36,455,563 | 89,105,656 | 87,326,502 |
| Cost of goods sold and materials consumed | (1,209,028,989) | (1,151,936,847) | (3,439,774,563) | (3,146,722,303) | |
| (Increase) /Decrease in prodution | (1,075,853) | (954,813) | 226,346 | (2,672,147) | |
| External supplies and services | (178,296,812) | (162,287,867) | (488,631,527) | (469,606,637) | |
| Employee benefits expense | (210,418,741) | (208,304,630) | (647,881,003) | (638,760,364) | |
| Depreciation and amortisation expenses | 6, 7, 8 and 9 | (83,443,942) | (83,146,919) | (253,885,543) | (246,103,441) |
| Impairment losses | (13,884,141) | (5,892,495) | (22,852,242) | (7,231,517) | |
| Provisions | 15 | 1,050,423 | (6,036,108) | (25,947,351) | (8,250,953) |
| Financial expense | (43,548,596) | (32,222,969) | (107,709,396) | (94,872,743) | |
| Other expenses | (22,020,569) | (20,647,609) | (51,865,551) | (54,293,744) | |
| Share of results of joint ventures and associates | 10.2 | (2,404,785) | 18,035,147 | (26,101,016) | 74,923,704 |
| Profit/(Loss) before taxation from continuing operations | 58,885,894 | 59,616,990 | (29,388,424) | 125,984,513 | |
| Income tax expense | (8,942,979) | (9,328,257) | (2,893,922) | (13,252,907) | |
| Profit/(Loss) after taxation from continuing operations | 49,942,915 | 50,288,733 | (32,282,346) | 112,731,606 | |
| Profit/(Loss) from discontinued operations after taxation | 4 | (1,716,850) | 16,763,123 | (3,750,729) | 18,485,189 |
| Consolidated profit/(Loss) for the period | 48,226,065 | 67,051,856 | (36,033,075) | 131,216,795 | |
| Attributable to equity holders of the Parent Company: | |||||
| Continuing operations | 52,495,798 | 34,930,372 | (20,226,629) | 71,564,064 | |
| Discontinued operations | (1,716,849) | 15,033,460 | (3,750,728) | 16,374,915 | |
| 50,778,949 | 49,963,832 | (23,977,357) | 87,938,979 | ||
| Attributable to non-controlling interests | |||||
| Continuing operations | (2,552,884) | 15,358,360 | (12,055,718) | 41,167,542 | |
| Discontinued operations | - | 1,729,664 | - | 2,110,274 | |
| 13 | (2,552,884) | 17,088,024 | (12,055,718) | 43,277,816 | |
| Profit/(Loss) per share | |||||
| From continuing operations | |||||
| Basic | 19 | 0.027481 | 0.018346 | (0.010589) | 0.037587 |
| Diluted | 19 | 0.025626 | 0.017102 | (0.009874) | 0.036872 |
| From discontinued operations | |||||
| Basic | 19 | (0.000899) | 0.007896 | (0.001963) | 0.008600 |
| Diluted | 19 | (0.000835) | 0.007360 | (0.001831) | 0.008017 |
The accompanying notes are part of these condensed consolidated financial statements.
(Translation of consolidated financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails.)
| (Amounts expressed in euro) | 3rd Quarter 2020 | 3 rd Quarter 2019 Restated |
30 Sep 20 | 30 Sep 19 Restated Note 4 |
|
|---|---|---|---|---|---|
| Net Profit / (Loss) for the period | 48,226,065 | 67,051,856 | (36,033,075) | 131,216,795 | |
| Items that may be reclassified subsequently to profit or loss: | |||||
| Exchange differences on translation of foreign operations | 3,461,861 | (10,349,581) | 13,692,695 | (10,031,374) | |
| Share of other comprehensive income of joint ventures and associates | 10.2 | (19,187,382) | (19,165,910) | (98,589,797) | (17,837,341) |
| Changes in cash flow hedging reserve Income tax relating to items that may be reclassified subsequently to profit or loss Others |
(272,870) (31,021) 246,026 |
2,007,991 (405,229) (305,528) |
(367,624) (72,253) 169,789 |
1,629,465 (343,982) (39,219) |
|
| (15,783,386) | (28,218,257) | (85,167,190) | (26,622,451) | ||
| Items that were reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations related to discontinued operations |
- | 203,283 | - | 203,283 | |
| Items that were reclassified subsequently to profit or loss: | - | 203,283 | - | 203,283 | |
| Items that won´t be reclassified subsequently to profit or loss: | |||||
| Changes value of financial assets at fair value | 11 | 3,341,928 | - | 1,283,043 | - |
| 3,341,928 | - | 1,283,043 | - | ||
| Total other comprehensive income for the period | (12,441,458) | (28,014,974) | (83,884,147) | (26,419,168) | |
| Total comprehensive income for the period | 35,784,607 | 39,036,882 | (119,917,222) | 104,797,627 | |
| Attributable to: Equity holders of parent company Non controlling interests |
40,568,106 (4,783,499) |
30,554,241 8,482,641 |
(84,738,471) (35,178,751) |
67,346,500 37,451,127 |
|
The accompanying notes are part of these consolidated financial statements.
(Translation of consolidated financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails.)
| Rese and Ret rves |
aine d Ea rning s |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Am sed in eu ro) ount s ex pres |
Note s |
Shar e Capi tal |
Own Shar es |
l Rese Lega rve |
Curr ency Tran slati on Rese rve |
Inve nts Fair stme Valu e Rese rve |
Cash -flow Hedg ing Rese rve |
Opti on Prem ium Conv le Bond ertib s |
Othe r Re es and serv Reta ined Earn ings |
Tota l Res s and erve Reta ined Earn ings |
Net Prof it/(L oss) |
Tota l |
Non troll ing con Inte rest s (Not ) e 13 |
Tota l Equi ty |
| ibut able Attr to E |
lder s of quit y Ho |
Pare nt Co mpa ny |
||||||||||||
| Bala 1 Jan 201 9 s at nce a uary |
2,00 0,00 0,00 0 |
(104 ) ,204 ,112 |
251 ,937 ,767 |
4,16 0,38 5 |
2,14 6,50 0 |
123 ,615 |
22,3 13,0 00 |
(236 ,806 ,688 |
) (208 ) ,063 ,188 |
221 ,653 ,131 |
2,16 1,32 3,59 8 |
1,12 7,49 3,09 0 |
3,28 8,81 6,68 8 |
|
| ct of Impa IFRS 16 a pplic ation |
- | - | - | - | - | - | - | (90,2 50) 11,6 |
(90,2 50) 11,6 |
(14,0 81) 97,1 |
(104 ) ,308 ,831 |
(2,04 6) 0,96 |
(106 ) ,349 ,797 |
|
| Bala ted s at 1 Jan 201 9 - R esta nce a uary |
2,00 0,00 0,00 0 |
(104 ) ,204 ,112 |
251 ,937 ,767 |
4,16 0,38 5 |
2,14 6,50 0 |
123 ,615 |
22,3 13,0 00 |
(327 ,018 ,338 |
) (298 ) ,274 ,838 |
207 ,555 ,950 |
2,05 7,01 4,76 7 |
1,12 5,45 2,12 4 |
3,18 2,46 6,89 1 |
|
| Tota l com preh ensiv e inc for the p eriod ome App iatio n of olida ted n ofit o f 20 18 et pr ropr cons |
- | - | - | (8,3 11) 17,4 |
- | 1,32 4,14 2 |
- | (13,5 10) 99,2 |
(20,5 79) 92,4 |
87,9 38,9 79 |
67,3 46,5 00 |
37,4 51,1 27 |
104 ,797 ,627 |
|
| Tran sfer to le gal r nd re taine d ea rning eser ves a s Divid ends dist ribut ed |
- - |
- - |
16,0 90,3 78 - |
- - |
- - |
- - |
- - |
191 ,465 ,572 (83,9 64,8 92) |
191 ,465 ,572 (83,9 64,8 92) |
(207 ,555 ,950 ) - |
- (83,9 64,8 92) |
- (156 ,482 ,940 ) |
- (240 ,832 ) ,447 |
|
| me d istrib from nt fu nds Inco ution inve stme Oblig ation fulf ield by sh ttrib ution mplo to e are a yees ial ca ncel latio n of Cash led E Part Sett quity Swa p |
- - - |
- - 4,34 2,97 0 |
- - |
- - |
- - |
- - |
- - |
- 120 ,006 3,74 2,90 8 |
- 120 ,006 3,74 2,90 8 |
- - |
- 120 ,006 8,08 5,87 8 |
(194 ) ,169 (2,5 56) |
(194 ) ,169 117 ,450 8,08 5,87 8 |
|
| ns of affil iated Aqu isitio pani com es Capi tal in crea se |
- - |
- - |
- - - |
- - - |
- - - |
- - - |
- - - |
- - |
- - |
- - - |
- - |
- 5,23 6,67 0 1,07 5,00 6 |
5,23 6,67 0 1,07 5,00 6 |
|
| Shar ing S Sier ra's good will onae Impa ct of IFRS 16 a pplic ation |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
- (12,0 88) 59,7 |
- (12,0 88) 59,7 |
- - |
- (12,0 88) 59,7 |
(7,87 5,30 0) (1,78 4) 0,96 |
(7,87 5,30 0) (13,8 52) 40,7 |
|
| Bala mbe as at 30 S epte r 20 19 nce |
2,00 0,00 0,00 0 |
(99,8 42) 61,1 |
268 ,028 ,145 |
(4,15 6) 7,02 |
2,14 6,50 0 |
1,44 7,75 7 |
22,3 13,0 00 |
(241 ,313 ,742 |
) (219 ) ,563 ,511 |
87,9 38,9 79 |
2,03 6,54 2,47 1 |
1,00 2,87 8,99 8 |
3,03 9,42 1,46 9 |
|
| Bala 1 Jan 202 0 s at nce a uary |
2,00 0,00 0,00 0 |
(99,8 06,6 45) |
268 ,028 ,145 |
(7,40 0,43 7) |
4,13 7,94 2 |
(673 ,747 ) |
- | (197 ,657 ,962 |
) (201 ,594 ,204 ) |
165 ,221 ,904 |
2,13 1,84 9,20 0 |
974 ,714 ,342 |
3,10 6,56 3,54 2 |
|
| Tota l com preh ensiv e inc for the p eriod ome |
- | - | - | 11,7 72,4 87 |
(1,07 3,35 4) |
(599 ,409 ) |
- | (70,8 60,8 38) |
(60,7 61,1 14) |
(23,9 77,3 57) |
(84,7 38,4 71) |
(35, 178, 751) |
(119 ,917 ,222 ) |
|
| n of olida ted n ofit o f 20 App iatio et pr 19 ropr cons sfer to le gal r nd re taine d ea rning Tran eser ves a s |
- | 9,42 4,15 4 |
,797 ,750 155 |
,797 ,750 155 |
(165 ,221 ,904 ) |
- | ||||||||
| Divid ends dist ribut ed |
13 | - | - - |
- | - - |
- - |
- - |
- - |
(88,4 83) 85,1 |
(88,4 83) 85,1 |
- | - (88,4 83) 85,1 |
(82,4 10) 75,0 |
- (170 ) ,960 ,193 |
| me d istrib from nt fu nds Inco ution inve stme Oblig ation fulf ield by sh ttrib ution mplo to e are a yees |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
- 176 ,967 |
- 176 ,967 |
- - |
- 176 ,967 |
(400 ) ,348 9,34 8 |
(400 ) ,348 186 ,315 |
|
| ial ca ncel latio n of Cash led E Part Sett quity Swa p Vari ation in p e of subs idiar ies ntag erce |
- - |
6,46 5,88 7 |
- | - | - | - | - | (2,80 9) 0,31 (41,3 79) 66,1 |
(2,80 9) 0,31 (41,3 79) 66,1 |
- | 3,66 5,56 8 (41,3 79) 66,1 |
- (21,7 17) 09,4 |
3,66 5,56 8 (63,0 96) 75,5 |
|
| Capi tal in crea se |
- | - - |
- - |
- - |
- - |
- - |
- - |
- | - | - - |
- | 140 ,000 |
140 ,000 |
|
| Capi tal d ecre ase |
13 | - | - | - | - | - | - | - | - | - | - | - | (27,2 21,9 46) |
(27,2 21,9 46) |
| Lose of c ol of sub sidia ries ontr |
5 | - | - | - | - | - | - | - | - | - | - | - | (356 ,173 ,784 ) |
(356 ,173 ,784 ) |
| Othe rs |
- | - | - | - | - | - | - | (1,10 3,21 4) |
(1,10 3,21 4) |
- | (1,10 3,21 4) |
(58,7 15) |
(1,16 1,92 9) |
|
| Bala 30 S mbe r 202 0 as at epte nce |
2,00 0,00 0,00 0 |
(93,3 40,7 58) |
277 ,452 ,299 |
4,37 2,05 0 |
3,06 4,58 8 |
(1,2 73,1 56) |
- | (246 ,298 ,978 |
) (240 ,135 ,496 ) |
(23,9 77,3 57) |
1,91 9,99 8,68 8 |
451 ,645 ,719 |
2,37 1,64 4,40 7 |
The accompanying notes are part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 SEPTEMBER 2020 AND 2019
(Translation of consolidated financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails)
| (Amounts expressed in euro) | Notes | 3 rd Quarter 2020 | 3 rd Quarter 2019 | 30 Sep 2020 | 30 Sep 2019 |
|---|---|---|---|---|---|
| OPERATING ACTIVITIES | |||||
| Net cash generated from operating activities (1) | 275,836,530 | 232,268,287 | 266,683,086 | 268,748,023 | |
| INVESTMENT ACTIVITIES | |||||
| Receipts arising from: | |||||
| Investments | 5 | - | 107,902,091 | 269,703,299 | 142,612,167 |
| Property, plant and equipment and intangible assets | 7 | 44,462,519 | 25,553,990 | 52,834,279 | 29,433,582 |
| Interests and similar income | 279,219 | 1,217,070 | 1,221,637 | 2,557,190 | |
| Loans granted | - | - | 2,368,303 | 655,472 | |
| Dividends | 944,851 | 11,500,324 | 6,036,222 | 96,990,224 | |
| Others | 59,053,532 | - | 82,882,530 | 24,067,898 | |
| 104,740,121 | 146,173,475 | 415,046,270 | 296,316,533 | ||
| Payments arising from: | |||||
| Investments | (209,003,640) | (20,127,703) | (216,848,012) | (103,704,056) | |
| Property, plant and equipment and intangible assets | (40,144,049) | (75,373,772) | (168,580,037) | (236,083,682) | |
| Loans granted | (196,879) | (118,275) | (2,579,923) | (1,721,281) | |
| Others | (48,151,613) | (6,389,205) | (84,295,345) | (22,724,433) | |
| (297,496,181) | (102,008,955) | (472,303,317) | (364,233,452) | ||
| Net cash used in/ generated by investment activities (2) | (192,756,059) | 44,164,520 | (57,257,046) | (67,916,919) | |
| FINANCING ACTIVITIES | |||||
| Receipts arising from: | |||||
| Loans, bonds and finance leases | 1,186,123,630 | 1,729,517,382 | 4,616,808,993 | 6,157,239,419 | |
| Capital increases, additional paid in capital and share premiums | 140,000 | 947,820 | 19,190,000 | 4,904,587 | |
| Others | - | 17,800 | - | 17,800 | |
| 1,186,263,630 | 1,730,483,002 | 4,635,998,993 | 6,162,161,806 | ||
| Payments arising from: | |||||
| Lease contracts | (43,445,227) | (38,961,490) | (124,105,918) | (101,901,275) | |
| Loans, bonds and finance leases | (1,124,697,906) | (1,838,723,085) | (4,459,807,147) | (6,038,964,714) | |
| Interests and similar charges | (7,944,185) | (9,646,127) | (22,613,950) | (29,721,819) | |
| Reimbursement of capital and paid in capital | (920,264) | - | (3,269,062) | - | |
| Dividends | (400,347) | - | (175,447,371) | (244,762,717) | |
| (1,177,407,929) | (1,887,330,702) | (4,785,243,448) | (6,415,350,525) | ||
| Net cash used in financing activities (3) | 8,855,701 | (156,847,700) | (149,244,455) | (253,188,719) | |
| Net increase (decrease) in cash and cash equivalents (4) = (1) + (2) + (3) | 91,936,171 | 119,585,107 | 60,181,584 | (52,357,615) | |
| Effect of exchange rate changes on the balance of cash held in foreign currencies | 47,911 | 119,686 | 210,430 | (52,937) | |
| Effect of discontinued operations | - | (1,858,850) | (131,653) | (2,535,126) | |
| Cash and cash equivalents at the beginning of the period | 591,220,849 | 525,709,991 | 623,269,608 | 698,156,366 | |
| Cash and cash equivalents at the end of the period | 683,109,109 | 643,316,562 | 683,109,109 | 643,316,562 | |
The accompanying notes are part of these financial statements.
(Translation of consolidated financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails)
(Amounts stated in euro)
SONAE, SGPS, SA ("Sonae Holding") has its head-office at Lugar do Espido, Via Norte, Apartado 1011, 4470-909 Maia, Portugal, and is the parent company of a group of companies. Sonae´s operations and operating segments are described in Note 6.
The Covid-19 outbreak continues to impact our activities. With the end of the initial lockdown and the gradual reopening of the economy since May, Sonae's businesses were less impacted in Q3 than in Q2. Nevertheless, the pandemic caused a number of significant impacts, such as changes in consumption patterns, reduced tourism and restrictions on gatherings/physical distance, which continued to affect several of our businesses this quarter.
The principal accounting policies adopted in preparing the accompanying consolidated financial statements are described below. These policies have been consistently applied in comparative periods.
The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, issued by the International Accounting Standards Board ("IASB"), and interpretations issued by the IFRS Interpretations Committee ("IFRIC") or by the previous Standing Interpretations Committee ("SIC"), as adopted by the European Union as from the consolidated financial statements issuance date.
Interim financial statements are presented quarterly, in accordance with IAS 34 – "Interim Financial Reporting". As such, they do not include all the information to be disclosed in the annual consolidated financial statements and should therefore be read in conjunction with the consolidated financial statements for the previous year.
The accompanying condensed consolidated financial statements have been prepared from the books and accounting records of the company and subsidiaries, adjusted in the consolidation process, on a going concern basis and under the historical cost convention, except for some financial instruments and properties investments which are stated at fair value.
Up to the date of approval of these consolidated financial statements, the European Union endorsed the following standards, interpretations, amendments and revisions some of which become mandatory during the year 2020:
| With mandatory application during the year 2020: | Effective date (for financial years beginning on or after) |
|
|---|---|---|
| IFRS 3 (amendment) | Business combinations (Change of business definition) | 01 Jan 2020 |
| IFRS 9, IAS 39 and IFRS 7 (amendment) |
Reform of reference interest rates (Introduction of exemptions from hedge accounting so that the reform of reference interest rates does not lead to the termination of hedge accounting) |
01 Jan 2020 |
| IAS 1 and IAS 8 (amendment) |
Presentation of financial statements and accounting policies, changes in accounting estimates and errors (Update of material definition in the application of the standards to the financial statements as a whole) |
01 Jan 2020 |
| Concetual structure - Changes in the reference to other IFRS (Amendment to some IFRS regarding cross references and clarifications on the application of the new definitions of assets / liabilities and expenses / income) |
01 Jan 2020 | |
| IFRS 16 (amendment) | Leases: Rent Concessions related with Covid-19 | 01 Jun 2020 |
These standards were first applied by the Group in 2020, however, the impacts were not significant in the accompanying financial statements, with the exception of the amendment to IFRS 16.
The overall objective of this amendment to IFRS 16 is to allow lessees, as a practical matter, to treat changes/concessions related to COVID-19 as not being a modification of the lease. The amendment does not affect lessors.
This practical expedient allows issuers to recognise rent discounts directly in the income statement from the lessee's perspective. On 30 September 2020, these discounts were recognised under "Other income", totalling approximately 5 million euro (Note 17).
The following standards, interpretations, amendments and revisions were not at to the date of approval of these consolidated financial statements endorsed by the European Union:
| With mandatory application after 2020 | Effective date (for financial years beginning on or after) |
|
|---|---|---|
| IFRS 17 | Insurance contracts (New accounting for insurance contracts, reinsurance contracts and investment contracts with discretionary participation features). |
01 Jan 2023 |
| IAS 1 (amendment) | Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current | 01 Jan 2023 |
| IAS 3 (amendment) | Business activity concentrations: References for the conceptual framework | 01 Jan 2022 |
| IAS 16 (amendment) | Property, Plant and Equipment: Previous earnings to expected usage | 01 Jan 2022 |
| IAS 37 (amendment) | Provisions, Contingent Liabilities and Contingent Assets: Compliance costs of onerous contracts | 01 Jan 2022 |
| IFRS 4 (amendment) | Insurance contracts- deferral of IFRS 9 | 01 Jan 2021 |
| IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (amendments) |
Interest Rate Benchmark Reform – Phase 2 | 01 Jan 2021 |
| Annual improvments 2018- 2020 | 01 Jan 2022 |
The Group did not proceed with the early implementation of any of these standards in the financial statements for the year ended 30 September 2020 since their application is not mandatory, lying in the process of analysing expected effects of those standards.
In 2019, the Group disposed of the We Do Group and Saphety and considered as discontinued activities some operations that are in the process of liquidation. To maintain the comparability of the financial statements and as required by IFRS 5, changes to the consolidated income statements by nature for the period ended 30 September 2019 were made to reflect in a single caption (Consolidated net profit for the period from discontinued operations), on the income statement face, the post-tax profit or loss from discontinued operations.
The impacts on the consolidated financial statements at 30 September 2019 are as follows:
| 30 Sep 2019 | |||
|---|---|---|---|
| Amounts in euro | Before the restatement |
Discontinued operations |
After the restatement |
| Sales | 4,356,348,455 | (1,438,474) | 4,354,909,981 |
| Services rendered | 278,873,044 | 291,450 | 279,164,494 |
| Changes in value of investment properties | 6,670,995 | - | 6,670,995 |
| Income or expenses related to investments | (17,970,084) | 11 | (17,970,073) |
| Other income and financial income | 9,468,599 | 4,161 | 9,472,760 |
| Other income | 87,259,340 | 67,162 | 87,326,502 |
| Cost of good sold and materials consumed | (3,146,449,729) | (272,574) | (3,146,722,303) |
| (Increase) /Decrease in prodution | (2,591,687) | (80,460) | (2,672,147) |
| External supplies and service | (472,050,324) | 2,443,687 | (469,606,637) |
| Employee benefits expense | (640,081,713) | 1,321,349 | (638,760,364) |
| Depreciation and amortisation expenses | (246,359,423) | 255,982 | (246,103,441) |
| Provisions and impairment losses | (15,517,579) | 35,109 | (15,482,470) |
| Financial expenses | (94,877,719) | 4,976 | (94,872,743) |
| Other expenses | (54,441,264) | 147,520 | (54,293,744) |
| Share of results of joint ventures and associates | 74,923,704 | - | 74,923,704 |
| Profit (loss) from continuing operations, before tax | 123,204,615 | 2,779,898 | 125,984,513 |
| Income tax expense | (12,751,127) | (501,780) | (13,252,907) |
| Consolidated profit (loss) for the period from continuing operations | 110,453,488 | 2,278,118 | 112,731,606 |
| Profit/(Loss) from discountinuing operations, after tax | 20,763,307 | (2,278,118) | 18,485,189 |
| Consolidated profit /(loss) for the period from continuing operations | 131,216,795 | - | 131,216,795 |
In February 2020, Sonae Sierra diluted its stake in its subsidiary Sierra B.V. from 50.1% to 25.1%. Sierra B.V. participates in the companies that own 4 assets in Portugal (Colombo, Vasco da Gama, Cascaishopping and Norteshopping) and two assets in Spain (Plaza Mayor and, the asset inaugurated in February 2020, Designer Outlet, both in Malaga). These entities were classified as held for sale in 2019. Sonae Sierra maintained the management service contracts for all assets. The effects of these transactions on the consolidated financial statements can be analysed as follows:
| Amounts in euro | At the disposal date |
|---|---|
| Non-current assets and liabilities held for sale | 1,097,147,948 |
| Other assets/liabilities with movements after 31 December 2019 | (18,026,817) |
| Capital decrease after 31 December 2019 | (47,287,831) |
| Dividends distributed after 31 December 2019 | 8,062,901 |
| Transfer to joint ventures and associates (Note 10.2) | (69,591,682) |
| Non-controlling interests (Note 13) | (356,522,582) |
| Liabilities directly related to assets classified as held for sale | (385,591,820) |
| Total net assets disposed | 228,190,118 |
| Gain/(Loss) on disposal (Note 16) | 34,542,798 |
| Disposal price | 262,732,916 |
| Expenses incurred with the disposal (Note 16) | (14,080,734) |
| Net receipt | 248,652,182 |
| Effective receipts | 248,917,737 |
| Amounts receivable in future | (265,555) |
| 248,652,182 |
The change in the period ended 30 September 2020 in the assets and non-current liabilities held for sale is related to this operation.
Sonae has in its portfolio 8 business segments:
These operating segments have been identified taking into consideration that each of these segments have separate identifiable revenues and costs, separate financial information is produced, and its operating results are reviewed by management on which it makes decisions.
The main operating segment information as at 30 September 2020 and 2019 can be detailed as follows:
| 30 Set 2020 | Turnover | Depreciation and amortisation (3) |
Provisions and impairment losses (3)(4) |
EBIT (3) | Financial results (3) |
Income tax (3) |
|---|---|---|---|---|---|---|
| Sonae MC | 3,769,309,711 | (183,646,181) | (8,368,872) | 173,850,251 | (59,087,715) | (18,447,897) |
| Worten | 775,380,606 | (29,819,781) | (1,749,184) | (18,952,124) | (5,287,279) | 1,843,948 |
| Sonae Fashion | 231,689,408 | (27,259,158) | (858,306) | (48,361,634) | (4,292,181) | 7,577,977 |
| Sonae Sierra | 72,335,060 | (2,243,613) | (10,280,475) | 30,374,018 | (6,694,739) | (766,651) |
| NOS | - | - | - | 21,387,528 | - | - |
| ISRG | - | - | - | (3,523,994) | - | - |
| Sonae IM | 89,368,418 | (5,564,216) | (340,484) | (16,539,778) | (679,975) | 3,247,020 |
| Sonae FS | 25,867,079 | (744,777) | - | 1,041,708 | 168,277 | 213,718 |
| Other, eliminations and adjustments (1) | (55,546,226) | (4,607,817) | (1,841) | (11,559,377) | (6,616,705) | 820,858 |
| Total consolidated - Direct | 4,908,404,056 | (253,885,543) | (21,599,162) | 127,716,598 | (82,490,317) | (5,511,027) |
| 30 Sep 2019 - Restated | Turnover | Depreciation and amortisation (3) |
Provisions and impairment losses (3) |
EBIT (3) | Financial results (23) |
Income tax (2) |
|---|---|---|---|---|---|---|
| Sonae MC | 3,426,649,867 | (177,267,716) | (746,535) | 160,864,370 | (56,345,430) | (16,716,321) |
| Worten | 743,714,449 | (28,976,330) | (7,617,493) | (16,723,982) | (5,298,753) | 672,819 |
| Sonae Fashion | 277,751,894 | (26,977,715) | (5,134,281) | (15,246,565) | (4,218,959) | 4,442,206 |
| Sonae Sierra | 125,307,106 | (2,237,706) | (1,482,167) | 64,883,752 | (10,393,928) | (4,466,048) |
| NOS | - | - | - | 31,816,000 | - | - |
| ISRG | - | - | - | 6,991,516 | - | - |
| Sonae IM | 90,281,733 | (5,451,842) | (193,148) | 10,711,875 | 100,954 | 939,752 |
| Sonae FS | 26,836,442 | (949,832) | - | 4,524,932 | 75,666 | 218,471 |
| Other, eliminations and adjustments (1) | (56,467,016) | (4,242,300) | (23,025) | (19,202,654) | (9,319,534) | 5,026,542 |
| Total consolidated - Direct | 4,634,074,475 | (246,103,441) | (15,196,649) | 228,619,244 | (85,399,984) | (9,882,579) |
| 30 Set 2020 | 30 Sep 2019 - Restated | |||||
|---|---|---|---|---|---|---|
| Investment (CAPEX) |
Invested capital | Financial net debt (2) |
Investment (CAPEX) |
Invested capital | Financial net debt (2) |
|
| Sonae MC | 137,513,107 | 2,390,113,268 | 1,545,553,484 | 220,301,168 | 2,352,213,473 | 1,611,807,967 |
| Worten | 13,723,358 | 29,985,344 | - | 15,620,000 | 114,700,793 | - |
| Sonae Fashion | 71,585,357 | 322,973,659 | - | 12,439,149 | 367,592,935 | - |
| Sonae Sierra | 1,855,697 | 923,860,199 | 30,716,414 | 5,381,557 | 1,945,772,154 | 257,920,094 |
| NOS | - | 664,562,818 | - | - | 656,290,738 | - |
| ISRG | - | 78,187,525 | - | - | 81,572,047 | - |
| Sonae IM | 9,909,375 | 194,941,265 | 5,718,453 | 23,354,814 | 148,888,584 | 28,320,491 |
| Sonae FS | 1,483,991 | 23,060,041 | - | 341,122 | 14,779,887 | - |
| Other, eliminations and adjustments (1) | 139,644,758 | 169,972,299 | 844,023,641 | (2,096,423) | 71,196,148 | 815,536,721 |
| Total consolidated | 375,715,643 | 4,797,656,418 | 2,426,011,992 | 275,341,387 | 5,753,006,759 | 2,713,585,273 |
1) Include Sonae individual accounts;
2) These captions are accompanied by management in more aggregated form, and not allocated to individual operating segments identified above;
3) Reconciled information in note 20;
4) These provisions do not include the provisions related to Covid-19 mentioned in note 20.
The caption "Others, eliminations and adjustments" can be analyzed as follows:
| Investment | Invested capital | |||
|---|---|---|---|---|
| 30 Set 2020 | 30 Sep 2019 Restated |
30 Set 2020 | 30 Sep 2019 Restated |
|
| Inter-segment intra-groups and contributions of entities non individualized entities as segments |
139,644,758 | (2,096,423) | 108,376,341 | 153,305,386 |
| Other investments | - | - | 115,140,000 | - |
| Cash settled equity swap | - | - | (53,544,042) | (82,109,238) |
| 139,644,758 | (2,096,423) | 169,972,299 | 71,196,148 |
All performance measures are reconciled to the financial statements in Note 20.
Glossary:
Net Invested capital = Net debt + Shareholder funds;
Net Financial Debt = Bonds + bank loans + other loans + financial leases - cash, bank deposits, current investments, excluding other long-term investments + lease liabilities;
Others, eliminations and adjustments = Intra-groups + consolidation adjustments + contributions from other companies not included in the disclosed segments by do not fit in any reportable segment, i.e., companies other than Sonae SGPS are included in the consolidated financial statements as of 31 December 2019;
Investments (CAPEX) = Gross investments in Property, Plant and equipment and intangible assets and investments in acquisitions.
During the nine months period ended 30 September 2020, the movements in Property, plant and equipment as well accumulated depreciation and impairment losses are made up as follows:
| Others | Tangible | Total | |||
|---|---|---|---|---|---|
| Land and | Plant and | tangibles | assets | tangible | |
| Buildings | Machinery | assets | in progress | assets | |
| Gross costs: | |||||
| Opening balance as at 1 January 2020 | 1,348,619,669 | 1,648,025,471 | 260,385,129 | 28,714,268 | 3,285,744,537 |
| Investment | 4,717,926 | 4,049,541 | 2,596,147 | 121,804,471 | 133,168,085 |
| Disposals | (6,747,678) | (27,829,541) | (7,291,640) | (907,827) | (42,776,686) |
| Exchange rate effect | (540) | (10,426) | (74,734) | - | (85,700) |
| Assets available for sale | (14,022) | (358,026) | (166,961) | - | (539,009) |
| Transfers | 9,572,487 | 87,933,501 | 10,920,369 | (113,223,401) | (4,797,044) |
| Closing balance as at 30 September 2020 | 1,356,147,842 | 1,711,810,520 | 266,368,310 | 36,387,511 | 3,370,714,183 |
| Accumulated depreciation and impairment losses | |||||
| Opening balance as at 1 January 2020 | 431,417,270 | 977,594,714 | 188,271,095 | 177,319 | 1,597,460,398 |
| Depreciation of the period | 17,364,780 | 89,034,665 | 16,720,421 | - | 123,119,866 |
| Impairment losses of the period | 706,844 | 3,202,740 | 26,348 | - | 3,935,932 |
| Disposals | (572,696) | (23,856,864) | (7,047,125) | - | (31,476,685) |
| Exchange rate effect | (177) | (6,334) | (51,933) | - | (58,444) |
| Depreciation of assets available for sale | - | (266,669) | (134,502) | - | (401,171) |
| Transfers | (82,476) | (732,943) | (95,405) | - | (910,824) |
| Closing balance as at 30 September 2020 | 448,833,545 | 1,044,969,309 | 197,688,899 | 177,319 | 1,691,669,072 |
| Carrying amount as at 30 September 2020 | 907,314,297 | 666,841,211 | 68,679,411 | 36,210,192 | 1,679,045,111 |
The investment includes the acquisition of assets of approximately 122 million euro (152 million euro in 2019), associated with the opening and remodelling of stores of Sonae retail operating segments.
During the period ended at 30 September 2020, a sale and leaseback transaction was accounted by the Group. The accounting values of the disposed assets, approximately, 34 million euro, corresponds to 6 real estate food retail assets located in Portugal. These operations resulted in a cash inflow of 51.4 million euro and generated a net capital gain of approximately, 3.4 million euro (Note 17).
The lease agreements for the assets in question, were considered as operating leases, taking into account the indicators traditionally used to determine the nature of the lease agreements as defined in IFRS 16. These assets have an initial period of 20 years, and the lease term can be extended, with market conditions, by four additional periods of 10 years, and it was considered by the Board of Directors that only the initial which is less than the remaining useful life of the assets subject to the transaction. It was also considered that there is no type of obligation to repurchase the assets subject to leasing, and the Group's current call options are exercisable based on market prices, as well as the present value of the minimum lease payments location.
During the nine months period ended 30 September 2020, the movement occurred in intangible assets and in the corresponding accumulated amortisation and impairment losses, was as follows:
| Patents and other |
Other intangible |
Intangible assets |
Total intangible |
||
|---|---|---|---|---|---|
| similar rights | Software | assets | in progress | assets | |
| Gross assets: | |||||
| Opening balance as at 1 January 2020 | 241,856,153 | 466,224,251 | 77,751,740 | 32,889,599 | 818,721,743 |
| Investment | 13,905 | 1,281,138 | 76,240 | 30,472,289 | 31,843,572 |
| Disposals | (796,480) | (4,401,005) | - | (302,800) | (5,500,285) |
| Exchange rate effect | (95,689) | (7,067) | (1,154) | (705) | (104,615) |
| Assets available for sale | (313,954) | (919,434) | - | (93,494) | (1,326,882) |
| Transfers | 66,729 | 27,258,602 | 4,697 | (27,375,857) | (45,829) |
| Closing balance as at 30 September 2020 | 240,730,664 | 489,436,485 | 77,831,523 | 35,589,032 | 843,587,704 |
| Accumulated depreciation and impairment losses | |||||
| Opening balance as at 1 January 2020 | 50,033,645 | 323,803,172 | 43,217,545 | - | 417,054,362 |
| Depreciation of the period | 1,872,677 | 30,516,814 | 3,726,704 | - | 36,116,195 |
| Impairment losses of the period | 291,667 | 290,625 | - | - | 582,292 |
| Disposals | (787,664) | (3,925,317) | - | - | (4,712,981) |
| Exchange rate effect | (95,689) | (4,255) | (1,154) | - | (101,098) |
| Depreciation of assets available for sale | (303,407) | (594,549) | - | - | (897,956) |
| Transfers | (49,094) | 9,763 | (3,203) | - | (42,534) |
| Closing balance as at 30 September 2020 | 50,962,135 | 350,096,253 | 46,939,892 | - | 447,998,280 |
| Carrying amount as at 30 September 2020 | 189,768,529 | 139,340,232 | 30,891,631 | 35,589,032 | 395,589,424 |
As at 30 September 2020 the Investment related to intangible assets in progress includes 30.5 million euro related to IT projects and development software. Within that amount it is included 11.2 million euro of capitalizations of personnel costs related to own work.
During the period of nine months ended on 30 September 2020, the detail and the movement in the value of the rights of use, as well as in the respective depreciations, was as follows:
| Land and Buildings | Vehicles | Others tangible assets |
Total tangible assets |
|
|---|---|---|---|---|
| Cost | ||||
| Opening balance as at 1 January 2020 | 1,435,043,433 | 99,076,538 | 1,072,141 | 1,535,192,112 |
| Additions | 74,783,660 | 5,138,125 | 1,431,254 | 81,353,039 |
| Effect of foreign currency exchange differences | (156,520) | (11,615) | (3,019) | (171,154) |
| Write-offs and decreases | (21,004,351) | (5,608,470) | 40,207 | (26,572,614) |
| Closing balance as at 30 September 2020 | 1,488,666,222 | 98,594,578 | 2,540,583 | 1,589,801,383 |
| Accumulated depreciation and impairment | ||||
| Opening balance as at 1 January 2020 | 441,004,350 | 33,252,081 | 744,431 | 475,000,862 |
| Depreciation of the period | 76,715,503 | 17,589,320 | 402,230 | 94,707,053 |
| Effect of foreign currency exchange differences | (114,370) | (8,740) | (1,006) | (124,116) |
| Write-offs and tranfers | (16,307,772) | (3,933,068) | 126,168 | (20,114,672) |
| Closing balance as at 30 September 2020 | 501,297,711 | 46,899,593 | 1,271,823 | 549,469,127 |
| Carrying amount as at 30 September 2020 | 987,368,511 | 51,694,985 | 1,268,760 | 1,040,332,256 |
Liabilities related to rights of use are recorded under non-current and current lease liabilities of 1.087 million euro and 107 million euro respectively (1.088 million euro and 103 million euro at 31 December 2019).
In the consolidated income statement, 94.7 million euro were recognised for depreciation of the period (90.9 million euro in 30 September 2019) and 55.2 million of euro of interest relating to the adjusted debt (53.7 million in 30 September 2019).
The value of investments in joint ventures and associates can be analysed as follows:
| Investments in joint ventures and associates | 30 Sep 2020 | 31 Dec 2019 |
|---|---|---|
| Investments in joint ventures | 806,052,295 | 976,280,761 |
| Investments in associates | 708,061,072 | 631,300,615 |
| Total | 1,514,113,367 | 1,607,581,376 |
The detail per company of investments in joint ventures is as follows:
| COMPANY | 30 Sep 2020 | 31 Dec 2019 |
|---|---|---|
| Sonae MC | ||
| Sohi Meat Solutions - Distribuição de Carnes, SA | 3,931,415 | 3,356,985 |
| Maremor Beauty & Fragances, S.L. | 124,819 | 120,649 |
| Sonae Sierra | ||
| Arrábidashopping- Centro Comercial, S.A. | 26,978,863 | 29,991,113 |
| 1) DOC Malaga Holdings S.L | - | 2,070,074 |
| Gaiashopping I- Centro Comercial, S.A. | 28,271,889 | 35,358,528 |
| Madeirashopping- Centro Comercial, S.A. | 15,702,843 | 15,670,288 |
| 1) Norte Shopping Retail and Leisure Centre B.V. | - | 32,206,931 |
| Pantheon Plaza B.V. | 4,047,045 | 4,994,201 |
| Park Avenue Development of Shopping Centres S.A. | (448,871) | (461,277) |
| Parque Atlântico Shopping - Centro Comercial, S.A. | 15,681,494 | 17,754,571 |
| Proyecto Cúcuta S.A.S. | 4,432,149 | 8,467,686 |
| Pud Srl | 5,202,060 | 5,695,813 |
| SC Aegean B.V. | 4,884,464 | 4,907,766 |
| 1) Shopping Centre Colombo Holding B.V. | - | 63,277,363 |
| Sierra Central S.A.S. | 49,404 | 57,222 |
| Sierra Balmain Asset Management sp. zo.o. | (233,456) | 1,708,766 |
| Sierra LM, SGPS, S.A. | 619,104 | 774,000 |
| 1) VdG Holding BV | - | 28,429,747 |
| Via Catarina- Centro Comercial, S.A. | 10,015,283 | 10,043,274 |
| L.C. Malheiro II, SGPS, SA | 2,097,775 | 1,818,083 |
| 2) North Tower B.V. |
2,649,873 | - |
| 1) Goodwill related to assets available for sale that will be recognized as associates |
- | 38,550,000 |
| NOS | ||
| ZOPT, SGPS, SA (consolidated) | 658,660,287 | 642,224,343 |
| Sonae IM | ||
| Unipress - Centro Gráfico, Lda | 562,891 | 604,053 |
| Sonae FS | ||
| MDS SGPS, S.A. (consolidated) | 19,844,402 | 25,936,780 |
| Sonae SGPS | ||
| Mktplace- Comércio Eletronico, SA | 2,978,562 | 2,723,802 |
| Investments in joint ventures | 806,052,295 | 976,280,761 |
1) Joint Venture "Sierra Prime" resulting from the dilution of the percentage of Sierra BV (Note 5);
2) Joint venture constituted in the period.
The value on the income statement related to Zopt results from net income of NOS, the net income of Zopt and the impact on results of the process of allocating the fair value to the assets and liabilities acquired by Zopt.
In this context of uncertainty regarding the level of evolution and contagion of the COVID-19 and consequently the strong economic slowdown, the business plans prepared in the year of 2019, are under review, being difficult to project the potential impact. Regarding the ZOPT's participation, it has already been negatively impacted due to the negative impacts verified in some business areas as described below.
With regard to ZOPT's financial participations in Finstar and ZAP Media (Finstar consolidated), the Board of Directors of NOS and ZOPT is certain that the patrimony seizure to Mrs. Isabel dos Santos, in the specific case of the shares held by her in Finstar and ZAP Media (where she holds 70% of the capital), does not change the control profile, in this case joint control as defined in IFRS 11, it is not expected to have relevant consequences for the operational management of companies, in addition to restrictions on the distribution of dividends in these companies.
At 4 April 2020, SONAECOM, was informed by its subsidiary ZOPT of the communication received from the Lisbon Central Criminal Instruction Court ('Court') to proceed to the preventive arrest of 26.075% of NOS' share capital, corresponding to half the shareholding in NOS held by ZOPT and, indirectly, by the companies Unitel International Holdings, BV and Kento Holding Limited , controlled by Mrs. Isabel dos Santos. Under the terms of the communication, the arrested shares (134,322,268.5 shares) are deprived of the right to vote and the right to receive dividends, which must be deposited with Caixa Geral de Depósitos, S.A. at the order of the court. The other half of ZOPT's participation in NOS' share capital, corresponding to an identical percentage of 26.075% - and which, at least in line with the criterion used by the Court, embodies the 50% held in ZOPT by SONAECOM - was not subject to arrest, nor the rights attached to it were subject to any limitation.
Although ZOPT has not been notified of the grounds for preventive arrest, based on the preliminary information they have, it is the understanding of the board of directors of ZOPT and SONAECOM that the measure of arrest imposed is illegitimate and offends several fundamental rights of ZOPT, no being legally liable to determine the deprivation of voting rights, not even to inhibit the holder of the arrested shares from continuing to exercise those rights, which deprivation we understand for this reason, be null and without any effect.
At 12 June 2020, ZOPT was notified of the order issued by the Lisbon Central Criminal Investigation Court, which authorizes it to exercise the voting right corresponding to the 26.075% of NOS share capital preventively seized under the aforementioned Court order. For this reason, the Boards of Directors of ZOPT and SONAECOM consider that the conditions of control of ZOPT over NOS are met, and the measure does not have material effects on the control of this company.
At 19 August, Sonaecom communicated the intention of the shareholders of ZOPT (Sonaecom, Unitel International Holdings, BV and Kento Holding Limited) to liquidate the company, maintaining Sonaecom as the reference shareholder of NOS. To date, the efforts to dissolve the ZOPT have not yet been carried out.
In the beginning of April, NOS announced that it had entered into an agreement with Tofane Global, SAS for the sale of the entire share capital of NOS International Carrier Services SA to iBasis, a wholly-owned subsidiary of Tofane and another, for the provision of Group companies. NOS for international voice and SMS wholesale services, which were previously provided by NOS ICS. The conclusion of this agreement was subject to non-opposition by the Competition Authority. Completion of this agreement occurred on 29 June 2020. The sale price amounts to 9.6 million euro and the receipt of 5.5 million euro will take place over 5 years.
During the period ended at 30 September 2020, resulting from the sale of NOS ICS and the respective classification of the company as a discontinued operating unit, the comparative periods, in the consolidated income statement, were restated.
The evolution in provisions during the first nine months of 2020 compared to 31 December 2019 was as follows:
At the beginning of March 2020, the parties were notified of the scheduled judicial due diligence for 17 April 2020, with a view to scheduling the acts to be carried out at the final hearing, establishing the number of sessions and their likely duration, as well as the designation of the respective dates and, also, attempted conciliation. The diligence was, meanwhile, rescheduled. It is the understanding of the Board of Directors, corroborated by the attorneys accompanying the process, that it is, in formal and substantive terms, likely that NOS SA will be able to win the lawsuit, due to MEO already having been convicted for the same offences by ANACOM, however, it is not possible to determine the outcome of the action.
The process has already been redistributed and the prior hearing took place on 10 September 2020. NOS is still awaiting for the presentation of proof requirements and the scheduling of the final hearing. The Board of Directors is convinced that the arguments used by the author are not justified, which is why it is believed that the outcome of the proceeding should not result in significant impacts for the Group's financial statements.
At 30 September 2020, accounts receivable and accounts payable include 37,139,253 euro and 43,475,093 euro, respectively, resulting from a dispute between the subsidiary NOS SA and, essentially, the operator MEO – Serviços de Comunicação e Multimédia, S.A. (previously named TMN – Telecomunicações Móveis Nacionais, S.A.), in relation to the non-definition of interconnection tariffs of 2001. In what concerns to that dispute with MEO, the result was totally favourable to NOS S.A., having already become final.
In 2020, due to the foreseeable sharp reduction in the collection of these penalties, as a direct consequence of the slowdown in the Portuguese economy due to the measures adopted to combat the new coronavirus COVID-19, NOS recognised expected credits losses to all penalties billed to customers and not provisioned, in the amount of approximately 7.0 million euro.
At 30 September 2020, the amounts billed and to be received from these indemnities amount to 109.8 million euro.
At 14 April 2020, NOS Comunicações, SA and Cellnex Telecom, SA entered into an agreement whose purpose is to transfer to Cellnex the shares representing the entire share capital of NOS Towering, SA, encompassing the disposal of approximately 2,000 sites (towers and rooftops).
On the same date, the parties entered into a long-term agreement to whereby Cellnex will provide the NOS Group with active network hosting over the passive infrastructure acquired, for a period of 15 years, automatically renewed for equal periods. In addition, this agreement foresees a perimeter increase of up to 400 additional sites over the next 6 years.
The potential value of the agreements to be reached over a 6-year period is 600 million euro, being dependent on the sale of additional sites and configuration alteration of the sites. The expected impact on pro forma operating Cash Flow for NOS in first year is approximately 22 million euro.
This agreement will enable NOS to continuously optimize and expand its state-of-the-art mobile network, while reinforcing its ability to invest in the long-term value of the company. By joining forces with Cellnex in Portugal, through this strategic partnership, NOS ensures the supply of current and future needs of its passive mobile infrastructure. In addition to this agreement, NOS will continue to pursue other investment efficiency opportunities.
At 30 September 2020, the operation was materialized with Cellnex payment to NOS of 398.6 million euro.
Prudent management of liquidity risk implies maintaining an adequate level of cash and cash equivalents to meet the responsibilities assumed, associated with the negotiation of credit lines with financial institutions.
On 30 September 2020, the average maturity of NOS group financing is 2.9 years, and no covenants are expected to be breached as a result of the projected reduction in results for this year.
The credit risk at NOS is essentially related to credit from services provided to customers, monitored on a regular business basis and for which expected credit losses are calculated considering: i) the customer's risk profile; ii) the average period of receipt; iii) the customer's financial condition; and iv) future prospects for collection.
In the nine months ending 30 September 2020 as a direct consequence of the slowdown in the Portuguese economy resulting from the measures adopted to combat the new coronavirus COVID-19, the NOS recognised extraordinary expected credit losses of 27.9 million euro, incorporating in the projection model for future collections the new projections released by the Banco de Portugal for GDP growth and unemployment rate for the next 3 years.
In terms of projecting future impacts on the NOS, these will depend on the extent, including temporal, of the spread of the virus and its containment measures, and it is difficult to predict the scale of the impact, knowing however that it will occur in the areas identified above. The capital structure of NOS is within the threshold of 2x Net Financial Debt / EBITDA After Lease Payments (EBITDA - Leasings Payments (Capital and Interest)), so it is the understanding of the Board of Directors of NOS that the company will overcome the negative impacts caused by this crisis, without being in question the continuity of the business, a conviction demonstrated by the maintenance of the shareholder remuneration policy with the payment of dividends on July 3, 2020.
The detail per company of investments in associates is as follows:
| COMPANY | 30 Sep 2020 | 31 Dec 2019 |
|---|---|---|
| Sonae MC | ||
| Sempre a Postos - Produtos Alimentares e Utilidades, Lda | 556,066 | 960,282 |
| Sonae Sierra | ||
| 3shoppings - Holding, SGPS, S.A. | 12,254,113 | 12,749,317 |
| Aliansce Sonae Shopping Centers, S.A. | 77,081,041 | 118,535,408 |
| Area Sur Shopping, S.L. | 6,873,539 | 7,469,872 |
| Fundo Investimento Imobiliário Parque Dom Pedro Shopping Center | 9,767,243 | 15,784,000 |
| Fundo Investimento Imobiliário Shop. Parque Dom Pedro ("FIISHPDP") | 94,951,841 | 153,438,522 |
| Le Terrazze - Shopping Centre 1 Srl | 6,945,845 | 7,196,941 |
| Iberia Shop.C. Venture Coöperatief U.A. ("Iberia Coop") | 15,333,543 | 16,112,511 |
| Sierra Portugal Real Estate ("SPF") | 20,879,729 | 21,655,244 |
| Olimpo Real Estate SOCIMI, S.A. | 7,803,750 | 7,932,798 |
| Olimpo Real Estate Portugal, SIGI, S.A. | 2,527,452 | 2,528,224 |
| Serra Shopping- Centro Comercial, S.A. | 1,040,311 | 1,050,037 |
| Sierra Cevital Shopping Center, Spa | - | 38,543 |
| Sierra Portugal Feeder 1 | 2,192,876 | 3,491,812 |
| Trivium Real Estate Socimi, S.A. | 30,974,448 | 30,707,669 |
| Zenata Commercial Project | 1,993,451 | 2,041,966 |
| 1) Mercado Urbano – Gestão Imobiliária, S.A. | 1,208,664 | - |
| 2) Sierra European Retail Real Estate Assets Holdings, BV ("Sierra BV") | 227,577,237 | - |
| Sonae SGPS | ||
| Iberian Sports Retail Group (ISRG) | 78,187,525 | 81,540,597 |
| Sonae IM | ||
| Armilar Venture Partners - Sociedade de Capital de Risco, SA (Armilar) | 1 | 1 |
| Fundo de Capital de Risco Armilar Venture Partners II (Armilar II) | 57,721,779 | 94,176,915 |
| Fundo de Capital de Risco Armilar Venture Partners III (Armilar III) | 32,398,569 | 32,707,854 |
| Fundo de Capital de Risco Espirito Santo Ventures Inovação e Internacionalização (AVP I+I) |
16,209,967 | 17,056,948 |
| Secucloud GMBH | 3,545,859 | 3,731,809 |
| 3) Probe.ly - Soluções de Cibersegurança, Lda | - | 342,497 |
| Alfaros SARL | 10,379 | 10,379 |
| Suricate Solutions | 25,843 | 25,843 |
| Others | 1 | 14,626 |
| Investment in associates companies | 708,061,072 | 631,300,615 |
2) Joint venture "Sierra Prime" resulting from the dilution of percentage of Sierra BV (Note 5);
3) During the period ended September 30, 2020, Sonae IM no longer has significant influence on Probe.ly, and the company is now valued at fair value through other comprehensive income.
In the period ended September 30, 2020, the variation in the proportion of the equity capital of the Armilar II Fund, in addition to the variation resulting from the appropriation of the fund's results, is essentially related to the receipt of the gross amount of 21 million euro, the amortization of units held in this fund. Despite this impact, this remission represents a 37% increase in the fund's valuation, compared to the 2018 distribution, and increases the accumulated return to 2.3x the capital invested in Armilar funds.
During the period ended at 30 September 2020, movements in investments in joint ventures and associates are as follows:
| 30 Sep 2020 | |||||
|---|---|---|---|---|---|
| Proportion on equity |
Goodwill | Total investment |
|||
| Investments in joint ventures | |||||
| Balance as at 1 January | 409,263,098 | 567,017,663 | 976,280,761 | ||
| Transfer to Associates | (125,984,114) | (38,550,000) | (164,534,114) | ||
| Increases during the period | 5,258,460 | - | 5,258,460 | ||
| Equity method: | |||||
| Effect in gains or losses in joint controlled | 8,040,720 | - | 8,040,720 | ||
| Distributed dividends | (9,313,277) | - | (9,313,277) | ||
| Effect in equity capital and non-controlling interests | (9,680,255) | - | (9,680,255) | ||
| 277,584,632 | 528,467,663 | 806,052,295 |
| 30 Sep 2020 | |||||
|---|---|---|---|---|---|
| Proportion on equity |
Goodwill | Total investment |
|||
| Investments in associates companies | |||||
| Initial balance as at 1 January | 610,439,640 | 20,860,975 | 631,300,615 | ||
| Transfer from joint ventures | 125,984,114 | 38,550,000 | 164,534,114 | ||
| Change of method by percentage dilution (Note 5) | 69,591,682 | - | 69,591,682 | ||
| Acquisitions during the period | 1,256,971 | - | 1,256,971 | ||
| Capital reduction in associated companies | (2,132,696) | - | (2,132,696) | ||
| Period disposals | (42,050) | - | (42,050) | ||
| Equity method: | |||||
| Effect in gains or losses in associated companies | (36,699,852) | - | (36,699,852) | ||
| Distributed dividends | (30,476,663) | - | (30,476,663) | ||
| Effect in equity capital and non-controlling interests |
(88,909,542) | - | (88,909,542) | ||
| Other effects in net income | 218,117 | - | 218,117 | ||
| Others | (579,624) | - | (579,624) | ||
| 648,650,097 | 59,410,975 | 708,061,072 |
The effect on equity and non-controlled interests results fundamentally from the exchange rate conversion effect of companies with a different functional currency than the euro.
As at 30 September 2020, the value of transfers from joint ventures to associates and change of method by dilution of percentage is related to the operation in Sonae Sierra that diluted its participation in the subsidiary Sierra B.V. from 50.1% to 25.1% (Note 5).
Dividend distributions related to Investments in Joint Ventures refer to Sonae Sierra's joint ventures and associates.
Other non-current investments, their head offices and book value as at 30 September 2020 and 31 December 2019, are as follows:
| Statment of financial position | |||
|---|---|---|---|
| Company | Head Office | 30 Sep 2020 | 31 Dec 2019 |
| Sonae MC | |||
| Dispar - Distrib. de Participações, SGPS, SA | Lisbon | 9,976 | 9,976 |
| Insco - Insular de Hipermerc., SA | Ponta Delgada | 2,672,520 | 2,672,520 |
| Sportessence - Sport Retail, SA | Ponta Delgada | 2,672,520 | 2,672,520 |
| Other financial assets | 17,132,498 | 15,526,748 | |
| Financial assets at fair value through profit or loss | 22,487,514 | 20,881,764 | |
| Sonae | |||
| NOS SGPS, SA | 115,140,000 | - | |
| Sonae IM | |||
| Arctic Wolf Networks, Inc | Delaware | 40,963,595 | 12,101,193 |
| Ometria, Ltd. | London | 8,095,985 | 8,095,985 |
| Sixgill Ltd | Israel | 5,415,162 | 5,415,162 |
| CelllWise | Singapore | 8,283,002 | 5,357,593 |
| ViSenze | Singapore | 3,459,140 | 5,260,238 |
| CB4 | Israel | 4,368,720 | 4,368,720 |
| Case on IT | Madrid | 2,930,744 | 2,930,744 |
| Daisy Intelligence | Canadá | 2,406,623 | 2,406,623 |
| Reblaze | St. Louis | 2,352,438 | 2,352,438 |
| Nextail Labs, SL | Madrid | 2,478,620 | 2,300,000 |
| ciValue | Yokneam (Israel) | 1,970,097 | 1,970,097 |
| StyleSage, Inc. | Delaware | 1,848,578 | 1,848,578 |
| Jscrambler | Porto | 1,550,000 | 1,250,000 |
| Whitefantasy | Évora | 640,804 | 640,804 |
| Fyde | California | - | 443,687 |
| Sales Layer | Valência | 2,500,358 | - |
| Deepfence | California | 2,085,593 | - |
| Iriu sRisk | Saragoça | 1,416,514 | 299,802 |
| Replai | Porto | 600,000 | - |
| Other financial assets | 2,436,259 | 1,325,358 | |
| Financial assets at fair value through other comprehensive income | 210,942,232 | 58,367,022 | |
| 233,429,746 | 79,248,786 |
In August 2020, Sonae SGPS signed a contract for the purchase and sale of 38,000,000 shares representing 7.38% of the share capital and voting rights of the NOS, at market price. On 30 September 2020, this holding was valued at its current price, the difference in value being recorded under "Other comprehensive income".
In October 2020, ArcticWolf announced a further round of US\$200 million of E-series funding to a valuation of 1.3 billion dollars. Sonae IM has been participating in all rounds, reinforcing its participation, the latter being led by Viking Global Investors and with the participation of DTCP, among other investors. This new round makes ArcticWolf the first unicorn in the portfolio directly invested by Sonae IM and the second in the total portfolio, alongside Outsystems, indirectly invested through Armilar funds.
As at 30 September 2020, "Other financial assets" includes 9,780,775 euro (9,823,569 euro as at 31 December 2019) of "Financial assets at fair value through profit or loss", relating to amounts deposited in an Escrow Account and invested in units in a highly rated monetary investment fund, which arise as guarantees for contractual liabilities assumed on the sale of the Brazil Retail segment and for which provisions have been set up in the applicable situations.
At 30 September 2020, the movements in "Other Investments" made up as follows:
| September 2020 | |||
|---|---|---|---|
| Non current | Current | ||
| Other investments: | |||
| Fair value (net of impairment losses) as at 1 January | 79,248,786 | - | |
| Acquisitions in the period | 145,962,457 | - | |
| Disposals in the period | (378,523) | - | |
| Increase/(decrease) in fair value through other comprehensive income | 8,612,907 | - | |
| Transfers to available for sale | (15,881) | - | |
| Fair value (net of impairment losses) as at 30 September | 233,429,746 | - | |
| Derivative financial instruments | |||
| Fair value as at 1 January | - | 588,747 | |
| Increase/(decrease) in fair value | - | 173,408 | |
| Fair value as at 30 September | - | 762,155 | |
| Financial instruments others | |||
| Fair value as at 1 January | - | 76,466 | |
| Increase/(decrease) in fair value | - | (38,286) | |
| Fair value as at 30 September | - | 38,180 | |
| 233,429,746 | 800,335 |
Deferred tax assets and liabilities as at 30 September 2020 and 31 December 2019 may be described as follows considering the different natures of temporary differences:
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 30 Sep 2020 | 31 Dec 2019 | 30 Sep 2020 | 31 Dec 2019 | |
| Difference between fair value and acquisition cost | 4,468,688 | 4,468,688 | 91,423,095 | 102,130,077 |
| Temporary differences on property, plant and equipment and intangible assets |
1,029,689 | 1,208,423 | 81,700,169 | 78,169,489 |
| Temporary difference of negative goodwill and equity method | - | - | 22,811,524 | 21,804,204 |
| Provisions and impairment losses not accepted for tax purposes | 15,578,237 | 15,808,902 | - | - |
| Valuation of hedging derivatives | 440,974 | 107,345 | 53,351 | 67,639 |
| Amortisation of Goodwill for tax purposes in Spain | - | - | 32,282,473 | 27,919,963 |
| Revaluation of tangible assets | - | - | 613,193 | 684,588 |
| Tax losses carried forward | 34,033,249 | 31,966,592 | - | - |
| Tax Benefits | 5,838,372 | 6,732,857 | - | - |
| Rights of use | 266,790,032 | 267,892,456 | 236,787,763 | 240,187,489 |
| Others | 3,601,144 | 3,200,113 | 1,059,282 | 1,326,045 |
| 331,780,385 | 331,385,376 | 466,730,850 | 472,289,494 |
As at 30 September 2020 and 31 December 2019, the tax rate to be used in Portuguese companies, for the calculation of the deferred tax assets relating to tax losses is 21%. The tax rate to be used to calculate deferred taxes in temporary differences in Portuguese companies is 22.5% increased by the state surcharge in companies in which the expected reversal of those deferred taxes will occur when those rates will be applicable. For companies or branches located in other countries, rates applicable in each jurisdiction were used.
During the period ended 30 September 2020, the movement in non-controlling interests are detailed as follows:
| 30 September 2020 | |||||||
|---|---|---|---|---|---|---|---|
| Sonae MC | Worten | Sonae Fashion | Sonae IM - Sonaecom, SGPS, SA |
Sonae Sierra | Others | Total | |
| Opening balance as at 1 January 2020 | 54,885,160 | 478,103 | 28,838,691 | 109,174,875 | 782,072,434 | (734,921) | 974,714,342 |
| Distributed dividends | (5,231,349) | - | - | (2,721,573) | (74,522,088) | - | (82,475,010) |
| Change in percentage of subsidiaries | - | - | (21,709,417) | - | - | - | (21,709,417) |
| Change in currency translation reserve | 7,258 | - | - | 71,285 | 1,841,637 | - | 1,920,180 |
| Change in fair value of assets available for sale | - | - | - | 2,356,387 | - | - | 2,356,387 |
| Participation in other comprehensive income (net of tax) related to joint ventures and associated companies included in consolidation by the equity method |
- | - | - | (496,852) | (27,191,996) | - | (27,688,848) |
| Capital decrease | (2,000,000) | - | - | - | (25,221,946) | - | (27,221,946) |
| Loss of control of subsidiaries (Note 5) | - | - | - | - | (356,173,784) | - | (356,173,784) |
| Changes in hedging reserves | 83,593 | - | - | - | 75,939 | - | 159,532 |
| Others | (474,491) | - | 180,877 | 301,300 | (187,669) | (16) | (179,998) |
| Profit for the period attributable to non-controlling interests | 3,826,724 | (374,584) | (7,645,050) | (257,403) | (7,404,294) | (201,111) | (12,055,718) |
| Closing balance as at 30 September | 51,096,895 | 103,519 | (334,899) | 108,428,019 | 293,288,233 | (936,048) | 451,645,719 |
The item "Percentage change in subsidiaries" refers to the completion of the acquisition of the remaining 50% of Salsa's share capital, thus the Group now owns 100% of that subsidiary.
As at 30 September 2020 and 31 December 2019, loans are made up as follows:
| 30 Sep 2020 | 31 Dec 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Outstanding amount | Outstanding amount | ||||||
| Current | Non Current | Current | Non Current | ||||
| Bank loans | |||||||
| Sonae, SGPS, SA - commercial paper | 119,500,000 | 440,000,000 | 143,350,000 | 285,000,000 | |||
| Sonae SGPS, SA 2016/2023 | 10,000,000 | 40,000,000 | 10,000,000 | 40,000,000 | |||
| Sonae SGPS, SA 2020/2027 | - | 30,000,000 | - | - | |||
| Sonae MC, SGPS,SA - commercial paper | - | 165,000,000 | 13,500,000 | 266,000,000 | |||
| Sonae MC affiliated /2014/2023 | - | 50,000,000 | - | 50,000,000 | |||
| Sonae MC affiliated /2015/2023 | - | 20,000,000 | - | 20,000,000 | |||
| Sonae MC affiliated /2017/2025 | 3,333,333 | 13,333,333 | 3,333,333 | 16,666,667 | |||
| Sonae MC /2018/2031 | - | 55,000,000 | - | 55,000,000 | |||
| Sonae MC affiliated /2020/2025 | - | 55,000,000 | - | - | |||
| Sonae Holding affiliated /2014/2021 | - | 20,000,000 | - | 20,000,000 | |||
| Sonae Holding affiliated /2019/2023 | - | 50,000,000 | - | 50,000,000 | |||
| Sonae Holding affiliated - commercial paper | 5,000,000 | 23,000,000 | 5,000,000 | 27,500,000 | |||
| Sonae Sierra SGPS, SA - commercial paper | 10,000,000 | 15,000,000 | - | 25,000,000 | |||
| Sonae Sierra / 2018/2022 | - | 10,000,000 | - | 10,000,000 | |||
| Sonae Sierra affiliated /2016/2021 | 41,300,000 | - | - | 41,300,000 | |||
| Sonae Sierra affiliated /2015/2023 | 5,200,000 | 114,400,000 | 5,200,000 | 118,300,000 | |||
| Others | 7,993,032 | 6,834,505 | 8,776,056 | 6,566,657 | |||
| 202,326,365 | 1,107,567,838 | 189,159,389 | 1,031,333,324 | ||||
| Bank overdrafts | 3,291,926 | - | 2,698,070 | - | |||
| Up-front fees beard with the issuance of borrowings | (638,477) | (1,752,104) | (407,610) | (1,226,479) | |||
| Bank loans | 204,979,814 | 1,105,815,734 | 191,449,849 | 1,030,106,845 | |||
| Bonds | |||||||
| 1) | Bonds Sonae SGPS/ 2015/2022 | - | - | - | 100,000,000 | ||
| 1) | Bonds Sonae SGPS/ 2016/2023 | - | - | - | 60,000,000 | ||
| Bonds Sonae SGPS/ 2019/2026 | - | 50,000,000 | - | 50,000,000 | |||
| Bonds Sonae SGPS/ 2020/2027 | - | 160,000,000 | - | - | |||
| 2) and 3) Bonds Sonae MC / December 2015/2024 | - | 50,000,000 | - | 50,000,000 | |||
| 2) | Bonds Sonae MC / May 2015/2022 | - | 75,000,000 | - | 75,000,000 | ||
| 2) and 3) Bonds Sonae MC / December 2019/2024 | - | 30,000,000 | - | 30,000,000 | |||
| 1) and 2) Bonds Sonae MC / June 2016/2021 | - | - | - | 95,000,000 | |||
| 2) | Bonds Sonae MC / September 2016/2021 | 3,000,000 | - | 3,000,000 | 3,000,000 | ||
| 2) | Bonds Sonae MC / April 2020/2027 | - | 95,000,000 | - | - | ||
| Bonds Sonae MC / July 2020/2025 | - | 50,000,000 | - | - | |||
| Bonds Sonae MC / July 2020/2025 | - | 22,500,000 | - | - | |||
| Bonds Sonae Sierra / 2018/2025 | 10,000,000 | 40,000,000 | - | 50,000,000 | |||
| Bonds Sonae Sierra / 2018/2023 | - | 25,000,000 | - | 25,000,000 | |||
| Bonds Sonae Sierra / 2018/2023 | - | 25,000,000 | - | 25,000,000 | |||
| Up-front fees beard with the issuance of borrowings | (3,620) | (4,772,527) | (153,665) | (2,670,667) | |||
| Bonds | 12,996,380 | 617,727,473 | 2,846,335 | 560,329,333 | |||
| Other loans | 555,333 | 1,795,221 | 908,663 | 1,706,802 | |||
| Derivates | 3,010,709 | - | 773,784 | - | |||
| Derivative instruments (Note 26) Other loans |
3,566,041 | 1,795,221 | 1,682,447 | 1,706,802 | |||
| Obligations under finance leases | 164,332 | 112,757 | 289,839 | 164,472 | |||
| 221,706,568 | 1,725,451,186 | 196,268,470 | 1,592,307,452 |
It is estimated that the book value of all loans does not differ significantly from its fair value, determined based on discounted cash flows methodology.
The interest rate at 30 September 2020 on bond loans and bank loans averaged approximately 1.14% (1.30% at 31 December 2019). Most of the bond loans and variable-rate bank loans are indexed to Euribor.
The derivatives are recorded at fair value.
| 30 Sep 2020 | 31 Dec 2019 | |
|---|---|---|
| N+1 a) | 219,337,955 | 196,055,960 |
| N+2 | 313,946,227 | 378,265,906 |
| N+3 | 421,452,618 | 350,293,255 |
| N+4 | 362,582,416 | 431,409,483 |
| N+5 | 369,718,650 | 239,721,238 |
| After N+5 | 264,275,906 | 196,514,715 |
| 1,951,313,772 | 1,792,260,558 |
The loans face value, maturities and interests are as follows (including obligations under financial leases):
a) Includes amounts used from commercial paper programs when classified as current.
The maturities presented above were estimated according to the contractual clauses of the loans and considering Sonae's best expectation as to its amortization date.
As at 30 September 2020, Sonae has, as detailed below, cash and bank balance equivalents in the amount of 686 million euro (610 million euro as at 31 December 2019) and available credit lines as follows:
| 30 Sep 2020 | 31 Dec 2019 | ||||
|---|---|---|---|---|---|
| Commitments of less than one year |
Commitments of more than one year |
Commitments of less than one year |
Commitments of more than one year |
||
| Unused credit facilities | |||||
| Sonae MC | 94,000,000 | 265,000,000 | 124,000,000 | 284,000,000 | |
| Sonae Sierra | 54,969,346 | - | 54,719,947 | - | |
| Holding & Others | 77,211,309 | 119,239,478 | 55,777,214 | 67,500,000 | |
| 226,180,655 | 384,239,478 | 234,497,161 | 351,500,000 | ||
| Agreed credit facilities | |||||
| Sonae MC | 94,000,000 | 430,000,000 | 129,000,000 | 550,000,000 | |
| Sonae Sierra | 54,969,346 | - | 54,719,947 | 25,000,000 | |
| Holding & Others | 157,000,000 | 582,650,000 | 207,750,000 | 380,000,000 | |
| 305,969,346 | 1,012,650,000 | 391,469,947 | 955,000,000 |
Movements in "Provisions and impairment losses" during the period ended 30 September 2020 are as follows:
| Caption | Balance as at 01 Jan 2020 |
Increase | Decrease | Transfer to held for sale |
Balance as at 30 Sep 2020 |
|---|---|---|---|---|---|
| Accumulated impairment losses on investments | 4,501,208 | 19,206 | (150,040) | - | 4,370,374 |
| Impairment losses on property, plant and equipment | 114,081,043 | 3,945,945 | (3,310,396) | (166,738) | 114,549,854 |
| Impairment losses on intangible assets | 30,008,630 | 582,291 | (1,150,892) | (246,909) | 29,193,120 |
| Accumulated impairment losses on other current debtors | 26,630,737 | 8,557,250 | (3,316,584) | (935,219) | 30,936,184 |
| Non - current provisions | 42,652,254 | 2,285,916 | (11,535,476) | - | 33,402,694 |
| Current provisions | 4,405,596 | 22,482,113 | (2,447,057) | (24,199) | 24,416,453 |
| 222,279,468 | 37,872,721 | (21,910,446) | (1,373,065) | 236,868,678 |
The increase in current provisions relates mainly to development projects in Sonae Sierra, which were made prudent in the context of the Covid 19 pandemic.
Impairment losses are deducted from the value of the corresponding asset.
Income or expenses related to investments for the periods ended 30 September 2020 and 2019 can be detailed as follows:
| 30 Sep 2020 | 30 Sep 2019 Restated |
|
|---|---|---|
| Dividends | 100,648 | 100,689 |
| Sierra Prime% Dilution (Note 5) Loss generated on sales of the financial contribution regarding Sonae |
20,462,064 | - |
| Sierra segment | - | (18,141,190) |
| Others | 1,694,173 | 97,685 |
| Gains / (losses) on the sale of investments in subsidiaries, joint ventures and associates |
22,156,237 | (18,043,505) |
| Others | (148,887) | (12,106) |
| Impairment of investments in subsidiaries Impairment reversal on financial investments |
- 2,885 |
(15,152) - |
| Impairment reversal/(losses) on investments | 2,885 | (15,152) |
| Total income and (expenses) related to investments | 22,110,883 | (17,970,073) |
The breakdown of other income for the periods ending 30 September 2020 and 2019 is as follows:
| 30 Sep 20 | 30 Set 19 Restated |
|
|---|---|---|
| Supplementary income | 27,175,144 | 22,726,484 |
| Prompt payment discounts obtained | 19,471,227 | 19,069,292 |
| Foreign currency exchange gains | 13,110,891 | 14,747,289 |
| Own work capitalised | 11,240,868 | 10,289,289 |
| Gains on sales of assets | 5,754,177 | 5,408,987 |
| Impairment losses reversals | 2,856,079 | 6,640,115 |
| Subsidies | 1,424,161 | 1,253,596 |
| Others | 8,073,109 | 7,191,450 |
| 89,105,656 | 87,326,502 |
As at 30 September 2020, the item "Gains on sale of assets" includes a gain of 3.4 million euro (3.2 million euro as at 30 September 2019) on the Sale & Leaseback operation.
As at 30 September 2020, "Other" includes approximately 5 million euro resulting from the application of the practical arrangements arising from the amendment to IFRS16 (Note 3).
38
| Turnover and other income | Purchases and services obtained | ||||
|---|---|---|---|---|---|
| Transactions | 30 Sep 2020 | 30 Sep 2019 Restated |
30 Sep 2020 | 30 Sep 2019 Restated |
|
| Parent Company | 207,808 | 196,204 | 360,129 | 362,904 | |
| Jointly controlled companies | 28,976,606 | 30,062,386 | 221,194,169 | 224,266,445 | |
| Associated companies | 52,385,898 | 59,923,546 | 3,924,895 | 3,214,155 | |
| Other related parties | 41,259,765 | 40,475,293 | 7,170,212 | 8,591,539 | |
| 122,830,077 | 130,657,429 | 232,649,405 | 236,435,043 | ||
| Interest income | Interest expenses | ||||
| Transactions | 30 Sep 2020 | 30 Sep 2019 Restated |
30 Sep 2020 | 30 Sep 2019 Restated |
|
| Parent Company | - | - | - | 4,633 | |
| Jointly controlled companies | 357,932 | 334,413 | 276,669 | 307,019 | |
| Associated companies | 355,307 | 1,186,427 | 3,936,888 | 3,684,542 | |
| Other related parties | 66,387 | - | 320,408 | 183,552 | |
| 779,626 | 1,520,840 | 4,533,965 | 4,179,746 | ||
| Accounts receivable | Accounts payable | ||||
| Balances | 30 Sep 2020 | 31 Dec 2019 | 30 Sep 2020 | 31 Dec 2019 | |
| Parent Company | 144,469 | 38,875 | 342,598 | 466,133 | |
| Jointly controlled companies | 9,065,133 | 7,429,858 | 81,383,032 | 80,692,278 | |
| Associated companies | 17,679,742 | 15,222,656 | 5,673,545 | 3,205,693 | |
| Other related parties | 14,501,794 | 16,061,643 | 5,257,396 | 7,768,566 | |
| 41,391,138 | 38,753,032 | 92,656,571 | 92,132,670 | ||
| Loans | |||||
| Obtained | Granted | ||||
| Balances | 30 Sep 2020 | 31 Dec 2019 | 30 Sep 2020 | 31 Dec 2019 | |
| Jointly controlled companies | - | - | 15,403,436 | 15,785,680 | |
| Associated companies | 13,915 | 287 | 10,854,201 | 19,218,261 | |
| Other related parties | - | - | 1,760,000 | 2,160,000 | |
| 13,915 | 287 | 28,017,637 | 37,163,940 |
The related parties include subsidiaries and jointly controlled companies or associated companies of Sonae Sierra SGPS, SA, ZOPT SGPS, SA, Sonae Indústria, SGPS, SA and Sonae Capital, SGPS, SA, as well as other shareholders of subsidiaries or jointly controlled companies by Sonae, and other subsidiaries of the parent company Efanor Investimentos, SGPS, SA.
Earnings per share for the periods ended 30 September 2020 and 2019 were calculated taking into consideration the following amounts:
| 30 Sep 2020 | 30 Sep 2019 Restated |
|||
|---|---|---|---|---|
| Continuing Operations |
Descontinuing Operations |
Continuing Operations |
Descontinuing Operations |
|
| Net profit | ||||
| Net profit taken into consideration to calculate basic earnings per share (consolidated profit for the period) |
(20,226,629) | (3,750,728) | 71,564,064 | 16,374,915 |
| Effect of dilutive potential shares | - | - | - | - |
| Interest related to convertible bonds (net of tax) | - | - | 3,746,214 | - |
| Net profit taken into consideration to calculate diluted earnings per share | (20,226,629) | (3,750,728) | 75,310,278 | 16,374,915 |
| Number of shares | ||||
| Weighted average number of shares used to calculate basic earnings per share | 1,910,236,308 | 1,910,236,308 | 1,903,965,803 | 1,903,965,803 |
| Effect of dilutive potential ordinary shares from convertible bonds | 128,667,482 | 128,667,482 | 128,667,482 | 128,667,482 |
| Outstanding shares related with share based payments | 10,630,179 | 10,630,179 | 10,630,179 | 10,630,179 |
| Shares related to performance bonus that can be bought at market price | (1,036,376) | (1,036,376) | (768,694) | (768,694) |
| Weighted average number of shares used to calculate diluted earnings per share | 2,048,497,593 | 2,048,497,593 | 2,042,494,770 | 2,042,494,770 |
| Earnings per share | ||||
| Basic | (0.010589) | (0.001963) | 0.037587 | 0.008600 |
| Diluted | (0.009874) | (0.001831) | 0.036872 | 0.008017 |
In the Management Report, and for the purposes of calculating financial indicators as EBIT, EBITDA and Underlying EBITDA the consolidated income statement is divided between Direct Income and Indirect Income.
The Indirect Income includes the contribution of Sonae Sierra, net of taxes that result from: (i) valuation of investment properties; (ii) gains (losses) with the sale of financial investments, joint ventures or associates; (iii) impairment losses relating to non-current assets (including Goodwill) and (iv) provisions for assets at risk. Additionally and with regard to the portfolio of Sonae, it includes: (i) impairment of real estate assets for retail, (ii) decreases in Goodwill, (iii) negative Goodwill (net of taxes) related to acquisitions in the financial year, (iv) provisions (net of tax) for possible future liabilities, and impairments related to noncore investments, businesses and discontinued assets (or to be discontinued / repositioned), (v) valuation results based on the methodology "mark-to-market" of other current investments that will be sold or traded in the near future and (vi) other irrelevant issues
The value of EBITDA, Underlying EBITDA and EBIT are calculated in the direct income component, i.e. excluding the indirect contributions.
The reconciliation between the two presentation formats for the consolidated income statement for the periods ended 30 September 2020 and 2019 can be summarized as follows:
| 30 Sep 2020 | 30 Sep 2019 Restated |
|||||
|---|---|---|---|---|---|---|
| Consolidated | Indirect Income | Direct Income | Consolidated | Indirect income | Direct income | |
| Turnover | 4,908,404,056 | - | 4,908,404,056 | 4,634,074,475 | - | 4,634,074,475 |
| Value created on investment properties | (15,819,504) | (15,819,504) | - | 6,670,995 | 6,670,995 | - |
| Investment income | - | - | - | - | - | - |
| Dividends and others adjustments | 100,648 | - | 100,648 | 100,689 | - | 100,689 |
| Others | 498,386 | - | 498,386 | (18,070,773) | - | (18,070,773) |
| Others income | - | - | - | - | - | - |
| Reversal of impairment losses | 366,271 | - | 366,271 | 457,578 | - | 457,578 |
| Reversal of provisions for warranty extensions | 2,489,808 | - | 2,489,808 | 1,568,385 | - | 1,568,385 |
| Others | 86,249,577 | - | 86,249,577 | 79,764,928 | - | 79,764,928 |
| Total income | 4,982,289,242 | (15,819,504) | 4,998,108,746 | 4,704,566,278 | 6,670,995 | 4,697,895,283 |
| Total expenses | (4,587,520,872) | 1,864,046 | (4,589,384,918) | (4,291,540,223) | - | (4,291,540,223) |
| Depreciation and amortisation | (253,885,543) | - | (253,885,543) | (246,103,441) | - | (246,103,441) |
| Impairments of inventories - Covid-19 | (33,400,000) | - | (33,400,000) | - | - | - |
| Losses on property, plant and equipment and intangible assets | (2,197,002) | - | (2,197,002) | 2,812,846 | - | 2,812,846 |
| Impairment losses and provisions | - | - | - | - | - | - |
| Provisions for warranty extensions | (379,551) | - | (379,551) | (285,821) | - | (285,821) |
| Others | (48,420,042) | (26,820,880) | (21,599,162) | (15,196,649) | - | (15,196,649) |
| Profit before financial results and results of joint ventures and associates | ||||||
| and non-recurrent items | 56,486,232 | (40,776,338) | 97,262,570 | 154,252,990 | 6,670,995 | 147,581,995 |
| Non-recurrent items | 16,703,425 | 9,123,422 | 7,580,003 | (17,097,858) | (21,930,807) | 4,832,949 |
| Financial profit/(loss) | (76,477,065) | 6,013,252 | (82,490,317) | (85,399,984) | - | (85,399,984) |
| Share of results of joint ventures and associated undertakings | - | - | - | - | - | - |
| Associates and joint ventures of Sonae Sierra | (30,945,562) | (43,100,162) | 12,154,601 | 39,796,840 | (4,832,171) | 44,629,011 |
| Armilar Venture Funds | (8,826,255) | (8,826,255) | - | (689,073) | (689,073) | - |
| ZOPT | 21,387,528 | - | 21,387,528 | 31,816,000 | - | 31,816,000 |
| Others | (7,716,727) | - | (7,716,727) | 3,305,597 | - | 3,305,597 |
| Profit before income tax | (29,388,424) | (77,566,082) | 48,177,657 | 125,984,512 | (20,781,056) | 146,765,567 |
| Income Tax | (2,893,922) | 2,617,105 | (5,511,027) | (13,252,907) | (3,370,328) | (9,882,579) |
| Profit/(Loss) from continued operations | (32,282,346) | (74,948,977) | 42,666,630 | 112,731,605 | (24,151,384) | 136,882,988 |
| Profit/(Loss) from discontinued operations | (3,750,729) | (900,000) | (2,850,729) | 18,485,189 | 21,930,807 | (3,445,618) |
| Profit/(Loss) for the period | (36,033,075) | (75,848,977) | 39,815,901 | 131,216,794 | (2,220,577) | 133,437,370 |
| Attributable to equity holders of Sonae | (23,977,357) | (71,242,998) | 47,265,641 | 87,938,979 | (4,289,301) | 92,228,280 |
| Non-controlling interests | (12,055,718) | (4,605,979) | (7,449,739) | 43,277,816 | 2,068,724 | 41,209,092 |
| "Underlying" EBITDA (b) | - | - | 405,753,821 | - | - | 404,400,164 |
| EBITDA (a) | - | - | 436,308,496 | - | - | 485,538,103 |
| EBIT (c) | - | - | 127,716,598 | - | - | 228,619,244 |
The financial statements were approved by the Board of Directors in a meeting held on 10 November 2020.
The Board of Directors,
Duarte Paulo Teixeira de Azevedo Ângelo Gabriel Ribeirinho dos Santos Paupério José Manuel Neves Adelino Margaret Lorraine Trainer Marcelo Faria de Lima Carlos António Rocha Moreira da Silva Fuencisla Clemares Philippe Cyriel Elodie Haspeslagh Maria Cláudia Teixeira de Azevedo João Pedro Magalhães da Silva Torres Dolores
This document may contain forward-looking information and statements, based on management's current expectations or beliefs. Forward-looking statements are statements that should not be regarded as historical facts.
These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, including, but not limited to, changes in regulation, industry and economic conditions; and the effects of competition. Forward-looking statements may be identified by words such as "believes," "expects," "anticipates," "projects," "intends," "should," "seeks," "estimates," "future" or similar expressions.
Although these statements reflect our current expectations, which we believe are reasonable, investors and analysts, and generally all recipients of this document, are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. You are cautioned not to put undue reliance on any forward-looking information or statements. We do not undertake any obligation to update any forward-looking information or statements.
Patrícia Vieira Pinto Head of Investor Relations [email protected] Tel.: + 351 22 010 4794
External Communication [email protected] Tel.: + 351 22 010 4745
Lugar do Espido Via Norte 4471-909 Maia Portugal Tel.: +351 22 948 7522
Sonae is listed on the Euronext Stock Exchange. Information may also be accessed on Reuters under the symbol SONP.IN and on Bloomberg under the symbol SON PL
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