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The good performance in the food retail and the full consolidation of Sonae Sierra are improving the holding company’s top-line and profitability, the discount to NAV retracted to 18.9% but remains attractive.
Sonae SGPS
The holding company’s achievements in 2018 marginally exceeded our expectations revenue-wise, while its bottom line was largely more fuelled by Sonae Sierra’s capital gains and Sonae RP’s sale and leaseback transactions.
Sonae reported an increase in turnover thanks to the positive contribution from all businesses, particularly food retail.
The holding company’s achievements over Q1 18 exceeded the management’s targets for FY18 with all businesses reporting increased turnover and an improved underlying EBITDA in comparison with Q1 17.
The company’s achievements in 2017 exceeded our expectations revenue-wise, while its bottom line was lower than our expectations due to the impact of non-recurrent effects in 2016.
Sonae’s 9M17 revenues grew by 6.9% to €4,115m on a yoy basis, fuelled by the positive performance of all businesses: Sonae Retail, Sonae FS and Sonae IM. Sonae’s underlying EBITDA grew by €9.6% to €221m in 9M17. The underlying EBITDA margin added 10bp to 5.4%. However, the holding’s EBITDA declined by 8.1% on a yoy basis to €273m, impacted by the non-recurrent items registered last year (benefiting mostly from the capital gains arising from the sale and leaseback transactions completed by Sonae RP in 2016. Sonae’s indirect results stood at €37m, increasing by €16m on a yoy basis and lifted by the positive effect of the valuation of Sierra’s assets, as well as from a capital gain driven by the deconsolidation of MDS. Thus, the holding’s net income gave up only 2.9% to €133m.
Sonae’s H1 17 interim financial statements reveal an 8% yoy increase in the holding’s revenues to €2,603m, fuelled by growth of 10% in Q2 17. Sonae’s underlying EBITDA increased by 9.2% to €116m, on a yoy basis. Thus, Sonae’s underlying EBITDA margin increased from 4.4% in H1 16 to 4.5% in H1 17. However, Sonae’s EBITDA suffered a sharp decline of 24% to €142m, i.e. a 5.5% EBITDA margin, down from 7.8% in H1 16. Indeed, over 2016, Sonae benefited from the positive impact of non-recurrent items (mostly from the capital gains arising from the sale and leaseback transactions completed by Sonae RP in H1 16). Consequently, Sonae’s direct results were down 35.5% to €43m, driven primarily by non-recurrent items. Earnings from joint ventures rose by 24.5% in H1 17 to €32m, benefiting from the positive effect of the valuation of Sierra’s assets, as well as from a capital gain driven by the deconsolidation of MDS. Thus, Sonae’s bottom line gave up only 2.5% to €75m.
Sonae impressed with 8.8% growth over the last quarter, raising its FY16 sales to €5,198m. The Food Retail business, through Sonae MC, increased sales by 5.6% during the whole year to reach €3,687m. Specialised Retail, including electronic and clothing, was the star performer for the retailer with an 11.2% increase. Retail properties delivered €72m revenues vs. €121m the year previously.
Sonae released a 6.7% increase yoy in 9M total sales to €3,882m, mainly driven by the retail operations (4.1% lfl growth over Q3). EBITDA has slightly enhanced, benefiting from non-recurrent items, albeit the underlying EBITDA is below the FY2015/16 level. Most divisions experienced declining profitability. Sustained by indirect results including the mark-to-market effect of NOS, net profit stood at €141m vs. €146m a year ago. Sonae succeeded in lowering its net debt to €1,248m, despite committing greater capex predominantly in Food and Specialised Retail. Sonae Sierra manages a retail real estate portfolio with a €909m book value, of which 22% is freehold.
Driven by positive growth in Food and Non-food retail formats, FY 2015 sales increased by 0.8%, yoy to €5,014m. The strong sales momentum for Food retail in Q4 supported this performance (+1.8% yoy and positive lfl). Retail property continues to generate cash (despite lowered level compared to 2014) following its high profitability. Net book value of the capital invested in Sonae MC, SR and IM real estate assets amounted, at the end of 2015, to €1,047m. Accounted as an equity associate, Sierra’s result experienced a 15.9% jump, benefiting from the asset valuations and the yield compression. However, the depreciation of the Brazilian real offset the 2.8% tenant sales increase in Brazil and 2.0% rise in Europe.
