Sonae, SGPS, S.A.

Good morning. We welcome you to SONAI's first half 2024 results conference call. During the presentation hosted by Mr. Joao Dolores, SONAI CFO, all participants will be in a 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 1 on your telephone keypad. If you're experiencing any difficulty in listening to the conference at any time, please try calling from a different device. I will now hand the call over to Mr. João Delores. Please go ahead, sir.

Good morning. Hi, everyone. Welcome to SONAI's results conference call for the first half of 2024. Together with me, I have the investor relations team, as usual, and also Cristina Novaes from BrightPixel, Fernando Van Gley from NP, Luis Matabuart from Sierra, and Paul Simoes from Varden. I would like to start by giving you a brief update on our portfolio, a brief reminder of a number of transactions that were completed recently. We've made significant moves, as you know, in these first six months of the year and are also already in Q3, totaling more than €1 billion invested in new companies that have joined the portfolio. In March, as you know, we integrated Musti into our portfolio following the successful public tender offer launched at the end of 2023, which totaled an investment of around 700 million euros. In April, our subsidiary Sparkfood completed the acquisition of a majority stake in BCF Life Sciences in France, for just over 160 million euros, further expanding its portfolio within the food ingredients ecosystem. And already in July, we finally concluded the Druni and Arnel merger in Spain, creating the largest player in that country in the health and wellness and beauty retail segment, and together with Wells, the largest operation in Iberia. These are important transactions, obviously, that will significantly change the financial profile and also the diversification profile of the group in the coming months. Regarding Druni in particular, as we know, we had this transaction on hold for quite some time. We were waiting for the competition authority authorization, but we were finally able to complete the transaction in the beginning of July. As I said before, it creates the Spanish market leader in the health and wellness and beauty segment with nationwide coverage through a network of more than 470 stores and a strong e-commerce operation. Druni and Adam L. together reached the total combined turnover of over 1 billion euros in 2023, and together with Wells, the full health and wellness and beauty network of MC surpasses 770 stores, and a turnover in 2023 of 1.3 billion euros. So the transaction, as you saw, implied an investment by MC of 148 million euros in addition to its 60% stake in Arnal, which was contributed to the joint venture. Simultaneously, Druni acquired the remaining 40% stake in Arnal from its founding shareholders for 81 million euros. Therefore, the combined entity is now a 50-50 partnership between MC and Druni's founding shareholders. Druni will be fully consolidated by MC and Sonai from Q3 onwards, given the governance rights enclosed in the shareholder agreement. This being said, our NAV had a slight decrease this quarter. This decrease was on the back of lower market multiples when we were in food retail. as our operational performance was quite solid, as we will see, and had a positive impact on NAD. In terms of real estate, Sierra, as you will also see, also had positive re-evaluations of its properties, also with a positive contribution towards the evolution of NAD. Let's have a look now at our largest businesses, starting with NC, as usual. MC continued to show a remarkable operational and financial performance at the beginning of this year in a context of a significant reduction of food inflation and also intense competition in the Portuguese grocery market. In food retail, the company continued to gain market share, continued to grow quite significantly, which is a testament to the ability that the team has had to improve its value proposition and serve customers in a demanding market. On the health and wellness and beauty segment, we continued to grow at double-digit rates, above 10%, both in Arnal and also in Wells, with also an increase in profitability. Total turnover increased by 7.8% to 3.3 billion euros in the semester, with a like-for-like growth of 5.7%. So in the context of very, very low inflation, around 1% inflation, this implied a significant volume increase in the first half of the year. Profitability improved on the back of this solid top-line performance and also additional efficiency gains that were executed by the company. And this enabled MC to maintain its price competitiveness and gain market share as we saw before. At the end of the first half of 24, MCs on the line of EPA margin improved in total 10 basis points year-on-year to 9.3% and reached 305 million euros. Regarding Vorten, the company also improved its market share at the beginning of this year, both online and offline, in a highly competitive and promotional electronics market in Portugal. Total turnover reached 593 million euros in the first half of the year, a 6.5% growth, 3.7% increased like-for-like, with the online channel remaining a key contributor to this level of growth, having increased 14% in sales year-on-year. A quick note also to our services line of business and also third-party additional categories in the marketplace, which continue to register quite strong growth. And iServices in particular has been delivering impressive performance and has expanded internationally in the last few months, already with 18 stores outside Portugal spread between Spain, Belgium, and France. Regarding profitability, Vorten had subdued Q2, and so the increase in market share and the increase in sales was done at the expense of more pressured profitability. Overall, in the first semester, underlying EBITDA stood practically flat in absolute terms at €25 million versus last year, with a 4.1% margin. We expect the rest of the year to see more solid a profitability profile without tampering, obviously, the growth of the company and the market share gains that the company has been able to achieve in the last few months. As for Moosti, the company released its nine-month results yesterday that run from October to June. In the quarter, the market context was particularly challenging as consumer confidence moderated and discretionary consumption decreased, particularly in Finland, the company's main market. In terms of the nine-month results, net sales increased by 4% to 317 million euros, and the BCA was pressured by the decrease in gross margin due to targeted investments in price and promotional activities, in particular, in the last quarter. Nevertheless, we believe that Moosky's leadership position and unique concept is well-positioned to benefit from the improving economic outlook and market trends in pet care research. The company actually increased its leadership position in share of Wallet in recent months, having added a significant number of new pet owners to its customer base, and we expect performance to improve up to the end of the year. Moving to Sierra. The company has been able to consistently deliver a solid performance in its shopping center portfolio. So when we look at the company's shopping center portfolio, we see tenant sales increasing 5% like the like. Occupancy rates continue to be high, above 98%. And footfall also above last year and also above pre-pandemic levels. If you recall, in the years that followed the pandemic, sales were above 5%. but footfall was still below the pre-pandemic levels, and now we have seen both footfall and sales above that period, which is obviously positive news. I would point out in this quarter the improved asset revaluations, as I mentioned at the beginning. This was due to improved operational performances of the shopping centers, as yields were practically stable this semester. This obviously had a positive impact on indirect results that reached 18.5 million euros, and net results also had a positive evolution, an increase of 17% year-on-year to 45 million euros. So overall, the company's NAV continued to increase, 26 million euros up to 1.083 billion euros at the end of June. A quick note on NOSH, that already reported its results, showing another quarter with very strong operational performance and growth, particularly in its core telco business. In our account, the equity methods that contribute to our results reached 29 million euros in Q2, 24, so an increase of 14 million euros versus last year. And this was fueled by both the operational performance that the company showed and also the significant capital gain of €31 million related to the sale of another portfolio of mobile towers to Celmex in the course. In May, Nosh paid a dividend per share which was 36% higher than last year's ordinary dividend, resulting in a €67 million cash inflow for Sona. Finally, BrightPixel. I would say that this was a stable quarter for BrightPixel. No significant investments in the quarter. A company which retains its practically stable NAV in the quarter and implies a cash on cash of 1.9 times versus capital invested historically. So overall, when we look at our consolidated figures, total turnover grew 11% year-on-year to 4.3 billion euros. This was mainly driven by MC's performance and also the growth that we saw at Morton, as well as due to the consolidation of Moosky in this quarter. And the line of EPA increased by 14% year-on-year to 342 million euros. once again fueled by the resilience of MCE's profitability and also Mucy's integration into the portfolio in Q2. Total consolidated EBITDA actually increased more than that, 18% year-on-year to 410 million euros, obviously benefiting from the performance at the underlying EBITDA level, coupled with a higher equity method contribution, especially from NOS, as was already explained before. This positive operational performance was partially offset by higher depreciations, given the strong investments that we have been making in our businesses, namely in terms of expansion, but also IT, and also increased financing costs and higher taxes. In any case, direct results increased 15 million euros year-on-year to 95 million in the first half of the year, and net results stood at 75 million euros, a 9 million euro increase versus 23 million. In terms of cash flow generation, the group maintained the healthy recurrent cash flow profile. Total net debt increased year on year, but this was exclusively due to the significant acquisitions that were executed in the last 12 months. But we continue to have a quite solid financial position with significant available liquidity facilities and a very comfortable debt maturity profile of close to four years. If you look at financial ratios, our holding LTV reached 16%, slightly surpassing our desired cap of 15%, but this is temporary as we will work to bring this down in the coming months. All our business' financial ratios remain at quite comfortable levels. For the rest of the year, we basically maintain the views that I shared with you in our last call. So we remain confident that our main businesses will continue to deliver solid performances while reinforcing their leadership positions, as we will naturally focus on integrating the most recent acquisitions and driving the value creation plans that underpin these investments. This is all for now. Thank you. You can now open the session to Q&A.

If you would like to ask a question, please press star 1 on your telephone keypad. Please ensure your line is unmuted locally, as you will be advised when to ask your question. And our first question comes from the line of João Pinto from JB Capital. Please go ahead.