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Ibersol

Earnings Release Nov 30, 2017

1932_10-q_2017-11-30_f92f1f0c-ca2b-4e1f-80d8-8d252a42de2a.pdf

Earnings Release

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IBERSOL – SGPS, SA

Publicly Listed Company

Registered office: Praça do Bom Sucesso, 105/159, 9th floor, Porto Share Capital Euros 30.000.000 Commercial Registry: Oporto under number 501669477 Fiscal number: 501669477

Consolidated Report & Accounts 9M2016 (not audited)

  • Consolidated Turnover of 332.5 million euros
  • Turnover without Eat Out Group (EOG) of 206.6 million euros Increase of 16.4% over the adjusted 9M of 2016
  • Consolidated EBITDA reached 49.8 million euros
  • Adjusted EBITDA without EOG of 34.0 million euros Ebitda increased 14.7% over the adjusted 9M of 2016
  • Consolidated net profit of 21.8 million euros
  • Consolidated net profit without EOG of 17.4 million euros Increase of 16.7% when compared to the adjusted 9M of 2016

Consolidated Management Report

Activity

Consolidated turnover for the nine months of the year amounted to EUR 332.5 million (EUR 206.6 million without Eat Out Group) compared to EUR 177.5 million in the same period of the previous year, broken down as follows:

Turnover 9M 2017 w/EOG EOG TOTAL 9M H17
euro million % Ch. 17/16 euro million % Ch. 17/16
Sales of Restaurants 204.37 16.5% 122,63 327.00 86.3%
Sales of Merchandise 1.82 19.1% 0.00 1.82 19.1%
Services Rendered 0.42 $-7.2%$ 3.28 3.70 724.0%
Net Sales & Services 206.60 16.4% 125.91 332.51 87.4%

Eliminating the effect of the Eat Out Group acquisition, restaurant sales growth in the first nine months was 16.5%. In Iberia, favorable growth has remained, especially in Portugal, where it adds the effect of the change in the VAT rate of the restaurants, on 1 July 2016, which is estimated at 2.5% on first nine months. On the other hand, in Angola, since the second quarter, there was a reversal of the growth trend.

Eat Out Group acquisition contributed to the services rendered growth, through royalty's revenues from franchisees.

All segments show a positive trend in like for like with gains in market share, especially in counters.

SALES IN RESTAURANTS 9M 2017 w/EOG
euro million % Ch. 17/16
EOG
euro million
TOTAL 9M H17 euro million % Ch. 17/16
Restaurants 59.75 9.7% 13.43 73.18 34.4%
Counters 121.20 18.0% 25.85 147.05 43.2%
Concessions & Catering 23.42 27.6% 83.35 106.77 481.8%
Total Sales 204.37 16.5% 122.63 327.00 86.3%

The "Catering and Concessions" business reached the better performance, benefited from a larger number of great catering events and the traffic increase in the concession areas, namely the airports in which they operate.

The contribution of the Eat Out Group equity restaurants sales amounts to 122.6 million, with special emphasis on the approximately 83 million sales in concessions.

During the semester, we closed 33 restaurants, 13 equities and 20 franchises.

The closures of the equity restaurants resulted from the end of the concession period of 9 resturants in Spain (6 of which at Fuerteventura Airport) and 4 due to non-renewal option of the respective contracts (Pans Plaza Norte, PH Carnaxide, Òkilo and Pasta Caffé Vila Real).

Continuing the process of evaluation of the franchisees network, 10 units of Santamaria and 9 Pans in Spain were closed.

Following the expansion plan for this year, we opened 14 new units, 10 equities and 4 franchise units.

At the end of the 3rd quarter, the total number of restaurants was 648 (501 equity and 147 franchises), as shown below:

Nº of Restaurants 2016 2017
31-Dec Openings Transfer Closings $30-Sep$
PORTUGAL 307 9 3 313
Own Stores 306 9 3 312
Pizza Hut 93 1 92
Okilo+MIIT 5 1 $\overline{4}$
Pans+Roulotte 46 46
Burger King 66 6 72
KFC 18 $\overline{2}$ 20
Pasta Caffé 10 1 9
Quiosques 8 8
Coffee Shops 30 30
Catering $\overline{7}$ 7
Concessions & Other 23 1 24
Franchise Stores $\blacksquare$ 1
SPAIN 340 5 30 315
Own Stores 188 1 0 10 179
Pizza Móvil 34 $-3$ 31
Pizza Hut $\mathbf{0}$ 3 3
Burger King 33 33
Pans 38 1 37
Ribs 9 9
FrescCo 3 3
Concessions 71 1 9 63
Franchise Stores 152 4 20 136
Pizza Móvil 16 16
Pans 67 2 9 60
Ribs 25 $\overline{2}$ 1 26
Fresco 8 8
SantaMaria 36 10 26
ANGOLA 10 10
KFC 9 9
Pizza Hut 1 1
Other Locations - Franchise Stores 10 10 10
FrescCo India $\overline{2}$ $\overline{2}$
Pans Italy 8 8
Total Own stores 504 10 0 13 501
Total Franchise stores 163 4 0 20 147
TOTAL 667 14 0 33 648

The consolidated net income of 9M amounted to 21.8 million euros, 3.8 million euros higher than the same period of 2016. According to the report for the first halt of 2016, the result for that period included 3.1 million euros of non-recurring income.

For comparative purposes with the first nine months of last year we will take as reference the adjusted accounts for the same period of 2016, in which we segregated the effect of financial compensation for the traffic losses, caused by the implementation of tolls on the ex-Scuts.

In this year the result is strongly influenced by the consolidation of Eat Out Group.

In order to better understanding the 9M 2017 indicators, we consider the two perimeters, with and without consolidation of the Eat Out Group:

2017 2016
Total 9M17 9M17
(without EOG)
Total 9M16 9M16
(adjusted)
Operating income
Sales 328.811.926 206.183.457 177.028.181 177.028.181
Rendered services 3.699.549 416.654 449.328 449.328
Other operating income 7.170.275 2.170.855 5.252.225 2.854.467
Total operating income 339.681.750 208.770.966 182.729.734 180.331.976
Custos Operacionais
Cost of sales 76.132.002 50.359.699 42 925 591 42.925.591
External supplies and services 110.685.505 62.055.999 53.317.217 53.317.217
Personnel costs 100.168.032 60.458.907 52.331.750 52.331.750
Amortisation, depreciation and impairment losses 21.042.868 12.227.826 8.355.461 8.355.461
Other operating costs 2.873.195 1.870.623 2.096.525 2.096.525
Total operating costs 310.901.602 186.973.054 159.026.544 159.026.544
Operating Income 28.780.148 21.797.912 23.703.190 21.305.432
EBITDA 49.823.016 34.025.738 32.058.651 29.660.893
Net financing cost 3.668.939 2.728.967 77.503 1.647.826
Gains (losses) in joint controlled subsidiaries - Equity method 24.126 24.126 4.405 4.405
Profit before tax 25.135.335 19.093.071 23.630.092 19.662.011
Income tax expense 3.290.877 1.721.266 5.605.163 4.771.866
Net profit 21.844.458 17.371.805 18.024.929 14.890.145

Not considering the Eat Out Group in the consolidation perimeter, net income grew 16.7%.

Gross margin corresponds to 77.1% of turnover (9M16: 75.8%), reflecting an improvement by consolidation of EOG's business, which by its typology have a higher gross margin, namely the contribution of the franchise business.

Without considering Eat Out Group contribution, the gross margin was 75.6% (9M16: 75.8%). The partial effect of the VAT rate reduction in the gross margin was absorbed by the increase in the weight of counters and catering events in total sales, characterized by lower margins and an increase in promotional aggressiveness levels.

Staff costs: increased 91.4%, as the sales evolution, representing 30.1% of turnover.

Without EOG, this increase was 15.5%, lower than the 16.5% activity increase. In the 9M17 represented 29.3% of the turnover, (9M6: 29.5%). Sales increase, the dilution of structure costs and VAT gains, compensated the effect of the increase in the minimum wage in Portugal and training costs incurred for the new units opening.

External Supplies and Services: increase of 107.6%, representing 33.3% of turnover (9M16: 30,0%). For this increase, it should be noted the incorporation of a substantial component of the franchise business and the increase of activity in concessions, characterized by higher rents. Without EOG, increase of 16.4%, representing 30.0% of turnover, similar than in the same period of 2016.

Other operating income amounted to 7.1 million euros, with a relevant contribution by Eat Out Group, corresponding to supplier contributions and an added value generated in a restaurant transfer in the amount of 0.8 million euros.

Without EOG, the decrease of around 0.7 million euros results almost entirely from the occasional consulting services rendered in the same period of the previous year.

The other operating costs amounted to around 2.9 million euros, due to costs associated with closures (0.7 million euros), impairment losses in current assets (0.3 million euros) and 1 million euros in fees and taxes.

Without EOG, decrease of 10.8% compared to the previous year.

Therefore, EBITDA amounted to 49.8 million euros, an increase of 68% over 9M16. The EBITDA without Eat Out Group, increased 4.4 million euros and amounted to 34.0 million euros, ie 16.7% over 9M16 adjusted.

Consolidated EBITDA margin stood at 15.0% of turnover and 16.5% without Eat Out Group, compared with 16.7% at the same period of the previous year (adjusted).

Consolidated EBIT margin is 8.7%of turnover, corresponding to an operating income of 28.8 million euros.

Without Eat Out Group, EBIT margin is 10.6%, lower than in the same period of 2016, corresponding to an operating income of EUR 21.8 million. Should be noted the increase of the depreciations value, which represented 5.9% of turnover (4.7% in 9M16). This increase in depreciation, results from a refurbishment and more frequent image updates and a development predominantly based on drives opening, with higher levels of investment.

Consolidated Net Financing Cost was around 3.7 million euros, around 3.6 million euros higher than 9M16, which benefited from non-recurring income of 1.6 million euros.

Average cost of loans in the first nine months of 2017, which stood at 2.5%, substantially lower than 9M16, due to the dilution of the weight of the debt in Angola, due to the financing for the acquisition of Eat Out Group.

The income tax for the period amounts to 3.3 million euros, which represents an effective rate of 24.0%. In the first nine months of the year, tax benefits were recognized at 2.7 million euros, resulting from RFAI application in the income statement of 2016.

Total Assets amounted to 440 million euros and equity stood at 172 million euros, representing 39% of assets.

CAPEX reached 20 million euros with an investment of 2.7 million euros in the new central unit production in Portugal. The remaining investments were incurred in the expansion, around 11 million euros and in the refurbishment and reconversion of some restaurants in Portugal and Spain.

Net debt at 30th September 2017 amounted to 80 million euros, 30 million euros lower than at the end of 2016.

Treasury Stock

By resolution of the General Assembly held on 26th May 2017, the share capital increased from 24,000,000 to 30,000,000 euros through the incorporation of reserves. In the process of listing the new shares, the company acquired 57 shares, at an average price of € 10.9, corresponding to the fractions resulting from the application of the attribution factor of the new shares.

At 30th September 2017, the company held 2,999,938 own shares, representing 9.9998% of the share capital, acquired by 11.179.969 euros, corresponding to an average price per share of 3.73 euros.

Risks and Uncertainties

Keeping the evolution of consumption in the Iberian, the risk of the activity is associated with the levels of quotas to be allocated in tenders for concessions exploration.

In Angola, the evolution of consumption and the devaluation of AKZ represent the main uncertainties, despite the small size of the group's business in this country. In addition, the limitations on the amount of foreign currency, available by BNA for payments abroad, significantly increased the foreign exchange risk of the operation in Angola.

In the fourth quarter sales growth is expected to continue and maintaining margins. In Portugal the sales growth in the first semester has an impact of around 7%, which will not occur in the rest of the year.

The expansion plan will result in the opening at least of 7 new restaurants in Portugal until the end of the year. In the 4th quarter and to date, the openings of 1 Burger King (Gaia) have already been completed.

As far as Eat Out Group is concerned, special attention will be given to the following phases of the Barcelona Airport tender, currently under evaluation. In November, the tender of Gran Canaria was finalized with an auction in which EOG won a lot. The tender for the Málaga airport has been published, and proposals will be presented next January. This year we will also open the unit that was awarded to us in the Madrid Airport.

In Angola, the development of business will be closely linked to the country's political and economic evolution. The outlook points to a strong possibility of a devaluation of the currency and consequently a fall in consumption.

Porto, 28 November 2017

______________________________ António Carlos Vaz Pinto de Sousa

______________________________ António Alberto Guerra Leal Teixeira

______________________________ Juan Carlos Vázquez-Dodero

In compliance with paragraph c) of section 1 of Article 246 of the Securities Market Code each member of the board identified below declares that to the best of their knowledge:

(i) the consolidated financial statements of Ibersol SGPS SA, referring to the trimester were drawn up in compliance with applicable accounting rules and provide a true and suitable picture of the assets and liabilities, financial situation and results of Ibersol SGPS, SA and the companies included in consolidation perimeter, and

(ii) the interim management report includes a fair review of the important events that have occurred in the first nine months of the year and the evolution of business performance and the position of all the companies included in consolidation.

António Carlos Vaz Pinto Sousa Chairman of the Boards of Director António Alberto Guerra Leal Teixeira Member of the Board of Directors Juan Carlos Vázquez-Dodero Member of the Board of Directors

Ibersol S.G.P.S., S.A.

Consolidated Financial Statements

30th September 2017

IBERSOL S.G.P.S., S.A. CONSOLIDATED STATEMENT OF FINANCIAL POSITION ON 30th SEPTEMBER 2017 AND 31st DECEMBER 2016 (values in euros)

ASSETS Notes 30/09/2017 31/12/2016
Non-current
Tangible fixed assets 7 178 959 873 179 388 621
Goodwill 8 111 156 658 111 156 658
Intangible assets 8 13 671 047 14 990 885
Deferred tax assets 7 496 966 8 555 186
Financial investments - joint controlled subsidiaries 2 441 757 2 417 631
Available-for-sale financial assets 486 092 440 541
Other financial assets 14 8 376 056 10 438 768
Other non-current assets 15 6 522 718 6 574 793
Total non-current assets 329 111 167 333 963 083
Current
Stocks 11 935 949 11 547 211
Cash and bank deposits 56 997 474 39 588 532
Income tax receivable 2 312 650 2 332 391
Other financial assets 14 12 227 161 7 041 574
Other current assets 15 27 398 554 28 584 565
Total current assets 110 871 788 89 094 273
Total Assets 439 982 955 423 057 355
EQUITY AND LIABILITIES
EQUITY
Capital and reserves attributable to shareholders
Share capital 9 30 000 000 24 000 000
Own shares -11 179 969 -11 179 348
Conversion Reserves -1 982 767 -2 002 180
Other Reserves & Retained Results 132 749 947 117 522 486
Net profit in the year 21 474 681 23 387 471
171 061 892 151 728 429
Non-controlling interest 703 176 333 399
Total Equity 171 765 068 152 061 828
LIABILITIES
Non-current
Loans 110 459 520 130 457 713
Deferred tax liabilities 9 539 028 10 187 932
Provisions 4 594 724 3 412 128
Derivative financial instrument 74 062 114 935
Other non-current liabilities 186 404 208 040
Total non-current liabilities 124 853 738 144 380 748
Current
Loans
46 924 641 36 333 949
Accounts payable to suppliers and accrued costs 73 205 233 69 304 753
Income tax payable 2 722 201 2 349 654
Other current liabilities 15 20 512 074 18 626 423
Total current liabilities 143 364 149 126 614 779
Total Liabilities 268 217 887 270 995 527
Total Equity and Liabilities 439 982 955 423 057 355

FOR THE NINE MONTHS PERIOD ENDED 30 SEPTEMBER, 2017 AND 2016 (values in euros) IBERSOL S.G.P.S., S.A. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes 30/09/2017 30/09/2016
Operating Income
Sales 5 328 811 926 177 028 181
Rendered services 5 3 699 549 449 328
Other operating income 6 7 170 275 5 252 225
Total operating income 339 681 750 182 729 734
Operating Costs
Cost of sales 76 132 002 42 925 591
External supplies and services 110 685 505 53 317 217
Personnel costs 100 168 032 52 331 750
Amortisation, depreciation and impairment losses of TFA and IA 7 e 8 21 042 868 8 355 461
Other operating costs 2 873 195 2 096 525
Total operating costs 310 901 602 159 026 544
Operating Income 28 780 148 23 703 190
Net financing cost 16 3 668 939 77 503
Gains (losses) in joint controlled subsidiaries - Equity method 24 126 4 405
Profit before tax 25 135 335 23 630 092
Income tax expense 17 3 290 877 5 605 163
Net profit 21 844 458 18 024 929
Other comprehensive income:
Change in currency conversion reserve (net of tax and that can be
recycled for results) 19 413 -1 167 468
TOTAL COMPREHENSIVE INCOME 21 863 871 16 857 461
Net profit attributable to:
Owners of the parent
21 474 681 18 086 698
Non-controlling interest 369 777 -61 769
21 844 458 18 024 929
Total comprehensive income attributable to:
Owners of the parent 21 494 094 16 919 230
Non-controlling interest 369 777 -61 769
21 863 871 16 857 461
Earnings per share: 9
Basic 0,80 0,67
Diluted 0,80 0,67

IBERSOL S.G.P.S., S.A. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE THIRD TRIMESTER OF 2017 AND 2016 (values in euros)

Notes 3rd TRIMESTER (unaudited)
Operating Income
Sales 5 126 840 515 69 277 871
Rendered services 5 1 319 855 59 333
Other operating income 6 2 234 829 624 165
Total operating income 130 395 199 69 961 369
Operating Costs
Cost of sales 29 080 190 16 542 188
External supplies and services 41 002 430 19 055 525
Personnel costs 35 340 676 18 156 767
Amortisation, depreciation and impairment losses of TFA and IA 7 e 8 6 970 644 2 913 111
Other operating costs 813 102 503 684
Total operating costs 113 207 042 57 171 275
Operating Income 17 188 157 12 790 094
Net financing cost 16 1 214 371 657 259
Gains (losses) in joint controlled subsidiaries - Equity method -1 075 2 525
Profit before tax 15 972 711 12 135 360
Income tax expense 17 3 809 189 2 897 618
Net profit 12 163 522 9 237 742
Other comprehensive income:
Change in currency conversion reserve (net of tax and that can be
recycled for results) 11 009 -40 843
TOTAL COMPREHENSIVE INCOME 12 174 531 9 196 899
Net profit attributable to:
Owners of the parent 11 974 132 9 214 333
Non-controlling interest 189 390 23 408
12 163 522 9 237 742
Total comprehensive income attributable to:
Owners of the parent 11 985 141 9 173 490
Non-controlling interest 189 390 23 408
12 174 531 9 196 899
Earnings per share: 9
Basic 0,44 0,34
Diluted 0,44 0,34

IBERSOL S.G.P.S., S.A.Statement of Alterations to the Consolidated Equityfor the nine months period ended 30th September, 2017 and 2016

(value in euros)

Ass
ign
ed
har
eho
lde
to s
rs
Not
e
Sha
re C
ital
ap
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n
Sha
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Co
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Res
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es
Leg
al
Res
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Oth
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&
erv
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Ret
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Res
ults
Net
Pro
fit
Tot
al p
nt
are
ity
equ
Inte
hat
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res
do
not
l
tro
con
Tot
al
Equ
ity
Bal
n 1
Ja
201
6
anc
e o
nua
ry
20
000
00
0
11
179
64
4
-
850
43
9
-
4 0
00
001
107
37
2 1
32
10
582
26
6
129
92
4 3
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5 1
21
687
135
04
6 0
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Cha
s in
the
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:
App
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tion
of
the
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20
15:
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pro
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T
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and
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10 5
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Acq
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Tot
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10 8
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18 0
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17
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29
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Net
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98
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-
5 5
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Bal
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116
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Bal
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9 19 4
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19 4
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19 4
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Acq
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Net
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the
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-62
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-62
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end
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30
Sep
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20
17
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21
474
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Tot
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25
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Net
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21
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10 -2 1
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- -2 1
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- -2 1
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Bal
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n 3
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20
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30
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0
11
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96
9
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1 9
82
767
-
- 132
74
9 9
47
21
474
68
1
171
06
1 8
92
703
17
6
171
76
5 0
68

IBERSOL S.G.P.S., S.A. Consolidated Cash Flow Statements for the nine months period ended 30 September, 2017 and 2016

(value in euros)

Nine months period ending on
September 30
Note 2017 2016
Cash Flows from Operating Activities
Receipts from clients 332 146 083 177 101 390
Payments to supliers -184 548 568 -102 050 640
Staff payments -76 998 068 -38 833 311
Payments/receipt of income tax -1 306 475 -2 645 864
Other paym./receipts related with operating activities -8 536 016 -1 774 715
Flows from operating activities (1) 60 756 956 31 796 860
Cash Flows from Investment Activities
Receipts from:
Financial investments 19 049 590 332
Tangible fixed assets 5 731 4 964
Intangible assets
Investment benefits 4 608
Interest received 920 448 2 111 585
Payments for:
Financial Investments 64 600 10 094 296
Other financial assets 3 126 100 8 700 525
Tangible fixed assets 24 358 808 16 805 224
Intangible assests 801 542 1 341 376
Flows from investment activities (2) -27 405 822 -34 229 932
Cash flows from financing activities
Receipts from:
Loans obtained 4 535 475 13 348 261
Sale of own shares 1 201
Payments for:
Loans obtained 21 571 360 3 780 748
Amortisation of financial leasing contracts 1 378 987 75 773
Interest and similar costs 4 247 737 1 977 395
Dividends paid 2 160 010 5 598 270
Acquisition of own shares 621
Flows from financing activities (3) -24 823 240 1 917 276
Change in cash & cash equivalents (4)=(1)+(2)+(3) 8 527 894 -515 796
Perimeter changes effect
Exchange rate differences effect 1 424 -551 779
Cash & cash equivalents at the start of the period 37 782 889 14 425 207
Cash & cash equivalents at end of the period 46 312 207 13 357 632

IBERSOL SGPS, S.A.

ANNEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIOD ENDED ON 30 SEPTEMBER 2017

(Values in euros)

1. INTRODUCTION

IBERSOL, SGPS, SA ("Company" or "Ibersol") has its head office at Praça do Bom Sucesso, Edifício Península n.º 105 a 159 – 9º, 4150-146 Porto, Portugal. Ibersol's subsidiaries (jointly called the Group), operate a network of 648 units in the restaurant segment through the brands Pizza Hut, Pasta Caffé, Pans & Company, Ribs, FresCo, SantaMaria, Kentucky Fried Chicken, Burger King, O' Kilo, Roulotte, Quiosques, Pizza Móvil, Miit, Sol, Sugestões e Opções, Silva Carvalho Catering e Palace Catering, coffe counters and other concessions. The group has 501 units which it operates and 147 units under a franchise contract. Of this universe, 315 are headquartered in Spain, of which 179 are own establishments and 136 are franchised establishments, and 10 in Angola.

Ibersol is a public limited company listed on the Euronext of Lisbon.

Ibersol SGPS parent company is ATPS - SGPS, S.A ..

2. MAIN ACCOUNTING POLICIES

The main accounting policies applied in preparing these consolidated financial statements are described below.

2.1 Presentation basis

These consolidated financial statements were prepared according to the International Financial Reporting Standards (IFRS), as applied in the European Union and in force on 01 January 2017, mainly with the international standard nº. 34 – Interim Financial Report.

The consolidated financial statements have been prepared in accordance with the historical cost principle, changed to fair value in the case of derivative financial instruments.

The accounting policies applied on 30 September 2017 are identical to those applied for preparing the financial statements of 30 September and 31 December 2016, except for the exchange currency differences included in other income / other operating costs and excluded from net financing cost.

3. IMPORTANT ACCOUNTING ESTIMATES AND JUDGMENTS

There where no substantial differences between accounting estimates and judgments applied on 31 December 2016 and the accounting values considered in the nine months period ended on the 30 September 2017.

4. INFORMATION ABOUT THE COMPANIES INCLUDED IN THE CONSOLIDATION AND OTHER COMPANIES

4.1. The following group companies were included in the consolidation on 30th September 2017 and 30th September and 31 December 2016:

% Shareholding
Company Head Office Sep/17 Sep/16 Dec/16
Parent company
Ibersol SGPS, S.A. Porto parent parent parent
Subsidiary companies
Iberusa Hotelaria e Restauração, S.A. Porto 100% 100% 100%
Ibersol Restauração, S.A. Porto 100% 100% 100%
(d) Ibersande Restauração, S.A. Porto 100% 80% 100%
Ibersol Madeira e Açores Restauração, S.A. Funchal 100% 100% 100%
Ibersol - Hotelaria e Turismo, S.A. Porto 100% 100% 100%
Iberking Restauração, S.A. Porto 100% 100% 100%
Iberaki Restauração, S.A. Porto 100% 100% 100%
Restmon Portugal, Lda Porto 61% 61% 61%
Vidisco, S.L. Vigo - Spain 100% 100% 100%
Inverpeninsular, S.L. Vigo - Spain 100% 100% 100%
Ibergourmet Produtos Alimentares, S.A. Porto 100% 100% 100%
Ferro & Ferro, Lda. Porto 100% 100% 100%
Asurebi SGPS, S.A. Porto 100% 100% 100%
Charlotte Develops, SL Madrid - Spain 100% 100% 100%
Firmoven Restauração, S.A. Porto 100% 100% 100%
IBR - Sociedade Imobiliária, S.A. Porto 100% 100% 100%
Eggon SGPS, S.A. Porto 100% 100% 100%
Anatir SGPS, S.A. Porto 100% 100% 100%
Lurca, SA Madrid - Spain 100% 100% 100%
(c) Q.R.M.- Projectos Turísticos, S.A Porto - - -
Sugestões e Opções-Actividades Turísticas, S.A Porto 100% 100% 100%
Resboavista- Restauração Internacional, Lda Porto 100% 100% 100%
José Silva Carvalho Catering, S.A Porto 100% 100% 100%
(a) Iberusa Central de Compras para Restauração ACE Porto 100% 100% 100%
(b) Vidisco, Pasta Café Union Temporal de Empresas Vigo - Spain 100% 100% 100%
Maestro - Serviços de Gestão Hoteleira, S.A. Porto 100% 100% 100%
SEC - Eventos e Catering, S.A. Porto 100% 100% 100%
IBERSOL - Angola, S.A. Luanda - Angola 100% 100% 100%
HCI - Imobiliária, S.A. Luanda - Angola 100% 100% 100%
(c) Gravos 2012, S.A. Porto 100% 100% 100%
Lusinver Restauracion, S.A. Vigo - Espanha 100% - 100%
The Eat Out Group S.L.U. Barcelona - Spain 100% - 100%
Pansfood, S.A.U. Barcelona - Spain 100% - 100%
Foodstation, S.L.U Barcelona - Spain 100% - 100%
(e) Dehesa de Santa Maria Franquicias, S.L. Barcelona - Spain 50% - 50%
Pansfood Italia, S.R.L. Barcelona - Spain 100% - 100%
Companies controlled jointly
UQ Consult - Serviços de Apoio à Gestão, S.A. Porto 50% 50% 50%

(a) Company consortium agreement that acts as the Purchasing and Logistics Centre and provides the respective restaurants with raw materials and maintenance services. (b) Union Temporal de Empresas which was founded in 2005 and that during the year functioned as the Purchasing Centre in Spain by providing raw materials to the respective restaurants.

(c) Company merged into subsidiary José Silva Carvalho Catering, S.A. in July 2016, with effect from January 1, 2016.

(d) As a result of the acquisition of the Eat Out Group, the Group now holds 100% of its subsidiary Ibersande, through its 20% share in Pansfood, S.A.U ..

(e) Although the parent company owns 50% of the voting rights, there is control of the subsidiary Dehesa.

The subsidiary companies were included in the consolidation by the full consolidation method. UQ Consult, the Jointly controlled entity, was subject to the equity method according to the group's shareholding in this company.

The shareholding percentages in the indicated companies meet an identical percentage in voting rights.

4.2. Alterations to the consolidation perimeter

4.2.1. Acquisition of new companies

The group did not buy any subsidiary in the nine months period ended on 30 September 2017.

In the year ended 31 December 2016, the Ibersol group acquired the following subsidiaries:

% Shareholding
Company Entry date Head Office 2016 2015
The Eat Out Group S.L.U. 31-Out-16 Barcelona - Spain 100,00% -
Pansfood, S.A.U. 31-Out-16 Barcelona - Spain 100,00% -
Foodstation, S.L.U 31-Out-16 Barcelona - Spain 100,00% -
Dehesa de Santa Maria Franquicias, S.L. 31-Out-16 Barcelona - Spain 50,00% -
Pansfood Italia, S.R.L. 31-Out-16 Barcelona - Spain 100,00% -

The above acquisitions had the following impact on the consolidated statement of financial position on December 31, 2016:

Date of acquisition Dec/16
Acquired net assets
Tangible and intangible assets (Notes 7 and 8) 32 360 743 32 654 939
Stocks 2 706 371 2 646 062
Deferred tax assets 5 941 376 5 601 456
Other assets 18 937 159 19 012 245
Cash & bank deposits 3 640 340 5 523 047
Provisions -1 000 000 -1 000 000
Loans -16 982 720 -25 794 395
Deferred tax liabilities -679 372 -863 895
Other liabilities -37 602 707 -31 153 618
7 321 190 6 625 841
Goodwill (Note 8) 70 647 649
Interests that do not control -868 839
Acquisition price 77 100 000
Payments 77 100 000
Amounts payable in the future -
77 100 000
Net cash-flows from acquisition
Payments made 77 100 000
Cash & cash equivalents acquired 3 640 340
73 459 660

The goodwill of the Eat Out Group in the amount of 70.647.649 euro was determined based on provisional amounts of the net assets acquired.

The impacts of the acquisitions on the consolidated statement of comprehensive income were as follows:

Sep/17
Operating income 131 102 710
Operating costs -124 120 471
Financial income -939 973
Investments income -
Income before taxes 6 042 266
Tax income -1 569 611
Net Income 4 472 655

The incorporation of the acquired subsidiaries in these statements results in significant changes in the consolidated statement of comprehensive income at September 30, 2017, compared to the same period in 2016.

4.2.2. Disposals

In the nine months period ended on 30 September 2017 and in the year ended December 31, 2016 there were no disposals of subsidiaries.

5. INFORMATION PER SEGMENT

Ibersol Administration monitors the business based on the following segmentation:

SEGMENT BRANDS
Restaurants Pizza Hut Pasta Caffe Pizza Movil FresCo Ribs StaMaria
Counters KFC O'Kilo Miit Burguer King Pans Coffee Counter
Other business Sol (SA) Concessions Catering Convenience stores Travel

The results per segment in the nine months period ended 30 September 2017 and 2016 were as follows:

Concessions Other, write
off and
30 September 2017 Restaurants Counters and Catering adjustments Total Group
Inter-segment client - - - - -
External client 76 408 685 148 420 008 106 854 273 828 510 332 511 475
Total sales and services 76 408 685 148 420 008 106 854 273 828 510 332 511 475
Royalties 2 843 846 5 839 375 1 331 242 - 10 014 464
Rents and Condominium 8 204 876 14 711 469 31 679 897 - 54 596 242
Coste of sales 15 497 815 39 239 468 21 394 719 - 76 132 002
Operating cash-flow (EBITDA) 11 985 496 23 647 308 14 190 212 - 49 823 016
Amortisation, depreciation and impairment losses 5 294 945 11 130 302 4 288 019 329 602 21 042 868
Operating income (EBIT) 6 690 551 12 517 006 9 902 193 -329 602 28 780 148
30 September 2016 Restaurants Counters Concessions
and Catering
Other, write
off and
adjustments
Total Group
Inter-segment client - - - - -
External client 56 086 272 102 700 197 18 430 573 260 467 177 477 509
Total sales and services 56 086 272 102 700 197 18 430 573 260 467 177 477 509
Royalties 2 564 709 4 794 896 230 931 - 7 590 536
Rents and Condominium 6 004 869 8 430 530 3 128 822 17 564 221
Coste of sales 10 917 134 27 567 027 4 441 429 - 42 925 591
Operating cash-flow (EBITDA) 8 519 084 17 719 928 5 819 639 - 32 058 651
Amortisation, depreciation and impairment losses 2 000 675 4 871 733 1 301 237 181 815 8 355 461
Operating income (EBIT) 6 518 409 12 848 195 4 518 402 -181 815 23 703 191

On September 30, 2017 and 2016 income and non-current assets by geography is presented as follows:

30 SEPTEMBER 2017 Portugal (1) Spain Grupo
Restaurants 166 833 118 160 021 778 326 854 896
Merchandise 895 996 1 061 034 1 957 030
Rendered services 149 793 3 549 756 3 699 549
Total sales and services 167 878 907 164 632 568 332 511 475
Tangible fixed and intangible assets 149 790 190 42 840 730 192 630 920
Goodwill 7 605 482 103 551 176 111 156 658
Deferred tax assets 2 574 550 4 922 416 7 496 966
Financial investments - joint controlled subsidiaries 2 441 757 - 2 441 757
Available-for-sale financial assets 486 092 - 486 092
Other financial assets 8 376 056 - 8 376 056
Other non-current assets - 6 522 718 6 522 718
Total non-current assets 171 274 127 157 837 040 329 111 167
30 SEPTEMBER 2016 Portugal (1) Spain Grupo
Restaurants 139 369 712 36 132 420 175 502 132
Merchandise 400 469 1 125 580 1 526 049
Rendered services 175 730 273 598 449 328
Total sales and services 139 945 911 37 531 598 177 477 509
Tangible fixed and intangible assets 135 514 649 17 776 200 153 290 849
Goodwill 7 605 482 32 903 527 40 509 009
Deferred tax assets 2 869 377 393 196 3 262 573
Financial investments - joint controlled subsidiaries 2 422 297 - 2 422 297
Available-for-sale financial assets 436 655 60 000 496 655
Financial Investment Advances - 10 000 000 10 000 000
Other financial assets 17 327 331 - 17 327 331
Other non-current assets - 1 344 183 1 344 183

(1) Due to the small size of its operations Angola is included in Portugal segment.

6. UNUSUAL AND NON-RECURRING FACTS AND SEASON ACTIVITY

On the nine months period ended on 30 September 2016, in operating income, from the agreement with Ascendi, is a non-current income of 2.397.758 eur corresponding to compensation for loss of traffic by charging tolls on former Scuts. It was also agreed not to install the Guimarães Service Areas, Fafe and Paredes have been returned to their respective concession rights that led to the receipt of contractual interest in the amount of 1.570.323 eur (Note 16). Furthermore, non-current consulting services in the amount of 951 thousand euros were provided to third parties.

In the restaurant segment season activity is characterized by an increase of sales in the months of July, August and December, witch leads to a greater activity on the third trimester of the year compared with the first semester. The previous years have evidenced that, in comparable perimeter and with an equal distribution of openings and closings, in the period that understands the nine first months of the year, sales are about 75% of annual volume and, with the dilution effect of the fixed costs with the increase of the activity, the operating income represents about 85%.

7. TANGIBLE FIXED ASSETS

In the nine months period ended 30 September 2017 and in the year ending on 31 December 2016, entries in the value of tangible fixed assets, depreciation and accumulated impairment losses were as follows:

Land Buildings Equipment Other tangible
fixed Assets
Tangible Assets
in progress (1)
Total
1 January 2016
Cost 11.963.649 150.435.664 76.028.676 19.707.381 411.815 258.547.187
Accumulated depreciation - 36.522.989 56.954.512 13.802.872 - 107.280.372
Accumulated impairment - 9.169.591 416.747 47.333 - 9.633.671
Net amount 11.963.649 104.743.084 18.657.418 5.857.177 411.815 141.633.142
31 December 2016
Initial net amount 11.963.649 104.743.084 18.657.418 5.857.177 411.815 141.633.142
Changes in consolidat perimeter - 61.509.602 37.914.100 956.299 239.525 100.619.526
Currency conversion -756.850 -1.723.366 -756.531 -224.851 -19.440 -3.481.038
Additions 135.242 16.405.428 8.187.617 2.615.018 1.215.586 28.558.891
Decreases - 863.164 236.294 47.292 105.686 1.252.436
Transfers - 100.636 5.806 11.681 -234.617 -116.494
Depreciation in the year 74.637 8.041.000 5.062.093 1.082.763 - 14.260.493
Deprec. by changes in the perim. - 38.817.273 28.953.945 1.042.245 - 68.813.463
Impairment in the year - 751.562 41.432 24.750 - 817.744
Impairment by changes in the perim. - 2.080.269 687.570 4.407 - 2.772.246
Impairment reversion - -90.976 - - - -90.976
Final net amount 11.267.404 130.573.092 29.027.075 7.013.867 1.507.183 179.388.621
31 December 2016
Cost 11.342.041 222.786.283 118.519.498 22.193.978 1.507.183 376.348.985
Accumulated depreciation 74.637 81.893.238 88.409.796 15.115.597 - 185.493.267
Accumulated impairment - 10.319.953 1.082.628 64.515 - 11.467.096
Net amount 11.267.404 130.573.092 29.027.075 7.013.867 1.507.183 179.388.621
Other tangible Tangible Assets
Land Buildings Equipment fixed Assets in progress (1) Total
30 September 2017
Initial net amount 11 267 404 130 573 092 29 027 075 7 013 867 1 507 183 179 388 621
Changes in consolidat perimeter - - - - - -
Currency conversion -573 -1 476 -798 -179 -7 -3 033
Additions - 12 040 961 4 927 696 1 403 773 867 744 19 2
40 174
Decreases - 581 907 6 161 24 127 643 715 735
Transfers - 1 075 804 2 718 7 795 -1 086 883 -566
Depreciation in the year 25 334 11 766 361 6 136 641 1 021 249 - 18 949 585
Deprec. by changes in the perim. - - - - - -
Impairment in the year - - - - - -
Impairment by changes in the perim. - - - - - -
Impairment reversion - - - - - -
Final net amount 11 241 497 131 340 112 27 813 889 7 403 983 1 160 395 178 959 874
30 September 2017
Cost 11 341 454 233 540 549 122 690 858 23 515 692 1 160 395 392 248 949
Accumulated depreciation 99 957 92 532 952 93 863 732 16 052 796 - 202 549 436
Accumulated impairment - 9 667 484 1 013 238 58 914 - 10 739 636
Net amount 11 241 497 131 340 112 27 813 889 7 403 983 1 160 395 178 959 874

(1) amounts essentially related to the industrial kitchen in Portugal, whose (re) opening took place in this period.

The 2016 investments of approximately 28.6 million in tangible fixed assets, relate to the opening of new units and remodelling of existing ones in Portugal and Spain.

In the nine month period ended September 30, 2017, an investment of approximately 2.7 million euros was made in the industrial kitchen in Portugal. The remaining investment mainly concerns the opening of six Burguer King, two KFC, the concession at Santa Maria Airport (Azores) and a unit in the group Eat Out.

8. INTANGIBLE ASSETS AND GOODWILL

Goodwill and intangible assets are broken down as follows:

Sep/17 Dec/16
Goodwill 111 156 658 111 156 658
Intangible assets 13 671 046 14 990 885
124 827 704 126 147 543

In the nine months period ended 30 September 2017 and in the year ending on 31 December 2016, entries in the value of intangible assets, amortization and accumulated impairment losses were as follows:

Goodwill Industrial
property
Other intangible
Assets
Intangible
Assets in
progress
Total
1 January 2016
Cost 42.370.687 23.375.701 5.918.825 759.034 72.424.247
Accumulated amortization - 9.386.529 5.534.246 - 14.920.775
Accumulated impairment 1.861.678 3.661.102 39.815 - 5.562.594
Net amount 40.509.009 10.328.070 344.764 759.034 51.940.880
31 December 2016
Initial net amount 40.509.009 10.328.070 344.764 759.034 51.940.880
Changes in consolidat. perimeter - 12.915.831 9.314.758 - 22.230.589
Currency conversion - -94.715 - -127.949 -222.664
Additions 70.647.649 1.914.708 54.868 132.476 72.749.701
Decreases - -49.444 50.066 66.883 67.505
Transfers - 3.150 - -3.150 -
Amortization in the year - 1.291.011 288.783 - 1.579.794
Amortiz. by changes in the perimeter - 12.108.385 6.754.442 - 18.862.827
Impairment in the year - - - - -
Impairment by changes in the perim. - 7.562 33.274 - 40.836
Impairment reversion - - - - -
Final net amount 111.156.658 11.709.530 2.587.825 693.528 126.147.543
31 December 2016
Cost 113.018.336 37.987.818 14.894.091 693.528 166.593.773
Accumulated amortization - 22.609.624 12.264.391 - 34.874.015
Accumulated impairment 1.861.678 3.668.664 41.875 - 5.572.216
Net amount 111.156.658 11.709.530 2.587.825 693.528 126.147.543
Goodwill Industrial
property
Other intangible
Assets
Assets in
progress
Total
30 September 2017
Initial net amount 111 156 658 11 709 530 2 587 825 693 528 126 147 543
Changes in consolidat. perimeter - - - - -
Currency conversion - -103 - -104 -207
Additions - 639 002 79 807 82 733 801 542
Decreases - 3 144 5 253 - 8 397
Transfers - - - - -
Amortization in the year - 1 400 436 712 341 - 2 112 777
Amortiz. by changes in the perimeter - - - - -
Impairment in the year - - - - -
Impairment by changes in the perim. - - - -
Impairment reversion - - - - -
Final net amount 111 156 658 10 944 849 1 950 038 776 157 124 827 704
30 September 2017
Cost 113 018 336 38 544 403 14 527 670 776 157 166 866 566
Accumulated amortization - 23 934 222 12 535 757 - 36 469 979
Accumulated impairment 1 861 678 3 665 332 41 875 - 5 568 884
Net amount 111 156 658 10 944 849 1 950 038 776 157 124 827 704

The distribution of goodwill allocated to segments is presented as follows:

Sep/17 Dec/16
Eat Out 70 647 649 70 647 649
Restaurants 11 104 988 11 104 988
Counters 25 349 831 25 349 831
Concessions and Catering 3 874 469 3 874 469
Other, write off and adjustments 179 721 179 721
111 156 658 111 156 658

As it's still in the period of analysis and review, goodwill of the acquisition of the Eat-Out business has not yet been distributed by Ibersol's segments.

9. INCOME PER SHARE

Income per share in the nine months period ended 30 September 2017 and 2016 was calculated as follows:

Sep/17 Sep/16
Profit payable to shareholders 21 474 681 18 086 698
Mean weighted number of ordinary shares issued 30 000 000 30 000 000
Mean weighted number of own shares -2 999 938 -2 999 938
27 000 062 27 000 062
Basic earnings per share (€ per share) 0,80 0,67
Earnings diluted per share (€ per share) 0,80 0,67
Number of own shares at the end of the year 2 999 938 2 999 938

Since there are no potential voting rights, the basic earnings per share is equal to earnings diluted per share.

At the Annual General Meeting of May 26, 2017, an increase in the share capital to 30 million euros was approved by the incorporation of free reserves amounting to 6 million euros, registered in the respective registry office on July, and admitted to listing in September. This increase in share capital results in an increase of 599.976 own shares.

In 2016, it was deliberate to increase the share capital to 24 million, by incorporation of legal reserves. The capital increase implied an increase of 399.980 own shares.

Ibersol acquired 57 own shares in 2017.

10. DIVIDENDS

At the General Meeting of 26th May 2017, the company decided to pay a gross dividend of 0,10 euro per share (0,10 euro in 2016), representing a total value of 2.160.010 euro for outstanding shares (1.800.000 euro in 2016), settled on June 23, 2017.

Also, in the year 2016, 3.798.270 euros of dividends were paid to a minority shareholder of the subsidiary Ibersande.

11. CONTINGENT ASSETS AND LIABILITIES

The group has contingent liabilities regarding bank and other guarantees and other contingencies related with its business operations (as licensing, advertising fees, food hygiene and safety and employees, and the rate of success of these processes is historically high in Ibersol). It is not expected that there will be significant liabilities arising from contingent liabilities.

On 30th September 2017 and 31st December 2016, responsibilities not recorded by the companies and included in the consolidation consist mainly of bank guarantees given on their behalf, as shown below:

Sep/17 Dec/16
Bank guarantees 24 519 817 18 424 430

The relevant amount comes from the guarantees required by the owners of spaces concession (Airports) or leased (Shopping centers).

In addition, Ibersol SGPS provided guarantees to the subsidiaries in the amount of 2.750.000 USD.

12. COMMITMENTS

There are no commitments related to investments on the date of approval of these Financial Statements.

13. IMPAIRMENT

Changes during the nine months period ended on 30 September 2017 and in the year 2016, under the heading of asset impairment losses were as follows:

Sep/17
Starting
balance
Perimeter
variation
Cancellation Impairment
assets
disposals
Impairment
in the year
Impairment
reversion
Closing
balance
Tangible fixed assets 11 467 097 - - -727 460 - - 10 739 637
Goodwill 1 861 678 - - - - - 1 861 678
Intangible assets 3 710 538 - - 3 332 - - - 3 707 206
Stocks 74 981 - - - - - 74 981
Other current assets 2 753 877 -11 -67 598 - 363 300 -69 978 2 979 591
19 868 171 -11 -67 598 -730 792 363 300 -69 978 19 363 092
Dec-16
Starting
balance
Perimeter
variation
Cancellation Impairment
assets
disposals
Impairment
in the year
Impairment
reversion
Closing
balance
Tangible fixed assets 9.633.672 2.772.246 - -1.665.589 817.744 -90.976 11.467.097
Goodwill 1.861.678 - - - - - 1.861.678
Intangible assets 3.700.917 40.836 - -31.215 - - 3.710.538
Stocks 74.981 - - - - - 74.981
Other current assets 1.442.527 2.022.906 -588.973 - 33.885 -156.467 2.753.877
Other non current assets 134.342 - -134.342 - - - -
16.848.116 4.835.988 -723.315 -1.696.804 851.629 -247.443 19.868.171

14. FINANCIAL RISK MANAGEMENT

14.1 Financial risk factors

The group's activities are exposed to a number of financial risk factors: market risk (including currency exchange risk, fair value risk associated to the interest rate and price risk), credit risk, liquidity risk and cash flow risks associated to the interest rate. The group maintains a risk management program that focuses its analysis on financial markets to minimise the potential adverse effects of those risks on the group's financial performance.

Financial risk management is headed by the Financial Department based on the policies approved by the Board of Directors. The treasury identifies, evaluates and employs financial risk hedging measures in close cooperation with the group's operating units. The Board provides principles for managing the risk as a whole and policies that cover specific areas, such as the currency exchange risk, the interest rate risk, the credit risk and the investment of surplus liquidity.

a) Market risk

i) Currency exchange risk

With regard to exchange rate risk, the Group follows a natural hedge policy using financing in local currency. Since the Group is mainly present in the Iberian market, bank loans are mainly denominated in euros and the volume of purchases outside the Euro zone are of irrelevant proportions.

The main source of the Group's exposure arises from the investment outside the euro area of operation that develops in Angola, although it is still small is in a growing phase. The devaluation of Kwanza is a risk to consider. The financing of the Angolan subsidiary in foreign currency in the amount of \$ 1.125.000, does not have large exposure due to the reduced amount. The remaining financing concerning Angolan subsidiaries are denominated in the local currency, the same in which the income is generated. In light of the current limitations on payments abroad, the Group adopted a policy of monthly monitoring of credit balances in foreign currency and its full coverage with the acquisition of Treasury Bonds of the Republic of Angola, indexed to the USD.

Currency exchange rate used for conversion of the transactions and balances denominated in Kwanzas, were respectively:

Sep/17
Euro exchange rates (x Rate on September, Average interest rate
foreign currency per 1 Euro) 30 2017 September 2017
Kwanza de Angola (AOA) 184,502 187,196
Dec-16
Euro exchange rates (x Rate on December, Average interest rate
foreign currency per 1 Euro) 31 2016 year 2016
Kwanza de Angola (AOA) 184,468 181,554

Due to the foreign currency hedge liabilities policy with assets indexed to the USD, the impact of an exchange variation during the period would not have had a significant effect on the result for the period.

ii) Price risk

The group is not greatly exposed to the merchandise price risk.

iii) Interest rate risk (cash flow and fair value)

With the exception of the Angola Treasury Bonds, the group has no significant interest bearing assets. Therefore, profit and cash flows from investment activities are substantially independent of changes in market interest rate. Regarding the Angolan State treasury bonds, interest is fixed.

The group's interest rate risk follows its liabilities, in particular long-term loans. Loans issued with variable rates expose the group to the cash flow risk associated to interest rates. Loans with fixed rates expose the group to the risk of the fair value associated to interest rates. At the current interest rates, in financing of longer maturity periods the group has a policy of fixing interest rates of at least 50% of the outstanding amount.

The unpaid debt bears variable interest rate, part of which has been the object of an interest rate swap. The interest rate swap to hedge the risk of a 5 million euros (commercial paper programmes) loan has the maturity of the underlying interest and the repayment plan identical to the terms of the loan. Financing contracted at the end of year 2016 will be subject to settlement operations during the year 2017, with swaps amounting to € 32 million in the second quarter.

Based on simulations performed on 30 September 2017, an increase of 100 basis points in the interest rate, maintaining other factors constant, would have a negative impact in the net profit of 738.000 euros.

b) Credit risk

The main activity of the Group is carried out with sales paid in cash, or debit or credit card, so the Group has no significant credit risk concentrations. Regarding the customers, the risk is limited to the Catering business and sales of services and merchandise to franchised, representing less than 4% of the consolidated sales. The Group has policies to ensure that credit sales are made to customers with an appropriate credit history. The Group has policies that limit the amount of credit that customers have access to.

The Group's cash and cash equivalents include mainly deposits resulting from cash provided by sales and its deposits in current accounts. These amounts excluded, the value of financial investments at September 30, 2017, is not significant, with the exception of the above mentioned Treasury Bonds of the Republic of Angola in the amount of 20,6 million euro, subject to country risk.

Deposits and other financial investments are spread over several credit institutions; therefore there is not a concentration of these financial assets.

c) Liquidity risk

Liquidity risk management implies maintaining a sufficient amount of cash and bank deposits, the feasibility of consolidating the floating debt through a suitable amount of credit facilities and the capacity to liquidate market positions. Treasury needs are managed based on the annual plan that is reviewed every quarter and adjusted daily. Related with the dynamics of the underlying business operations, the group's treasury strives to maintain the floating debt flexible by maintaining credit lines available.

The Group considers that the short-term bank loans are due on the renewal date and that the commercial paper programmes matured on the dates of denunciation.

On the nine months period ended on 30 September 2017, current liabilities reached 143 million euros, compared with 111 million euros in current assets. This disequilibrium is, on one hand, a financial characteristic of this business and, on the other hand, due to the use of commercial paper programmes in witch the Group considers the maturity date as the renewal date, regardless of its initial stated periods. It is expected in the year 2017 to maintain the commercial paper programmes (22.000.000 euros) short term debt. However, the expected operating cash flows and, if necessary, contracted credit lines, on the amounts of which have not yet been used, are sufficient to settle current liabilities.

Even with reduced use of the group has contracted a significant amount of short-term lines. On September 30, 2017, the use of short term liquidity cash flow support was about 11%. Investments in term deposits and other application of 55 million euros, match 35% of liabilities paid.

The following table shows the Group financial liabilities (relevant items), considering contractual cash-flows:

to September 2018 from September 2018 to 2028
Bank loans and overdrafts 46 924 641 110 459 520
Other non-current liabilities - 186 404
Accounts payable to suppliers and accrued
costs
63 319 133 -
Accrued costs 12 482 301 -
Total 122 726 075 110 645 924

d) Capital risk

The company aims to maintain an equity level suitable to the characteristics of its main business (cash sales and credit from suppliers) and to ensure continuity and expansion. The capital structure balance is monitored based on the gearing ratio (defined as: net remunerated debt / net remunerated debt + equity) in order to place the ratio within a 35%-70% interval.

On 30th September 2017 and 31st December 2016 the gearing ratio was of 32% and 42%, respectively, as follows:

set/17 Dec-16
Bank loans 157 384 161 166 791 662
Other financial assets -20 603 217 -17 480 341
Cash and bank deposits -56 997 474 -39 588 532
Net indebtedness 79 783 470 109 722 788
Equity 171 765 068 152 061 828
Total capital 251 548 538 261 784 616
Gearing ratio 32% 42%

14.2 Estimated fair value

The fair value of financial instruments commercialised in active markets (such as publicly negotiated derivatives, securities for negotiation and available for sale) is determined based on the listed market prices on the consolidated statement of financial position date. The market price used for the group's financial assets is the price received by the shareholders in the current market. The market price for financial liabilities is the price to be paid in the current market.

The nominal value of accounts receivable (minus impairment adjustments) and accounts payable is assumed to be as approximate to its fair value. The fair value of financial liabilities is estimated by updating future cash flows contracted at the current market interest rate that is available for similar financial instruments.

15. OTHER ASSETS AND LIABILITIES

15.1 Other current assets and liabilities

Other current assets and liabilities on 30 September 2017 and 31st December 2016 are broken down as follows:

Other current assets

Sep/17 Dec/16
Clients 12 077 998 11 933 322
State and other public entities 670 934 1 542 489
Other debtors 6 312 635 5 206 424
Advances to suplliers 536 832 236 513
Advances to financial investments debt 1 103 000 2 900 000
Accruals and income 6 689 770 6 677 919
Deferred costs 2 986 976 2 841 775
Other current assets 30 378 145 31 338 442
Accumulated impairment losses 2 979 591 2 753 877
27 398 554 28 584 565
Other current liabilities
Sep/17 Dec/16
Other creditors 12 482 301 10 933 132
State and other public entities 6 998 854 7 035 937
Deferred income 1 030 919 657 354
20 512 074 18 626 423

15.2 Other non-current assets

The balance of other non-current assets is mainly long term deposits and securities from Spain subsidiaries, resulting from lease agreements.

16. NET FINANCING COST

Net financing cost on 30th September 2017 and 2016 are broken down as follows:

2017 2016
Interest paid 3 406 360 1 823 166
Interest earned (1) -900 136 -2 183 239
Currency exchange differences -126 779 -24 022
Payment discounts obtained -7 629 -7 947
Other financial costs and income 1 297 123 469 545
3 668 939 77 503

(1) 2016 balance is essentially Aenor's compensation interest. It was agreed not to install the Service Areas of Guimarães, Fafe and Paredes and the respective concession rights that gave rise to the receipt of contractual interest in the amount of 1.570.323 (Note 6).

17. INCOME TAX

Income taxes recognized as of September 30, 2017 and 2016 are detailed as follows:

Sep/17 Jun/16
Current income tax 6 407 356 5 416 708
Insufficiency (excess) of tax estimate (1) -2 707 163 -1 992
Deferred taxes -409 316 190 447
3 290 877 5 605 163

(1) Essentially resulting from the tax benefit (RFAI) considered in the delivery of the income tax return for the year 2016, since all the criteria and parameters relevant to their use were fulfilled.

The effective tax rate on profits (excluding RFAI impact) on 30 September 2017 and 2016 was of 24%, as follows:

Sep/17 Jun/16
Pre-tax profit 25 135 335 23 630 092
Income tax 5 998 040 5 607 155
Effective tax rate 24% 24%

18. TRANSACTIONS WITH RELATED PARTIES

The related parties of Ibersol group are:

  • António Carlos Vaz Pinto de Sousa – 2.100 shares (*) (**)

  • António Alberto Guerra Leal Teixeira – 2.100 shares (*) (**)

  • ATPS, SGPS, SA – 16.472.250 shares (**)

(*) ATPS voting rights are also attributable to Antonio Carlos Vaz Pinto de Sousa and António Alberto Guerra Leal Teixeira under subparagraph b) of paragraph 1 of article 20 and paragraph 1 Article 21, both of the Portuguese Market Code, by holding the domain of ATPS, in which they participate indirectly in equal parts by their companies, respectively, CALUM - SERVIÇOS E GESTÃO, S.A. with the NIPC 513799486 and DUNBAR - SERVIÇOS E GESTÃO, S.A with the NIPC 513799257, which together hold the majority of the capital of ATPS.

(**) Including the shares corresponding to the rights of the deliberate capital increase deliberated on May 26, 2017 and registered in the respective registry office on July 4, 2017.

  • Joint controlled entities – UQ Consult

With respect to the balances and transactions with related entities, the overall value of the balances and transactions of the Group with the joint controlled UQ Consult relates mainly to support services and management information systems, and was, respectively, 759.936 and 1.989.397 euros.

- Administrators

The company shareholder ATPS-S.G.P.S., S.A., which signed a service-rendering contract with the subsidiary Ibersol Restauração, S.A.. ATPS-S.G.P.S., S.A. under contract with Ibersol Restauração, S.A. has the obligation to ensure that its administrators, António Carlos Vaz Pinto de Sousa and António Alberto Guerra Leal Teixeira, manage the group without incur in any additional charge. The company does not pay directly to its administrators any remuneration.

19. IFRS STANDARDS ALREADY ISSUED OR REVIEWED AND FOR FUTURE APPLICATION

Standards that have been published and are mandatory for the accounting periods beginning on or after 1 January 2017, and were already endorsed by the EU:

a) IFRS 9 (new), 'Financial instruments' (effective for annual periods beginning on or after 1 January 2018). IFRS 9 replaces the guidance in IAS 39, regarding: (i) the classification and measurement of financial assets and liabilities; (ii) the recognition of credit impairment (through the expected credit losses model); and (iii) the hedge accounting requirements and recognition. The impact of this standard is being assessed by Ibersol's management.

b) IFRS 15 (new), 'Revenue from contracts with customers' (effective for annual periods beginning on or after 1 January 2018). This new standard, applies only to contracts with customers to provide goods or services, and requires an entity to recognise revenue when the contractual obligation to deliver the goods or services is satisfied and by the amount that reflects the consideration the entity is expected to be entitled to, following a five step approach." The impact of this standard is being assessed by Ibersol's management.

Standards (new and amendments) and interpretations that have been published and are mandatory for the accounting periods beginning on or after 1 January 2017, but are not yet endorsed by the EU:

a) IAS 7 (amendment), 'Cashflow statement – Disclosure initiative' (effective for annual periods beginning on or after 1 January 2017). This amendment is still subject to endorsement by the European Union. This amendment introduces an additional disclosure about the changes in liabilities arising from financing activities, disaggregated between cash changes and non-cash changes and how it reconciles with the reported cash flows from financing activities, in the Cash Flow Statement. Its application is not expected to have significant impacts.

b) IAS 12 (amendment),'Income taxes – Recognition of deferred tax assets for unrealised losses' (effective for annual periods beginning on or after 1 January 2017). This amendment is still subject to endorsement by the European Union. This amendment clarifies how to account for deferred tax assets related to assets measured at fair value, how to estimate future taxable profits when temporary deductible differences exist and how to assess recoverability of deferred tax assets when restrictions exist in the tax law. Its application is not expected to have significant impacts.

c) IAS 40 (amendment), 'Transfers of Investment property' (effective for annual periods beginning on or after 1 January 2018). This amendment is still subject to endorsement by the European Union. This amendment clarifies when assets are transferred to, or from investment properties, the evidence of the change in use is required. A change of management intention in isolation is not enough to support a transfer. This change is not applicable to the entity.

d) IFRS 2 (amendment), 'Classification and measurement of share-based payment transactions' (effective for annual periods beginning on or after 1 January 2018). This amendment is still subject to endorsement by the European Union. This amendment clarifies the measurement basis for cash-settled, share-based payments and the accounting for modifications to a share-based payment plan that change the classification an award from cashsettled to equity-settled. It also introduces an exception to the principles in IFRS 2 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee's tax obligation associated with a share-based payment and pay that amount to the tax authority This change is not applicable to the entity.

e) IFRS 4 (amendment), 'Insurance contracts (Applying IFRS 4 with IFRS 9)' transactions' (effective for annual periods beginning on or after 1 January 2018). This amendment is still subject to endorsement by the European Union. This amendment allows companies that issue insurance contracts the option to recognise in Other Comprehensive Income, rather than Profit or Loss the volatility that could rise when IFRS 9 is applied before the new insurance contract standard is issued. Additionally, it is given an optional temporary exemption from applying IFRS 9 until 2021, to the companies whose activities are predominantly connected with insurance, not being applicable at consolidated level. This change is not applicable to the entity.

f) Amendments to IFRS 15, f) 'Revenue from contracts with customers' (effective for annual periods beginning on or after 1 January 2018). These amendments are still subject to endorsement by European Union. These amendments refer to additional guidance for determining the performance obligations in a contract, the timing of revenue recognition from a license of intellectual property, the review of the indicators for principal versus agent classification, and to new practical expedients to simplify transition. Its application is not expected to have significant impacts.

g) IFRS 16 (new), 'Leases' (effective for annual periods beginning on or after 1 January 2019). This standard is still subject to endorsement by European Union. This new standard replaces the IAS 17 with a significant impact on the accounting by lessees that are now required to recognise a lease liability reflecting future lease payments and a "right-of-use asset" for all lease contracts, except for certain short-term leases and for low-value assets. The definition of a lease contract also changed, being based on the "right to control the use of an identified asset". The impact of this standard is being assessed by Ibersol's management.

h) IFRS 17 (new), 'Insurance contracts' Leases' (effective for annual periods beginning on or after 1 January 2021). This standard is still subject to endorsement by European Union. This new standard replaces IFRS 4 and applies to all entities issuing insurance contracts, reinsurance contracts and investment contracts with discretionary participation characteristics. IFRS 17 is based on the current measurement of technical liabilities at each reporting date. The current measurement can be based on a complete "building block approach" or "premium allocation approach". The recognition of the technical margin is different depending on whether it is positive or negative. IFRS 17 is of retrospective application. This change is not applicable to the entity.

i) Annual Improvement 2014 – 2016 (generally effective for annual periods beginning on or after 1 January 2017). These improvements are still subject to endorsement by European Union. The 2014-2016 annual improvements impacts: IFRS 1, IFRS 12 and IAS 28. Its application is not expected to have significant impacts.

Interpretations:

a) IFRIC 22 (new), 'Foreign currency transactions and advance consideration' (effective for annual periods beginning on or after 1 January 2018).This interpretation is still subject to endorsement by European Union.An Interpretation of IAS 21 'The effects of changes in foreign exchange rates' it refers to the determination of the "date of transaction" when an entity either pays or receives consideration in advance for foreign currency denominated contracts". The date of transaction determines the exchange rate used to translate the foreign currency transactions. Its application is not expected to have significant impacts.

b) IFRIC 23 (new), 'Uncertainty over income tax treatment' (effective for annual periods beginning on or after 1 January 2019). This interpretation is still subject to endorsement by European Union. This is an interpretation of IAS 12 - 'Income tax', referring to the measurement and recognition requirements to be applied when there is uncertainty as to the acceptance of an income tax treatment by the tax authorities. In the event of uncertainty as to the position of the tax authority on a specific transaction, the entity shall make its best estimate and record the income tax assets or liabilities under IAS 12, and not under IAS 37 - "Provisions, contingent liabilities and contingent assets ", based on the expected value or the most probable value. The application of IFRIC 23 may be retrospective or retrospective modified. Its application is not expected to have significant impacts.

20. SUBSEQUENT EVENTS

There are no subsequent events to 30th September 2017 that may have a material impact on the financial statements presented.

21. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors and authorised for emission on 28th November 2017.

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