Jeronimo Martins — Interim / Quarterly Report 2015

Nov 25, 2015

CONSOLIDATED REPORT & ACCOUNTS First Nine Months 2015

Unaudited

INDEX

I – Consolidated Management Report

• Message from the Chairman and CEO Pedro Soares dos Santos 3
• 1. Sales Analysis 3
• 1. Results Analysis 4
  2. 1. Balance Sheet 5
  3. 1. Outlook 2015 6

II – Consolidated Management Report Appendix

• 1. Sales Growth 7
• 1. Store Network 7
• 1. EBITDA Margin Breakdown 7
• 1. Financial Costs Breakdown 7
• 1. Definitions 7
• 1. Information Regarding Individual Financial Statements 7

III – Consolidated Financial Statements

• 1. Consolidated Financial Statements 8
• 1. Notes to the Consolidated Financial Statements 12

I

CONSOLIDATED MANAGEMENT REPORT

Message from the Chairman and CEO – Pedro Soares dos Santos

'In the first nine months of the year the Group strengthened its competitive position in all markets where it operates while strongly increasing cash flow generation.

Biedronka strengthened its market share and continues reinforcing the competitiveness of its model for the future.

In Portugal, Pingo Doce and Recheio continued to outperform their respective markets.

In Colombia, in line with our expansion plan, we opened a second region in the Caribbean Coast, and we had 110 stores operating under the Ara brand at the end of September.

With most of the year behind us, I feel reassured by the proven capacity of all our Companies to leverage on their differentiated strategies and to keep on track to deliver our targets, with top line growth as their main priority.'

1. Sales Analysis

(Million Euro)	9M 15		9M 14		D %		Q3 15		Q3 14		D %
		% total		% total Pln		Euro		% total		% total Pln		Euro
Biedronka										6,836 67.2% 6,191 66.3% 9.8% 10.4% 2,337 66.2% 2,162 65.9% 8.4%		8.1%
Pingo Doce		2,511 24.7% 2,391 25.6%				5.0%		888 25.2%		835 25.4%		6.4%
Recheio	631	6.2%	603	6.5%		4.6%	238	6.7%	229	7.0%		3.9%
Mkt. Repr. and Rest. Serv.	5 6	0.6%	5 6	0.6%		0.9%	2 0	0.6%	2 0	0.6%		0.3%
Others & Cons. Adjustments	140	1.4%	9 2	1.0%		n.a.	4 8	1.3%	3 5	1.1%		n.a.
Total JM	10,175		100% 9,333	100%				9.0% 3,531 100% 3,281 100%				7.6%

In the first nine months of the year, Group sales increased 9.0% to €10,175m (+8.7% excluding the currency impact).

The performance in the period was the result of solid delivery across all banners which drove Group LFL sales to increase by 3.3%.

In Poland, the competitive landscape remained intense and promotion oriented. Food deflation was at -2.2% in the nine months, softening from -2.1% in second quarter of 2015 to -0.9% in third quarter of 2015.

Biedronka total sales grew 10.4% to €6,836m both driven by 2.9% LFL sales increase and by our continued store expansion programme. In the third quarter of the year, Biedronka maintained a strong LFL of 3.5% with volume growth substantially overcompensating basket deflation which remained close to -3%. In the first nine months of the year, the Company opened 92 stores (72 net additions).

In third quarter of 2015 Biedronka focused on its revamping programme and its in-store adjustments in order to benefit fully from the new offer already in place.

In Portugal, while food inflation was 1.2% for the nine months of the year (+1.7% in third quarter of 2015) the market remained very promotion-driven.

Pingo Doce had another very strong quarter with LFL sales growth, excluding fuel, reaching 4.7% in the nine months of the year (+5.2% in third quarter of 2015).

Pingo Doce maintained its promotional strategy while continuing to improve the shopping experience (21 remodellings in the nine months) and quality and innovation of the overall offer. Pingo Doce opened 19 stores, two of which replaced existing locations.

Recheio delivered another sound quarter with LFL reaching 4.2% in nine months of the year (+3.9% in third quarter of 2015). Total sales increase 4.6% over the nine months of 2014.

In the nine months of the year, Ara and Hebe sales were €83m and €72m, respectively.

In September, Ara opened its second distribution centre entering in the Caribbean Coast region, and ended the month with a total of 110 stores.

(Million Euro)	9M 15			9M 14	D		Q3 15		Q3 14	D
Net Sales and Services	10,175		9,333		9.0%	3,531		3,281		7.6%
Total Margin	2,169	21.3%	1,980	21.2%	9.5%	757	21.5%	694	21.1%	9.2%
Operating Costs	-1,581	15.5%	1,432	15.3%	10.4%	-533	-15.1%	-488	-14.9%	9.3%
EBITDA	588	5.8%	547	5.9%	7.3%	224	6.4%	206	6.3%	8.9%
Depreciation	-221	-2.2%	-205	-2.2%	7.6%	-74	-2.1%	-70	-2.1%	5.4%
EBIT	367	3.6%	342	3.7%	7.1%	151	4.3%	136	4.1%	10.8%
Financial Results	-20	-0.2%	-26	-0.3%	-24.7%	-7	-0.2%	-8	-0.3%	-18.8%
Profit in Associated Companies	15	0.1%	15	0.2%	-0.4%	7	0.2%	7	0.2%	1.6%
Non-Recurrent Items	-7	-0.1%	-1	0.0%	n.a.	-3	-0.1%	-1	0.0%	n.a.
EBT	354	3.5%	330	3.5%	7.4%	148	4.2%	133	4.1%	10.7%
Taxes	-83	-0.8%	-74	-0.8%	11.5%	-34	-0.9%	-30	-0.9%	13.2%
Net Profit	272	2.7%	256	2.7%	6.2%	114	3.2%	104	3.2%	10.0%
Non Controlling Interests	-20	-0.2%	-19	-0.2%	4.3%	-11	-0.3%	-12	-0.4%	-2.0%
Net Profit attributable to JM	252	2.5%	237	2.5%	6.4%	103	2.9%	92	2.8%	11.5%
EPS (€)	0.40		0.38		6.4%	0.16		0.15		11.5%

2. Results Analysis

Operating Profit

At the Group level, in the nine months of the year consolidated EBITDA grew 7.3% to €588m. The respective margin was 5.8%, 10bps down from the margin registered in the same period last year. In third quarter of 2015, EBITDA grew 8.9% with an EBITDA margin of 6.4%, 10bps higher than in third quarter of 2014.

In the first nine months, Biedronka's EBITDA reached €474m, posting an increase of 9.4% on previous year (+10.8% in third quarter of 2015). EBITDA margin was at 6.9%, 10bps down in the nine months of 2014, reflecting the investments made in the value proposition.

The distribution businesses in Portugal reached an EBITDA of €169m, 1.3% ahead of the same period last year. EBITDA margin was at 5.4%, 20bps down on previous year impacted by the investments in the value proposition and in the top line.

Financial Results

Financial charges for the Group were €20m, €6m below the nine months of 2014 due to lower average net debt and lower cost of debt.

Net Results

Net Profit attributable to Jerónimo Martins in the nine months of the year was €252m, 6.4% ahead of the same period last year. The nine months of the year net profit includes start-up losses in Ara and Hebe which at EBITDA level amounted to €42m.

3. Balance Sheet

(Million Euro)	9M 15	2014	9M 14 (1)
Net Goodwill	642	640	647
Net Fixed Assets	2,997	2,940	2,895
Total Working Capital	-1,829	-1,778	-1,630
Others	114	111	119
Invested Capital	1,924	1,912	2,031
Total Borrowings	689	714	742
Leasings	0	1	2
Accrued Interest	5	4	10
Marketable Sec. & Bank Deposits	-519	-446	-305
Net Debt	176	273	449
Non Controlling Interests	248	243	240
Share Capital	629	629	629
Reserves and Retained Earnings	871	767	713
Shareholders Funds	1,748	1,639	1,582
Gearing	10.1%	16.7%	28.4%

(1) Change of accounting policies The Group changed the previous accounting policy for Land (classified as Tangible Assets) and adopted the historical cost for Land in the financial statements prepared as at December 31, 2014, as explained in the 2014 Annual Report. The Balance Sheet presented for September 2014 was restated in line with the new accounting policy.

Net Debt for the Group was €176m and Gearing was 10.1%.

Cash Flow

(Million Euro)	9M 15	9M 14
EBITDA	588	547
Interest Payment	-20	-23
Other Financial Items	11	16
Income Tax	-84	-85
Funds From Operations	496	455
Capex Payment	-283	-348
Working Capital Movement	51	0
Others	-5	1
Free Cash Flow	258	109

The Free Cash Flow in the period, after capex payments, was €258m, €150m above the same period in 2014.

Investment Programme

The Group Capex was €283m in the first nine months of the year, c.50% of which was invested in Biedronka.

Distribution from Free Reserves

At its meeting on November 4, 2015, the Board of Directors decided to request the Chairman of the General Meeting to summon an Extraordinary Shareholders' Meeting to present a proposal for the distribution of an amount of €235,662,832.50 from free reserves payable in 2015. This includes the dividends that would be paid in 2016 and is equivalent to the gross amount of €0.375 per share, to be distributed to the Shareholders proportionally to their holdings, excluding own shares.

4. Outlook for 2015

The solid performance in the first nine months of the year reinforces our confidence that the banners will deliver their targets. Our commitment to top line performance across the markets where we operate remains unchanged.

For Ara and Hebe EBITDA losses are still expected in the range €60-70m (excl. F/X).

Our capex for the year is estimated to be no higher than €450m following an efficient execution of the revamping plan in Biedronka.

The store opening programme in Biedronka is confirmed in line with the planned 100 new stores for the year.

Due to both strong volume growth and tightly controlled execution plan, Biedronka's EBITDA margin for the year is expected to be above the established floor of 6.5% on sales.

Lisbon, 4 th November 2015

The Board of Directors

CONSOLIDATED MANAGEMENT REPORT APPENDIX

1. Sales Growth

II

	Total Sales Growth						LFL Sales Growth
	Q1 15	Q2 15	H1 15	Q3 15	9M 15	Q1 15	Q2 15	H1 15	Q3 15	9M 15
Biedronka
Euro	11.2%	12.1%	11.7%	8.1%	10.4%
PLN	11.4%	9.8%	10.6%	8.4%	9.8%	2.9%	2.4%	2.6%	3.5%	2.9%
Pingo Doce	3.9%	4.7%	4.3%	6.4%	5.0%	3.4%	4.2%	3.8%	4.5%	4.1%
Ex-Fuel	4.7%	5.2%	4.9%	7.1%	5.6%	4.2%	4.7%	4.5%	5.2%	4.7%
Recheio	4.1%	5.8%	5.0%	3.9%	4.6%	4.7%	4.1%	4.4%	3.9%	4.2%

2. Stores Network

		Openings		Closings		Network
	Q1 15	Q2 15	Q3 15	9M 15	9M 15	9M 14
2,587	5 8	2 5	9	2 0	2,659	2,527
380	2	4	1 3	2	397	380
4 1	0	0	0	0	4 1	4 1
	2014

Sales Area (sqm)	2014		Openings		Closings/ Remodellings		Network
		Q1 15	Q2 15	Q3 15	9M 15	9M 15	9M 14
Biedronka	1,649,889	40,870	17,991	6,250	4,465	1,710,534	1,604,628
Pingo Doce	460,863	1,252	4,540	12,486	1,018	478,123	460,863
Recheio	128,665	0	0	0	524	128,141	128,665

3. EBITDA Margin Breakdown

(% of sales)	9M 15	% total	9M 14	% total
Biedronka	6.9%	80.7%	7.0%	79.1%
Distribution Portugal	5.4%	28.8%	5.6%	30.5%
Others & Cons. Adjustments	n.a.	-9.4%	n.a.	-9.6%
JM Consolidated	5.8%	100%	5.9%	100%

4. Financial Costs Breakdown

(Million Euro)	9M 15	9M 14
Net Interest	-17	-23
Exchange Differences	0	0
Others	-3	-3
Financial Results	-20	-26

5. Definitions

Like For Like (LFL) sales: sales made by stores that operated under the same conditions in the two periods. Excludes stores opened or closed in one of the two periods. Sales of stores that underwent profound remodelling are excluded for the remodelling period (store closure);

Cash Flow per share: (Net Profit + Depreciation – Deferred Tax – Non-recurrent Items) / Number of Shares;

Gearing: Net Debt / Shareholder Funds.

6. Information Regarding Individual Financial Statements

In accordance with number 3 of article 10 of the Regulation number 5/2008 of the Portuguese Securities Market Commission (CMVM), the Quarter Individual Financial Statements of Jerónimo Martins SGPS, S.A. will not be disclosed as they do not include additional relevant information, compared to the one presented in this report.

CONSOLIDATED FINANCIAL STATEMENTS III

CONSOLIDATED INCOME STATEMENT BY FUNCTIONS

FOR SEPTEMBER 2015 AND 2014

				Euro thousand
	Notes	9 Months 2015	9 Months 2014	rd Quarter 3 2015	rd Quarter 3 2014
Sales and services rendered	3	10,174,588	9,332,573	3,530,590	3,280,860
Cost of sales	4	(8,005,875)	(7,352,746)	(2,773,139)	(2,587,014)
Total margin		2,168,713	1,979,827	757,451	693,846
Distribution costs	4	(1,636,627)	(1,479,121)	(550,924)	(506,006)
Administrative costs	4	(165,266)	(158,263)	(56,004)	(51,955)
Exceptional operating profits/losses	4	(7,448)	(1,170)	(2,735)	(677)
Operating profit		359,372	341,273	147,788	135,208
Net financial costs	5	(19,707)	(26,171)	(6,768)	(8,334)
Gains in joint ventures and associates	9	14,610	14,676	6,686	6,581
Profit before taxes		354,275	329,778	147,706	133,455
Income taxes	6	(82,523)	(73,994)	(33,535)	(29,623)
Profit before non-controlling interests		271,752	255,784	114,171	103,832
Attributable to:
Non-controlling interests		19,528	18,718	11,457	11,687
Jerónimo Martins Shareholders		252,224	237,066	102,714	92,145
Basic and diluted earnings per share - euros	14	0.4014	0.3772	0.1634	0.1466

To be read with the attached notes to the consolidated financial statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

				Euro thousand
	9 Months 2015	9 Months 2014 (*)	rd Quarter 3 2015	rd Quarter 3 2014 (*)
Net profit	271,752	255,784	114,171	103,832
Other comprehensive income:
Items that will not be reclassified to profit or loss
	-	-	-	-
Items that may be reclassified to profit or loss
Currency translation differences	19,388	(7,534)	(5,732)	(3,621)
Change in fair value of cash flow hedges	2,533	138	955	(390)
Change in fair value of hedging instruments on foreign operations	(14,615)	755	65	(281)
Change in fair value of available-for-sale financial assets	(124)	10	(192)	(40)
Related tax	(792)	(11)	49	170
	6,390	(6,642)	(4,855)	(4,162)
Other comprehensive income, net of income tax	6,390	(6,642)	(4,855)	(4,162)
Total comprehensive income	278,142	249,142	109,316	99,670
Attributable to:
Non-controlling interests	19,996	19,127	11,646	11,712
Jerónimo Martins Shareholders	258,146	230,015	97,670	87,958
Total comprehensive income	278,142	249,142	109,316	99,670

To be read with the attached notes to the consolidated financial statements

(*) Restated – see note 2.3

CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 2015 AND 31 DECEMBER 2014

		Euro thousand
	Notes	30 September 2015	31 December 2014
Assets
Tangible assets	7	2,822,954	2,773,324
Investment properties	7	42,901	42,947
Intangible assets	7	815,509	806,194
Investments in joint ventures and associates	9	77,532	74,272
Available-for-sale financial assets		1,579	1,252
Trade debtors, accrued income and deferred costs	10	118,103	102,112
Deferred tax assets		50,629	51,349
Total non-current assets		3,929,207	3,851,450
Inventories		606,675	572,004
Income tax receivable		8,472	2,217
Trade debtors, accrued income and deferred costs	10	269,845	313,463
Derivative financial instruments	8	73	2,627
Cash and cash equivalents	11	487,927	430,660
Total current assets		1,372,992	1,320,971
Total assets		5,302,199	5,172,421
Shareholders' equity and liabilities
Share capital		629,293	629,293
Share premium		22,452	22,452
Own shares		(6,060)	(6,060)
Oher reserves		(61,345)	(67,267)
Retained earnings	13	915,656	817,398
		1,499,996	1,395,816
Non-controlling interests		247,838	242,875
Total Shareholders' equity		1,747,834	1,638,691
Borrowings	15	286,548	373,877
Trade creditors, accrued costs and deferred income	17	819	836
Derivative financial instruments	8	-	2,681
Employee benefits	16	42,659	42,460
Provisions for risks and contingencies	16	79,443	81,828
Deferred tax liabilities		52,526	58,890
Total non-current liabilities		461,995	560,572
Borrowings	15	402,927	340,925
Trade creditors, accrued costs and deferred income	17	2,659,729	2,616,004
Derivative financial instruments	8	2,560	1,715
Income tax payable		27,154	14,514
Total current liabilities		3,092,370	2,973,158
Total Shareholders' equity and liabilities		5,302,199	5,172,421

To be read with the attached notes to the consolidated financial statements

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

									Euro thousand
							Shareholders' equity attributable to Shareholders of Jerónimo Martins, SGPS, S.A.
	N o	Share	Share	Own		Other reserves		Retained		Non	Shareholders'
	t e s	capital	premium	shares	Cash flow hedge	Available-for sale financial assets	Currency translation reserves	earnings	Total	controlling interests	equity
Balance Sheet as at 31 December 2013 (*)		629,293	22,452	(6,060)	(2,453)	(1,251)	(48,111)	709,661	1,303,531	235,835	1,539,366
Equity changes in the 9 Months of 2014
Currency translation differences					5		(7,430)		(7,425)		(7,425)
Change in fair value of cash flow hedging					(391)				(391)	409	18
Change in fair value of hedging instruments on foreign operations							755		755		755
Change in fair value of available-for-sale financial investments						1,260		(1,250)	10		10
Other comprehensive income		-	-	-	(386)	1,260	(6,675)	(1,250)	(7,051)	409	(6,642)
Net profit								237,066	237,066	18,718	255,784
Total comprehensive income		-	-	-	(386)	1,260	(6,675)	235,816	230,015	19,127	249,142
Dividends								(191,672)	(191,672)	(15,042)	(206,714)
Balance Sheet as at 30 September 2014 (*)		629,293	22,452	(6,060)	(2,839)	9	(54,786)	753,805	1,341,874	239,920	1,581,794
Balance Sheet as at 31 December 2014		629,293	22,452	(6,060)	(2,548)	(157)	(64,562)	817,398	1,395,816	242,875	1,638,691
Equity changes in the 9 Months of 2015
Currency translation differences					(13)		19,105		19,092		19,092
Change in fair value of cash flow hedging					1,541				1,541	468	2,009
Change in fair value of hedging instruments on foreign operations							(14,615)		(14,615)		(14,615)
Change in fair value of available-for-sale financial investments						(96)			(96)		(96)
Other comprehensive income		-	-	-	1,528	(96)	4,490	-	5,922	468	6,390
Net profit								252,224	252,224	19,528	271,752
Total comprehensive income for the year		-	-	-	1,528	(96)	4,490	252,224	258,146	19,996	278,142
Dividends	13							(153,966)	(153,966)	(15,033)	(168,999)
Balance Sheet as at 30 September 2015		629,293	22,452	(6,060)	(1,020)	(253)	(60,072)	915,656	1,499,996	247,838	1,747,834

To be read with the attached notes to the consolidated financial statements

(*) Restated – see note 2.3

CONSOLIDATED CASH FLOW STATEMENT FOR SEPTEMBER 2015 AND 2014

			Euro thousand
	Notes	2015	2014
Operating activities
Cash received from customers		11,466,183	10,519,963
Cash paid to suppliers		(10,058,916)	(9,280,503)
Cash paid to employees		(775,374)	(691,119)
Cash generated from operations	12	631,893	548,341
Interest paid		(20,330)	(25,122)
Income taxes paid		(83,545)	(85,209)
Cash flow from operating activities		528,018	438,010
Cash flow from investment activities		(284,977)	(329,597)
Cash flow from financing activities		(183,920)	(166,366)
Net changes in cash and cash equivalents		59,121	(57,953)
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year		430,660	371,671
Net changes in cash and cash equivalents		59,121	(57,953)
Effect of currency translation differences		(1,854)	(5,183)
rd Quarter Cash and cash equivalents at the end of 3	11	487,927	308,535

To be read with the attached notes to the consolidated financial statements

CONSOLIDATED CASH FLOW STATEMENT FOR THE INTERIM PERIOD

			Euro thousand
	9 Months 2015	9 Months 2014	rd Quarter 3 2015	rd Quarter 3 2014
Cash Flow from operating activities Cash Flow from investment activities Cash Flow from financing activities	528,018 (284,977) (183,920)	438,010 (329,597) (166,366)	290,630 (109,619) (37,410)	273,099 (113,962) (161,985)
Cash and cash equivalents changes	59,121	(57,953)	143,601	(2,848)

To be read with the attached notes to the consolidated financial statements

1 Activity

Jerónimo Martins, SGPS, S.A. (JMH), is the parent Company of Jerónimo Martins Group (Group) and has its head office in Lisbon.

The Group is devoted to the production, distribution and sale of food and other fast moving consumer goods products. The Group operates in Portugal, Poland and Colombia.

Head Office: Rua Actor António Silva, n.º 7, 1649-033 Lisboa

Share Capital: 629,293,220 euros

Registered at the Commercial Registry Office and Tax Number: 500 100 144

JMH has been listed on Euronext Lisbon since 1989.

The Board of Directors approved these consolidated financial statements on 4 th November 2015.

2 Accounting policies

All amounts are shown in thousand euros (EUR thousand) unless otherwise stated.

The JMH consolidated financial statements were prepared in accordance with the interim financial reporting standard (IAS 34), and all other International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB) and with the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as adopted by the European Union.

The consolidated financial statements were prepared in accordance with the same standards and accounting policies adopted by the Group in the preparation of the annual financial statements, including an explanation of the events and relevant changes for the understanding of variations in the financial position and Group performance since the last annual report. Thus, some of the notes from the 2014 annual report are omitted because no changes occurred or they are not materially relevant for the understanding of the interim financial statements.

As mentioned in the Consolidated Financial Statements chapter of the 2014 Annual Report, point 30 - Financial risks, the Company, as a result of its normal activity, is exposed to several risks which are monitored and mitigated throughout the year. During the first nine months of 2015, there was no material changes in addition to the notes detailed below, that could significantly change the assessment of the risks that the group is exposed to.

2.1 New standards, amendments and interpretations adopted by the Group

In 2014, the EU issued the following Regulations, which were adopted by the Group from January 1st 2015:

EU Regulation	IASB Standard or IFRIC Interpretation endorsed by EU	Issued in	Mandatory for financial years beginning on or after
Regulation no. 1361/2014	Annual Improvements to IFRS's 2011–2013 Cycle: IFRS 1 First-time Adoption of IFRS, IFRS 3 Business Combinations, IFRS 13 Fair Value Measurement and IAS 40 Investment Property (Amendment)	December 2013	January 1, 2015

The Group adopted the new improvements, with no significant impact on the Consolidated Financial Statements.

2.2 New standards, amendments and interpretations endorsed by EU but not effective for the financial year beginning 1 January 2015 and not early adopted

The EU adopted several improvements to IFRS's, issued by the IASB and Interpretations issued by the IFRIC:

EU Regulation	IASB Standard or IFRIC Interpretation endorsed by EU	Issued in	Mandatory for financial years beginning on or after
Regulation no. 28/2015	Annual Improvements to IFRS's 2010–2012 Cycle: IFRS 2 Share-Based Payment, IFRS 3 Business Combinations, IFRS 8 Operating Segments, IFRS 13 Fair Value Measurement, IAS 16 Property, Plant and Equipment, IAS 24 Related Party Disclosures and IAS 38 Intangible Assets (Amendment)	December 2013	February 1, 2015
Regulation no. 29/2015	IAS 19 Employee Benefits: Defined Benefit Plans - Employee Contributions (Amendment)	November 2013	February 1, 2015

These amendments to standards are effective for annual periods beginning on or after February 1 st, 2015, and have not been applied in preparing these consolidated financial statements. None of these amendments is expected to have a significant impact on the Group's Consolidated Financial Statements.

2.3 Restatement of financial statements (change of accounting policies)

The Group has decided to adopt the historical cost for land (classified as tangible assets) in the financial statements prepared as at December 31, 2014, with restatement of the opening balances at January 1, 2014 and January 1st, 2013.

In accordance with IAS 8, the effects of the change in the accounting policy were applied retrospectively. There are no impacts on the Income Statement for the first nine months of 2014. The Balance Sheet opening and closing balances for the year 2014, Statement of Comprehensive Income and Statement of Changes in Shareholders' Equity were impacted as follows:

CONSOLIDATED BALANCE SHEET

		30 September 2014
	Published	Change of accounting policies	Restated
Assets
Tangible assets	2,854,225	(129,728)	2,724,497
Investment property	44,071	-	44,071
Intangible assets	817,574	-	817,574
Investments in joint ventures and associates	79,866	(2,897)	76,969
Other non-current assets	131,935	-	131,935
Total non-current assets	3,927,671	(132,625)	3,795,046
Inventories	544,732	-	544,732
Other current assets	292,399	-	292,399
Cash and cash equivalents	308,535	-	308,535
Total current assets	1,145,666	-	1,145,666
Total assets	5,073,337	(132,625)	4,940,712
Shareholders' equity and liabilities
Attributable to Jerónimo Martins Shareholders	1,420,867	(78,993)	1,341,874
Non-controlling interests	270,689	(30,769)	239,920
Total shareholders' equity	1,691,556	(109,762)	1,581,794
Borrowings	607,733	-	607,733
Deferred tax liabilities	78,068	(22,863)	55,205
Other non-current liabilities	120,967	-	120,967
Total non-current liabilities	806,768	(22,863)	783,905
Borrowings	136,770	-	136,770
Other current liabilities	2,438,243	-	2,438,243
Total current liabilities	2,575,013	-	2,575,013
Total shareholders' equity and liabilities	5,073,337	(132,625)	4,940,712

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		30 September 2014
	Published	Change of accounting policies	Restated
Net profit	255,784	-	255,784
Other comprehensive income:
Items that will not be reclassified to profit or loss	-	-	-
	-	-	-
Items that may be reclassified to profit or loss
Currency translation differences	(7,699)	165	(7,534)
Change in fair value of cash flow hedging	138	-	138
Change in fair value of hedging instruments on foreign operations	755	-	755
Change in fair value of available-for-sale financial assets	10	-	10
Related tax	20	(31)	(11)
	(6,776)	134	(6,642)
Other comprehensive income, net of income taxes	(6,776)	134	(6,642)
Total comprehensive income	249,008	134	249,142
Attributable to:
Non-controlling interests	19,127	-	19,127
Jerónimo Martins Shareholders	229,881	134	230,015
Total comprehensive income	249,008	134	249,142

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

					Shareholders' equity attributable to Shareholders of Jerónimo Martins, SGPS, S.A.
						Fair value and other reserves
	Share capital	Share premium	Own shares	Land revaluation	Cash flow hedge	Available for-sale financial assets	Adj. in joint ventures and assoc.	Currency translation reserves	Retained earnings	Total	Non controlling interests	Shareholders' equity
Balance Sheet as at 1 January 2014 - Published	629,293		22,452 (6,060)	76,230	(2,453)	(1,251)	2,897	(48,111)		709,661 1,382,658	266,604	1,649,262
Change of accounting policies	-	-	-	(76,230)	-	-	(2,897)	-	-	(79,127)	(30,769)	(109,896)
Balance Sheet at at 1 January 2014 - Restated	629,293		22,452 (6,060)	-	(2,453)	(1,251)	-	(48,111)		709,661 1,303,531	235,835	1,539,366
Comprehensive income restated	-	-	-	-	(386)	1,260	-	(6,675)	235,816	230,015	19,127	249,142
Dividends										(191,672) (191,672)	(15,042)	(206,714)
Balance Sheet as at 30 September 2014 - Restated	629,293		22,452 (6,060)	-	(2,839)	9	-	(54,786)		753,805 1,341,874	239,920	1,581,794

2.4 Transactions in foreign currencies

Transactions in foreign currencies are translated into euros at the exchange rate prevailing on the transaction date.

On the balance sheet date, monetary assets and liabilities expressed in foreign currencies are translated at the exchange rate prevailing on that date and exchange differences arising from this conversion are recognised in the income statement. When qualifying as hedges on investments in foreign subsidiaries the exchange differences are deferred in equity.

The main exchange rates applied on the balance sheet date are those listed below:

Euro foreign exchange reference rates (foreign exchange units per 1 Euro)	Rate at 30 September 2015	Average rate for the 9 Months
Polish Zloty (PLN)	4.2448	4.1532
Swiss Franc (CHF)	1.0915	-
Colombian Peso (COP)	3,497.5100	2,934.9200

3 Segments reporting

Management monitors the performance of the business based on a geographical and business nature. Due to the fact that the business units in the distribution area in Portugal share a set of competences, the Group analyses, on a quarterly basis, its segments in an aggregate performance perspective. In addition, the Group also analyses separately the distribution business unit in Poland. Apart from these, there are also other businesses, but due to their low materiality they are not reported separately.

Business segments:

• Portugal Distribution: comprises the business unit of JMR (Pingo Doce supermarkets), and the wholesale business unit Recheio;
• Poland Distribution: the business unit using the brand Biedronka;
• Others, eliminations and adjustments: includes i) the business units with low materiality (Marketing Services and Representations, Restaurants, Pharmacies and Drugstores in Poland and retail business in Colombia), ii) the Holding companies and iii) the Group's consolidation adjustments.

Management evaluates the performance of segments based on the Earnings Before Interest and Taxes (EBIT). This indicator excludes the effects of exceptional operating profits/losses.

R&A - First Nine Months 2015 Notes to the Consolidated Financial Statements

Detailed information by segment at September 2015 and 2014

	Portugal Distribution		Poland Distribution			Others, eliminations and adjustments	Total JM Consolidated
	2015	2014	2015	2014	2015	2014	2015	2014
Net sales and services				3,143,285 2,998,452 6,836,051 6,191,011 195,252			143,110 10,174,588	9,332,573
Inter-segments	169	104	1,121	1,182	(1,290)	(1,286)	-	-
External customers	3,143,116	2,998,348	6,834,930	6,189,829	196,542	144,396	10,174,588	9,332,573
Operational cash-flow (EBITDA)	168,952	166,813	473,936		433,232 (55,371)	(52,577)	587,517	547,468
Depreciations and amortisations	(80,163)	(81,779)	(130,164)	(114,640)	(10,370)	(8,606)	(220,697)	(205,025)
Operational result (EBIT)	88,789	85,034	343,772		318,592 (65,741)	(61,183)	366,820	342,443
Exceptional operating profits/losses							(7,448)	(1,170)
Financial results							(5,097)	(11,495)
Income tax							(82,523)	(73,994)
Net result attributable to JM							252,224	237,066
Total assets (1)	2,074,120	1,986,221	2,769,929	2,826,930	458,150	359,270	5,302,199	5,172,421
Total liabilities (1)	1,518,706	1,440,543	2,054,648	2,100,836	(18,989)	(7,649)	3,554,365	3,533,730
Investments in fixed assets	100,241	29,223	144,898	245,855	37,714	25,573	282,853	300,651

(1) The comparable amounts of total assets and liabilities are reported to 31 December 2014.

Reconciliation between EBIT and the operational result of the income statement by functions

	September 2015	September 2014
EBIT	366,820	342,443
Exceptional operating profits/losses	(7,448)	(1,170)
Operational result	359,372	341,273

4 Total margin and operating costs

	September 2015	September 2014
Net sales and services	10,174,588	9,332,573
Net cost of products sold	(7,979,824)	(7,331,903)
Net cash discount and interest paid to suppliers	(4,840)	(3,549)
Electronic payment commissions	(14,853)	(12,441)
Other supplementary costs	(6,358)	(4,853)
Cost of sales	(8,005,875)	(7,352,746)
Total margin	2,168,713	1,979,827
Supplies and services	(374,544)	(341,970)
Advertising costs	(54,103)	(51,314)
Rents	(247,516)	(225,955)
Staff costs	(785,274)	(694,571)
Amortization	(219,002)	(203,328)
Profit/loss with tangible and intangible assets	(1,344)	(1,676)
Transportation costs	(111,443)	(111,820)
Other operational profit/loss	(8,667)	(6,750)
Distribution and administrative costs	(1,801,893)	(1,637,384)
Legal contingencies	(291)	-
Losses from organizational restructuring programmes	(6,386)	(1,146)
Assets write-offs and gains/losses in sale of tangible assets	(981)	(24)
Others	210	-
Exceptional operating profits/losses	(7,448)	(1,170)
Operating profit	359,372	341,273

5 Net financial costs

	September 2015	September 2014
Interest expense	(18,792)	(25,206)
Interest received	1,710	1,723
Dividends	68	30
Net foreign exchange	109	(147)
Other financial costs and gains	(2,810)	(2,556)
Fair value of financial investments held for trade:
Derivative instruments	8	(15)
	(19,707)	(26,171)

The interest expense heading includes the interests regarding loans measured at amortized cost, as well as interests on fair value and cash flow hedging instruments (note 8).

Other financial costs and gains include costs with debt issued by the Group.

6 Income tax recognised in the income statement

	September 2015	September 2014
Current income tax
Current tax of the year	(90,392)	(71,551)
Adjustment to prior year estimation	356	1,171
	(90,036)	(70,380)
Deferred tax
Temporary differences created and reversed	6,842	(4,077)
Change to the recoverable amount of tax losses and temporary differences from previous years	(404)	(611)
	6,438	(4,688)
Other gains/losses related to taxes
Impact of changes in estimates for tax litigations	1,075	1,074
	1,075	1,074
Total income taxes	(82,523)	(73,994)

7 Fixed assets, intangible assets and investment property

	Tangible assets	Investment property	Intangible assets	Total
Net value at 31 December 2014	2,773,324	42,947	806,194	3,622,465
Foreign exchange differences	(2,551)	-	2,888	337
Increases	265,430	2	17,423	282,855
Disposals and write-offs	(3,328)	-	(134)	(3,462)
Transfers	(348)	-	348	-
Depreciation and impairment losses	(209,573)	-	(11,210)	(220,783)
Fair value changes	-	(48)	-	(48)
Net value at 30 September 2015	2,822,954	42,901	815,509	3,681,364

As a consequence of currency translation adjustment of the assets in the Group's businesses reported in foreign currency, the net amount of tangible and intangible assets increased by EUR 337 thousand, of which the amount of EUR 2,069 thousand is related to Goodwill.

The difference to total of amortisations stated in note 4, relates mainly to the production activities that were attributable to the cost of the goods sold.

R&A - First Nine Months 2015 Notes to the Consolidated Financial Statements

8 Derivative financial instruments

		September 2015				December 2014
	Notional	Assets			Liabilities		Assets		Liabilities
		Current	Non current	Current	Non current	Notional	Current	Non current	Current	Non current
Derivatives held for trading
Currency forwards (PLN)	5 million PLN	8	-	-	-		-	-	-	-
Cash flow hedging derivatives
Interest rate swap (EUR)	225 million EUR	-	-	994	-	225 million EUR	-	-	1,715	-
Interest rate swap (PLN)	500 million PLN	-	-	1,566	-	500 million PLN	-	-	-	2,681
Foreign operation investments hedging derivatives
Currency forwards (PLN)	50 million PLN	65	-	-	-	600 million PLN	2,627	-	-	-
Total derivatives held for trading		8	-	-	-		-	-	-	-
Total hedging derivatives		65	-	2,560	-		2,627	-	1,715	2,681
Total assets/liabilities derivatives		73	-	2,560	-		2,627	-	1,715	2,681

At September 2015 the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 1,104 thousand (December 2014: payable EUR 423).

9 Investments in joint ventures and associates

During the first nine months of 2015, the movement under this heading was as follows:

	Joint ventures		Associates		Total
	September 2015	December 2014	September 2015	December 2014	September 2015	December 2014
Opening balance	73,537	77,639	735	895	74,272	78,534
Equity method:
Net result	14,586	14,973	24	208	14,610	15,181
Dividends and other income received	(11,350)	(19,159)	-	(368)	(11,350)	(19,527)
Other comprehensive income	-	84	-	-	-	84
Closing balance	76,773	73,537	759	735	77,532	74,272

10 Trade debtors, accrued income and deferred costs

	September 2015	December 2014
Non-current
Other debtors	80,378	79,131
Collateral deposits associated to financial debt	34,367	19,367
Deferred costs	3,358	3,614
	118,103	102,112
Current
Commercial customers	57,303	50,868
Other debtors	89,209	97,649
Other taxes receivable	8,132	16,011
Accrued income and deferred costs	115,201	148,935
	269,845	313,463

Non-current debtors are mainly related to additional tax liquidation as well as pre-paid tax, which the Group has already contested and made a legal claim for reimbursement.

The debtor's amount is registered at the recoverable value. The Group constitutes provisions for impairment losses whenever there are signs of uncollectable amounts.

11 Cash and cash equivalents

	September 2015	December 2014
Bank deposits	200,286	171,790
Short-term investments	284,071	255,043
Cash and cash equivalents	3,570	3,827
	487,927	430,660

12 Cash generated from operations

	September 2015	September 2014
Net results	252,224	237,066
Adjustments for:
Non-controlling interests	19,528	18,718
Income tax	82,523	73,994
Depreciations and amortisations	220,697	205,025
Provisions and other operational gains and losses	6,709	1,924
Net financial costs	19,707	26,171
Profit/ Losses in associated companies	(14,610)	(14,676)
Profit/ Losses on tangible and intangible assets	2,122	1,706
	588,900	549,928
Changes in working capital:
Inventories	(36,565)	28,589
Trade debtors, accrued income and deferred costs	(8,695)	(7,607)
Trade creditors, accrued costs and deferred income	88,253	(22,569)
	631,893	548,341

13 Dividends

Dividends distributed in 2015 in the amount of EUR 168,999 thousand, include an amount of EUR 153,966 thousand paid to JMH Shareholders, and an amount of EUR 15,033 thousand paid to non-controlling interests in the Group companies.

14 Basic and diluted earnings per share

	September 2015	September 2014
Ordinary shares issued at the beginning of the year	629,293,220	629,293,220
Own shares at the beginning of the year	(859,000)	(859,000)
Shares issued during the year	-	-
Weighted average number of ordinary shares	628,434,220	628,434,220
Diluted net result attributable to ordinary shares	252,224	237,066
Basic and diluted earnings per share – euros	0.4014	0.3772

15 Borrowings

JM Nieruchomosci - Sp. Komandytowo-akcyjna contracted a loan on a total amount of PLN 415.000 thousand with maturity in 2020.

Renewal of the Commercial Paper Programme held by JMH and Recheio, SGPS until August 2020 with improvement of the financial conditions associated.

Jeronimo Martins Polska negotiated a new credit facility in a total amount of PLN 300.000 thousand for one year, renewable until 2020.

Early redemption of the loan held by Jeronimo Martins Polska that would end in 2017, in a total amount of PLN 150.000 thousand.

Jeronimo Martins Colombia issued new short term credit facilities in a total amount of COP 56.000.000 thousand and renewed other existing short term facility of COP 60.000.000 thousand for one more year.

15.1 Current and non-current loans

	September 2015	December 2014
Non-current loans
Bank loans	286,425	373,651
Financial lease liabilities	123	226
	286,548	373,877
Current loans
Bank overdrafts	16,348	58,327
Bank loans	161,435	56,544
Bond loans	225,000	225,000
Financial lease liabilities	144	1,054
	402,927	340,925

15.2 Financial debt

The Group entered into several foreign exchange rate risk and interest risk hedging operations, as well as shortterm investments. The net consolidated financial debt at the balance sheet date is as follows:

	September 2015	December 2014
Non-current loans (note 15.1)	286,548	373,877
Current loans (note 15.1)	402,927	340,925
Derivative financial instruments (note 8)	2,487	1,769
Interest on accruals and deferrals	2,922	2,622
Bank deposits (note 11)	(200,286)	(171,790)
Short-term investments (note 11)	(284,071)	(255,043)
Collateral deposits	(34,367)	(19,367)
	176,160	272,993

16 Provisions and employee benefits

	Risks and contingencies	Employee benefits
Balance at 1 January	81,828	42,460
Set up, reinforced and transfers	3,301	2,372
Unused and reversed	(2,446)	-
Foreign exchange difference	(15)	-
Used	(3,225)	(2,173)
Balance at 30 September	79,443	42,659

17 Trade creditors, accrued costs and deferred income

	September 2015	December 2014
Non-current
Other non-commercial creditors	1	-
Accrued costs and deferred income	818	836
	819	836
Current
Other commercial creditors	2,189,044	2,182,406
Other non-commercial creditors	164,426	175,726
Other taxes payables	81,748	79,456
Accrued costs and deferred income	224,511	178,416
	2,659,729	2,616,004

18 Contingencies

Following the contingencies mentioned in the 2014 Annual Report, changes occurred on the headings as follows:

f) The Portuguese Tax Authorities carried out some corrections of VAT rates applied to certain goods sold by some Group companies. With these corrections the total amount of assessments for the years 2005 to 2012 in Pingo Doce, Feira Nova and Recheio amounted to EUR 1,814 thousand, EUR 1,300 thousand and EUR 551

thousand, respectively. The Board of Directors believes that the Tax Authorities have no grounds to request this payment and these assessments have been challenged;

• i) Sociedade Ponto Verde (SPV) claimed through a judicial proceeding against Pingo Doce, in September 2014, an amount of EUR 3,397 thousand (including outstanding interest), related to the Management of the secondary and tertiary packaging waste system. Pingo Doce contested considering that SPV does not manage that kind of waste and therefore no amount is due. The Civil Court, having the same understanding of Pingo Doce, declared itself materially incompetent to decide the case, saying that it should be judged by the administrative courts. SPV filed an appeal to the Court of Appeal. The Court of Appeal ruled in favor of SPV and the case returned to the Civil Court, where the procedure stands by;
• j) The Food and Veterinary Department (Direcção-Geral de Alimentação e Veterinária) claimed from Pingo Doce the amount of EUR 8.654 thousand, in respect of the Food Safety Tax (Taxa de Segurança Alimentar Mais – TSAM) assessed for the years 2012 to 2015. The values at stake have been challenged in Court by Pingo Doce, since it understands that this tax is not due, namely on the grounds of the unconstitutional nature of the Statute that approved the TSAM.

19 Related parties

Sociedade Francisco Manuel dos Santos owns 56.14% of the Group. No transactions occurred between this Company and any company of the Group in the first nine months of 2015, neither were there any amounts payable or receivable between them on September 30th, 2015.

Balances and transactions of Group companies with related parties are as follows:

	Sales and services rendered		Stocks purchased and services supplied
	September 2015	September 2014	September 2015	September 2014
Joint ventures	46	346	75,055	69,658
Associates	-	-	-	9
Other related parties (*)	69	73	89	191

	Trade debtors, accrued income and deferred costs		Trade creditors, accrued costs and deferred income
	September 2015	December 2014	September 2015	December 2014
Joint ventures	263	640	17,741	5,774
Associates	-	-	-	-
Other related parties (*)	34	17	-	-

(*) Entities controlled by the major Shareholder of Jerónimo Martins and entities owned or controlled by members of the Board of Directors.

All the transactions with these related parties were made under normal market conditions, i.e. the transaction value corresponds to prices that would be applicable between non-related parties.

Outstanding balances between Group companies and related parties, being a result of a trade agreement, are settled in cash, and are subject to the same payment terms as those applicable to other agreements celebrated between Group companies and their suppliers.

The amounts receivable are not covered by insurance and no guarantees are given or received, as the Group holds a relevant influence over these companies.

There are no adjustments for doubtful debts and no costs were recognised during the year related with bad or doubtful debts with these related parties.

20 Events after the balance sheet date

At the conclusion of this Report there were no relevant events to highlight that are not disclosed in the Financial Statements.

Lisbon, 4 th November, 2015

The Certified Accountant The Board of Directors