CONSOLIDATED REPORT THREE MONTHS ENDED 31 MARCH 2017 (Unaudited)

Transcription

1 CONSOLIDATED REPORT THREE MONTHS ENDED 31 MARCH 2017 (Unaudited) 1

2 SAG GEST Soluções Automóvel Globais, SGPS, S.A. A listed Company Registered Share Capital: Eur 169,764,398 Taxpayer No Registered at the Amadora Registrar of Companies under No Registered Office: Estrada de Alfragide, 67 Offices: Alfrapark, Edifício SGC, Piso 2 Tel: +(351) Fax: +(351) investor.relations@sag.pt Web: 2

3 CONSOLIDATED MANAGEMENT REPORT THREE MONTHS ENDED 31 MARCH CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED 31 MARCH NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED 31 MARCH GENERAL BUSINESS INFORMATION SUMMARY OF THE MAIN ACCOUNTING POLICIES CONSOLIDATED ENTITIES REPORTING BY OPERATING SEGMENTS OTHER OPERATING INCOME OTHER OPERATING EXPENSES SALES, GENERAL AND ADMINISTRATIVE EXPENSES COMMERCIAL EXPENSES SALES, GENERAL AND ADMINISTRATIVE EXPENSES CAR EXPENSES SALES, GENERAL AND ADMINISTRATIVE EXPENSES OVERHEADS PAYROLL EXPENSES GAINS AND LOSSES IN THE SALE OF TANGIBLE FIXED ASSETS FINANCIAL EXPENSES FINANCIAL INCOME GAINS AND LOSSES FROM ASSOCIATED COMPANIES INCOME TAX EARNINGS PER SHARE TANGIBLE FIXED ASSETS INTANGIBLE ASSETS GOODWILL INTANGIBLE ASSETS - OTHER INVESTMENTS IN AFFILIATES INVESTMENT PROPERTIES INVENTORIES ACCOUNTS RECEIVABLE TRADE CUSTOMERS ACCOUNTS RECEIVABLE RELATED PARTIES ACCOUNTS RECEIVABLE OTHER DEBTORS DEFERRED EXPENSES ACCRUED INCOME OTHER TAXES CASH AND CASH EQUIVALENTS AND TERM DEPOSITS EQUITY INSTRUMENTS NON-CONTROLLING INTERESTS BANK DEBT PROVISIONS ACCOUNTS PAYABLE - SUPPLIERS ACCOUNTS PAYABLE OTHER RELATED PARTY DISCLOSURES ACCRUED EXPENSES DEFERRED INCOME FINANCIAL RISKS RENTALS AND OPERATING LEASES FINANCIAL INSTRUMENTS COMMITMENTS AND CONTINGENCIES SUBSEQUENT EVENTS

4 CONSOLIDATED MANAGEMENT REPORT THREE MONTHS ENDED 31 MARCH

5 MANAGEMENT REPORT THREE MONTHS ENDED 31 MARCH 2017 To the Shareholders, In accordance with the applicable regulations, the Board of Directors of SAG Gest Soluções Automóvel Globais, SGPS SA hereby submits the Management Report and the Consolidated Financial Statements in respect of the three-months ended 31 March OPERATIONAL PERFORMANCE Automotive Distribution In the 1st Quarter 2017, the Portuguese Passenger Car (PC) Market increased 3.0% when compared with the same period in 2016, with a total of 68,504 units (66,495 in 2016). According to official data provided by ARAC, the volume of new PC s allocated to the rent-a-car segment increased 12% during the same period, with 12,365 units, increasing the weight of this market segment which now accounts for approximately 18% of the total (16.6% in 2016). It is expected that the weight of this segment will continue to increase due to the seasonal effect of Easter in April. The volume achieved by the Brands represented by SIVA was 7,798 units, which represented a decrease of 9.2% when compared with the 8,585 units in the 1st Quarter of Volume for the rent-a-car segment in the 1 st Quarter 2017 was 1,925 units, 25.6% less than in the same period last year. The weight of this segment in the total volume of the Brands represented by SIVA decreased from 30.1% in 2016 to 24.7% in 2017, reflecting SIVA s clear commitment to the market s more profitable segments. The weight of the volume of the Brands Dealer Networks in the Brands total volume increased from 45.9% in 2016 to 50.9% in the 1 st Quarter Consequently, SIVA s market share was 11.4%, a 1.5% decrease when compared to the same period in The Volkswagen Passenger Car Brand, with a volume of 4,543 units and a 3.7% decrease achieved a 7.6% market share (8.1% in 2016) in the Light Passenger Car market. The Brand decreased its presence in the rent-a-car segment by approximately 12%. The Audi Brand volume was 2,130 units, a 8.4% decrease when compared to the 2,325 units in the same period last year, and a 3.6% market share (4.0% in 2016). The rent-a-car segment decreased approximately 18%. The Škoda Brand decreased 34.5% to 671 units (1,025 units in the same period in 2016), with a decrease of around 75% in rent-a-car volume. The Volkswagen Commercial Vehicles Brand, with 453 units sold, also decreased (12.4%) when compared with the 517 units recorded in the 1 st Quarter In this context, the Contribution Margin of the Distribution area increased 7.0% when compared with the same period last year and represented 10.3% of the area s turnover (9.5% in the same period in 2016). 5

6 Automotive Retail The number of new vehicles of the Volkswagen, Audi, Škoda and Volkswagen Commercial Vehicles Brands sold by the Soauto Dealers (Soauto SA, Loures Automóveis, Rolporto and Rolvia) in the 1 st Quarter 2017 was 1,147 units, a 4.2% increase when compared to the 1,099 units sold during the same period in the previous year. The Soauto Dealerships sold 478 used cars, a 5.9% increase when compared to the 450 units sold during the same period the year before. 2. ECONOMIC AND FINANCIAL RESULTS Consolidated Turnover for the 1 st Quarter 2017 was Eur million, a 0.9% decrease when compared with Eur million recorded during the same period the year before. In spite of a decrease in Turnover, Consolidated Contribution Margin amount increased 4.3% (Eur 0.7 million) when compared with the 1 st Quarter 2016, and was 11.3% of Consolidated Turnover (10.7% in the same period in 2016) due to the impact of the increase of the weight of more profitable market segments. Variable Expenses increased approximately 23.3% (Eur 0.7 million) when compared with the 1 st Quarter 2016, while Overhead Expenses increased by approximately Eur 0.3 million (3.4%). As a consequence, Consolidated EBITDA for the 1 st Quarter 2017 (Eur 5.1 million) recorded a marginal decrease of approximately Eur 0.2 million (4.1%) when compared with Eur 5.4 million during the 1 st Quarter Earnings Before Interest and Taxes (EBIT) were Eur 4.6 million, a decrease of Eur 0.3 million (6.4%) when compared with approximately Eur 4.9 million in the 1st Quarter Consolidated Net Financial Expenses in the 1 st Quarter 2017 (Eur 3.6 million) were at the same level as in the same period in 2016, and the Interest Coverage ratio (EBITDA / Net Financial Expenses) was 1.4X in 2017 (1.5X in 2016), basically unchanged when compared with the 1 st Quarter The amount for Corporate Income Tax decreased by around Eur 0.4 million when compared with the 1 st Quarter The amount recorded in 2017 includes the impact of the decrease in the amount of non-deductible interest expenses which is related to the option adopted in 2016, under the applicable tax regulations, of determining that amount under the Special Regime for Taxation of Groups of Companies in which SAG is included, and not on an individual Entity basis. Net Results attributable to SAG Gest was again positive in the 1 st Quarter 2017 (approximately Eur 0.4) million, a 65.8% increase when compared with the Net Result recorded during the same period in On 31 March 2017, Consolidated Equity was Eur 21.5 million, a Eur 0.4 million increase (representing to the Net Results for the 1 st Quarter 2017) when compared with 31 December Consolidated Net Debt, as at 31 March 2017 was Eur million, representing an increase of approximately Eur 20.4 million (21.4%) in comparison to Eur 95.5 million on 31 December Consolidated Net Debt as at 31 March 2017 was, however, less than on 31 March 2016 (Eur million). 3. RISK MANAGEMENT SAG Gest s Risk Management Policy aims to ensure an accurate identification of risks involved in the businesses performed by its Subsidiaries and Affiliates, as well as to adopt and implement the measures required to minimize the negative impacts that adverse developments of the factors inherent to those risks may cause on its consolidated financial structure and sustainability. 6

7 The identification of the risks to which SAG Gest s materially relevant Subsidiaries are exposed has allowed the identification of the following major risks: Reliance on Suppliers The business of the SIVA Subsidiary is based on Distribution Agreements entered into with the Volkswagen Group for an undetermined period of time, subject to the relevant EU Regulations, which have been fully complied with and have remained in force for more than 25 years. However, maintenance of these Agreements depends on factors that include the continuation of Volkswagen Group s distribution policies, as well as the performance of the represented Brands in the Portuguese market. Automobile Risk Residual Values The growth trend in the Rent-a-Car segment, and the business terms applied in this sales channel, which involve the repurchase, as used cars, of the cars that were initially supplied (Buy-Back clauses) also increased the SIVA Subsidiary s exposure to risks resulting from changes in the market value of semi-new and used cars. To minimize the potential negative impacts resulting from this type of risk, the SIVA Subsidiary has implemented mechanisms to monitor permanently developments in the market value of the semi-new and used cars included in its balance sheet (which includes vehicles billed to Entities operating in the Rent-a-Car segment that the Subsidiary has pledged to repurchase). These market price monitoring mechanisms include permanent access to credible specialized information sources and the identification of alternative sales channels allowing the reduction the supply of used cars to levels compatible with the size of the Portuguese market, when potential excessive supply could translate into an unjustified degradation of market value for this type of vehicle. Financial Risks The main financial risks identified are the equity risk, the liquidity risk, the interest rate exposure risk and credit risk. The purpose of capital risk management is to ensure that Consolidated Equity will reach the appropriate levels to ensure a balanced structure of the consolidated financial position. The principles to be observed in the management of this risk are set out in the contractual documents that formalized the operation of reinforcement of SAG Gest Consolidated Equity, which was completed in December 2015, among which the following should be highlighted: Dividend Distribution: o o Until the end of 2021, SAG Gest is obliged to distribute dividends of at least 50% of the consolidated net profit for the year, provided that, in accordance with its Consolidated Financial Statements, the Shareholders' Equity / Total Assets ratio is at least 7.5%. From 2022 onwards, SAG Gest is obliged to distribute dividends of at least 60% of the consolidated net profit for the year, provided that the value of its Consolidated Equity remains positive. Reimbursement of Supplementary Capital Payments o Until the end of 2019, SAG Gest has the obligation to reimburse Supplementary Capital Payments performed by the Principal SA Shareholder up to the amount that, according to its Consolidated Financial Statements, allows for the Shareholders' Equity / Total Assets ratio, after this reimbursement, to be equal to or greater than 7,5% 7

8 o From 2020 onwards, if the Net Debt / EBITDA ratio is lower than 2.5 X, SAG Gest is obliged to reimburse the Supplementary Capital Payments performed by the Principal SA Shareholder, in an amount that allows (a) its Net Debt / EBITDA ratio not to exceed 2.5 X and (b) Net Consolidated Equity to be positive. The management of the liquidity risk involves the dynamic monitoring and measurement of this type of risk in order to ensure the fulfilment of all short and medium-term financial responsibilities (cash outflows) by Entities held by SAG Gest towards the Entities that do business with them. In December 2015, SAG Gest concluded a restructuring process with its main Banks, which consisted mainly on the reconstruction of SAG Gest's Consolidated Equity and the extension of maturities and the reduction of bank debt. The objective of this process was to rebalance the consolidated financial structure of SAG Gest and to create conditions that would allow the presentation of a sustainably profitable Consolidated Statement of Profit and Loss and Other Comprehensive Income, providing SAG Gest and its Subsidiaries with a basis for the sustainable development of their activities. The plan that served as the basis for the implementation of this process assumes that the required financial facilities essential to accommodate the temporary impacts associated with the characteristics of the business developed by SAG Gest and its Subsidiaries are made available. The unavailability of this type of support constitutes a significant risk for the normal development of the activities of SAG Gest and its Subsidiaries. The known weakness of the Portuguese financial system has maintained the liquidity risk of SAG Gest at significant levels. SAG Gest has responded to this situation with a careful and intense centralized management of its cash flows, and by maintaining a permanent interaction with the most important Portuguese Financial Institutions. Interest rate risk management aims to ensure the assessment and dynamic management of this risk through the definition of exposure limits of SAG Gest s Consolidated Statement of the Financial Position and of the Statement of Comprehensive Income to interest rate changes. The control policy that has been adopted aims at selecting suitable strategies for each business area in order to ensure that this risk factor does not negatively affect the relevant operational capacity. On the other hand, exposure to interest rate risk is further monitored through simulation of adverse scenarios having some degree of probability and which could negatively affect SAG Gest's consolidated results. In what relates to credit risk management, the development of the Customer portfolio and each business unit's exposure are monitored on a monthly basis. SAG Gest adopted in 2001 a Credit Risk Manual establishing policies, criteria and procedures to be adopted in the credit control area. The Credit Risk Manual is regularly updated and includes criteria to be used in determining a credit rating. Operational Risk Operational risk management is based on the assignment of functional responsibilities and formal definition of internal control procedures, at the business area level. 4. OUTLOOK FOR THE REMAINDER OF 2017 The recovery trend in the Portuguese Automotive Market that was initiated during the 2 nd Half of 2013 generally continued during the first three months in If this trend continues during the remainder of the year, the operational activities profitability is expected to improve. 8

9 5. TREASURY STOCK INFORMATION On 31 December 2016, the Company directly owned 16,760,815 treasury stock, with the nominal value of Eur 1 each, and also indirectly controlled a further 5,100 shares held by the Rolporto Subsidiary, as well as 5,100 shares held by the Loures Automóveis Subsidiary, all with a nominal value of Eur 1 each. During the three months ended on 31 March 2017, SAG Gest did not purchase or sell any treasury stock and, therefore, on 31 March 2017, the Company directly owned 16,760,815 treasury stock, with the nominal value of Eur 1 each, and also controlled indirectly a further 5,100 shares held by Rolporto Subsidiary, as well as 5,100 shares held by Loures Automóveis Subsidiary, all with a nominal value of Eur 1 each. The portfolio of treasury stock held directly and indirectly represented 9.879% of the total shares representing the Company s share capital on 31 March 2017, with an average unit purchase price Eur FINANCIAL INFORMATION COMPLIANCE STATEMENT In compliance with the legal and statutory provisions, the Board of Directors firmly believes that, to the best of its knowledge, the information contained in the Consolidated Financial Statements as at 31 March 2017, and for the three months then ended, was prepared in compliance with the applicable accounting standards and provides an accurate and adequate image of the consolidated assets and liabilities, financial situation and consolidated results of the Company, and that the Management Report accurately reflects the development of business, the performance and consolidated financial position of the Company and contains a description of the main risks and uncertainties that confront it. Alfragide, 26 May 2017 THE BOARD OF DIRECTORS Dr. João Manuel de Quevedo Pereira Coutinho Dr. Carlos Alexandre Antão Valente Coutinho Engª Esmeralda da Silva Santos Dourado Dr. Fernando Jorge Cardoso Monteiro Dr. José Maria Cabral Vozone Dr. Luís Miguel Dias da Silva Santos Engº Pedro Roque de Pinho de Almeida Dr. Rui Eduardo Ferreira Rodrigues Pena 9

10 CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED 31 MARCH 2017 (Unaudited) 10

11 CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME (Eur Thousand) Period of 3 months ended on March 31 Notes Revenue Sales 4 150, ,498.2 Services Rendered 4 3, ,962.2 Turnover 4 154, ,460.4 Cost of Goods Sold (137,581.6) (138,660.1) Gross Margin 16, ,800.2 Other Operating Income 5 6, ,085.4 Other Operating Expenses 6 (4,820.3) (5,129.6) Impairments Losses on Accounts Receivable 23 (4.6) 56.9 Impairments Losses on Inventories 22 (710.2) (1,182.8) Contribution Margin 17, ,630.1 Variable Expenses SG&A - Commercial Expenses 7 (2,615.2) (2,370.5) SG&A - Car Expenses 8 (862.5) (450.1) Sub-Total - Variable expenses (3,477.7) (2,820.7) Variable Margins 13, ,809.4 Overheads SG&A - Non-Variable Expenses 9 (3,380.9) (3,343.0) Payroll Expenses 10 (5,357.5) (5,110.2) Sub-Total - Overheads (8,738.4) (8,453.2) Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) 5, ,356.2 Provisions Depreciation and Amortization 17 and 19 (538.3) (516.9) Gains and (Losses) from Tangible Fixed Assets sales Earnings Before Interest and Tax (EBIT) 4, ,911.1 Financial Expenses 12 (4,074.9) (4,278.5) Financial Income Gain / (Losses) from Associated Companies Fair Value Adjustments Earnings Before Taxes (EBT) ,272.0 Corporate Income Tax 15 (559.8) (994.3) Net Profit / (Loss) Attributable to: Shareholders of SAG GEST SGPS, SA Non-Controlling Interests OTHER ITENS OF COMPREHENSIVE INCOME Total other items of the Comprehensive Income not to be reclassified to Consolidated Statement of profit and Loss in subsequent periods Total Other Itens Of The Comprehensive Income that can be reclassified to consolidated Statement of profit and Loss in subsequent periods Total Comprehensive Income of Continued and Discontinued Operations Attributable to: Shareholders of SAG GEST SGPS, SA Non-Controlling Interests Earnings per share: Basic, for Net Profit / (Loss) after Tax (Eur) Notes are an integral part of the Consolidated Financial Statements above mentioned. Chartered Accountant The Board of Directors 11

12 CONSOLIDATED STATEMENT OF THE FINANCIAL POSITION (Eur Thousand) Notes March 2017 December 2016 Non-Current Assets Tangible Fixed Assets 17 64, ,373.3 Intangible Assets - Goodwill 18 10, ,653.2 Intangible Assets - Other ,047.3 Investments in Associates - Equity Method Consolidation Accounts Receivable - Related Parties 24 and , ,186.3 Investment Properties 21 1, ,023.0 Deferred Income Tax Assets 15 5, ,660.7 Total - Non-Current Assets 219, ,947.2 Current Assets Inventories , ,631.3 Accounts Receivable - Trade Customers 23 44, ,285.5 Accounts Receivable - Related Parties 24 and 36 2, ,977.0 Accounts Receivable - Other 25 1, ,369.0 Deferred Expenses 26 2, ,401.3 Acrrued Income 27 45, ,699.5 Current Income Tax Receivable 15 6, ,633.6 Taxes - Other Than Income Tax 28 2, ,236.7 Term Deposits 29 3, ,196.0 Cash and Cash Equivalents 29 4, ,658.5 Total - Current Assets 323, ,088.3 Total Assets 542, ,035.5 Equity Registered Share Capital 16 and , ,764.4 Treasury Stock - Par Value 16 and 30 (16,771.0) (16,771.0) Treasury Stock - Share Premium 30 (16,367.8) (16,367.8) Share Premium , ,664.3 Supplementary Capital Payments , ,171.9 Reserves: Legal Reserve 30 15, ,916.1 Other Reserves 30 8, ,132.1 Retained Earnings Brought Forward 30 (425,246.2) (423,927.2) Net Profit / (Loss) For The Year (1,158.0) Sub Total 19, ,424.8 Non-Controlling Interests 31 1, ,662.6 Total Equity 21, ,087.4 Non-Current Liabilities Bank Loans 32 94, ,600.0 Deferred Income Tax Liabilities 15 3, ,062.1 Total - Non-Current Liabilities 98, ,662.2 Current Liabilities Bank Loans 32 29, ,737.8 Accounts Payable - Trade Suppliers , ,222.7 Accouts Payable - Other 35 10, ,591.6 Accrued Expenses 37 23, ,011.7 Deferred Income 38 22, ,217.4 Current Income Tax Payable Taxes - Other Than Income Tax 28 38, ,479.6 Total - Current Liabilities 423, ,285.9 Total Liabilities 521, ,948.1 Total Equity and Liabilities 542, ,035.5 Notes are an integral part of the Consolidated Financial Statements above mentioned. Chartered Accountant The Board of Directors 12

13 CONSOLIDATED STATEMENT OF CASH FLOWS (Eur Thousand) Cash Flows from Operating Activities Notes March 2017 December 2016 Net Profit / (Loss) (1,009.5) Non-Cash Items Depreciation and Amortization ,126.0 Impairment Losses on Accounts Receivable (45.0) (185.1) Impairment Losses on Inventories (524.4) (823.5) Provisions 0.0 (397.6) Fair Value Adjustments Equity Method - Appropriated Net Result (1.7) 17.2 Accruals and Deferrals (15,261.6) (2,255.5) Provision for Income Tax ,650.2 Interest Paid - Bank Loans 3, ,430.8 Interest Paid - Treasury Operations (316.2) (1,299.1) Total Non-Cash Items (11,765.9) 5,342.0 Corporate Income Tax Paid (58.6) (570.3) Cash Profits (11,427.5) 3,762.2 Working Capital Trade Customers (4,440.3) (206.1) Trade Suppliers 13, ,784.8 Inventories (17,471.9) (194.4) Other Debtors and Creditors (506.0) 4,573.3 Taxes - Other Than Income Taxes 2, ,878.8 Total Working Capital (5,613.0) 24,836.3 Net Cash Flow from Operating Activities (17,040.5) 28,598.6 Cash Flows from Investment Activities Payments regarding: Acquisitions - Tangible Fixed Assets (718.4) (3,307.7) Acquisitions - Intagible Assets 0.0 (275.8) Related Party - Financial Operations (340.7) (6,146.0) Total Payments (1,059.1) (9,729.5) Receipts arising from: Disposals of Tangible Fixed Assets ,903.0 Related Party - Interest ,299.1 Term Deposits 0.0 4,800.0 Total Receivables ,002.2 Net Cash Flow from Investment Activities (89.5) (1,727.3) Cash Flows from Financing Activities Bank Loans 16,587.5 (21,902.1) Bank Interest (3,284.9) (6,430.8) Net Cash Flow from Financing Activities 13,302.6 (28,332.9) Total Net Cash Flow (3,827.4) (1,461.7) Change in Cash and Cash Equivalentes (3,827.4) (1,461.7) Cash and Cash Equivalents - Opening Balance 8, ,120.1 Cash and Cash Equivalents - Closing Balance 29 4, ,658.5 Notes are an integral part of the Consolidated Financial Statements above mentioned. Chartered Accountant The Board of Directors 13

14 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Registered Share Capital Treasury Stock (Par Value) Treasury Stock (Share Premium) Share Premium Supplementary Capital Payments Reserve for Revaluation Legal Reserves Other Reserves Retained Earnings Brought Forward Net Profit / (Loss) For the Year Total Non- Controlling Interests Total Shareholders Equity Notes As at 1 January 2017 Opening Balance 169,764.4 (16,771.0) (16,367.8) 149, , , ,132.1 (423,927.2) (1,158.0) 19, , ,087.4 Net Profit / (Loss) For the Year Other Itens of the Comprehensive Income Cumulative Translation Adjustments Total Comprehensive Income Changes in the Consolidation Perimeter Supplementary Capital Payments Allocation on Prior Year's Net Profit / (Loss) (1,319.0) 1,158.0 (.0) - (.0) Refund of Supplementary Capital Payments Tranfer between equity accounts Closing Balance as at 31 March ,764.4 (16,771.0) (16,367.8) 149, , , ,132.1 (425,246.2) , , ,484.4 Registered Share Capital Treasury Stock (Par Value) Treasury Stock (Share Premium) Share Premium Supplementary Capital Payments Reserve for Revaluation Legal Reserves Other Reserves Retained Earnings Brought Forward Net Profit / (Loss) For the Year Total Non- Controlling Interests Total Shareholders Equity As at 1 January 2016 Opening Balance 169,764.4 (16,771.0) (16,367.8) 149, , , , ,132.1 (351,681.0) (74,897.0) 20, , ,096.9 Net Profit / (Loss) For the Year (1,158.0) (1,158.0) (1,009.5) Total Comprehensive Income (1,158.0) (1,158.0) (1,009.5) Changes in the Consolidation Perimeter Supplementary Capital Payments Allocation on Prior Year's Net Profit / (Loss) (74,897.0) 74, Refund of Supplementary Capital Payments Tranfer between equity accounts (2,650.8) - - 2, Closing Balance as at 31 December ,764.4 (16,771.0) (16,367.8) 149, , , ,132.1 (423,927.2) (1,158.0) 19, , ,087.4 Notes are an integral part of the Consolidated Financial Statements above mentioned. Chartered Accountant The Board of Directors 14

15 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED 31 MARCH 2017 (Unaudited) 15

16 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 MARCH 2017 (Unaudited) 1. GENERAL BUSINESS INFORMATION The Consolidated Financial Statements of SAG Gest - Soluções Automóvel Globais SGPS, SA (hereafter SAG Gest) as at 31 March 2017 have been approved and authorized for release by the Board of Directors on 26 May In the opinion of the Board of Directors the Consolidated Financial Statements of SAG Gest as at 31 March 2017 reflect in a true and fair manner the consolidated operations as well as the consolidated financial position and the consolidated cash flows of SAG Gest and the Entities included in the consolidation perimeter. The Shareholders have the capacity to change the Consolidated Financial Statements of SAG Gest as at 31 March 2017, after their approval for release by the Board of Directors. The Consolidated Financial Statements are consolidated in Portugal. The consolidation perimeter led by SAG Gest includes Entities operating in different business areas in Portugal, which include: the distribution and the retail activities in connection of new cars of the Volkswagen, Volkswagen Commercial Vehicles, Audi, Škoda, Bentley and Lamborghini Brands the distribution and sale of automotive spare parts and accessories, the provision of after sales services (repairs and maintenance) of cars the sales of multi-brand used cars the preparation of new vehicles and body repairs The corporate object of SAG Gest, with Head-Office at Estrada de Alfragide, 67 Alfragide, Amadora, Portugal, is the management of shareholdings. SAG Gest Shares are listed at the NYSE Euronext Lisbon since June SUMMARY OF THE MAIN ACCOUNTING POLICIES 2.1. Bases for Preparation The Consolidated Financial Statements of SAG Gest were prepared as a going concern, on the basis of the historical cost, except for Investment Properties which are recognized at fair value. The Consolidated Financial Statements, as well as the Separate Financial Statements of the Entities included in SAG Gest s current consolidation perimeter (as described in Note 3 Consolidated Entities), relate to the three months ended 31 March 2017, and were prepared using accounting policies that are consistent among them. All amounts shown in the Notes herein are expressed in thousands of Euros Eur (000) unless otherwise stated. The quarterly amounts, as well as the corresponding variances, have not been audited Compliance Statement The Consolidated Financial Statements were prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union, in force on 1 January

17 The preparation of Consolidated Financial Statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of Assets and Liabilities, as well as reported amounts of income and expenses during the reporting period. Although these estimates are based on Management's best understanding of current events and actions, actual results may differ from those estimates. However, Management believes that the estimates and assumptions adopted do not incorporate significant risks that could cause, in the course of the financial year, material adjustments to the reported amounts of Assets and Liabilities, as disclosed in Note 2.6 Management Judgments Changes in Accounting policies New Standards and Interpretations applicable to the financial year started 1 January 2017 Effective 1 January 2017, the European Union (EU) endorsed the following issues, revisions, amendments and improvements to Standards and Interpretations. New ammendments applicable to the financial year started on or after 1 January 2017 Standard IAS 7 - Statement of Cash Flows Amendment Additional disclosure of Financial Liability variations broken down between (a) transactions that resulted in cash transactions, and (b) transactions that did not result in cash transactions and the way in which this information combines with financial cash flow in the Cash Flow Statement Mandatory for financial years beginning on or after January 1, 2017 IAS 12 - Income Tax Recognised Deferred Asset Taxes associated with fair value assets, future estimated taxable profit in the case of temporary deductible differences, and assessment of the recoverability of Deferred Asset Taxes in the case of tax law restrictions January 1, 2017 IFRS 1, IFRS 12 and IAS 28 Annual improvements January 1, New Standards and Interpretations applicable to financial years starting after 1 January 2018 The European Union (EU) endorsed the following issues, revisions, amendments and improvements to the Standards and Interpretations, issued by IASB but not yet mandatory for the current financial year. New ammendments applicable to the financial year started on or after 1 January 2018, endorsed by the European Union (EU) Standard Amendment Mandatory for financial years beginning on or after IFRS 9 - Financial instruments New standard for accounting treatment of financial instruments January 1, 2018 IFRS 15 - Revenue from contracts with customers Recognition to the revenue related to the delivery of assets and provision of services through the application "Método das 5 etapas" January 1, 2018 SAG Gest is analysing the possible effects that the emissions, revisions, changes and improvements to these Standards and Interpretations may cause in its Consolidated Financial Statements, namely those associated with the adoption of IFRS 15 Revenue from Contracts with Customers New Standards and Interpretations already issued not yet endorsed by the European Union (EU) The new Standards and Interpretations, revisions and amendments, recently issued by IASB not yet endorsed by European Union, whose adoption is not yet mandatory in the European Union (EU) are disclosed in the following table. 17

18 New ammendments applicable to the financial year started on or after 1 January 2018, but not yet endorsed by the European Union (EU) Standard IAS 40 - Investment property Mandatory for financial Amendment years beginning on or after Transfer from and to the Investment Property category only whenever there is proof of a January 1, 2018 change in use IFRS 2 - Share based payments Accountability of payment transactions based on fully paid shares and recognised changes in a share-based payment plan, which also change its classification (from cashsettled to equity-settled). Requirements for a share-based payment plan to be treated as fully equity-settled whenever the Employer is required to hold back a tax sum from the employee to be paid to the Tax Authorities January 1, 2018 IFRS 4 - Insurance Contracts Entities negotiating insurance contracts are granted the option to recognise volatility, which may result in the application of IFRS 9 in Other Comprehensive Income (instead of recognising it in the Profit and Loss Account) before the new Standard on insurance contracts is published January 1, 2018 Determined contractual obligations, moment when the revenue of an intellectual property Amendment IFRS 15 - Revenue from contracts with licence is recognised, revised indicators for classifying the main relation v. agent and new customers foreseen regimes that will simplify this transition January 1, 2018 IFRS 16 - Leases IFRIC 22 - Foreign currency transactions and advance consideration Lessee accounting - obligation to recognise (a) a lease liability representing future lease payments, and (b) a right of use asset for all lease contracts except in certain short-term leases and cheap assets. The definition of a lease contract has also been changed and is now based on the 'right to control use over an identified asset' Interpretation of the IAS 21 - Determination of the 'transaction date' - used to determine the exchange rate to be used to exchange transactions into foreign currency - in situations where an Entity will pay or receive in advance a consideration for contracts involving foreign currency January 1, 2019 January 1, 2018 SAG Gest is analysing the possible effects that the emissions, revisions, changes and improvements to these Standards and Interpretations may cause in its Consolidated Financial Statements, namely those associated with the adoption of IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases Bases for Consolidation Consolidation using the Full Consolidation Method a) The Consolidated Financial Statements include the Financial Statements of SAG Gest and of the Subsidiaries in whose Share Capital SAG Gest holds a direct or indirect majority stake, or which it controls. Entities controlled by SAG Gest (the Parent Company) are included in the Consolidation Perimeter. Control exists when the SAG Gest is exposed, or is entitled to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, SAG Gest controls an investee if, and only if, it has: Power over the investee (i.e., existing rights that give it the actual ability to direct the relevant activities of the investee); Exposure, or entitlement to variable returns arising from its involvement with the investee; The ability to use its power over the investee to affect such returns. Generally, it is assumed that a majority of voting rights results in control. To support this assumption and where SAG Gest has less than a majority of the voting or similar rights of an investee, SAG Gest considers all relevant facts and circumstances in assessing whether it has power over an investee, including: Any contractual arrangements with the other vote holders of the investee Rights arising from other contractual arrangements 18

19 SAG Gest s voting rights and potential voting rights SAG Gest re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes in one or more of the three elements of control. The Financial Statements of such Entities were consolidated using the Full Consolidation Method. b) Subsidiaries are consolidated using the Full Consolidation Method from date when SAG Gest obtains control until date when control is lost. Financial Statements of these Subsidiaries are prepared with reference to the same accounting period of SAG Gest s Financial Statements, applying accounting principles that are consistent among them. c) Changes in the holding percentages in those Subsidiaries, where no loss of control occurs, are recognized as equity transactions, in accordance with IFRS 10 Consolidated Financial Statements. Consolidation using the Equity Method d) Autolombos, an Affiliate where SAG Gest currently has significant influence, was consolidated using the Equity Method. Non-Controlling Interests e) The amounts representing participations held by unrelated third parties are included in the Consolidated Statement of the Financial Position and in the Consolidated Statement of Profit and Loss and Other Comprehensive Income as Non-Controlling Interests. f) Losses are attributed to Non-Controlling Interests, even where that results in a negative amount for Non- Controlling Interests. g) Non-Controlling Interests represent the interests held by unrelated third parties in the Rolvia and Loures Automóveis Subsidiaries. h) Non-Controlling Interests are measured in the proportion of the identifiable net assets attributable to unrelated third parties. Acquisition related expenses are recognized as costs. i) Transactions with Non-Controlling Interests that do not result in loss of control are recognized as capital transactions (transactions between the owners in their capacity as owners). The difference between the Fair Value of any amount paid and the net book amount of the portion of the Subsidiary's acquired Net Assets is recognized in Shareholders' Equity. Gains or losses on disposals for Non-Controlling Interest are also recognized in Shareholders' Equity. Effects of changes in control j) When the SAG Gest no longer has control or a significant influence on an Affiliate, any residual interest of the Affiliate s Shareholders Equity shall be revalued to its market value, and the changes are recognized in the Consolidated Statement of Income. Fair value is the initial book value for the purposes of subsequent accounting treatment of such participation as a Financial Asset. k) Where, as a consequence of a transaction, SAG Gest loses control of a Subsidiary, the following procedures are adopted: All Assets (including Goodwill) and Liabilities relating to the Subsidiary are de-recognized The amount of any Non-Controlling Interests is de-recognized Any Cumulative Translation Adjustments included in Equity and relating to such Subsidiary are reclassified and included in the results for the year The Fair Value of the consideration received, if any, is recognized The Fair Value of any interests retained is recognized 19

20 Any remaining outstanding balances are recognized in the results for the year in which the transaction is completed Any other items related to the Subsidiary that have affected Comprehensive Income are recognized against results for the year Consolidation process l) Inter-company balances and transactions (with their corresponding income and expenses) between the Entities included in the consolidation perimeter were eliminated in the consolidation process. m) Dividends paid between Entities included in the consolidation are eliminated in the consolidation process, in the proportion of the share of control attributable to SAG Gest. Business Combinations and Goodwill n) SAG Gest adopted IFRS 3 Business Combinations, effective 1 January 2004, and therefore, as from that date, Goodwill Amortization ceased to be recognized. The amounts recognized as Goodwill became subject to impairment tests on an annual basis and whenever necessary. Management considers that the amount of Goodwill recognized in the Consolidated Statement of the Financial Position is close to its fair recoverable value, as disclosed in Note 18 Intangible Assets Goodwill. o) From 1 January 2009 onwards, SAG Gest applied the revised IFRS 3 Business Combinations. Business acquisitions are recognized using the purchase method, with cost being measured as the sum of (i) the Fair Value of the acquired assets as at acquisition date, (ii) the consideration paid and (iii) the value of any Non- Controlling Interests in the acquired Entity. p) Where business acquisitions are performed in stages, the Fair Value on the date of each purchase of previously acquired interests is re-measured at the Fair Value on the date of each subsequent purchase, and the corresponding gains or losses are recognized in the results for the year. Any contingent consideration is measured at its Fair Value on acquisition date. Any subsequent changes to this Fair Value that is considered as an asset or a liability will be recognized according to IAS 39 Financial Instruments: Recognition and Measurement, in the Consolidated Statement of Profit and Loss and Other Comprehensive Income. If that contingency is considered as Equity, it shall not be re-measured until it is established as an Equity component. q) Differences between the book value of Financial Investments and the acquisition values of the Entities included in consolidation are reported as follows: Where the acquisition price is higher than the acquired Entity s Equity Value, such difference is recognized as Goodwill, under Intangible Assets Where the acquisition price is lower than the acquired Entity s Equity Value, such differences affect the Net Result in the financial year in which the acquisition occurs First consolidation adjustments r) Differences determined on the date of the first consolidation (in 1998), regardless of their (positive or negative) nature, were recognized directly against Consolidated Equity, and are included in Retained Earnings, as disclosed in Note 30 Equity Instruments. These differences were calculated as follows: 20

21 Equity Appropriated By SAG Gest Purchase Price Company % Value First Consolidation Adjustments 2.5 Main Accounting Policies Revenue Recognition (Notes 4 and 38) Business Income Business Income is recognized as such to the extent that economic benefits to the Entity are likely to flow and can be reliably measured. Business Income represent the Fair Value of the amounts received or receivable in respect of the sale of products and/or services in the normal course of business of the Company. Business Income is recognized net of any taxes and commercial discounts. Therefore, business Income includes only gross inflows from economic benefits received and to be received by SAG Gest and by Entities included in the consolidation. Amounts collected on behalf of third parties, such as taxes, including Car Taxes ( Imposto Sobre Veículos ISV ), are not economic benefits that flow to SAG Gest or the Entities included in the consolidation and do not result in capital increases and therefore are excluded from Business Income. a) Sales of Goods Business Income arising from the sale of goods is recognized when the significant economic risks and benefits resulting from the ownership of the asset have been passed to the Buyer, and such Revenue can be measured reliably. i. Deferred Income Billed Not Shipped ii. SIVA - Sociedade de Importação de Veículos Automóveis, S.A. 301, % 35, ,908.4 Soauto - Comércio de Automóveis, S.A. 6, % 3, ,596.0 ROLPORTO - Comércio e Indústria de Automóveis, S.A. 1, % 1,289.5 (49.6) LGA - Logística Automóvel, S.A. 1, % 1,384.3 (286.9) Autoimpor - Sociedade Importadora de Automóveis, S.A % (232.3) , , ,649.7 In the case of cars, revenue recognition usually coincides with car ownership transfer, which occurs, in most cases, simultaneously with the issuing of the corresponding sales invoice. However, where the delivery of the car to the Customer only takes place after issuance of the corresponding invoice, a sale is recognized as revenue only when the car is delivered to the Customer. The amount of the sales invoices meeting these criteria is recognized as Deferred Income, between date of issuance of the invoice and delivery date, as disclosed in Note 38 Deferred Income. Buy-Back Transactions In transactions where, simultaneously with the issuing of the sales invoice, the Selling Entity, or any other Entity included in the consolidation perimeter, undertakes a repurchase commitment for the same vehicle (transactions with Buy-Back clauses), the principles set forth in IAS 18 Revenue are applied. Therefore, the amounts invoiced in respect of such transactions are not recognized as Revenue. Other expenses or income relating to transactions of this nature are recognized on a straight-line basis over the period during which such commitments are in force, which generally corresponds to the period of time between invoice date and the date when the vehicle is repurchased (the holding period ). The amounts already recognized through this specialization during the three months ended 31 March 2017 is disclosed in Note 5 Other Operating Income, and the amounts to be recognized are disclosed in Note 38 Deferred Income. 21

22 b) Services Revenue from Services is recognized during the period in which the services are actually provided, regardless of whether an invoice has been issued. c) Interest Interest Income is accrued so that it is recognized during the corresponding period, regardless of whether the corresponding supporting document has been issued. d) Dividends Dividend income is recognized when, in substance, the reporting Entity has an obligation to declare a Dividend Appropriation of Income and Expenses Income and Expenses are recognized during the period to which they relate, regardless of their payment or receipt, on an accrual basis. The differences between the amounts received and paid and the corresponding Income and Expenses are recognized as Assets or Liabilities if they qualify as such Corporate Income Tax (Note 15) Corporate Income Tax for the period includes Current Income Tax and Deferred Income Tax. Corporate Income Tax is recognized in the Consolidated Statement of Profit and Loss and Other Comprehensive Income, except when it is related to items that are recognized directly in Shareholders' Equity. The amount of Current Tax Payable is determined based on Earnings Before Tax, adjusted in accordance with the applicable tax regulations. SAG Gest recognizes Deferred Income Taxes, in accordance with IAS 12 Income Tax, so as to adequately specialize the tax effects of its operations, and to exclude distortions related to fiscal criteria which counteract the economic effects of certain transactions. Deferred Income Taxes represents the amount of Income Tax over temporary differences between the Accounting Basis of Assets and Liabilities and their corresponding amount for tax purposes. Deferred Income Taxes are recognized in respect of deductible tax losses whenever there is reasonable certainty that future profits will be generated against which such tax losses may be used. Deferred Income Tax Assets are reviewed annually and reduced whenever it is no longer probable that the corresponding original tax losses will be used. Deferred Income Tax Liabilities are recognized in respect of all taxable temporary differences, except for: (i) the initial recognition of Goodwill; or (ii) the initial recognition of Assets and Liabilities that do not result from a business combination and that, on transaction date, do not affect the accounting or taxable income. However, taxable temporary differences related to Investments in Subsidiaries should not be recognized to the extent that: (i) SAG Gest has the ability to control the period of reversal of the temporary difference; and (ii) it is likely that the temporary difference will not reverse in the near future. The amount of Deferred Income Taxes is determined by applying the tax rates (and laws) in force, or substantially in force, on reporting date and which are expected to be applicable in the period of realization of the Deferred Income Tax Assets or the settlement of Deferred Income Tax Liabilities. According to the legislation in force in Portugal, SAG Gest considered the basic Corporate Income Tax rate of 21%. Where an Entity does not record tax losses, the basic Corporate Income Tax rate is increased by Municipal tax ( Derrama Municipal ) at the rate of 1.5%. The resulting income tax rate (22.5& where there are no tax losses. Or 21% where the Entity reports negative taxable income) is applied to the amounts of the temporary differences that originate Deferred Tax Assets or Liabilities. The movements during the year, the reconciliation between the Corporate Income Tax for the year and the Current Income Tax and the breakdown of the Deferred Income Tax balances are reported in Note 15 Corporate Income Tax. 22

23 2.5.3 Tangible Fixed Assets (Note 17) Tangible Fixed Assets are recognized at acquisition cost, which includes all costs associated with the respective acquisition, less cumulative depreciation and any cumulative impairment losses. Depreciation is calculated on a cost basis using the straight-line method, except in the case referred to below, in order to fully depreciate the assets until the end of their estimated useful life, using the annual depreciation rates disclosed in the following table. Buildings and Other Constructions 2.00 Basic Equipment to Transport Equipment to Tools to Office Equipment to Other Fixed Assets to In the Globalrent Subsidiary depreciation of the vehicles assigned to its Rent-a-Car activities (short-term rental of vehicles without driver), which are recognized as Basic Equipment, is determined in order to reflect, on a straight-line base, the loss estimated to occur in the value of the vehicle during its intended period of use. Expenses arising from the repair and maintenance of equipment are recognized as expenses in the year in which they occur Intangible Assets (Notes 18 and 19) a) Goodwill Positive consolidation adjustments (Goodwill) represent the excess of the acquisition cost over the Fair Value of the identifiable Assets and Liabilities (i) as at acquisition date or (ii) as at the date of a change in control requiring a change in the consolidation method. Goodwill is allocated to Cash-Generating Units for the performance of impairment tests. Goodwill is not amortized, and its value is reduced by any impairment losses determined annually on reporting date, or whenever there are signs of a loss in value. Any loss in value (impairment) is recognized against the result for the period, and cannot be subsequently reversed. Gains or losses arising from the sale of an Entity / Cash-Generating Unit are calculated including the corresponding Goodwill amounts. Where there is a business reorganization, which implies a change in the composition of the Cash Generating Units to which Goodwill has been allocated, a review is made of the allocation of Goodwill to the new Cash Generating Units. Re-allocation is performed using a relative value approach of the new Cash Generating Units that result from the reorganization. As set forth in Appendix B of IFRS 1 First Time Adoption of International Financial Reporting Standards, SAG Gest chose to neither (a) retroactively perform the calculations required to determine the value of Goodwill in accordance with IFRS 3 Business Combinations, nor (b) to apply retroactively IAS 21 Effects of Changes in Exchange Rates, in respect of acquisitions completed on or before 1 January b) Store Key-money Key-money expenses are recognized during the term of the applicable rental agreements. Store Key-money is amortized over a period of 5 years. The amount related to Store Key-money was allocated to Cash-Generating Units for the performance of impairment tests. % 23

24 c) Other Intangible Assets Other Intangible Assets are measured at cost. Amortization is calculated on a straight-line basis, using amortization rates that allow full amortization of such assets until the end of their useful life. Software is amortized using a 33.33% amortization rate Investments in Affiliates (Note 20) Associated Entities are those where SAG Gest has a significant influence, generally associated with a participation between 20% and 50% of the voting rights, but does not control. SAG Gest s investments in Affiliates are recognized using the Equity Method. In accordance with this method, investments are recognized at their acquisition cost, adjusted by the percentage held by SAG Gest in eventual subsequent changes affecting the equity of those Entities. Where signs of impairment are identified, such Financial Investments are subject to impairment tests. The results for the period reflect the appropriation by SAG Gest of results of the Affiliates operations, in the proportion of the interest held. When the share of losses attributable to the Entities included in consolidation is equivalent to or exceeds the value of the financial investment in the Associates, additional losses are recognized where SAG Gest and/or any of the other Entities included in the consolidation have assumed obligations towards third parties. Dividends recognized during the year reduce the carrying amount of Investments in Affiliates. When SAG Gest loses significant influence, the retained Investment in the Affiliate is recognized at its Fair Value (with impact on the year s results). Unrealized gains and losses on transactions between SAG Gest, and/or any of the other Entities included in the consolidation, and Affiliated Entities are eliminated in proportion to the interest held in the Affiliates. Unrealized losses are also eliminated unless the transaction provides additional evidence of impairment of the transferred Asset. The accounting policies of the Associates are amended, whenever necessary, to ensure that they are applied consistently with those adopted by SAG Gest and its Affiliates Investment Properties (Note 21) Investment Properties represent land and buildings held for income and/or capital valuation, or both, that are not used in current business operations (rendering of services or sales). Investment Properties are recognized at their Fair Value, determined in accordance with the disclosures in Note Determining Fair Value, and reflecting market conditions on reporting date. Changes in valuations are recognized in the Consolidated Statement of Profit and Loss and Other Comprehensive Income as Fair Value Adjustments in the year when they occur. Expenses incurred (maintenance, repairs, insurance and property tax), as well as any income and rentals received from Investment Properties are recognized in the Consolidated Statement of Profit and Loss in the year to which they relate Inventories and Impairment Losses on Inventories (Note 22) Inventories are measured at the lowest of cost or net realizable value. Net realizable value represents the expected sales price less costs to sell. Cost is determined as follows: New Cars acquisition cost plus any other additional purchase expenses, or net realizable value where it is lower than the acquisition value. 24

25 Used Cars when vehicles recognized in Inventory result from trade-in transactions, they are valued at the purchase cost as determined at the trade-in valuation performed at the time of the transaction. The amount is adjusted whenever there is evidence of impairment in relation to the net realizable value. Vehicles under Buy-Back programs the cost recognized represents the agreed re-purchase price, after deduction of any impairment losses; Spare parts and other saleable goods are valued at purchase cost plus any other expenses incurred prior to the respective entry into Inventories. Exits are valued at the average cost. The amount of Adjustments for Spare Parts Inventory is determined on the basis of stock turnover, by type of material, calculated based upon inventory transactions recorded during the previous 24 months. These criteria are applied consistently Determining Fair Value Certain policies and disclosures adopted by SAG Gest require the determination of the Fair Value of Financial and Non-Financial Assets and Liabilities. Fair Value is the amount that would be received from the sale of an Asset or paid to transfer Liabilities in a regular transaction between market participants on valuation date. To determine the Fair Value of an Asset or a Liability, SAG Gest uses observable market data, whenever available. Fair Value is classified by hierarchy level, based on the inputs used in evaluation techniques, namely: Level 1: listed, non-adjusted prices used in active markets for identical Assets and Liabilities; Level 2: Directly or indirectly observable inputs for Assets and Liabilities; Level 3: Inputs based on non-observable data Fair Value is not determined based on active market quotations, but rather using valuation models, whose main inputs are not observable in the market. This includes Investment Properties, which are evaluated by independent external experts Financial Assets (other than Financial Investments) Financial Assets are recognized on the date on which the Entity undertakes the respective acquisition (date of negotiation or date of contract, as the case may be). During the three months ended 31 March 2017, only Loans and Accounts Receivable were recognized, as disclosed in Notes 23 Accounts Receivable Trade Customers and 26 Accounts Receivable Other, which include Non-Derivative Financial Assets, with fixed or determinable receipts. Customers and Debtors balances are recognized at their nominal value, less any impairment losses, so that the amounts included in the Consolidated Financial Statements represent the respective net realizable value. Impairment losses are recognized when there are signs that the receivable is uncollectible, and the write-off is only recognized when the applicable legal requirements are met, namely the issuance of Certificate of Insolvency and the respective Certification by a Statutory Auditor. These Assets are derecognised when: i. Contractual rights to the receipt of their cash flows expire; ii. iii. All risks and benefits associated with their holding have been substantially transferred by SAG Gest and/or the Entities included in the consolidation; Even if retaining part, but not all the risks and benefits associated with the holding of the Assets have been transferred, control over the Assets has been transferred. 25

26 Cash and Cash Equivalents (Note 29) This item includes Cash and Time Deposits with a maturity of 3 months or less, readily convertible to known amounts of cash and which are not subject to an significant risks of changes in value Equity Instruments (Note 30) Equity Instruments are classified in accordance with their substance, regardless of their legal form. Equity Instruments issued by Entities included in the consolidation are recognized for the amount received, net of the costs incurred with their issuing. Treasury Stock is measured at the Shares purchase price and recognized as a reduction of Consolidated Equity. When these Shares are disposed of, the amount received, less any direct transaction costs and applicable taxes, is recognized directly in Consolidated Equity. Holders of Common Shares are entitled to receive dividends as resolved by the General Shareholders Meeting and are entitled to one vote for each Share held, and there are no Preferred Shares. The rights relating to Treasury Stock held by SAG Gest and its Affiliates are suspended until such Shares are placed on the market again. The amount of Shares held as Treasury Stock is presented as Treasury Stock until the date such Shares are cancelled, reissued or sold. When Treasury Stock is subsequently sold or reissued, the amount received is again included in Equity attributable to Shareholders. Dividends payable are recognized until they are paid as Liabilities in the Consolidated Financial Statements in the year in which the Shareholders approve their distribution Financial Liabilities Financial Liabilities are classified according to their substance, regardless of their legal form. During the three months ended 31 March 2017, there was recognition of: a) Bank Loans b) Accounts Payable Policies and procedures applied in the situations that occurred during the three months ended 31 March 2017 are as follows: a) Bank Loans (Note 32) Bank Loans are measured at their amortized cost, and the amount received is net of charges incurred with issuing such Loans. Financial Expenses are calculated using the Effective Interest Rate Method and recognized in the Consolidated Statement of Profit and Loss and Other Comprehensive Income, as Financial Expenses, on an accrual basis. b) Accounts Payable (Note 34 and 35) Outstanding balances due to Suppliers and Other Creditors are initially recognized at their nominal value, which is deemed to represent their Fair Value, and are subsequently recognized, where applicable, at their amortized cost, using the Effective Interest Rate Method Provisions (Note 33) Provisions are recognized where the Entity has a legal or constructive obligation deriving from past circumstances, implying a probable outflow of economic resources that may be required to settle such obligation, and that such outflow can be measured reliably. Provisions represent to the present value of the estimated disbursements to settle the obligation and are reviewed on date of each financial report, and adjusted to reflect the best estimate at that date. 26

27 SAG Gest is a part in several pending legal cases. Based upon the opinion of its Legal Counsel, SAG Gest judges whether there is the need to recognize a Provision in respect of contingencies associated with such legal cases Contingent Assets and Liabilities (Note 42) Contingent Assets are not recognized in the Consolidated Financial Statements, and are only disclosed when there is the likelihood of a future economic benefit. Contingent Liabilities are not recognized in the Consolidated Financial Statements and are disclosed in the Notes to the Consolidated Financial Statements, unless the likelihood of an outflow of funds is remote, in which case they are not disclosed Subsequent Events (Note 43) Events taking place after reporting date that provide additional information in respect of the conditions existing on reporting date are reflected in the Consolidated Financial Statements. Events taking place after reporting date that provide additional information in respect of the conditions existing after reporting date are disclosed in the Notes to the Consolidated Financial Statements, if material Impairment of Assets Impairment of Non-Financial Assets On each reporting date, SAG Gest evaluates whether there are any signs that its Tangible and Intangible Assets may be in an impairment situation. Whenever these occur, or whenever IFRS require the performance of impairment tests, SAG Gest estimates the recoverable amount of the Asset, which corresponds to the Asset s highest market value, less costs to sell, or the asset s value in use. In the event of an impairment situation, the value of the Asset is reduced in order to reflect its net realizable value. Non-Financial Assets, other than Goodwill, where impairment losses have been recognized are valued on each reporting date to verify the possible reversal of recognized impairment losses. When there is recognition of an impairment loss, or its reversal, depreciation/amortization of the respective Assets is recalculated prospectively according to the adjusted recoverable value of the recognized impairment Impairment of Financial Assets Impairment losses in balances of Customers and of Other Accounts Receivable are recognized whenever there is objective evidence that the amounts are not recoverable in accordance with the initial terms of the transaction. The identified impairment losses are recognized in the Consolidated Statement of Profit and Loss and Other Comprehensive Income, as Impairment Losses on Accounts Receivable, and are subsequently reversed through Profits and Loss, if the impairment signs decrease or no longer occur Financial and Operating Leases Leases are classified as Operating Leases where a significant part of the risks and benefits of ownership of the leased Asset are held by the Lessor. Payments performed in respect of Operating Leases are recognized in the Consolidated Statement of Profit and Loss and Other Comprehensive Income using the straight-line method during the lease period, net of any incentives received from the Lessor. Fixed Assets acquired under Financial Lease contracts, or other contractual instruments that, in substance, represent a Financial Lease, are recognized as Financial Leases, in accordance with the provisions set forth in IAS 17 Leases. Accordingly, on the one hand, the acquired Tangible Assets are recognized after deduction of their respective cumulative depreciation and, on the other, Liabilities representing the outstanding principal lease payments are recognized at their amortized cost, using the Effective Interest Rate Method. Interest expenses included in contractual instalments and depreciation are recognized as expenses in the year to which they relate. 27

28 Assets leased to third parties under an Operating Lease are recognized as Tangible Fixed Assets in the Consolidated Statement of the Financial Position. These items are depreciated over their estimated useful lives. Rental Income (net of any incentives granted to the Lessee) is recognized in a straight line over the term of the lease Foreign Currency Denominated Transactions and Balances a) Functional currency The functional currency used in the preparation of the Consolidated Financial Statements of SAG Gest and its Subsidiaries, Affiliates and Associates is the Euro. b) Foreign currency denominated transactions Transactions denominated in foreign currency (outside the Euro Zone) are converted into Euros using the exchange rate prevailing on transaction date. Foreign currency denominated accounts receivable and payable are converted into Euros using the exchange rate prevailing on reporting date. c) Non-Monetary Assets and Liabilities denominated in foreign currency Foreign currency denominated non-monetary Assets and Liabilities recognized at Fair Value are converted into the functional currency of each Subsidiary or Affiliate using the exchange rate prevailing on the date when their Fair Value is determined. Subsequently, and on each reporting date, those amounts are reconverted to SAG Gest s functional currency using the exchange rate prevailing on reporting date. d) Exchange rate differences All exchange rate differences determined following the application of these procedures are recognized as Income or Expenses for the period. Exchange differences arising from the conversion of balances between Entities include in the consolidation are recognized as Income or Expenses of the period in the Consolidated Financial Statements, unless those balances are considered as part of the net investment in a foreign Subsidiary, in which case they are recognized against Equity Earnings per Share Basic Earnings per Share and Diluted Earnings per Share of continuing operations and, if applicable, of discontinued operations, are presented in the Consolidated Statement of Profit and Loss and Other Comprehensive Income. Basic Earnings per Share are calculated dividing (i) the profit and loss for the period attributable to holders of SAG Gest Common Shares, by (ii) the weighted average number of Common Shares outstanding during the period. In calculating Diluted Earnings per Share, the profit and loss for the period attributable to holders of SAG Gest Common Shares is adjusted (i) in respect of preferred dividends, (ii) of the differences resulting from the liquidation of Preferred Shares and (iii) of other similar effects. The weighted average number of Shares outstanding shall be adjusted for events other than the conversion of potential Common Shares which have changed the number of Common Shares outstanding without a corresponding change in resources, to reflect the effects of all potential dilutive Common Shares. Dilution is a reduction in earnings per Share or an increase in losses per Share resulting from the assumption that (i) convertible instruments are converted, (ii) options or subscription premiums are exercised, or (iii) Common Shares are issued when certain conditions are met. When Basic Earnings per Share and Diluted Earnings per Share are the same, the respective values are presented in a single line in the Consolidated Statement of Profit and Loss and Other Comprehensive Income. 28

29 Non-Current Assets (or Disposal Groups) Held for Sale Non-Current Assets (or Disposal Groups) are classified as Non-Current Assets Held for Sale when their book value will be mainly recovered through a sale transaction, or through a distribution to Shareholders, instead of their continued use in the activities. Non-Current Assets Held for Sale may refer to a separate Asset (e.g. Tangible Assets, or Investment in a Subsidiary with loss of control), or to a Disposal Group that includes Assets and Liabilities (e.g. business for sale in full). In order for a Non-Current Asset or Disposal Group to be classified as held for sale, it must be available for immediate sale and the transaction must also be highly probable. A sale transaction is considered probable when Management undertakes to proceed with the sale, defining an appropriate price range and actively seeking a possible buyer, so that the sale operation can be completed within a period of 12 months. Non-Current Assets Held for Sale are measured at the lower of (i) net book value and (ii) Fair Value less costs to sell, from the date where they are classified as held for sale. Assets with defined useful lives are no longer depreciated / amortized from the date when they are classified as held for sale, until the date the sale transaction occurs, or the transaction is no longer probable. When, due to changes in circumstances, Non-Current Assets and/or Disposal Groups no longer meet the conditions to be classified as held for sale, they shall be reclassified in accordance with the underlying nature of the Assets and will be valued at the lower of (i) the net book value before they were classified as held for sale, adjusted for any depreciation / amortization expenses, or revaluation amounts that would have been recognized had these Assets not been classified as held for sale, and (ii) the recoverable amounts of the items on the date they are reclassified according to their underlying nature. These adjustments shall be recognized in the results for the year. 2.6 Management Judgments In the preparation of the Consolidated Financial Statements in accordance with IFRS, the Board of Directors uses estimates and assumptions affecting the application of policies and the reported amounts. Estimates and judgments are continually evaluated and are based on the experience of past events and other factors, including expectations in respect of future events that are considered to be likely in view of the circumstances upon which the estimates were based or are the result of an acquired information or experience. The most significant accounting estimates contained in the Consolidated Financial Statements are as follows: a) Valuation and Useful Life of Intangible Assets SAG Gest used various assumptions in estimating future cash flows resulting from Intangible Assets acquired as part of processes of acquisition of Entities, which include an estimate of future revenues, discount rates and the useful life of said assets. b) Going Concern The bases understood as fundamental to ensure the future profitability of SAG Gest and the stability of its capital structure were defined in December 2015 and were subsequently confirmed by the performance achieved in the financial year 2016 and in the Quarter ended 31 March 2017 where, as in the same period in the previous year, SAG Gest recorded positive net results. These facts confirm that the objectives defined in the context of the changes implemented at the end of 2015 were achieved, and that SAG Gest is now in a position to ensure the sustainability of its business. These prospects of SAG Gest's activities are not affected by the fact that on 31 March 2017 the amount of current liabilities in the Statement of the Consolidated Balance Sheet exceeds the value of current assets by approximately Eur 99.7 million (approximately Eur million on 31 December 2016) since the rotation of the two main components of current assets (Inventories and Accounts Receivable) - which is about 3 and 17 times a year, respectively - exceeds the rotation of about 2 times a year that currently characterizes the main component of current liabilities (Accounts Payable to Suppliers). 29

30 Accordingly, the Board of Directors of SAG Gest is of the opinion that the Consolidated Financial Statements should be prepared and submitted on a basis of a going concern. 2.7 Uncertainties a) Analysis of Goodwill Impairment Goodwill is tested annually and whenever circumstances arise which may indicate that its book value could be in an impairment situation. The recoverable amounts of Cash-Generating Units have been determined based on value-in-use calculations. The use of this method requires the estimate of the future cash flows expected to arise from the operation of the Cash-Generating Units and the choice of a suitable discount rate. The assumptions and variables on which Management had to exercise judgment and the respective sensitivity analyses are disclosed in Note 18 Intangible Assets Goodwill. b) Recognition of Provisions and Impairment Losses SAG Gest is currently a party to various legal cases. Based on the opinion of its Legal Advisors, an assessment is made to determine whether a Provision should be recognized in respect of the contingencies associated with such legal cases. Accounts Receivable Impairment Losses are essentially calculated based upon the ageing of the open items composing the Accounts Receivable balances, the Clients risk profile and their financial condition. Estimates relating to Accounts Receivable Impairment Losses differ from business to business. Inventories Impairment Losses are calculated based on the expected sales price of goods in inventory. c) Determination of the market value of Investment Properties Investment Properties are land and buildings and are recognised at the Fair Value as determined by specialised and independent entities with recognised professional qualifications and experience in the valuation of assets of this nature. 3. CONSOLIDATED ENTITIES a) Entities included in Consolidation The Subsidiaries and Affiliates included in the Consolidated Financial Statements as well as their financial indicators as at 31 March 2017 are as follows: (1) Entities included in consolidation using the Full Consolidation Method Company Head Office Turnover Total Assets Shareholder Equity % in Equity Net Result Mar-17 Dec-16 SIVA - Sociedade de Importação de Veículos Automóveis, S.A. Azambuja 144, , , , % % SAG Overseas Investment and Finance, Ltd. Ireland - 8, ,541.4 (30.9) % % SOAUTO - Comércio de Automóveis, S.A. Lisbon 21, , , % % ROLPORTO - Comércio e Indústria de Automóveis, S.A. Oporto 4, , , % % AA00 - Sociedade de Formação Profissional e Consultoria Técnica, S.A. Amadora , % % ROLVIA - Sociedade de Automóveis, S.A. Oporto 4, , , % 60.00% SOAUTO, SGPS, S.A. Amadora - 26, ,687.6 (0.6) % % SIVA Serviços - Assessoria Financeira e Administrativa, S.A. Amadora 1, , ,931.1 (389.3) % % GlobalRent - Sociedade Portuguesa de Rent-a-Car, Lda. Amadora 12, , % % Autoimpor - Sociedade Importadora de Automóveis, S.A. Amadora - 336, ,153.6 (2,891.4) % % LGA - Logística Automóvel, S.A. Azambuja 2, , , % % Fundo de Investimento Imobiliário Fechado - Imocar Lisbon - 61, , , % % Loures Automóveis - Comércio de Automóveis, S.A. Loures 7, , , % 71.66% 30

31 (2) Entities included in consolidation using the Equity Method % in Equity Company Head Office Turnover Total Assets Shareholder Net Result Mar-17 Dec-16 Equity Autolombos - Sociedade de Automóveis, Lda. Oeiras 2, , % 40.00% b) Main Changes in the Consolidation Perimeter During the Quarter ended 31 March 2017, there were no changes to SAG Gest s consolidation perimeter when compared with the situation existing on 31 December REPORTING BY OPERATING SEGMENTS The financial information in respect of Operating Segments is regularly and periodically reported to the Board of Directors (SAG Gest s main decision-making body). Based on this report, the Board of Directors evaluates the performance of each Segment and allocates available resources. Management evaluates the performance of the Segments based on information on Operating Results and on the contribution of each Segment to the Consolidated Operating Result. This evaluation excludes the effects of unusual operating results. Management monitors the performance of the businesses in accordance with the various activities carried out. The Automotive Distribution and Automotive Retail Segments were identified in this context. The aggregations were performed taking into account the similarities of the respective economic activities, particularly in what relates to the nature of the products and services marketed, the type of Customers and the methods of distribution and provision of services. The Operating Segments considered are as follows: The Distribution segment which includes: i. the automotive distribution activities in Portugal in respect of the Volkswagen, Volkswagen Commercial Vehicles, Škoda, Audi, Bentley and Lamborghini Brands ii. iii. iv. the sales of spare parts and accessories the preparation of new vehicles the training and technical consultancy activities The Retail segment includes the activities involving the retail sale in Portugal of new vehicles of the Volkswagen, Volkswagen Commercial Vehicles, Škoda and Audi Bentley and Lamborghini Brands, the sale of multi-brand used vehicles, the sale of parts and accessories and the provision of repair and maintenance services of vehicles as Official Workshops for the Volkswagen, Volkswagen Commercial Vehicles, Škoda and Audi vehicles. This segment also includes results from the Autolombos Affiliate, which is included in the Consolidated Financial Statements using the Equity Method. Other Operations include i. the activities of SAG Gest, as Parent Company ii. iii. the activities of the shared services unit (SIVA Serviços) the Rent-a-Car activities in Portugal Operating results of the Cash-Generating Units are monitored separately with the objective of deciding in respect of the allocation of resources and of monitoring performance. Performance of each segment is evaluated on the basis of net operating income and contribution to the net consolidated operating income. Financing and taxes are mostly managed centrally and are not allocated to Operating Segments. Transfer prices applied to transactions between Operating Segments are determined on an arm s length basis, similar in all aspects to transactions conducted with unrelated bona fide third parties. 31

32 Business segments The tables below disclose the Results, Assets and Liabilities as at 31 March 2017 and 31 March 2016 of the Operating Segments where SAG Gest and its Subsidiaries and Affiliates carry out their activities: Distribution Retail Other Activities Intra-Group Transactions Total Consolidated BUSINESS SEGMENT REPORTING Mar-17 Mar-16 Mar-17 Mar-16 Mar-17 Mar-16 Mar-17 Mar-16 Mar-17 Mar-16 Revenue Sales 156, , , , , ,105.1 Services 3, , , , , , , ,482.8 Intra-Group Sales (36,408.6) (38,025.5) (5,592.2) (7,350.4) (1,217.1) (751.6) (43,218.0) (46,127.6) Segment Revenue 122, , , , , ,460.4 Result Impairments in Accounts Receivable (0.9) 53.8 (3.6) (4.6) 56.9 Impairments in Inventories (659.7) (1,021.5) (50.6) (161.2) - - (710.2) (1,182.8) Provisions (3.1) Depreciation and Amortization (277.9) (232.2) (199.7) (205.0) (60.7) (79.6) (538.3) (516.9) Segment Profit (EBIT) 4, , (1,016.2) (1,634.6) - - 4, ,911.1 Financial (Expenses) / Income (1,391.6) (804.0) (223.0) (294.0) (2,028.6) (2,541.0) (3,643.3) (3,639.1) Income From Associated Companies - Equity Method (.0) (0.0) Net Profit Before Taxes and Non-Controlling Interests 3, , (3,043.1) (4,175.6) ,272.0 Income Taxes (842.7) (1,071.4) (131.3) (172.0) (559.8) (994.3) Non-Controlling Interests Net Profit / (Loss) attributable to SAG GEST 2, , (2,628.9) (3,926.6) Mar-17 Mar-16 Mar-17 Mar-16 Mar-17 Mar-16 Mar-17 Mar-16 Mar-17 Mar-16 OTHER INFORMATION Segment Assets 761, , , , ,001, ,048,793.8 (1,304,159.9) (1,649,896.3) 542, ,035.5 Total Consolidated Assets 761, , , , ,001, ,048,793.8 (1,304,159.9) (1,649,896.3) 542, ,035.5 Segments Liabilities 508, , , , , ,300.0 (659,509.9) (1,095,011.9) 521, ,948.1 Total Consolidated Liabilities 508, , , , , ,300.0 (659,509.9) (1,095,011.9) 521, ,948.1 Capital Expenditure

33 5. OTHER OPERATING INCOME Other Operating Income is as follows: Period of 3 months ended on March Warranty Extensions 1, Accrued Income - "Buy-Back" Operations * 1, Vehicles Preparation - Expenses Recovered ,007.7 Vehicles Legalization - Expenses Recovered Transportation - Expenses Recovered Vehicle Taxes - Expenses Recovered Commissions Earned Mobility Program - Expenses Recovered Quality Tools Rappel - Oils and Lubricants Rappel - Parts and Accessories Maintenance Agreement Other Expenses Recovered Data Processing Fees Buildings Rental Signposting and Dealerships Furniture Other Operating Income Total Other Operating Income 6, ,085.4 *As disclosed under Note a ii) Revenue Recognition Buy-Back Transactions. 6. OTHER OPERATING EXPENSES Other Operating Expenses are as follows: Period of 3 months ended on March Warranty Extensions Vehicle Taxes ,060.2 Vehicles Legalization Expenses Transportation Expenses Subcontracts Indirect Taxes Training Delivery Services Mobility Program Expenses Replacement Vehicle Fuel Consumables Signposting and Dealerships Furniture Technical Assistance Vehicle Maintenance Contracts Levies Car Washing Fines and Penalties Other Operating Expenses Total Other Operating Expenses 4, ,

34 7. SALES, GENERAL AND ADMINISTRATIVE EXPENSES COMMERCIAL EXPENSES Third Party Supplies and Services Commercial Expenses are as follows: Sales, General & Administrative Expenses - Commercial Expenses Period of 3 months ended on March Advertising 2, ,361.5 Patronage Other Commercial Expenses SG&A- Commercial Expenses 2, , SALES, GENERAL AND ADMINISTRATIVE EXPENSES CAR EXPENSES Third Party Supplies and Services Car Expenses are as follows: Sales, General & Administrative Expenses - Car Period of 3 months ended on March Vehicles Rental Expenses Fuel Vehicles Insurance Expenses Vehicles Maintenance Expenses Freight and Carriage Other Car Expenses SG&A- Car Expenses

35 9. SALES, GENERAL AND ADMINISTRATIVE EXPENSES OVERHEADS Third Party Supplies and Services Overheads are as follows: Sales, General & Administrative Expenses - Non-Variable Expenses Period of 3 months ended on March Rents and Rentals IT Specialized Services Management Fees Repairs & Maintenance Other Specialized Services Consulting Fees Electricity Cleaning, Hygiene and Comfort Miscellaneous Fees Travelling Expenses Surveillance and Security Telecommunications Other Insurance Audit Fees Translations Tools and Utensils Office Supplies Legal Advisors Fees Other Fluids Staff Transportation Water Other Commissions Mail Litigation and Notaries Newspapers and Magazines Books Car Logistics Other Non-Variable Expenses SG&A- Non-Variable Expenses 3, ,

36 10. PAYROLL EXPENSES Payroll Expenses are as follows: Period of 3 months ended on March Corporate Bodies - Fixed Remuneration Employees - Fixed Remuneration 3, ,221.4 Social Security Contributions Employee Bonuses and Variable Remuneration Workmen Compensation Canteen Expenses Trainees Restructuring and Reorganization Expenses Other Employee Benefits Other Payroll Costs Total Payroll Expenses 5, ,110.2 The number of Employees of SAG Gest, its Subsidiaries and Affiliates at the end of the three months ended 31 March and the average number of Employees during the same period are disclosed in the following table. Period of 12 months ended on December 31 End of Period Average Number of Employees GAINS AND LOSSES IN THE SALE OF TANGIBLE FIXED ASSETS Gains and Losses in the Sale of Tangible Fixed Assets are as follows: Period of 3 months ended on March Gains and (Losses) from Tangible Fixed Assets sales Total Gains and (Losses) on the Sale of Tangible Fixed Assets represents the net amount of realized losses and gains in the sale of Tangible Fixed Assets. 36

37 12. FINANCIAL EXPENSES Financial Expenses are as follows: As disclosed in Note 42 Commitments and Contingencies, SAG Gest and/or other Entities included in the consolidation perimeter requested several Financial Institutions to issue Bank Guarantees to third parties (including Suppliers), on their behalf. The amount of the said Bank Guarantees on 31 March 2017, which remained unchanged as compared to 31 December 2016, was Eur (000) , FINANCIAL INCOME Financial Income is as follows: 14. GAINS AND LOSSES FROM ASSOCIATED COMPANIES Gains and Losses from Associated Companies represent the appropriation, by SAG Gest, of the net results reported during the period by the Autolombos Affiliate which is consolidated using the Equity Method. In this Affiliate, SAG Gest does not hold a majority stake but has significant management influence. These amounts are detailed in the following table. Period of 3 months ended on March Interest Paid 2, ,430.2 Bank Guarantees Expenses 1, ,782.9 Bank Charges Cash Discount Allowed Unfavourable Exchange Differences Total Financial Expenses 4, ,278.5 Period of 3 months ended on March Interest Received Compensatory Interests Favourable Exchange Differences Other Financial Income Total Financial Income

38 Reported Net Result Period of 3 months ended March 31 Participation % Autolombos - Sociedade de Automóveis, Lda % 4.2 (0.1) Appropriated Net Result Period of 3 months ended March 31 Participation % Autolombos - Sociedade de Automóveis, Lda % 1.7 (0.0) Sub-Total Appropriated Net Income 1.7 (0.0) Income / (Loss) from Associated Companies 1.7 (0.0) 15. INCOME TAX a) Changes to tax legislation i. Special Regime for the Taxation of Groups of Companies (RETGS) Law no. 2/2014, dated 16 January 2014, amended, among others, Article 69 of the Portuguese Corporate Income Tax Code, which establishes the scope and conditions for the adoption of the Special Regime for the Taxation of Groups of Companies (RETGS). These changes were effective 1 January Paragraph 2 of said Article 69 establishes that, for an Entity to be considered as a controlled Entity, for the purposes of the application of the RETGS, the percentage that a Shareholder holds directly or indirectly in that Entity must be 75% (previously 90%), provided that such participation confers at least 50% of the voting rights. If this condition occurs, the Entity will be included in the perimeter of application of the RETGS led by its Shareholder Entity. As a consequence of this amendment, and after compliance with the other requirements of Article 69 of the Portuguese Corporate Income Tax Code, SAG Gest had, with effect from 1 January 2014, a new dominant Entity for tax purposes, SGC SGPS, its majority Shareholder and, as a consequence, became part of the RETGS perimeter of said Entity. In addition, and also as a result of these changes, the remaining Entities previously included in the RETGS perimeter led by SAG Gest, directly and indirectly owned by the SGC SGPS Shareholder in more than 75%, became part of the RETGS perimeter of the said Entity, with effect from 1 January The decision to continue applying this regime was communicated to the Tax Authorities by the dominant Entity on 25 March The Tax Authorities confirmed this change on 2 March Also on 25 March 2014, pursuant to Paragraphs 3 and 4 of Article 71 of the Portuguese Corporate Income Tax Code, an application was filed requesting the maintenance of tax losses related to prior years, calculated under the RETGS led by SAG Gest, as well as the maintenance of the applicable share of the individual tax losses of the Entities included in the previous RETGS led by the SGC SGPS Shareholder. 38

39 ii. The Tax Authorities' response to this request, which is expected to be granted, is still awaited, and therefore the use of deductible tax losses within the scope of the current RETGS perimeter was considered in accordance with the request made. Deductibility of interest expenses With the introduction of the new limitation regime in respect of the deductibility of interest expenses (thin capitalization rules), the tax deductibility of interest expenses is now limited In accordance with this system, interest expenses are only deductible according to the following limits: i. Eur (000) 1,000 ii. 30% of the result before depreciation/amortization, net interest costs and taxes, as adjusted for tax purposes (tax EBITDA). When the RETGS applies, the controlling entity can choose to calculate the deductible interest expenses on a consolidated basis, or on an individual basis (Entity by Entity). SGC SGPS, as controlling company of the RETGS where SAG Gest and its Subsidiaries and Affiliates are included, chose to calculate the amount of the deductible interest expenses on a consolidated basis. This option was communicated on 31 March 2016, and for this reason, this method was not used in the 1st Quarter 2016, and it applies for 3 years (between 1 January 2016 and 31 December 2018). Therefore, deductible interest expenses are the sum total of the qualifying interest expenses incurred by each of the Entities included in the RETGS, limited to the highest of (i) Eur (000) 1,000 or (ii) 30% of the tax EBITDA calculated on a consolidated basis. b) Revisions to tax returns In accordance with the legislation in force, Portuguese tax returns are subject to review and correction by the Tax Authorities during a period of four years (five years for Social Security). Thus, the tax returns of the Entities included in the consolidation for the years 2013 to 2016 may still be subject to revision, although SAG Gest considers that any corrections resulting from revisions of the Tax Authorities to those tax returns will not have a significant effect on the Consolidated Financial Statements as at 31 March Where tax losses have been incurred, or inspections, claims or challenges are under way, the term is extended or suspended, depending on the circumstances. Accordingly, the tax returns of the Entities included in the consolidation may also be corrected in cases where the respective Corporate Income Tax Additional Settlement Note has been challenged in court, as disclosed in Note 42 Commitments and Contingencies. c) Calculation of Current Income Tax The Current Income Tax represents the liability in respect of the payment of Income Tax that must be settled in relation to the current fiscal year and corresponds, under the RETGS regime, to the sum of the taxes related to each of the Entities included in the consolidation, as shown in their respective annual tax returns. The Income Tax rates applicable in Portugal during the year 2017 are as follows: i. Basic Income Tax rate ( IRC ): 21% on taxable income ii. Local Income Tax Surtax ( Derrama Municipal ): 1.5% on the positive taxable income, calculated on an individual basis, for each of the Entities included in the consolidation that carry out their activities in Portugal 39

40 iii. State Income Tax Surtax ( Derrama Estadual ): is charged on the positive taxable income calculated on an individual basis for each of the Entities included in the consolidation that carry out their activities in Portugal, with the following tax rates being applicable: a. 3% on positive taxable income between Eur(000) 1,500.0 and Eur(000) 7,500.0 b. 5% on the positive taxable income between Eur(000) 7,500.0 and Eur(000) 35,000,0 c. 7% on the positive taxable income that exceeds Eur(000) 35,000,0 d) Conciliations: Book Earnings and Taxable Income, Effective Tax Rate and Statutory Tax Rate The conciliations between (i) the Book Earnings and Taxable Income, and (ii) the tax rates applied to the Book Earnings and the statutory tax rates applied (after accounting corrections) during the years ended 31 March 2017and 2016 are disclosed in the following tables. 40

41 Books Tax (Current income tax) Period of 3 months ended March Differences Deferred Income Tax Debit / (Credit) of Results Assets Liabilities A - Earnings Before Tax B - Temporary Differences between Tax and Reporting Basis Elimination of Intra-Group Margins 83.5 (83.5) (18.8) Recognition/ (Reversal) Non Deductible Provisions (559.6) Utilization of Tax Losses Carried Forward (512.9) Non Deductible Accrued Expenses 14.2 (14.2) (3.2) Imocar Investment Fund Earnings (1,006.6) 1, Others 88.4 (88.4) (11.0) Total Temporary Differences - (1,893.0) 1, C - Permanent Differences between Tax and Reporting Basis Non Deductible Financial Expenses 1, ,079.3 Income From Associated Companies - Equity Method (1.7) (1.7) Tax Benefits (26.8) (26.8) Fines, Penalties and Compensatory Interests Donations Impairment Losses Non Deductible Depreciations Others Total Permanent Differences 1, , D - Taxable Income (D = A + B + C) 2, ,893.0 D Taxable Income - Foreign Operations (0.0) (0.0) D Taxable Income - Portugal 2, D Taxable Income - Portugal - Items Subject to Special Income Tax Rates (88.4) D-1 Corporate Income Tax (Portugal) Corporate Income Tax Rate (Portugal) 21.0% 21.0% D-2 Items Subject to Special Income Tax Rates (11.0) - Tax Rate - Items Subject to Special Income Tax Rates 12.5% 12.5% 2 - Municipal Tax Municipal Tax Rate (Portugal) 1.5% 1.5% Municipal Tax - Taxable Income (Note 1) 4, , Income Tax Surtax - Applied to Taxable Income in Excess of 1,500, Income State Tax Surtax (Portugal) 3.0% 3.0% Income Tax Surtax - Taxable Income (Note 2) Income Tax Surtax - Applied to Taxable Income in Excess of 7,500, Income State Tax Surtax (Portugal) 5.0% 5.0% Income Tax Surtax - Taxable Income (Note 2) - - D-5 - Total Calculated Tax - (5 = ) Average Statutory Income Tax Rate (Portugal) 24.6% 37.1% 1 - Taxable Income subject to Foreign Income Tax Rates (0.0) (0.0) 2 - Income Tax Related to Foreign Taxable Income (0.0) (0.0) Average Income Tax Rate 12.5% 12.5% 3 - Taxable Income subject to Income Tax in Portugal (D - 2) 2, Taxable Income subject to Income Tax in Portugal - Items Subject to Special Income Tax Rates (D - 3 (88.4) Income Tax Rate related to Taxable Income in Portugal (5) Statutory Income Tax Rate - Portugal 24.6% 37.1% 5. Taxable Income ( 5= = D) 2, CORPORATE INCOME TAX - CALCULATION Total Income Tax (2 + D-5) Income Tax on Items Subject to Special Income Tax Rates Adjustments to Prior Years Income Tax Estimates - - Current Income Tax Deferred Taxes - (Increase) / Decrease Deferred Taxes - Increase / (Decrease) Deferred Income Tax Income Tax Continued Operations Income Tax Discontinued Operations - - Average Income Tax Rate - (7 + 8) : D 25.4% 180.0% 22.6% 22.5% Effective Income Tax Rate - (7 + 8) : A 58.5% 58.5% 21.3% 23.3% Note 1: Local Surtax is calculated as disclosed in Note 15 c). During the three months ended 31 March 2017, SAG Gest and the SIVA, Rolvia, Soauto Comércio, AA00, Globalrent, LGA, Rolporto and Loures Automóveis Subsidiaries recorded positive taxable income. Note 2: In 2016, a tax loss carry forward of approximately Eur (000) 21,300 was determined in respect of the liquidation of the Novinela Subsidiary. As at 31 March 2017, the Deferred Tax Assets relating to this situation were not recognized, as the future recoverability of this loss is still under analysis. 41

42 Books Tax (Current income tax) Period of 3 months ended March Differences Deferred Income Tax Debit / (Credit) of Results Assets Liabilities A - Earnings Before Tax 1,272.0 B - Temporary Differences between Tax and Reporting Basis Elimination of Intra-Group Margins (114.9) (25.8) Recognition/ (Reversal) Non Deductible Provisions (324.3) Utilization of Tax Losses Carried Forward (1,952.8) 1, Non Deductible Accrued Expenses 13.1 (13.1) (3.0) Imocar Investment Fund Earnings (1,003.7) 1, Others 88.4 (88.4) (11.0) Total Temporary Differences - (3,064.4) 3, C - Permanent Differences between Tax and Reporting Basis Financial Investments Impairments Non Deductible Financial Expenses 3, ,014.3 Income From Associated Companies - Equity Method Tax Benefits (12.9) (12.9) Fines, Penalties and Compensatory Interests Donations Non Deductible Depreciations Others (203.2) (203.2) Total Permanent Differences 2, , D - Taxable Income (D = A + B + C) 4, , ,064.4 D Taxable Income - Foreign Operations D Taxable Income - Portugal 4, D Taxable Income - Portugal - Items Subject to Special Income Tax Rates (88.4) D-1 Corporate Income Tax (Portugal) Corporate Income Tax Rate (Portugal) 21.0% 21.0% Calculated Tax (D - 2 x Tax Rate) D-2 Items Subject to Special Income Tax Rates (11.0) Tax Rate - Items Subject to Special Income Tax Rates 12.5% 2 - Municipal Tax Municipal Tax Rate (Portugal) 1.5% 1.5% Municipal Tax - Taxable Income (Note 1) 5, , Income Tax Surtax - Applied to Taxable Income in Excess of 1,500, Income State Tax Surtax (Portugal) 3.0% 3.0% Income Tax Surtax - Taxable Income (Note 2) Income Tax Surtax - Applied to Taxable Income in Excess of 7,500, Income State Tax Surtax (Portugal) 5.0% 5.0% Income Tax Surtax - Taxable Income (Note 2) - - D-5 - Total Calculated Tax - (5 = ) Average Statutory Income Tax Rate (Portugal) 23.7% 29.5% 1 - Taxable Income subject to Foreign Income Tax Rates Income Tax Related to Foreign Taxable Income Average Income Tax Rate 12.5% 12.5% 3 - Taxable Income subject to Income Tax in Portugal (D - 2) 4, Taxable Income subject to Income Tax in Portugal - Items Subject to Special Income Tax Rates (D - 3 (88.4) Income Tax Rate related to Taxable Income in Portugal (5) Statutory Income Tax Rate - Portugal 23.7% 29.5% 5. Taxable Income ( 5= = D) 4, ,150.0 CORPORATE INCOME TAX - CALCULATION Total Income Tax (2 + D-5) Income Tax on Items Subject to Special Income Tax Rates Adjustments to Prior Years Income Tax Estimates - - Current Income Tax Deferred Taxes - (Increase) / Decrease Deferred Taxes - Increase / (Decrease) Deferred Income Tax Income Tax Continued Operations Income Tax Discontinued Operations Average Income Tax Rate - (7 + 8) : D 23.6% 86.5% 21.5% 22.5% Effective Income Tax Rate - (7 + 8) : A 78.2% 78.2% 35.1% 17.5% Note 1: Local Surtax is calculated as disclosed in Note 15 c). In the three months ended 31 March 2016, SAG Gest and the SIVA, Rolvia, Soauto Comércio, AA00, Rolporto, Frotarent, Globalrent, LGA, and Loures Automóveis Subsidiaries, and the Imocar Real Estate Investment Fund recorded positive taxable income. Note 2: State Surtax is calculated as reported in Note 15 c). In the three months ended 31 March 2016, SAG Gest and the SIVA Subsidiary recorded positive taxable income in excess of Eur (000) 1,

43 Income Tax was calculated using to tax rates enacted or substantially enacted on reporting date in each country where taxable income is generated, in accordance with the applicable tax regulations. Estimated Corporate Income Tax of Eur (000) 559.8, as recognized in the Consolidated Statement of Profit and Loss and Other Comprehensive Income for the three months ended 31 March 2017 and calculated as per the above table in respect of 2017 is reflected in the Consolidated Statement of the Financial Position as follows: Corporate Income Tax 2017 Current Income Tax - Receivable (461.9) Note 15 g) (iv) Current Income Tax - Payable Note 15 h) Current Income Tax - Payable / (Receivable) Deferred Taxes - (Increase) / Decrease Note 15 e) Deferred Taxes - Increase / (Decrease) Note 15 e) Corporate Income Tax - Estimated e) Deferred Income Taxes Deferred Income Tax balances are as shown in the table below, which includes the differences between the tax and the book bases of the corresponding Assets and/or Liabilities: 2017 Temporary Differences between Income Tax and Book Values as at 31 December 2016 Balance as at 31 December 2016 Deferred Income Tax Impact on Results of the year Balance Sheet Reclassifications Balance as at 31 March 2017 Temporary Differences between Income Tax and Book Values as at 31 March 2017 Deferred Income Tax Assets Provisions 7, ,765.2 (125.9) - 1, ,285.6 Margins in Inventories 3, ,351.7 Tax Losses Carried Forward 13, ,883.8 (107.7) - 2, ,219.3 Other Consolidation Adjustments Others 2, ,209.6 Total Deferred Income Tax Assets 27, ,660.7 (203.8) - 5, ,116.2 Deferred Income Tax Liabilities Azambuja Fixed Assets Revaluation 13, , , ,039.9 Deferred Expenses (3.2) Real Estate Fund Imocar - Change in regulation 6, , , ,049.1 Total Deferred Income Tax Liabilities 19, , , ,702.1 f) Deferred Tax Assets arising from tax losses carried forward Tax Losses Carried Forward available for use in the future, and the corresponding Deferred Tax Assets, by year of origin and expiry date, are detailed in the table below. Management expects that positive taxable income will be generated in the future allowing the use of the cumulative tax losses. 43

44 Origin IRC Tax Losses Year Value Expiry , , Total 13, ,776.0 g) Current Income Tax Receivable The balance receivable in respect of Current Income Tax is as follows: Mar-17 Corporate Income Tax Dec-16 i. Corporate Income Tax Disputed amounts ii. Corporate Income Tax - Disputed Amounts 3, ,973.8 Advance Corporate Income Tax Payments 1, ,517.1 Income Tax Surtax Corporate Income Tax Receivable - FY Corporate Income Tax Receivable FY Estimated Other Total Corporate Income Tax Receivable 6, ,633.6 The amount of Eur (000) 3,973.8 represents the payment of Corporate Income Tax in respect of several previous periods, resulting from additional tax assessments issued by the Portuguese Tax Authorities. Such additional tax assessments are being legally challenged, and are disclosed in Note 42 Commitments and Contingencies. This payment was performed in accordance with the terms and conditions set forth in Decree-Law 151-A/2013. The performance of said payment eliminated all contingencies resulting from default interest, penalties and costs that, on the date when the payment was performed, were as follows: compensatory interest in the amount of Eur (000) interest on arrears in the amount of Eur (000) costs in the amount of Eur (000) 45.9 These amounts would represent an additional contingency if this payment had not been performed. That payment also allowed the cancellation of Bank Guarantees of Eur (000) 6,327.2, provided in the scope of the respective challenging proceedings. Income Tax Receivable (Advance Corporate Income Tax Payments, Income Tax Surtaxes) by financial year Details of Corporate Disputed Amounts, of Advance Corporate Income Tax Payments and of Income Tax Surtax, by year, are as disclosed in the following table. 44

45 Year Corporate Income Tax Disputed Amounts Advance Corporate Income Tax Payments Income Tax Surtax Corporate Income Tax Receivable Total 3, , On 29 August 2012, 14 August 2013 and 25 July 2014, SAG Gest filed requests for reimbursements of the Advance Corporate Income Tax Payments (PEC) performed in 2007, 2008 and 2009, respectively, because insufficient taxable profits allowing for the offset of such amounts were declared in respect of the years 2007 to The Tax Authorities rejected these requests and SAG Gest is challenging this rejection because it disagrees with the decision. During the current financial year, Advance Corporate Income Tax Payments of Eur (000) 58.1 were performed, of which Eur 25.1 thousand by the Loures Automóveis Affiliate and Eur (000) 33.5 by SAG Gest. iii. IRC (Corporate Tax) receivable on financial year 2016 The calculation of the estimated 2016 Corporate Income Tax for the 2016 included the offset of Eur (000) related to Advanced Corporate Income Tax Payments. iv. Estimated Corporate Income Tax Receivable 2017 On 31 March 2017, the amount of Eur (000) of Estimated Corporate Income Tax Receivable 2017 represents the sum total of the individual estimates of the companies that are part of the consolidation perimeter and which calculated a tax credit. The amount of Eur (000) representing the Corporate Income Tax Expense recognized in the Consolidated Statement of Profit and Loss and Other Comprehensive Income for 2017, as disclosed in the table in Paragraph d) herein, represents the difference between: The receivable amount of Eur (000) disclosed in the previous Paragraph; and The payable amount of Eur (000) representing the sum total of the individual Corporate Income Tax estimates of the Entities included in consolidation that recorded a tax liability, as disclosed in the following Paragraph. 45

46 h) Current Income Tax Payable The balance in respect of Current Income Tax Payable was as follows: Mar-17 Corporate Income Tax Dec-16 Portugal Tax on Items Subject to Special Income Tax Rates - FY Estimated Corporate Income Tax Payable Sub-Total Corporate Income Tax - Portugal Ireland Coporate Income Tax Payable - FY Coporate Income Tax Reclassifications - (36.2) Sub-Total Corporate Income Tax - Ireland - - Total Corporate Income Tax Payable On 31 March 2017 the payable amount of Eur (000) of Estimated Corporate Income Tax Payable 2017 represents the sum total of the individual Corporate Income Tax estimates of the Entities included in consolidation that recorded a tax liability. This amount, less the amount receivable of Eur (000) disclosed in the previous Paragraph, represents the Estimated 2017 Corporate Income Tax disclosed in the table in Paragraph d) herein. The balance of Corporate Income Tax Payable in Portugal in respect of the year 2016 results from the 2016 Estimated Corporate Income Tax of Eur (000) 520,0, less the estimated offset of Advance Corporate Income Tax Payments of Eur (000) 494, EARNINGS PER SHARE As at 31 March 2017, the Entities included in the consolidation jointly owned 16,771,015 Shares as Treasury Stock (Shares representing SAG Gest s Registered Capital). During the three months ended 31 March 2017, no transactions (purchases or sales) were performed involving Treasury Stock, and for that reason the number of Shares held as Treasury Stock on 31 March 2017remained unchanged. The nominal value of SAG Gest Shares is Eur 1 each. 46

47 47

48 17. TANGIBLE FIXED ASSETS Changes in Tangible Fixed Assets during the three months ended 31 March 2017were as follows: 2017 Land Buildings Basic Equipment Transport Equipment Tools and utensils Office Equipment Other Tangible Assets Fixed Assets in Progress TOTAL Opening Balance- 1 January 2017 (Net Tangible Fixed Assets) 19, , , , ,373.3 Additions Retirements-At Cost - - (672.7) - - (1.1) (673.8) Retirements of Accumulated Depreciation Transfers (19.9) (19.9) Current Year's Depreciation Charge Against P&L From Continued Operations - (237.3) (77.6) (4.4) (15.0) (8.9) (21.6) - (364.8) Closing Balance - 31 March 2017 (Net Tangible Fixed Assets) 19, , , , ,073.4 Tangible Fixed Assets - Balance Detail - 31 March 2017 As at 1 January 2017 At Cost 19, , , , , , , , ,006.6 Accumulated Depreciation - (11,944.6) (30,171.1) (1,418.1) (4,211.6) (10,917.4) (13,970.6) - (72,633.4) Tangible Fixed Assets - Net 19, , , , ,373.3 As at 31 March 2017 At Cost 19, , , , , , , , ,051.2 Accumulated Depreciation - (12,181.9) (30,229.4) (1,422.6) (4,226.6) (10,925.1) (13,992.2) - (72,977.9) Tangible Fixed Assets - Net 19, , , , ,

49 Changes in Tangible Fixed Assets during the twelve months ended 31 December 2016 were as follows: 2016 Land Buildings Basic Equipment Transport Equipment Tools and utensils Office Equipment Other Tangible Assets Fixed Assets in Progress TOTAL Opening Balance- 1 January 2016 (Net Tangible Fixed Assets) 19, , , ,396.6 Additions , ,753.1 Retirements-At Cost - - (2,014.9) (71.9) (16.1) (3.2) (.5) - (2,106.6) Retirements of Accumulated Depreciation Transfers - (183.6) (262.4) (445.5) Exchange Rate Variances Current Year's Depreciation Charge Against P&L From Continued Operations - (1,023.3) (190.0) (20.7) (65.6) (124.1) (81.5) - (1,505.2) Closing Balance - 31 December 2016 (Net Tangible Fixed Assets) 19, , , , ,373.3 Tangible Fixed Assets - Balance Detail - 31 December 2016 As at 1 January 2016 At Cost 19, , , , , , , , ,728.3 Accumulated Depreciation - (10,921.3) (30,131.7) (1,430.6) (4,162.1) (10,796.5) (13,889.6) - (71,331.7) Tangible Fixed Assets - Net 19, , , ,396.6 As at 31 December 2016 At Cost 19, , , , , , , , ,006.6 Accumulated Depreciation - (11,944.6) (30,171.1) (1,418.1) (4,211.6) (10,917.4) (13,970.6) - (72,633.4) Tangible Fixed Assets - Net 19, , , , ,373.3 It is considered that, as at 31 March 2017, there are no impairment signs affecting Tangible Fixed Assets. 49

50 18. INTANGIBLE ASSETS GOODWILL In December 2016, SAG Gest performed valuations using the Discounted Cash Flows (DCF) method, supporting the recoverability of the Goodwill amount recognized in the Consolidated Statement of the Financial Position. Aa disclosed in Notes a) Intangible Assets Goodwill and 2.7 a) Contingencies Goodwill Impairment Analysis, SAG Gest annually conducts the tests required to verify whether the recognized Asset value is not in an impairment situation. Therefore, the Board of Directors considers that the valuations performed in December 2016 are still valid on 31 March The amount of Goodwill as at 31 March 2017, which was unchanged from December 31, 2016, determined in accordance with the disclosed procedure is as follows: Goodwill Company Business Segments Purchase Price Net Fair Value of the Assests / Liabilities Acquired Goodwill Impairment Losses Recognized Net Book Value March 31, 2017 Full Consolidation Globalrent Distribution 2,992.8 (1,966.4) 4, , ,167.3 Soauto Comércio de Automóveis Retail 4, , ,967.8 Loures Automóveis Retail 3, , , ,908.8 Rolporto Retail 3, , , ,654.7 Soauto, SGPS Retail 2, , , Rolvia Retail Total 16, , , , , Goodwill impairment tests are performed based on the calculation of the value in use of each Cash Generating Unit to which Goodwill has been allocated. The value in use thus determined is compared to the net book value of each Cash Generating Unit. If the value in use is higher than the net book value, no impairment is recognized. The calculation of the value in use of the Assets was performed using the Discounted Cash Flows (DCF) methodology. Future Cash Flows were discounted using the WACC (Weighted Average Cost of Capital), calculated as disclosed in the following table. 50

51 Cost of Debt (after Tax) Definition ( Long Term Interest Rate + Spread) * ( 1- Tax Rate) Input Data Source Last Update Long Term Interest Rate 0.00% Reuters - Euribor Swap Rate 10 Yr January Credit Spread 3.84% SAG Corp. Current Credit Spread January Tax Rate 21.50% January Cost of Debt 3.01% Cost of Equity Definition (Risk Free Rate + Beta ( Risk Premium) + Country Risk Premium (Portugal)) Input Data Source Last Update Risk Free Rate 0.45% Deutsche Bunds 10 years January Beta Sector (unlevered) 0.52 Damodaran - Retail Automotive - Europe January Beta Empresa (levered) 1.14 Leverage D/E=1,5 January Risk Premium 5.50% Market Consensus January Country Risk Premium (Portugal) 3.72% Portuguese Bonds 10 years - Deutsche Bunds 10 years January Cost of Equity 10.44% WACC Definition (Cost of Equity * (E/(D+E)) + Cost of Debt * (D/(D+E))) % Debt 60% % Equity 40% Cost of Debt 3.01% Cost of Equity 10.44% WACC 5.99% The calculation of future cash flows to be discounted in the Soauto Comércio de Automóveis, Loures Automóveis, Rolporto and Rolvia Subsidiaries, was performed using an extended explicit period, until This was due to the specific features of the economic activities of these Subsidiaries, where annual after sales services income is projected based on the new cars sales portfolio from the 4 preceding years. Therefore the explicit period was extended until 2023, so that the base of the projection of free cash flow in perpetuity would represent 4 years of constant sales in each Subsidiary. To determine future cash flows to be discounted, several assumptions were used in respect of the development of the markets where each Entity operates, and assumptions were derived in relation to the development of the assets being evaluated, namely in what relates to production and profitability indicators. The assumptions that were used are considered in the context of Portugal s macroeconomic framework, and of impacts that have been observed in the domestic automotive market. Therefore, the trends of the Portuguese Automotive Market, both in respect of the passenger car (PC) and the light commercial vehicle (LCV) markets, assumes a slight recovery in the coming years, similar to 2014 and 2015, stabilizing from 2021 onwards at 198 thousand units (PC) and 35 thousand units (LCV), respectively. For both markets, stabilization is expected at figures that are still lower than the historical average, as shown in the following charts. 51

52 Passenger cars: Light commercial vehicles: Market shares used for projection purposes in the explicit period were as follows: Market Share P 2018.P 2019.P 2020.P 2021.P 2022.P Volkswagen VP 10.3% 9.6% 9.7% 9.5% 8.2% 8.3% 8.7% 9.0% 9.2% 9.2% 9.2% Volkswagen VCL 10.3% 9.9% 8.2% 6.3% 6.0% 5.7% 5.7% 6.5% 7.5% 7.5% 7.5% Audi 6.2% 5.6% 5.6% 5.3% 4.6% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Skoda 2.0% 1.7% 1.7% 1.7% 1.4% 1.5% 1.7% 2.0% 2.0% 2.0% 2.0% Conservative assumptions were made in respect of each Entity both in terms of the sales volumes and of the margins trends, as follows: sale of vehicles: maintenance of the market share observed in the recent period starting in 2012 in all Brands, with margins remaining within the levels recorded since 2012 services and sale of parts: maintenance of the 2015 margins during the entire projection period cost structure: progression in line with revenue trend payroll expenses: the employee structure existing at the end of 2016 was considered, evolving in accordance with the planned level of activity The assumptions that have a stronger impact on the valuation results are as follows: automotive market volume trend (MTM PC) market shares trends of the more representative Brands (Audi and Volkswagen PC) 52