1. 2018 ANNUAL RESULTS HIGHLIGHTS:
- Sonae turnover reached 8.1% to €5,951 M, with growth across all business units
- Improved profitability, as underlying EBITDA grew 8.4% to €372 M
- Net result increased 33.7%, from €166 M to €222 M
- Investment rose to €702 M, driven by organic expansion and acquisitions
- Proposed dividend increase to 4.4 euro cents per share, corresponding to a dividend yield of 5.4%
Ângelo Paupério, Sonae Co-CEO, says, "2018 was a successful year for Sonae, marked by significant growth, improved profitability and the conclusion of an important stage of our strategic development.
Consolidated turnover reached €6 bn (+8.1%), with a positive contribution of all business units, in particular Sonae MC (+7.0%) and Worten (+7.6%), both showing also strong LfL growth levels.
In terms of profitability, recurrent EBITDA increased by 12.2% to €425 M and EBITDA reached €483 M, corresponding to a growth of 26.7%. I would also like to highlight the performance of Sonae MC, which, in a challenging market environment, maintained its benchmark profitability levels.
The Group's net income exceeded €220 M, growing by 33.7%, with a particularly positive evolution of direct income which increased 58.3% versus 2017.
2018 was also marked by the endeavor to optimize the Group's organisational structure, with a special focus on strengthening management teams, ensuring competencies and complementarities that enable greater levels of autonomy, agility and inherent accountability, thus creating the conditions to better respond to the growing challenges of ever-changing competitive landscapes.
In terms of portfolio management, we began the year by concluding the merger between SportZone and JD Sprinter, which led to the creation of ISRG, a strong Iberian operator benefitting from important synergies and already delivering very positive results. Also of considerable importance was the additional investment in Sonae Sierra, enhancing the Group's international profile and creating the conditions to accelerate the implementation of our capital recycling strategy and take advantage of existing real estate value creation opportunities in an international context. Finally, we must highlight the continued strong investment, in both capital and skills, in our growth avenues, particularly in the areas of health and wellness, technology for retail and telecommunications, and new financial services.
This intense activity coincided with the last year of the current Board of Director’s mandate of which I was part as Co-CEO and ensured that the transfer of responsibilities now taking place was made with increased comfort and confidence. I am certain that our company is prepared for the challenges ahead and I have the deepest conviction and sincere wishes that the new executive team led by Cláudia Azevedo will continue to enhance the success of this unique project that unites us all, which is Sonae.”
2. CONSOLIDATED ANALYSIS
All businesses accelerate sustained growth
In 2018, Sonae businesses continued to post a strong performance in both sales and profitability. Turnover increased 8.1% y.o.y to about 6 billion euros. This performance benefitted from positive contributions of Sonae’s retail businesses, namely from like-for-like sales and expansion of store network.
Similar to top line growth, Sonae’s underlying EBITDA grew 8.4% y.o.y to €372 M and, consequently, margin remained flat compared to 2017, at 6.3%.
Sonae EBITDA had a significant increase of €102 M, reaching €483 M, mainly fuelled by a strong operational performance and capital gains, from both Sonae Sierra’s sale of assets and Sonae RP’s sale and leaseback transactions, and also by the positive impact of the joint-venture with JD/Sprinter (ISRG). This EBITDA performance was the main reason for the 58% increase in direct results to €209 M, €+77 M when compared to 2017, and thus the net income group share which surpassed €220 M, versus €166 M in the previous year.
From a statutory point of view, Sonae now includes the full consolidation of Sonae Sierra following Sonae’s shareholding increase from 50% to 70% at the end of 3Q18. Thus far, Sonae Sierrra was considered through the equity method. On a pro-forma basis, and excluding Sonae Sierra’s total turnover from 4Q18 figures, Sonae consolidated turnover would have grown 7.3% and, excluding Sonae Sierra underlying EBITDA of €11 M, consolidated underlying EBITDA would have grown by 5.2% y.o.y, corresponding to a 6.1% margin.
Reduction of 223 million euros in debt on a like-for-like basis
Sonae strengthened its financial solidity, as net debt stood at €1,317 M at the end of 2018, including the acquisition of 20% of Sonae Sierra for €256 M and the consolidation of this company’s net debt. Taking into consideration the restated figures (pro-forma), that is, including the full consolidation of Sonae Sierra’s net debt at the end of 2017, Sonae’s net debt decreased by €223 M (-17.4%) y.o.y, to €1,061 M.
Sonae’s average gearing at book value decreased to 0.5x in 4Q18 compared to 0.6x in 4Q17, due to the group’s reinforced capital structure which is now composed of 71% equity.
In addition, excluding Sonae Sierra, Sonae was able to maintain a low average cost of debt of around 1%. Since the end of 2018, Sonae has already refinanced €200 M in long term facilities, which enables Sonae to secure a comfortable average maturity profile of around 4 years.
Capex above €700 M and support to 1,175 institutions
Investment in 2018 rose to €702 M, which includes: capex related with maintaining and expanding retail businesses, €256 M related with the acquisition of 20% of Sonae Sierra and Sonae Sierra capex in 4Q.
Growth across the several business units was accompanied by Sonae’s strengthened commitment to community, having invested 11 million euros in social economy organisations, through material goods, competences and financial resources to 1,175 institutions.