Paulo Azevedo 

Through 2018, we continued to implement our corporate strategy by: (i) investing in the Business Units with value creation plans already approved and whose added value is already materialised in results; (ii) improving the competitive position and the profitability of the businesses still with unsatisfactory performance; and, (iii) identifying and materialising new business areas, which will foster growth. At the same time, we continued to sell our portfolio of Real Estate assets, which has the purpose of financing the investment plan of our businesses and the options for future growth.

The growing sustainability of our businesses continues to be noticeable, not only in our Capital Structure, which remains adequate to the type of businesses and assets held by the Group, but also in the improvement of our profitability metrics. In 2018, the EBITDA of our Business Units continued to grow and reached 20.6M€, an increase of more than 18% when compared to 2017. In addition, and very important to the Group's sustainability in the mid to long term, 2018 was a year of strong investment, like 2017. We invested 32.6M€ in 2018 (1.2x the EBITDA), after investing 61.6M€ in 2017.

This investment was mainly channelled to businesses with value creation plans already approved and, more specifically, where we already have a team with proven capacity, in-depth sector’s knowledge, and above all with recognised performance as profitability is concerned. Accordingly, we have invested 15M€ in Energy, taking sustained steps towards internationalisation with the creation of a small team in Mexico, a country of great opportunities in our preferred technology, the Cogeneration. In Fitness, where the leadership position is about to be achieved, we have invested 12.6M€, already including the acquisition of the Pump chain, whose integration in our portfolio was a success.

In the Hospitality and Refrigeration & HVAC businesses, our efforts are mainly focused in operational improvement, since the profitability of both businesses is still at an insufficient stage. Nevertheless, we made relevant progress throughout the year: in Hospitality, we achieved the important goal of EBITDA "breakeven" and, at the same time, we continued kept opening new units in order to mitigate the lack of scale that the segment has. In this context, the concession of the emblematic building of Santa Apolónia Railway Station, or even the acquisition of Aqualuz Lagos operation, already in 2019, are noteworthy steps. As in 2018, in 2019 we will remain committed to improving the profitability of the Refrigeration & HVAC business. In what concerns Tróia Operations, we are entirely committed to take the customer experience to levels of excellence.

Regarding our future growth options, namely in the new Industrial Engineering business, which materialises the announced "investment theme" - Exporting Portuguese Engineering, 2018 was totally dedicated to the turnaround of our first acquisition: Adira. The difficulties have been considerably beyond of what we expected, but now that we stabilised the management team, we are confident that in short to mid-term Adira will show an operating activity, and most importantly a commercial activity in line with its potential. We believe in the value of the company and so we are certain that the measures taken to provide the company with the required financial and human resources will result in a significantly better performance.

The sale of Real Estate Assets is one of the key pillars of our strategy and plays a critical role in its materialisation. In 2018, we surpassed the sales delivered in 2017 as the total amount of Real Estate Assets (including CPCVs and Reserves) reached 86.6M€. In particular, I would like to highlight the sale of EFANOR Allotment for 30M€, as well as the PPSA of UNOP3, for 20M€, for the development of another distinctive project in the Tróia Peninsula.

Also in relation to Real Estate, I would like to emphasize that, at the end of the year we updated the valuation of the Real Estate portfolio with the help of the independent entity Cushman & Wakefield. We are pleased to announce that the overall value of the portfolio has been confirmed, thus reaffirming the intrinsic value of our assets, which of course brings good prospects for this activity in the coming years.

The cash flow generated in 2018 in Real Estate, coupled with our positive expectations for this activity in the future, allows to fulfil the triple objective of: (i) financing the growth of the Business Units with high potential for value creation; (ii) maintaining a robust capital structure, adequate for the type of businesses and assets held by the Group; and, (iii) proposing the General Meeting a dividend distribution that represents one of the best yields in the Portuguese stock exchange.

Before finishing, I would like to outline two points that fill me with equal measure of pride. The first has to do with the fact that this year Sonae Capital reports for the very first time a Sustainability report. We have finally managed to release this report after organising and aggregating the information necessary to show the economic, social and environmental picture of the Group and its Business Units. Sustainability will undoubtedly continue to be one of our concerns for years to come and thus we will define priority work themes and communicate our progress for all of them.

Secondly, it is worth mentioning that, shortly after we started 2019, Sonae Capital reached the threshold of 1,500 Employees. We are, without a doubt, a growing company, and for this, we will continue to attract and to develop more and more talent so that we have the capacity to surpass more and more our ambitious goals.

And it is precisely with a word of gratitude and recognition to them, our Employees, that I would like to end this message: it was only with their dedication and commitment that we reached these results in 2018. I also take this opportunity to extend this recognition to all the members of our Corporate Bodies and Partners, in which I include Customers, Suppliers and Investors.

Duarte Paulo Teixeira de Azevedo, Management Report 2018

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