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SONAE, a diversified business with a robust balance sheet

SONAE, a diversified business with a robust balance sheet

RESTULTS 1Q21

Income from Sonae in 1Q21 have grown 6% vs. 1Q20 to 1,641 mln eur driven by its main businesses (Sonae MC and Worten) and the good evolution of its online channel in all its businesses. In relation to EBITDA, the company has obtained an EBITDA margin of 6.9%, higher than last year (+ 0.5pp), due to greater cost savings and better efficiency in all the group’s business lines.

By business lines:

Sonae MC: Sales have grown by 7% to 1,273 mln euros (vs. 1,194.2 mln euros in 1Q20), due to the higher consumption within the home as all the hotel industry remains closed in the country and despite the restrictions imposed on weekends in Portugal. In terms of EBITDA margin, they have obtained a margin of 8.6% (vs. 8.1%) due to greater cost savings and efficiency improvements.

Worten: Sales have grown 17% to EUR 272 mln (vs. EUR 233 mln in 1Q20), due to the increase in demand for electronic products as a result of teleworking. Its EBITDA margin was 6.4% vs. 3.5% in 1Q20 due to the closure and sale of unprofitable stores in Worten Spain and higher volume and sales mix.
Sonae Fashion: it continues to be one of the group’s business lines most affected by the pandemic, with a drop of -22% to EUR 61 mln vs. 77.9 mln eur in 1Q20 due to the strict restrictions applied in Portugal, forcing the closure of all types of non-essential trade.

Sonae Sierra: line of business severely affected by the pandemic, with a -19% drop in sales to € 22 mln vs. 27 mln eur in 1Q20 due to the closure of stores on weekends in shopping centers due to the restrictions taken. Regarding EBITDA margin, they have obtained a margin of 13.7% vs. 17% in 1Q20 due to lower sales volume and additional costs derived from the pandemic.

SONAE, a diversified business with a robust balance sheet

SONAE, a diversified business with a robust balance sheet

SONAE, a diversified business with a robust balance sheet

SOLVENCY AND LIQUIDITY

The increase in net financial debt in the quarter to 1,327 mln eur stands out (vs. 1,071 mln eur in 2020 and 1,233 mln eur in 1Q20) justified by the recent acquisitions reinforcing the position in NOS, Sonae Sierra and Salsa (Sonae Fashion).

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Solvency multiples remain contained, DFN / EBITDA at 3.43v estimated for the end of 2021 with 1v DFN / PN and good consistency ratio.

SONAE, a diversified business with a robust balance sheetSONAE, a diversified business with a robust balance sheet

SONAE, a diversified business with a robust balance sheet

SHAREHOLDER REMUNERATION

Sonae has decided to pay a dividend of € 0.0486 / share, + 5% from the previous dividend. Of the total dividend, almost 72 million are charged to 2020 dividends and 25.5 million are charged to reserves. This amount, and at current prices, represents a not inconsiderable dividend-Yield yield of 6%.

FUNDAMENTAL ASSESSMENT

While performance in 2020 was significantly affected by the global pandemic situation, Sonae should have no problem navigating through this adverse context and resuming the implementation of its strategy and returning to its recent performance as soon as possible. The balance sheet remains strong with solvency multiples at very controlled levels, which gives it the capacity to face new investments and growth once the international economic recovery begins.

The diversification and wide range of businesses that make up the Sonae Group make it easier for it to withstand a situation of economic stress like the current one without significant deterioration. Your participation in the NOS operator is very attractive.

In a valuation by ratios and under a forecast for the end of 2021 of EPS 0.06 € / share, the market discounts 13.6 times profits, practically in line with the historical average of the value that is around 12.7v. If we adjust the PER multiple with the expected EPS growth (+ 109%), the PEG ratio is very attractive, 0.13v and reflects the potential of the value. The returns both on turnover, as on net worth and capitalization improve in 2021e from 2020. Also positive, a very remarkable yield on dividend-Yield> 6% that protects the value.

SONAE, a diversified business with a robust balance sheetSONAE, a diversified business with a robust balance sheet

SONAE, a diversified business with a robust balance sheet

Based on our fundamental valuation, we review the recommendation to positive with a view to the medium / long term. The company has sufficient financial muscle to face the health crisis situation and emerge stronger. Certainly some of its businesses will be more impacted than others, but at the Group level, its balance sheet is ready to be part of the recovery.

COMPANY’S DESCRIPTION

SONAE is a multinational that manages a diversified portfolio of businesses in the areas of retail, financial services, technology, shopping centers and telecommunications.

Sonae S&F: Sport Zone, Berg Outdoor, Berg Cycles and Deeply (sports equipment and clothing), MO (clothing, footwear and accessories), Zippy (clothing, footwear and accessories for babies and children), Losan (specialized in the wholesale business of children’s clothing, with a strong international presence) and Salsa (jeans, clothing and accessories).

Sonae MC It is the national market leader in retail trade, with a set of different formats: Continente (hypermarkets), Continente Modelo and Continente Buen día (convenience supermarkets). Mi Super (local shops in franchising format), Buen Bocado, Bagga (cafes and restaurants), Go Natural (supermarkets and healthy restaurants), Make Notes, Note! (bookstore / stationery), ZU (products and services for dogs and cats), Well’s (health, wellness and optics) and Dr. Well (dental medicine and aesthetic medicine clinics).

Worten: home appliances, consumer electronics and entertainment.

Worten Mobile covers mobile telecommunications.

Sonae Retail Properties, created in 2009, manages retail real estate assets.

Sonae IM: telecommunications and cybersecurity.

Sonae Sierra: real estate.

US: telecommunications.

The social capital, fully subscribed and carried out, is represented by 2,000,000,000 ordinary shares, with a par value of 1 euro each.

Significant shareholders:

Efanor Investimentos

52.90%

Free-float

36.33%

BPI Bank

4.80%

Criteria Caixa

2.00%

Invesco Limited

1.99%

Norges Bank

1.98%

Indices in which it is listed:

PSI ALL-SHARE

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PSI 20

PSI 20 Ex Banks

PSI CONSUMER SERV.

IBERIAN INDEZ

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