Investor Presentation • Sep 3, 2018
Investor Presentation
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September 2018
Sonae MC is the Leading Food Retailer in Portugal
1
in Grocery retail in Grocery retail e-commerce in Healthy nutrition in Para-pharmacies
709 directly operated stores 49% real estate ownership(1) ~30k employees
Turnover ~€4.1bn(2) Underlying EBITDA ~€301m (~7.4% margin) (3)
100% brand awareness(4)
Note: For the purpose of the potential IPO and for this document, Sonae MC business is now defined as: i) the operation of food retail and adjacent formats (brands presented in the next slide), operated directly or through franchise agreements; ii) ownership and management of related retail real estate properties, part of which is leased to third and related parties, as well as iii) rendering back office services to related parties. Financial information relates to year ended 31 December 2017 and is based on unaudited preliminary annual combined financial statements for the potential IPO perimeter. Sonae MC's store data as of June 2018. Sonae MC has additional 344 franchised stores and 1 outlet store.
(1) Freehold real estate ownership calculated as stores sales area ownership in percentage of total stores sales area (based on December 2017 figures).
(2) Turnover: total revenue from sales and services rendered.
(3) EBITDA: profit before interest, tax, dividends, share of profit or loss of joint ventures and associates, depreciation and amortization, provisions and impairments losses and net capital gains/losses on disposal/(write off) of fixed assets excluding net gains on sale & leaseback transactions; Underlying EBITDA: means EBITDA excluding non-recurring items (capital gains/losses from sale & leaseback transactions of real estate assets). Underlying EBITDA is adjusted for items impacting comparability and thus provides an understanding of our underlying profitability. (4) Based on study by Instituto de Marketing Research (IMR) on behalf of Sonae MC.
Food retail as core offer, complemented by adjacent formats
Acquired key
Unique opportunity to gain direct exposure to the growing Portuguese food retail market
Leading food retailer in a highly competitive environment
Strong retail network & digital platform
Comprehensive network of food retail formats in urban locations complemented by an unrivalled digital platform
Exceptional brand power and customer engagement
1 2 3 4 5 6 7
Most recognized retail brand in Portugal with a unique loyalty programme covering ~85% of Portuguese households(1)
Highly efficient operator
Best-in-class supply chain capabilities and continuous focus on efficiency
Strong financial performance
Track record of growth and FCF generation with best-in-class
real estate ownership
Clear growth strategy
margin and >40% Three growth pillars, executed by highly experienced management team
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Unemployment rate
(2) Consumer confidence represents by how much optimistic views of consumers are superior to pessimistic views.
Source: IMF World Economic Outlook database, Ministry of Finance, Eurostat, AMECO
Portuguese food retail market is expected to continue its solid growth…
Portuguese consumers are increasingly focused on…
they buy
HOW they buy
1 Attractive Market Environment 2 3 4 5 6 7
+ Fresher + Healthier + Proximity/urban + Omnichannel
+ Convenient + Experience
+ Value + Choices + Smaller basket size
Note: Sonae MC store data as of 30 June 2018. Other players as of December 2017.
Presence in formats based on store split as per PlanetRetail RNG in 2017. Hypermarket & Superstores >2,500 sqm; Supermarket 400 – 2,500 sqm; Proximity <400 sqm.
Portuguese food retail market reached €19.7bn in 2017 as of May 2018.
Ranking excludes department stores due to specific product sales mix.
(1) Only includes Continente, Continente Modelo, Continente Bom Dia and Meu Super banners.
(2) Player is present in format, although not representative: Pingo Doce operates 9 Hypermarkets, E-Leclerc operates 2 Proximity stores and has recently started an e-commerce operation.
(3) Jerónimo Martins announced in April 2018 it would explore a partnership with a third party online platform (Mercadão).
(4) Auchan launched a proximity growth programme in the beginning of 2017.
Source: Company information, PlanetRetail RNG, CaixaBank BPI.
1 2 Leading Food Retailer in Portugal 3 4 5 6 7
2014-2017
Note: Rankings exclude department stores due to specific product sales mix. Source: PlanetRetail RNG as of May 2018.
15% 20%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
(1) Basket prices indexed to the lowest price operator.
(2) Continente and Continente Modelo's DECO pricing excludes promotions through the loyalty card (at minimum 2% annual cash discount).
Source: Nielsen; DECO (Portuguese Consumers' association), as of June 2018.
Note: Sonae MC's store data as of June 2018. Information regarding number of SKUs calculated based on 2017 average monthly figures.
(1) Figure includes 9 Continente Modelo franchised stores located in Azores.
Source: Company information.
… ahead of other European markets
Total supermarkets & neighbourhood sales – CAGR 2013-17
Mobile app: ~78k registered users accounting for c.20% of online turnover
Ability to leverage store estate with click & collect option
DRIVE THROUGH
Same-day nationwide delivery (7 days/week)
| 13% TOTAL SALES AREA |
|||||||
|---|---|---|---|---|---|---|---|
| Description | PARA-PHARMACIES | HEALTHY NUTRITION | COFFEE SHOP | STATIONERY, BOOKS AND GIFTS |
PET CARE AND VET SERVICES |
DIY | |
| Year of 1st opening | 2005 | 2005 | 2005 | 2007 | 2014 | 1995 | |
| # stores | Owned | 200 | 37 (10 / 27) (2) |
129 | 38 | 9 | 31 |
| Franchised | 28 | 1 (0 / 1) (2) |
7 | 6 | - | - | |
| (2016-17; net) | # stores opened in L2Y(1) | 55 | 7 (1 / 6) (2) | 18 | 11 | 8 | 1 |
| Average size (sqm) | ~100 | ~260 / 60(2) | ~60 | ~210 | ~100 | ~2,000 | |
| Average # of SKUs ('000) | ~2 | ~3 | ~0.4 | ~3 | ~1 | ~11 | |
| LFL growth (2016, 2017, 1H18) |
Positive | Positive | Positive | Positive | Positive | Positive | |
| Concept | • Para-pharmacies, including health, beauty products and well-being • Eye care |
• Chain of organic supermarkets and restaurants • Ambitious expansion plan with several openings / acquisitions in the last couple of years |
• Urban coffee shops, complementing their offer with simple meals • Focus on coffee, pastries and bread, served in comfortable environments |
• Stationery, bookstore and gifts • Complemented by convenience amenities, such as mail, payshop and printing services |
• Pet store brand, providing food, products and services for pets • Services include grooming as well as veterinary |
• Discounter in the DIY, light construction, bathroom and garden segments |
Note: Sonae MC store data as of June 2018. Sonae MC owns 51% of Go Natural's restaurants. Sonae MC owns 50% of Maxmat.
(1) Including franchised stores.
Source: Company information.
(2) Split refers to number and number of number, openings, and average size of supermarkets / restaurants.
Numerous awards and distinctions in areas such as workplace attractiveness and HR leadership
(1) Based on a study by Instituto de Marketing Research (IMR) on behalf of Sonae.
Source: Company information.
With purchases in the last 12 months
(1) Company estimate considering an universe of 4.1 million households in Portugal.
(2) Currently has 19 partners across industries.
Source: Company information, INE.
Permanently assessed and benchmarked to foster:
Note: Management figures.
(1) Measure of productivity based on picked boxes per hour taking only into account the impact of external effects to the logistics. External effects concern demand, type of stores, product range, etc.
(2) Costs directly related to logistic operations that depend on boxes or weight moved (eg. workforce, materials, third part operators, transportation costs).
(3) Store FTEs and general expenses of comparable stores at 2007 constant prices; general expenses exclude rents, electricity, customer bags and central cost.
Source: Company information.
1 2 3 4 5 6 Solid Financial Profile 7
Note: Financial information is based on unaudited preliminary annual and interim combined financial statements for the potential IPO perimeter.
(1) Turnover: total revenue from sales and services rendered.
(2) Like-for-like ("LFL"): management figures; sales from owned stores that operated under the same conditions in comparable months in both the current period and the prior comparative period, and excludes stores opened, closed or that underwent major upgrade works in one of the periods. LFL sales growth is the change in LFL sales compared to the prior period, expressed as a percentage.
| 2015 | 2016 | 2017 | 1H17 | 1H18 | ||
|---|---|---|---|---|---|---|
| Underlying EBITDAR(1) |
361 | 375 | 395 | 166 | 178 | |
| Margin (% of turnover) |
9.9% | 9.8% | 9.7% | 8.9% | 9.0% | |
| Rents from leased real estate |
(62) | (84) | (94) | (46) | (50) | |
| Underlying EBITDA(2) |
299 | 291 | 301 | 120 | 128 | |
| Margin (% of turnover) |
8.2% | 7.6% | 7.4% | 6.4% | 6.5% | |
| Freehold real estate ownership(3) |
62% | 51% | 49% | 51% | 49% |
Note: Financial information is based on unaudited preliminary annual and interim combined financial statements for the potential IPO perimeter.
EBITDA means profit before interest, tax, dividends, share of profit or loss of joint ventures and associates, depreciation and amortization, provisions and impairments losses and net capital gains/losses on disposal/(write off) of fixed assets excluding net gains on sale & leaseback transactions.
(1) Underlying EBITDAR means underlying EBITDA before rental costs related to leased real estate assets.
(2) Underlying EBITDA means EBITDA excluding non-recurring items (capital gains/losses from sale & leaseback transactions of real estate assets).
(3) Freehold real estate ownership calculated as stores sales area ownership in percentage of total stores sales area (year-end figures).
(4) Underlying EBITDA margin and underlying EBITDAR margin mean underlying EBITDA and underlying EBITDAR, respectively, as a percentage of turnover (total revenue from sales and services rendered). Source: Company information.
| (€m) | 2015 | 2016 | 2017 |
|---|---|---|---|
| Maintenance capex | (81) | (107) | (95) |
| Optimisation capex | (31) | (36) | (40) |
| Expansion capex | (38) | (100) | (84) |
| Gross capex(1) | (150) | (243) | (219) |
| Sale & leaseback(2) | 133 | 149 | 25 |
| Total net capex(3) | (17) | (94) | (194) |
Note: Financial information has been re-stated to reflect the perimeter for the potential IPO. Financial information is preliminary, has not been audited and is subject to final confirmation.
(1) Gross capital expenditure ("gross capex"): maintenance capital expenditure plus optimization capital expenditure plus expansion capital expenditure
(2) Net book value.
(3) Net capital expenditure ("net capex"): gross capital expenditure less sale & leaseback divestments (net book value of retail properties sold in sale & leaseback transactions).
Source: Company information.
Note: Financial information has been re-stated to reflect the perimeter for the potential IPO. Financial information is preliminary, has not been audited and is subject to final confirmation. Maintenance capex: investments to maintain and refurbish existing stores, as well as investments in non-store areas such as IT, warehousing, logistics and e-commerce. Optimisation capex: investments to significantly change existing stores or the customer experience. This type of investment goes beyond a typical store refurbishment. Expansion capex: investments to open new stores, including associated real estate investments.
EBITDA means profit before interest, tax, dividends, share of profit or loss of joint ventures and associates, depreciation and amortization, provisions and impairments losses and net capital gains/losses on disposal/(write off) of fixed assets excluding net gains on sale & leaseback transactions.
(4) FCF before net interest, dividends, expansion capex, divestments, net financial investments, and others = Underlying EBITDA + Maintenance capex + Optimisation capex + ΔWC + Income tax expense.
Uses of Cash: our Economic & Financial Priorities
(1) Like-for-like ("LFL"): sales from owned stores that operated under the same conditions in comparable months in both the current period and the prior comparative period, and excludes stores opened, closed or that underwent major upgrade works in one of the periods. LFL sales growth is the change in LFL sales compared to the prior period, expressed as a percentage.
(2) Net debt: gross debt (bank loans, bonds and other loans), less cash, bank deposits and current investments.
(3) EBITDA: profit before interest, tax, dividends, share of profit or loss of joint ventures and associates, depreciation and amortization, provisions and impairments losses and net capital gains/losses on disposal/(write off) of fixed assets excluding net gains on sale & leaseback transactions; Underlying EBITDA: EBITDA excluding non-recurring items (capital gains/losses from sale & leaseback transactions of real estate assets).
1 2 3 4 5 6 Solid Financial Profile 7
1 2 3 4 5 6 7 Clear Growth Strategy
. Strategic drivers Distinctiveness in critical consumer preference attributes Exploiting major market opportunities • Further develop value perception • Win in fresh • Step-up private label transformation programme • Drive the healthy nutrition agenda • Continued store network optimisation • Efficiency and effectiveness • E-commerce & digital • Proximity stores • Health & Wellness A B C Key areas of focus Reinforce… Market leadership Profitable growth + Drive traffic and basket size Secure best in class efficiency vs. peers Anticipate consumer trends to capture abovemarket growth Leveraging key operational processes Social purpose +
This document was prepared solely for informational purposes and does not constitute an offer to sell or the solicitation of an offer to buy any security. This document should not be construed as a prospectus or offering document and you should not rely upon it or use it to form the basis for any decision, contract, commitment or action whatsoever, with respect to any proposed transaction or otherwise.
This document was prepared and the analyses contained in it based, in part, on certain assumptions made by and information obtained from Sonae SGPS, S.A. (the "Company") and/or from other sources. Neither Barclays Bank PLC, BNP Paribas and Deutsche Bank AG, London Branch (the "Banks"), the Company nor any of their respective affiliates, officers, employees or agents, make any representation or warranty, express or implied, in relation to the fairness, reasonableness, adequacy, accuracy or completeness of the information, statements or opinions, whichever their source, contained in this document or any oral information provided in connection herewith, or any data it generates and accept no responsibility, obligation or liability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such information. The information and opinions contained in this document are provided as at the date of the document, are subject to change without notice and do not purport to contain all information that may be required to evaluate the Company. The information in this document is in draft form and has not been independently verified. The Banks, the Company and their respective affiliates, officers, employees and agents expressly disclaim any and all liability which may be based on this document and any errors therein or omissions therefrom.
Neither the Banks, the Company nor any of their respective affiliates, officers, employees or agents, makes any representation or warranty, express or implied, that any transaction has been or may be effected on the terms or in the manner stated in this document, or as to the achievement or reasonableness of future projections, management targets, estimates, prospects or returns, if any. The information contained in this document does not purport to be comprehensive and has not been subject to any independent audit or review. This presentation contains combined financial information prepared for the perimeter of the businesses proposed to be listed. This financial information is preliminary, has not been audited nor reviewed, and is subject to change. You should not place undue reliance on this financial information.
A significant portion of the information contained in this presentation is based on estimates or expectations of the Company, and there can be no assurance that these estimates or expectations are or will prove to be accurate. The Company's internal estimates have not been verified by an external expert, and the Company cannot guarantee that a third party using different methods to assemble, analyse or compute market information and data would obtain or generate the same results.
Statements in this document, including those regarding the possible or assumed future or other performance of the Company or its industry or other trend projections, constitute forward-looking statements. By their nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of the Company. Such factors may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there can be no assurance that such forward-looking statements will prove to be correct. You should not place undue reliance on forward-looking statements. They speak only as at the date of the document and neither the Banks nor the Company undertakes any obligation to update these forward-looking statements. Past performance does not guarantee or predict future performance. Moreover, the Banks, the Company and their respective affiliates, officers, employees and agents do not undertake any obligation to review, update or confirm expectations or estimates or to release any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of the presentation.
This document and any materials distributed in connection with this document are not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. This document does not constitute an offer to sell, or a solicitation of an offer to purchase any securities in the United States. The securities described herein have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in or into the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. In the United States, this document is directed only at persons reasonably believed to be "qualified institutional buyers" as defined in Rule 144A under the Securities Act. All offers and sales outside the United States will be made in reliance on Regulation S under the Securities Act. The document may not be reproduced, redistributed, published or passed on, directly or indirectly, to any person in Australia, Canada, Japan or any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.
Within the European Economic Area, this presentation is being made, and is directed only, to persons who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive 2003/EC and amendments thereto, including Directive 2010/73/EU, as implemented in member states of the European Economic Area ("Qualified Investors"). These materials do not constitute a prospectus within the meaning of the Portuguese Securities Code (Cόdigo dos Valores Mobiliários) and do not constitute an offer to acquire securities.
This presentation is for information purposes only and does not constitute an offering document or an offer of securities to the public in the United Kingdom to which section 85 of the Financial Services and Markets Act 2000 of the United Kingdom (as amended by the Financial Services Act 2012 of the United Kingdom) applies. It is not intended to provide the bases for any evaluation of any securities and should not be considered as a recommendation that any person should subscribe for or purchase any securities. In the United Kingdom, this presentation is being made, and is directed only, to persons who are both: (i) Qualified Investors; and either (ii) persons falling within the definition of Investment Professionals (contained in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order")) or other persons to whom it may lawfully be communicated in accordance with the Order; or (iii) high net worth bodies corporate, unincorporated associations and partnerships and the trustees of high value trusts, as described in Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). Any investment or investment activity to which this presentation relates in available only to Relevant Persons and will be engaged in only with Relevant Persons.
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