Sonae, SGPS, S.A.

Good afternoon, ladies and gentlemen. Welcome to SONE's 2024 results presentation. Our host today is Mr. João Dolores, SONE's CFO. This conference starts with a presentation followed by Q&A. And I'll pass the call on to Mr. Dolores. You may start, sir.

Thank you very much for the introduction. Good afternoon, everyone. Thank you for joining us for SONAI's 2024 results presentation. I'm very happy to have you here with us today. As you will see, we had great results last year. Together with me, as usual, and besides the Investor Relations team, I have Cristina Novaes on my left, Miguel Moreira as well, Fernando Vanzalera on my right-hand side, and Paul Simoes. Today we're trying out a new format, a video one. I hope it works well and that it helps also in conveying the main messages that we have to convey to you. So I'll start with briefly recalling the significant moves in our portfolio during 2024. As you know, it was a quite intense year in terms of investments. We invested over 1.1 billion euros in M&A efforts. And there are two transactions in particular, which I would like to highlight given the importance that they have for the group. So in March, as you know, we successfully built a leading position, a majority position in Musti, a reference pet care retailer in the Nordics through a public tender offer. So I currently own just over 80% of the company and we see Musti as promising platform for growth in the European pet care landscape. Last November, Musti extended its presence to new geographies, to the Baltics, by acquiring Pet City, a player that operates in all three Baltic countries. In July, we concluded the merger of Arenal with Druni under MC, thus establishing the leading health and wellness and beauty player in Iberia. And this is also a platform where we see great potential for continued growth on the back of a very, very strong year of 2024. All the acquisitions, the major acquisitions that we did last year are important stepping stones for growth, and they've all been done together with good, solid management teams that remain alongside us in the management of these companies. That is true for Druni, it's true for Musti, and it's also true for BCF, the largest acquisition done under Sparkfood in 2024. I will share a bit more information about the financials and the performance of these companies as I go along. So if you look at our portfolio right now, we believe we strengthened the portfolio in a number of areas. We have enlarged our presence in the retail sector. We have expanded our geographical reach, positioning ourselves for growth. And we strongly believe that these new opportunities can be captured in the months to come and we can help these companies accelerate their growth potential. Most of our companies are leading companies in their respective sectors, and in the sectors where we are not leaders, we have a clear path to achieve leadership. I would also like to highlight the transaction which was already completed in 2025, which was the acquisition by Nosh of Clarinet Portugal, a very important transaction, an investment of over 150 million euros to better position Nosh in the ICT space, in terms of services for B2B customers. So Nosh wants to position itself more and more as a digital partner for Portuguese companies, and this acquisition is going to be instrumental in that regard. I will now go into each one of the businesses, starting as usual with MC. MC had a fantastic year in 2024, as you can see. It continued to increase its market leadership position in food retail in the country. We enhanced our market share by 50 basis points, thus increasing the gap versus number two in the country. We grew in total more than 7% to 6.5 billion euros in the grocery segment, with a like-for-like of 4.4%, and a stable EBITDA margin versus 2023. If you look at the other segment, the other big segment that composes the Portugal.mc Health and Wellness and Beauty, We more than doubled the size of the business there, obviously with a contribution from Druni's acquisition. But even without that contribution, the business had a like-for-like growth of 10%, with very strong performances from both Wells and Adenal during the year, and with an enhanced EBITDA margin of 12.5%, also benefiting from the integration of Druni's results in the latter half of the year. If you look at consolidated figures for MC, MC reached record level turnover, so going by 15% to 7.6 billion, and the total of the TA margin went up from 9.7% to 10% in the year. In terms of balance sheets, the company continued to enhance its financial position. And if you look at the pro forma consolidation of Duni's numbers into our accounts, this means a decrease in net debt to VTA of 2.8 times, from 2.8 times to 2.7 times. Moving on to Vorten. Vorten also had a very positive year in terms of growth. So total growth of 8% to 1.4 billion euros. Slightly above that, if you consider total GMV, which includes the sales done by the sellers on our marketplace. 4.2% like-for-like growth with a very strong performance, not only in the core electronics business, but also in extended ranges that we have in the marketplace and also in the services business units. And so we continue to have a very strong momentum in all areas of Vorten's offering. And that means that we increased also our market share in Portugal, both offline and online in the core electronics segment. Small notes to ICE services, which continue to expand its presence internationally. And so it continued to grow in Portugal, but also expanding its presence in Spain, France and Belgium with a quite distinctive concept, which we believe can have further potential to grow outside of the country. In terms of total profitability, the margin was a bit pressured by increased costs and also gross margin erosion. But still, the team was able to almost compensate that fully with efficiency measures, and we were able to maintain the TA margin at a healthy level of 5.6%. Regarding most team. The numbers I'm showing here are for Q4, as Musti had to close the year with a 15-month period to align with our financial calendar. I would say that Musti's performance throughout the year was improving, so a bit of a hard couple of quarters in Q2 and Q3, with a challenging macroeconomic backdrop in the Nordics, putting some strain and some pressure on private consumption. But already in Q4, we saw improvements in terms of like-for-like growth, but also in terms of total growth. In the quarter, the company actually grew 5.6% to 122 million euros. And throughout the year, the company continued to improve its market share in all its key geographies. And so it was a tough backdrop in the market. But in Finland, in Sweden and in Norway, we continue to increase our market share, which is obviously quite important for us to make sure that we maintain our leading positions in these geographies and are better prepared to seize market growth when it resumes. And we feel that happening already going into 2025. In terms of profitability, the margin was a bit pressured, came down to 14.1%. But the economic outlook and consumer confidence that we are seeing right now in the Nordics are improving, driven by lower interest rates and also increased purchasing power. And most of these fundamentals remain quite strong. So we believe the company is well positioned to capitalize on this economic recovery and, again, the return of the pet care market to its long-term growth trajectory. Sierra. Our real estate business had a very strong momentum in its core shopping center operations, both in Europe and in Brazil. In Europe, our tenant sales reached 3.5 billion euros, increasing 5.3% year on year. So a very strong display in terms of footfall, in terms of sales from our tenants, and so with a very positive impact in our EBITDA and our direct results. Our shopping centers in Europe continue with practically full occupancy, which is a good sign of the quality of the assets. And if you look at total net results, we increased that by 9.8% to 97 million euros here, also with the contribution from revaluations of assets in the portfolio. This improved net results was the main driver for the increase in NEV, which grew by 4.5%. And our total assets under management increased also to 6.8 billion euros with a very strong weight of shopping centers, but already with a higher diversification in terms of real estate uses. As today, a quarter of our assets under management are already in alternative real estate segments. If you look at our LTV, it remains practically flat versus last year, so the company has a very healthy balance sheet and debt position. NOS, in its 10th anniversary, had its best year ever in terms of operational and financial performance. So it grew 6.2% to 1.7 billion euros with strong performances across all the segments, not only the telco business, but also in terms of the cinema exhibition business and within telco with strong displays in both B2C and B2C segments. That growth means that the company continues to gain market share in the Portuguese telco market. and is now even closer to number one in the market as we strive to reach market leadership in years to come. EBITDA margin was improved by 20 basis points to 38% as we continue to have strong efficiency measures deployed across the company and have registered a very, very strong operational performance. net income and free cash flow had an extraordinary performance in 2024 as you probably saw already as the company announced the results of the markets a couple of weeks ago net income increased 50 to 272 million euros free cash flow had a very strong increase to 360 million euros here both metrics influenced not only by the strong operational performance but also by some extraordinary impacts such as the sale of an additional set of mobile towers to sell next but also some rulings in our favor in terms of the activity fee that Anacom had to return to operators in 2024. But overall, a very strong display from Nosh, both operationally and financially. Bright Pixel had a resilient year. It was a less active year in terms of the investment management activity. But it was quite resilient here in terms of the performance of the underlying assets and also in terms of the valuation of these assets on our balance sheet. So currently we hold 45 companies in the portfolio in the three segments that you know, cybersecurity, retail tech and infrastructure and software. And during 24 BrightPixel invested in four new companies, mostly in the cybersecurity area. We also sold a couple of companies in the portfolio, but NAV was practically stable and it still represents roughly a two times cash on cash return vis-a-vis the investment that was made historically in these businesses. So going on to consolidate the results. If you look at our consolidated figures, this year was a milestone year for us. So we practically reached 10 billion euros. And in pro forma terms, we more than overcame that figure. So an 18% increase versus 2023. And even excluding M&A, we are talking about 7% growth in total. So quite strong growth. And if you look at the longer term trend here, if you look at the last nine or 10 years, you can see that the growth momentum has been accelerating. And this is very important for us because it means that obviously we are generating higher returns. We are reaching more communities. We are reaching more people with our value propositions and with our mission. And so this is really what drives us and what makes us run at the end of the day. So if you look at the last few years, you can see the acceleration of growth, which we expect to continue to register in years to come. The growth came from several angles, as you can see. So a very strong display from most of our retail businesses, but also from the acquisitions that we made throughout the years. So strong contributions from the MC food component, also from health and wellness and beauty, organically and inorganically, Vorten also with an important contribution to our growth, and then the consolidation of Moosky obviously has an important impact here as well. And so if you see, most of the growth came from our major retail businesses, and we expect that to be the case also in the next 12 months. In terms of EBITDA, we reached for the first time over a billion euros of total EBITDA, a 4.5% growth, This growth is actually even more significant if you take into consideration that last year we had 168 million euros of capital gains from the sale of our 30% stake at ISRG. But even with that tough comparable, we were able to increase our EBITDA by 4.5%. And again, if you look at a longer-term trend, you see that the growth in EBITDA has been double-digit in the last few years. And so this is also something which is very important to us, making sure that we grow, but we don't go at the expense of operating profitability, which has been increasing and improving in all our major businesses. All in all, our net result reached 223 million euros on a comparable basis, an 18% increase versus last year, if we exclude the contribution from the capital gain of ISRG last year. So quite strong display in terms of net income and bottom line. If we look at the evolution of our balance sheet and our debt, our debt actually increased by 160 million euros, but that's mostly on the back of the acquisitions that were done. during the year. If you look at the cash flow generation capacity of our portfolio, it reached 286 million euros. And then obviously with the 1.1 billion of M&A, we have this increase in debt. But still, we are at quite comfortable levels of leverage, 16% LTV, which we will bring down in the next few quarters and with very strong very attractive funding conditions, very enlarged maturity profiles, and with a very comfortable profile of debts, which is above three years right now in terms of maturity. So we are quite comfortable with the balance sheet that we have right now, but we will probably deleverage the company significantly over the next few quarters. Our dividend policy remains the same, and so we The dividend that will be proposed to the AGM will be, again, a 5% increase in DPS, which equates to a dividend yield of roughly 6%, 6.5%, which complies with our historical and very consistent dividend policy. We continue to progress also in a number of ESG objectives. We are on track on most of these objectives, which are quite stringent and quite demanding. We continue to decrease our carbon footprint by lowering our CO2 emissions. We reached 90% of plastic packaging recyclability in our own label. We have a very strong target of 100% by 2025. We will probably not be able to reach it because it's technically not possible. But the fact that we put this target out there means that we went from 70% in 2019 to 90% this year, which is an amazing achievement. and we are very proud of that. In terms of leadership positions occupied by women, we have a target of 45% by 2026. We are at 41% in 2024 and also on track to reach our desired goal. So, when I think about what's coming in 2025, it's hard to say, as you can imagine, in terms of global geopolitics and macroeconomy, So we are living under a backdrop of a lot of uncertainty, trade tensions, a lot of protectionist policies being waved around. And at the same time, lower interest rates should provide for some relief in terms of financial costs and also consumer spending. But in this evolving landscape, we need to do what we've always done in the last few years, which is to remain flexible, agile, making sure that we have the ability to act quickly on changing circumstances. and ultimately seek for long-term growth and value creation. All our businesses will strive to maintain their leading positions in their respective businesses, and I'm quite confident, given what we are seeing at this stage, that that will be the case. And so very happy to share these results with you as they reflect, again, the efforts of thousands of people that worked throughout the year to make these results possible. And now we will obviously be open for your questions. Thank you again for listening and for your trust in Sonaic. You can open the session to Q&A, please.

Thank you. Ladies and gentlemen, the Q&A session starts now. If you would wish to ask a question, please press star followed by one on your telephone keypad. Our first question comes from Joao Pinto of Sone. Your line is open, please go ahead.

Hi, good afternoon everyone. Thanks for taking my question. Regarding food retail, How is the competitive backdrop evolving in terms of promotion intensity? You keep reporting strong sales. Mercadona is also growing quite fast. How are competitors responding? Related to this, do you see any margin risk into 2025? And still on food retail, how many stores do you want to open in 2025? And what's the split between grocery and health and beauty? Then on Musti, are you seeing any signs of rebounds in terms of demand and could you provide your target for store openings in 2025? Thank you very much.

Okay, thank you Joel.

Hi Joel, thank you very much for your questions. tackling them one by one. So in terms of the competitive position, as you mentioned, the Portuguese market is highly competitive at the moment, the food retail market. And what we are seeing is the level of promotions more or less stable, a slightly increase over the last quarters. And in terms of price investment, we're seeing the players, I would say, quite aggressive in terms of the price investment in the market. Obviously, and that being said, MC has been performing well in terms of sales, as you mentioned. I would also say that in terms of the competitive landscape, it's important to mention the investments of many players in the market in terms of expansion and refurbishments, in terms of expansion. The sales area in the market is growing about 2-3% a year, which is obviously put pressure in terms of the competitive landscape and in terms of refurbishment. As you know, a lot of our competitors and ourselves are investing a lot on their store network. And so even from a demand and from a supply standpoint, we're seeing a lot of pressure. And that's on the food retail side. In terms of the margin for 2025, as you know, our cost base is increasing at a higher pace than our inflation in top line. Our estimate for this year of food inflation, as João mentioned this morning, is about 2%. And our cost base is growing in terms of inflation at about 4% to 5%. And obviously, that puts pressure in terms of our margins. That being said, MC has been deploying an important cost-to-serve program over the last years. We'll continue to be very focused on efficiency and obviously focusing on volumes growth in this highly competitive market. And so our goal for this year is obviously not to decrease EBITDA margin. And we are confident that with the value proposition, the strategy being very clear, we'll be able to deliver it in 2025. In terms of the openings, in terms of our strategy is to maintain more or less what we have done in 2024. For food retail, we have opened, as you know, 25 stores in 2024, probably more or less the same in 2025. On the health, wellness and beauty side, we opened 21 stores in Wales, 32 in Bruni. I would say that it should be very different in the year of 2025, both on the food side as well as in health, wellness and beauty.

Okay, I can tackle the mostly questions. The answer to your first question is yes, we are already seeing a better performance in terms of demand and in terms of growth. As you know, we finished the year with a like for like of around 1%. And we are seeing progressively from January to March that low single-digit like-for-like go up to a high single-digit like-for-like, so a much healthier performance in terms of growth in our like-for-like store network. And in terms of store openings, We don't, mostly there's a listed company, as you know, it doesn't provide guidance, but I can tell you that last year we opened half a dozen stores, so five to six stores in each of the main geographies of expansion, so excluding Finland, because Finland is quite a mature market in terms of store footprint. But if you consider Sweden and Norway, we opened five, six stores in each geography, and you can expect that to be the norm going into 2025 as well.

Thank you very much.

Thank you, Joan.

Thank you. We'll now take our next question from Antonio Salabas of AES Research. Your line is open. Please go ahead.

Good afternoon. I have a specific question regarding Sun IMC. Your depreciations increased, sequentially increased a lot, and also the taxes. tax provisions also increase. I don't know if you can explain or provide some explanation about these two things. Thank you very much. Sure.

Antonio, thank you very much for the questions. On the depreciation, it's mainly the impact of the acquisition of Druni. And so obviously it impacts both on the fixed assets, but mainly really on the lease liabilities. And obviously with the opening of our stores and the investments in terms of refurbishments, we are obviously seeing a higher level of depreciations this year. In terms of the taxes, I would say there are three main components. One is around the inclusion of Druni in our taxes. Obviously that has a relevant impact. The good performance, operational performance of the business has also increased the tax basis. And so that's the second component. And the third component there are a couple of accounting adjustments which are not included necessarily. There is a difference between the accounting taxable income and the taxable income, and therefore there is a difference in accounting which also accounts for a relevant part of this difference versus the last year.

Just a follow-up question on the depreciations. and if you can provide some color in terms of capital spending. So this figure of depreciation, should we see this on a quarterly basis, or should it keep the profile or the pattern that we have seen in the last quarters? Okay, so there is an obviously there. Go ahead, go ahead, please. Sorry, sorry, sorry. I was asking if I didn't, maybe I didn't explain well, but just profile. Well, the depreciation has increased in the last quarter. And I'm asking if we should see, again, same profile or not.

Yes. So I would say there is, in terms of CAPEX and the investment for next year, it's not necessarily our question, but it's related to it. So we're expecting to see more or less the same level of CAPEX, both in terms of health, wellness and beauty and food. There were a couple of extraordinary effects in the depreciation in 2024 that we probably will not see at the same level in 2025, but I would say it should not be too far away from what we have seen in the last quarters.

Okay. Thank you very much. Thank you, Natalia.

Thank you. Once again, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. We will now take our next question from Jeroen van Eppen of D-Group Petercam. Please go ahead.

Yeah, good afternoon. Two questions from my side. First one on capital allocation. Some of your peers like Exor, Wendell, JBL, They have been selling listed assets lately to buy back shares or to deleverage a bit. So could you just talk a bit about how you look at these transactions of your peers and could you comment whether you would consider such a transaction to be part of your capital allocation toolkit, if I may call it that. And then a second question is maybe relevant for BrightPixel. Could you maybe give a comment on The exit market, what you're seeing there, is the bid-ask spread narrowing or is it still an issue today? Thank you.

Thank you. Let me just make sure that I understood the first question. So the first question is on the possibility of doing share buybacks as an alternative in terms of capital allocation. Was that the question?

Yeah, what we see is that these holding companies are selling listed shares. participations from their portfolio and they are in those proceeds to buy back shares of their own holding company.

Yeah. So I can take that one first and then I'll ask Steven to answer the one on BrightPixel. So we currently don't have any such plans. And so the investments that we, the portfolio that we have, you know, investments is one that we feel quite comfortable with. And so the exposure that we have to our different assets in the portfolio is the one that we want to have that ensures that we have the influence that we currently have to deploy, to help these companies deploy their strategies. And so we are not planning to divest, make any significant divestments in any of our listed companies. In terms of share buybacks, this is obviously something that we have discussed in the past. It's something that we have decided not to do in the recent past, and we also don't have any short-term plans to do buybacks. We understand the potential economic rationale to do so, but as long as we feel that there are good investment opportunities to deploy capital and to generate superior returns in our existing portfolio, we will always privilege those options. So the short answer to that is that we don't have the same plans as other investment holdings have executed in recent months.

Can I start? Regarding Bradpixel and the exit question, the market continues to be very close to VC exits. We have been seeing Some positive signs on the IPO market, but still very modest. In terms of M&A exits, we see some transactions, but lower levels because the M&A last year was focused on earlier companies, which means that the money that the exit transaction generates is lower than what investors need to pull the VC market. In that sense, of course, we have a great portfolio and we expect to return a lot of value to the group, and we are always aware of the opportunities that arise to execute that strategy. But we are not pressured to sell the assets, so we are waiting for the market to open and to execute the best exits. But we did this year to exit with a great return. And we hope to do it again during the next year and the next ones. And we hope that the market helps us to give this value that we have in our portfolio.

I don't know if I answered. Yeah, that's very clear. Thank you very much.

You're welcome. Thank you.

Thank you. And we will now move on to our next question from Guillaume Sampaio of CaixaBank. Your line is open. Please go ahead.

Hello. Thank you for taking my question. So I appreciate your comments on the MC margins for next year. But specifically for Q4, on grocery retail, we've seen a slight decline in margins. We're coming from a slight improvement trend. So what could explain this decline in Q4 specifically? Thank you.

Yeah, thank you very much. Very good question. So in Q4, as a whole in the year, as you know, we have maintained our EBIT margin in the grocery part of MC business. In Q4, we had a couple of extraordinary costs, which deteriorated our margin by 0.1 percentage points. And so from, let's say, recurrent EBIT standpoints, our margin did not decline in Q4 2024. Also, as you mentioned, based on the strong performance in terms of sales and also in terms of cost discipline. And so that was really a one-off, which was driven by some extraordinary costs.

Okay, good.

Thank you. That was our last question. I will now hand it back to Mr. Dolores for closing remarks.

Okay. Thank you very much for your questions. Thank you very much for listening to our results. And we will see you again in May when we announce our Q1 results, hopefully with the same backdrop, the same positive backdrop that we saw at the end of 2024. Thank you very much. We'll see you next time.