Sonae, SGPS, S.A.

Good morning. We welcome you to SONE's first quarter 2024 results conference call. During the presentation, hosted by Mr. Joao Dolores, SONE's CFO, all participants will be in listen-only mode. Q&A is available after the presentation. If you wish to ask a question during the Q&A session, you may do so by pressing the star key followed by one on your telephone keypad. If you're experiencing any difficulty in listening to the conference at any time, please make sure you have your headset fully plugged in, or alternatively, please try calling from a different device. I now hand the call over to Mr. Joao Dolores. Please go ahead, sir.

Good morning. Hello, everyone. Welcome to SANAE's results conference call for the first quarter of 2024. Besides myself and the investor relations team, we have on the call Cristina Novaes from BrightPixel, Fernando Wanzler from MC, Luís Mota Duarte from Sierra, and Paulo Simões from Vorten. I would like to start by giving you a quick note on our portfolio, as we have made important moves this year. The first quarter of 24 was marked by the integration of Musti into our portfolio. following the successful public tender offer launched in November of 23. In March, the consortium led by Sonai reached just over 80% of Musti's share capital with a total investment of roughly 700 million euros. This operation is an important step in the development and future proofing of our portfolio as we expand into new markets with a leading player in the pet care sector. Musti has been included in our consolidated accounts since March, though still with no material impact in the quarter's results. Already in April, our subsidiary Sparkfood completed the acquisition of an 89% stake in BCF in France for 160 million euros, expanding our portfolio of businesses in the food ingredients ecosystem. This company will obviously start being included in our accounts from the second quarter onwards. So, moving on to NAV, as usual, our net asset value grew almost 100 million euros this quarter and reached 4.6 billion euros at the end of March, which equates to 2.38 euros per share. This positive evolution was mostly fueled by profitability improvements at MC and Vartan, as we will see in the next few pages. So, let's have a look at our largest businesses in the portfolio, starting with retail and MC. MC showed once again a strong operational and financial performance in a context of a significant reduction in food inflation versus last year, and also intense competition in the Portuguese grocery market. Continente was able to increase its market share in this context and further reinforce its leadership position in the quarter, having opened six new proximity stores since the beginning of the year. The health and wellness and beauty segment also delivered positive results and fueled MC's revenue growth on the back of strong performances of both Wells in Portugal and Adenal in Spain. Total revenues increased by 9.4% to 1.6 billion euros, with a like-for-like growth of 7.6%, with grocery volumes recovering quite significantly this year. Profitability improved on the back of this solid top-line evolution, and also additional efficiency gains, which enabled MC to maintain its price competitiveness in the market. At the end of the first quarter, MC's underlying EVTA margin improved 20 basis points year-on-year to 8.6% and reached €139 million. As for Wharton, it also had a good start to the year, reinforcing its leadership position in the electronics market in the country. Both core segments and new growth avenues maintain the robust performance, with Vartan leveraging its marketplace, offering new categories and services to increase its share of wallets and customer loyalty. Total turnover reached €310 million in the first quarter, a 9.3% growth, and a 5.3% like-for-like increase. With the online channel continuing to be a key contributor to this growth, having grown 17% year-on-year, and already representing roughly 20% of total sales. Just a quick highlight to iServices that delivered a robust top-line growth while continuing to expand both in Portugal and also in foreign markets. The company is currently operating already in Spain, Belgium and France and has significant plans to continue to increase its presence in other geographies. Regarding profitability, Vartan's strong sales performance coupled with the ongoing cost efficiency measures led underlying EBITDA margin to improve 40 basis points year-on-year to 4.7%. Moving on to real estate, Sierra delivered strong results in Q1, once again, mainly fueled by the solid performance of the shopping center portfolio. Indeed, this portfolio delivered, once again, quite impressive results. Tenant sales increased year-on-year by 7.4% like-for-like, driven by the macroeconomic conditions and also rental contract inflation adjustments, as we continue to have practically full occupancy in our shopping centers, around 98% occupancy in total. The services area delivered a 5% year-on-year growth, driven by the contribution of new vehicles, such as the CTT real estate vehicle and also new RS in Germany, and new development projects continue to progress well. All in all, direct results increased in the quarter to 14.7 million euros, a 3.4 year-on-year increase, and NAV reached 1.1 billion euros at the end of March, slightly above the year-end figure. In terms of balance sheets, Sierra's gross LTV continued to reduce and reached 37.9% at the end of March. Just a quick note on our telco and technology businesses, so starting with NOSCH, As you know, Nosh already published its results some days ago, showing once again a solid operational and financial performance. The company continued to grow in the telco segments, both in B2C and B2B, where it continued to gain market share, and also had a very positive quarter in the media and entertainment segment, particularly in the cinema exhibition business. Net results were significantly influenced by an additional reimbursement of activity fees by Anacom, and this has a significant impact both in the net income of the company and also in the equity method results that consolidate at Sonai. The dividend of 35 cents per share relating to 23 results was already paid in April and resulted in a total cash-in for Sonicom of 67 million euros. As for BrightPixel, the company continues to develop its investment activities. It currently has a portfolio of 43 companies in total. In the first quarter, it did not execute any new investments, but it continued to manage its portfolio of existing investments. And at the end of Q1, NAV was quite stable, which shows the resilience of the portfolio of investments that we have. So NAV stood at €344 million and cash invested at €177 million. reflecting a cash-on-cash of the existing portfolio of around two times. Moving on to consolidated figures, our turnover grew 11% year-on-year in Q1, reaching €2.1 billion, mainly driven by MCI and Vorten that benefited from a resilient consumption momentum. Underlying EBITDA increased by 15% year-on-year to €158 million, mostly driven by profitability improvements at MC, which led underlying EBITDA margins to improve by 30 basis points to 7.6%. Total EBITDA followed a similar trend, increasing by 13% year-on-year to 180 million euros, benefiting from the underlying EBITDA performance, obviously, coupled with the higher equity method contribution, essentially from NOF, which more than offsets the sale of ISRG and its contribution in the first quarter of 2023. Looking at the bottom line, this very positive operational performance was partially offset by higher depreciations following our businesses' investments in the last few months, and also increased financing costs related to higher interest rates and also higher debt level, leading direct results to reach 33 million euros in the quarter. Indirect results benefited from some small foreign exchange rate impact in BrightPixel's portfolio shareholding. All in all, net result group share stood roughly stable year on year at 25 million euros. In terms of cash flow generation and debt, in the last 12 months, Sonai generated a solid operational cash flow of 112 million euros, This is a reflection of the strong operational performance of our main businesses, despite the significant investments that we are doing to accelerate our footprint, namely in food retail in Portugal, and also due to some important refurbishment efforts in our existing stores. When excluding Mussi's acquisition, consolidated net debt decreased by 224 million euros year on year. Obviously, with the investment in Mussi led total net debt to increase to 1.4 billion at the end of Q1, which was well expected. The group's capital structure remains solid, with a conservative loan-to-value, significant liquidity facilities available, and a comfortable debt maturity profile of above four years. Looking forward, and as we take a look at the rest of the year, we remain confident that our main businesses will deliver solid performances while continuing to reinforce their leadership positions. MC and Vartan will remain focused on reinforcing their market shares and also delivering further growth and profitability. And Musti will accelerate expansion in the Nordics while integrating itself within the Sonai ecosystem and looking for new international expansion opportunities. At Sierra, shopping centers should maintain the good momentum, while services are expected to grow further, supported on existing and new investment vehicles, together with new accretive developments that are being launched. BrightPixel will continue to pursue and invest in innovative startups to grow its portfolio and also manage its existing value in its current portfolios. In addition, and after Musti, we have already announced the completion of BCF, as I mentioned at the beginning, the BCF acquisition, and should be closing the Bruni transaction as well in the health and wellness and beauty space in Spain soon, as we get the approval from the Spanish Competition Authority. So we will be focused in successfully integrating in the group all the recently acquired companies. This is it for now. Thank you. You can now open the session to Q&A.

Thank you. Ladies and gentlemen, the Q&A session starts now. As a reminder, if you would wish to ask a question, please press star followed by one on your telephone keypad. And our first question comes from Joao Pinto from JB Capital. Please go ahead.