THIRD QUARTER OF 2017 EARNINGS RELEASE

Transcription

1 THIRD QUARTER OF 2017 EARNINGS RELEASE São Paulo, November 10, 2017 JHSF Participações S.A. (BM&FBovespa: JHSF3) announces its operating and financial results for the third quarter (3Q17) of All the following information, unless otherwise indicated, is presented in Brazilian Reais (R$), based on consolidated figures and in accordance with Brazilian corporate law and International Financial Reporting Standards (IFRS). All percentage changes between periods, unless otherwise indicated, are nominal. A significant part of the variations presented in this release for the Recurring Income business and the Consolidated came from the sale of stakes in two shopping malls, concluded in 4Q16. 3Q16 results were not adjusted for this effect. Only on page 2, we present proforma tables for 3Q16, which excludes this effect. The information held in this release, was not audited by the independent audit. We recommend this material to be read in conjunction with the Explanatory Notes to the Quarterly Information (ITR). All amounts have been rounded to the nearest thousand, unless otherwise indicated, generating rounding of the final unit only and resulting in immaterial divergences. Margins are calculated as a percentage of net revenue, except when otherwise indicated. All the acronyms used herein are defined in the Glossary on the final page of this document. 3Q17 HIGHLIGHTS Shopping Malls (Performance compared to 3Q16) Growth of +10.4% in Retailer Sales, reaching R$475.2 million in 3Q17. In Shopping Ponta Negra (Manaus), sales growth was over 30%. Growth in Sales Indicators: SSS +7.0% and SAS Growth in Occupancy Rate to 93.8% in 3Q17 (92.6% in 3Q16). Occupancy Cost decreased 170 b.p., to 9.8%. Consolidated Growth of +5% in Gross Profit vs. 3Q16 Proforma. Growth of +57% in Operating Income vs. 3Q16. Reduction of -59% in Consolidated Financial Result vs. 3Q16, reflecting the Company s deleveraging process in 2016, and the fall of the basic interest rate. 3Q17 Results Conference Call November 13, 2017 In English (simultaneous translation) 11:30 a.m. (New York time) 2:30 p.m. (Brasília time) Phone: +1 (646) Code: JHSF In Portuguese 2:30 p.m. (Brasília time) 11:30 a.m. (New York time) Phones: +55 (11) Code: JHSF Investor Relations Thiago Alonso de Oliveira CFO and IRO Bruna Gambôa Manager Fernanda Shiraishi Assistant Phone: +55 (11) ri@jhsf.com.br Website: ri.jhsf.com.br

2 Pro forma Consolidated Results Consolidated Information (R$ million) 3Q17 3Q16 Proforma Var. % Gross Revenue % Taxes on Revenue (10.0) (8.1) 23% Net Revenue % COGS (50.2) (51.0) -1% Gross Profit % Margin (% of Net Revenue) 37% 36% 1 p.p. Operating Expenses (25.7) (29.9) -14% Commercial Expenses (3.1) (4.2) -26% Administrative Expenses (17.3) (24.9) -31% Other Operating Expenses (5.4) (0.8) 557% Fair Value of Investment Properties % Operating Income % EBITDA % Adjusted EBITDA % Margin (% of Net Revenue) 18% 28% -10 p.p. Financial Result (36.0) (77.3) -53% Income Taxes and Social Contribution (7.2) (11.0) -35% Discontinued Operations % Net Income (29.2) (53.0) -45% Margin (% of Net Revenue) -37% -67% 30 p.p. Pro forma Recurring Income Results Income Statement (R$' million) 3Q17 3Q16 Proforma Var. % 3Q17 3Q16 Proforma Var. % 3Q17 3Q16 Proforma Var. % 3Q17 3Q16 Proforma Var. % Gross Revenue % % % % Taxes on Revenue (4.4) (4.1) 7% (0.5) (0.8) -33% (0.8) (1.5) -51% (5.7) (6.4) -11% Net Revenue % % % % COGS (4.8) (7.7) -37% (1.5) (2.9) -50% (0.8) (1.7) -51% (7.1) (12.3) -42% Gross Profit % % % % Margin (% of Net Revenue) 86% 78% 08 p.p. 44% 14% 2 p.p. 58% 56% p.p. 82% 71% p.p. Operating Expenses (1.7) % (3.1) (3.9) -20% (2.8) (2.4) 14% (7.6) (5.7) 32% Commercial Expenses (0.7) (0.8) -8% - (0.0) -100% (0.2) (0.4) -54% (0.9) (1.1) -24% Administrative Expenses (0.7) (2.1) -64% (2.8) (3.9) -29% (2.5) (2.3) 7% (6.0) (8.3) -28% Other Operating Expenses (0.2) % (0.3) - - (0.1) % (0.7) % Fair Value of Investment Properties % - (4.3) Operating Income % (2.0) (7.8) -74% (1.7) (0.3) 468% % (-) Depreciation % % % % EBITDA % (1.8) (7.6) -76% (1.6) (0.2) 559% % (-) Fair Value of Investment Properties (10.4) (16.2) -36% (10.4) (11.9) - (+/-) Other Adjustments 1.7 (2.3) -171% 0.9-0% (2.3) 0% Adjusted EBITDA % (0.9) (3.2) -72% (1.6) (0.9) 87% % Margin (% of Net Revenue) 87% 75% 12 p.p. NOI % Margin (% of Gross Revenue) 83% 82% 2 p.p. Shopping Malls Other Service Retail TOTAL 2

3 Consolidated Result 1 Consolidated Information (R$ million) 3Q17 3Q16 Var. % Gross Revenue % Taxes on Revenue (10.0) (10.7) -7% Net Revenue % COGS (50.2) (54.8) -8% Gross Profit % Margin (% of Net Revenue) 37% 45% -8 p.p. Operating Expenses (25.7) (32.1) -20% Commercial Expenses (3.1) (4.4) -29% Administrative Expenses (17.3) (25.6) -33% Other Operating Expenses (5.4) (2.1) 151% Fair Value of Investment Properties 10.4 (3.7) -380% Operating Income % EBITDA % Adjusted EBITDA % Margin (% of Net Revenue) 18% 43% -25 p.p. Financial Result (36.0) (88.1) -59% Income Taxes and Social Contribution (7.2) (1.8) 301% Discontinued Operations % Net Income (29.2) (55.7) -48% Margin (% of Net Revenue) -37% -56% 19 p.p. Results by Business 2 3Q17 Income Statement (R$' million) Recurring Hotels and RE Income Restaurants Development Holding Consolidated Gross Revenue Taxes on Revenue (5.7) (3.9) (0.4) - (10.0) Net Revenue COGS (7.1) (34.9) (8.2) - (50.2) Gross Profit (7.7) Margin (% of Net Revenue) 82% 13% -1545% - 37% Operating Expenses (7.6) (4.7) 4.0 (17.5) (25.7) Commercial Expenses (0.9) - (2.2) (0.0) (3.1) Administrative Expenses (6.0) (4.1) (2.2) (5.0) (17.3) Other Operating Expenses (0.7) (0.6) 8.4 (12.5) (5.4) Fair Value of Investment Properties Operating Income (3.7) (17.5) 14.0 Adjusted EBITDA (11.5) (3.1) 14.4 Margin (% of Net Revenue) 71% 3% -2296% - 18% Net Financial Result (36.0) Income Taxes and Social Contribution (7.2) Discontinued Operations - Net Income (29.2) Margin (% of Net Revenue) -37% 1 The reconciliation of Adjusted EBITDA is later presented in this release. 2 Since 1Q17, JHSF has been allocating expenses previously accounted in Shared Services Center Holding directly to each business unit. 3

4 Summary by Business 3Q17 (R$ million) Recurring Income Hotels & Restaurants RE Development and Airport Holding Consolidated Financial Statements Sumarry Gross Revenue COGS (7.1) (34.9) (8.2) - (50.2) Operating Expenses (7.6) (4.7) 4.0 (17.5) (25.7) Adjusted EBITDA (ex-fair Value) (11.5) (3.1) 14.4 Financial Result (17.8) (0.9) (17.5) 0.1 (36.0) Net Income 1.8 (0.7) (21.5) (8.7) (29.2) Balance Sheet Sumary Total Assets 2, , ,464.2 Debt Managerial Allocation ¹ ,355.6 Other Liabilities Shareholder's Equity 1, ,160.3 ¹ Includes costs to be amortized of R$39.5 million. [The remainder of this page was intentionally left blank] 4

5 Operating Indicators: Shopping Malls 3 Operating Highlights ¹ 3Q17 3Q16 Var. % Total GLA (sq.m) 147, , % JHSF GLA (sq.m) 103, , % Total Malls Sales (R$' million) % Same Store Sales (SSS) % 7.0% -0.1% Same Area Sales (SAS) % 7.4% -0.7% Same Store Rent (SSR) % 2.3% 11.3% Same Area Rent (SAR) % 2.7% 11.0% Occupancy Cost (%) 9.8% 11.5% Leased Area (%) 93.8% 92.6% ¹ The decline in GLA is due to the sale of 33% of Shopping Cidade Jardim. Portfolio Location % JHSF Total GLA (sq.m) JHSF GLA (sq.m) Cidade Jardim Shopping Mall São Paulo - SP 67.0% 37,574 25,175 Bela Vista Shopping Mall Salvador - BA 51.0% 51,070 26,046 Ponta Negra Shopping Mall Manaus - AM 80.0% 35,180 28,144 Catarina Fashion Outlet São Roque - SP 100.0% 24,060 24,060 TOTAL 147, ,425 [The remainder of this page was intentionally left blank] 3 The Operating Indicators held in this release were not audited by the independent audit. 5

6 Management Comments 4 Strategy JHSF s Management is focused on developing and managing real estate assets geared towards business with recurring revenues and on serving high-income individuals. The Company maintains assets in different maturation stages and with value creation potential. The actions directed by the Company s growth are in their preliminary phase and are benefited by the reduction of the interest rate in Brazil. They will be implemented when market conditions are more stable and capital structure is appropriate for this movement. The decision-making process of JHSF s Management is based on the balance between: (i) the strengthening of Operating Income; (ii) the streamlining of capital allocation; and (iii) initiatives to reduce the cost of equity and third-part capital. The combination of these measures contributes to the value creation we intend to deliver to our shareholders and other stakeholders. The Company s Management has invested, and will continue investing, in audit and internal mechanisms and procedures related to integrity. Also in reinforcing compliance mechanisms, and the effective application of ethics and conduct codes. Our Business JHSF is turning into a recurring real estate income company, increasingly the independence of its non-recurrent businesses, with higher execution risks. Our current business units are: Recurring Income We have been developing and managing shopping malls since 1999, and focusing our projects on niches. This business unit comprises: (i) four shopping malls 5 ; (ii) shopping mall services 6 ; and (iii) high-end retail brands. The Recurring Income growth is based on (i) the increase of occupancy rate (without CAPEX) mainly in our malls in Manaus and Salvador; (ii) the GLA expansions in consolidated projects, SCJ, SBV and CFO, to be developed in areas that are part of JHSF s land bank, with reduced incremental CAPEX and low risk of execution, once they are already anchored in mature projects; and (iii) launching of a new shopping mall concept, Shops Cidade Jardim, in Jardins neighborhood, São Paulo, with about 3,500 sq.m. of GLA. JHSF Management will keep its shareholders and the market properly informed about the launch, CAPEX and the potential operating results generation of these projects. 4 Disclaimer: Management makes statements concerning future events that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of its Management, and on information currently available to the Company. Statements include information regarding JHSF s intentions, estimates or current expectations or those of its Board of Directors or Executive Officers. Statements also include information concerning the Company s possible or presumed future operating results, as well as statements preceded by, followed by, or including the words believes, may, will, continues, expects, envisages, intends, plans, estimates or similar expressions. These statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. JHSF s future results and the creation of shareholder value may differ materially from those expressed in or suggested by these statements. Many of the factors that will determine these results and values are beyond the Company s ability to control or predict. 5 Shopping Cidade Jardim ( SCJ ), Shopping Bela Vista ( SBV ), Shopping Ponta Negra ( SPN ) and Catarina Fashion Outlet ( CFO ). 6 Administration, parking and supply of energy and telecommunications. 6

7 Hotels and Restaurants Hotel and restaurant operations under the Fasano brand, includes four hotels, in operation, as well as 14 restaurants (in São Paulo, Rio de Janeiro and Brasilia). The potential growth of this division, in short term, will derive from 4 new hotels in Brazil (Angra dos Reis, Belo Horizonte, Salvador and Trancoso), where we will also develop new restaurants activities. These new operations will not require Company s CAPEX, since we will only operate those assets. In the medium and long term, we intend to internationalize the operations, having the United States and Europe as a destination for our additional operations. Real Estate Development This business division is focused on monetization of assets: (i) inventory, by selling existing units, and (ii) portfolio of receivables. JHSF has no plans to reinvest in real estate development for unit selling. Our plan is to develop our existing land bank, essentially 4 pieces of land near Shopping Cidade Jardim, as leasing projects from residential units for high-income customers, with a total private area of around 120,000 sq.m. The launch of these projects will be modular and it depends on (i) the specific funding viability, preferentially equity from investors of the projects, and (ii) the macroeconomic scenario. Executive Airport Refers to the São Paulo Catarina Executive Airport, under construction. The inauguration of this project is scheduled for 2H18. We want to provide infrastructure dedicated to executive aviation, runway, hangars, patios and hangars, for executive planes owners and operators that seek a safe and convenient facility for their operations, providing comfort that is not available now at commercial airports near our area of influence. Our business model is inspired by similar solutions deployed in cities such as New York, London and Paris, which, after developing airports exclusively dedicated to executive aviation, bypassed the infrastructure bottleneck of commercial airports, which is the same difficulty faced by the main airports in the metropolitan region of São Paulo. [The remainder of this page was intentionally left blank] 7

8 Company s Operational Environment in 3Q17 The Consumer Confidence Index returned to grow 1.4 in September, after 3 periods of decline, reaching 82.3 points, the same level registered in June The result is due to the improvement in the perception of labor market and to the lower risk of political crisis. Despite the positive result, it is worth to highlight that the consumers remained cautious 7. In commerce, the index measuring the number of visits to shopping malls grew by 1.6% in September. The standout regions were the Northeast (+1.3%) and the Southeast (+0.5%). In the year to date, there was an increase of 0.6%, indicating possible retail resumption 8. In the Hotel sector, the month of September registered a growth in the Occupancy Rate (+6.1%) and a decline in the REVPAR as well as on the Average Daily, of -0.3% and -6%, respectively. Going through the first nine months of the year, the Occupancy Rate increased 0.2%, while Average Daily and REVPAR registered drops (-9.4% and -9.3%) 9. In the Real Estate sector, in August, net sales grew by 59% when compared to the same period in Cancellations fell 27.5% and the launches totaled units, growth of 6.3%. The positive performance during August keeps the real estate market in the path of recovery of operations 10. Shopping Malls Retailer sales of our four Shopping Malls rose 10.4% compared to 3Q16, with a highlight to the 32.9% sales growth in SPN. Operating indicators presented a positive performance compared to 3Q16: SSS +7.0%, SAS +7.4%, SSR +2.3% and SAR +2.7%. Occupancy Cost fell 170 basis points, to 9.8%. Occupancy Rate reached 93.8%. Hotels and Restaurants In 3Q17, we observed different situations between our operations. In São Paulo we have positive operating indicators, while in Rio de Janeiro results were impacted by the current economic and social scenario and by the strong basis of comparison in 3Q16, due to the Olympic Games. In the Hotels division, there was a decrease in the Consolidated Indicators: Average Daily -37.5%; Occupancy Rate -10.9% and REVPAR -44.3%. In the Restaurants division, the Consolidated Couverts Sold grew by 2.8% and the Consolidated Average Couvert declined by 5.0%. Real Estate Development In 3Q17, the sales performance of the Real Estate Development business was impacted by net cancellations in Fazenda Boa Vista, which were offset by the sale of other projects, especially Horto Bela Vista, in Salvador. Executive Airport Currently in the pre-operational phase, the construction works of São Paulo Catarina Executive Airport has an estimated CAPEX to be disbursed around R$35 million. The Phase Zero, with inauguration scheduled for 2H18, will have 5,000 sq.m. of hangars, 7,500 sq.m. of patios, besides 1,940 meters of runway which will be later expanded to 2,400 meters. 7 Source: Sondagem do Consumidor Índice de Confiança do Consumidor September Source: FX Retail Analytics Índice de Visitas em Shopping Centers Published on October 10 th, Source: infohb September Source: ABRAINC/FIPE Indicators September

9 Capital Market Other Information 3Q17 3Q16 Var. % 2Q17 1Q17 4Q16 2Q16 1Q16 Shares Outstanding EOP (million) % Closing Price (R$) % Market value (R$ million) 1, % 993 1, Average volume (R$ thousand) 3,252 1, % 1,945 3, ,470 Average number of trades daily 1, % 814 1, [The remainder of this page was intentionally left blank] 9

10 Management Board of Directors José Auriemo Neto Chairman Carlos Eduardo Andreoni Ambrósio Independent Member Luiz Gonzaga de Mello Belluzo Independent Member Osvaldo Roberto Nieto Independent Member Richard Barczinksi Independent Member Eduardo Silveira Camara Member Thiago Alonso de Oliveira Member Statutory Management Eduardo Silveira Camara Chief Executive Officer Wilmar Silva Rodrigues Executive Vice President Thiago Alonso de Oliveira Chief Financial and Investor Relations Officer João Alves Meira Neto Chief Legal Officer Fiscal Council Antonio Carlos Rovai Sitting Member Ariovaldo dos Santos Sitting Member Héctor José Alfonso Sitting Member Bruno Meirelles Salotti Alternate Member Clovis Antônio Pereira Pinto Alternate Member Francisco Montagner Neto Alternate Member Statutory Audit Committee Ademir José Scarpin Sitting Member Osvaldo Roberto Nieto Sitting Member Renato Ferreira Barbosa Sitting Member The Quarterly Information was analyzed and approved for disclosure by the Board of Directors at the meeting held on November 10 th, 2017, having been previously examined by a meeting of the Fiscal Council and Statutory Audit Committee on November 8 th, The comments on the Company s consolidated performance are available on the investor relations website ri.jhsf.com.br. Audit Pursuant to CVM Instruction 381/03, we hereby declare that the payments made by JHSF and its subsidiaries to Ernst & Young Auditores Independentes, in contracts initiated after the definition of the Company s independent auditor hiring, are exclusively related to the external audit of the Quarterly Information. Arbitration The Company is bound to arbitration by the Market Arbitration Chamber, pursuant to the Arbitration Clause in its Bylaws. 10

11 Comments on the 3Q17 Consolidated Financial Statements Gross and Net Revenue Revenue (R$' million) 3Q17 3Q16 Var. % Gross Revenue % Recurring Income % Hotels and Restaurants % RE Development 0.9 (2.9) -130% Net Revenue % Recurring Income % Hotels and Restaurants % RE Development 0.5 (1.6) -132% In 3Q16 Consolidated Gross Revenue and Recurring Income Gross Revenue still included SMT (100% sold on December 21, 2016) and the totality of SCJ (33% was sold on December 29, 2016). Excluding this effect, Consolidated Gross Revenue increased 3% compared to 3Q16 (see Consolidated Results Proforma table, on page 2 of this release). In Recurring Income business 11, excluding the effect above mentioned, Gross Revenue fell 7% vs. 3Q16 (see Recurring Income Results Proforma, on page 2 of this release), due to: (i) Gross Revenue remained stable (+1%), in Shopping Mall division; (ii) Revenue decreased in Other Services division, as a result of lower spreads from electric energy sales; and (iii) reduction of 50% in the Retail division, as consequence of the sale of international brands. Despite the 3Q16 being a strong basis of comparison, due to the Rio de Janeiro Olympic Games, the Gross Revenue in the Hotel and Restaurant business was steady (-2%). Real Estate Development Gross Revenue was impacted by the cancellations made in this quarter, in spite of the higher result recorded in 3Q16. Cost of Goods and Services Sold (COGS) Cost of Goods Sold - COGS (R$' million) 3Q17 3Q16 Var. % Consolidated COGS % Recurring Income % Hotels and Restaurants % RE Development % In 3Q17, there was a reduction of Consolidated Cost of Goods Sold (COGS). The main COGS variation was in Recurring Income business, due to (i) the sale of stakes in shopping malls, already described in this release; (ii) the sale of retail activities (international brands); and (iii) the lower purchase volume of energy. The Real Estate Development business presented an increase of COGS, as a consequence of (i) the monetary adjustment recognized in cancellations agreements recorded in the period (essentially from 2014 sales); and (ii) the incurred costs in the Townhouses and Residência Cidade Jardim projects (R$3.1 million). 11 Recurring Income consists of: (i) Shopping Malls, (ii) Other Services and (iii) Retail. 11

12 Gross Profit Gross Profit (R$' million) 3Q17 3Q16 Var. % Consolidated Gross Profit % Margin (% of Net Revenue) 37% 45% Recurring Income % Margin (% of Net Revenue) 82% 73% Hotels and Restaurants % Margin (% of Net Revenue) 13% 14% RE Development (7.7) (5.4) 44% Margin (% of Net Revenue) -1545% 339% Operating Expenses Operating Expenses (R$' million) 3Q17 3Q16 Var. % Consolidated Operating Expenses (25.7) (32.1) -20% Recurring Income (7.6) (7.8) -3% Commercial (0.9) (1.3) -33% Administrative (6.0) (8.4) -28% Other (0.7) % Hotels and Restaurants (4.7) (1.0) 360% Commercial - (0.0) - Administrative (4.1) (4.1) 0% Other (0.6) % Real Estate Development 4.0 (9.1) -144% Commercial (2.2) (2.8) -23% Administrative (2.2) (2.0) 10% Other 8.4 (4.3) -294% Holding (17.5) (14.1) 24% Commercial (0.0) (0.2) -91% Administrative (5.0) (11.1) -55% Other (12.5) (2.8) 345% Since 1Q17, JHSF has been allocating expenses previously accounted in Shared Services Center (Holding) directly in the Recurring Income and Real Estate Development businesses, increasing the Administrative Expenses of these businesses and reducing the Holding s Administrative Expenses. For the Hotel and Restaurant business, there is a separate administrative structure, directly allocated in this operation. In Recurring Income, there was a reduction of the Commercial and Administrative Expenses. In 3Q16, Other Operating Expenses was positively impacted by the reversal of provision, which did not occur in the same proportion in 3Q17. The variation in Real Estate Development Expenses is a result of: (i) the reduction in fees paid to brokers, affecting Commercial Expenses ; and (ii) the reversal of commercial provisions for the cancellations cases in the period, recognized in Other Operating Expenses. The Holding s Administrative Expenses dropped as a consequence of the expense allocation, previously accounted in Holding, in the business divisions. Other Operating Expenses was impacted by non-recurring expenses of R$4.5 million (commissions and fees), which did not occur in 2016, and by provisions for losses (R$8.0 million). 12

13 Investment Properties and Fair Value Appreciation of Investment Properties (R$' million) 3Q17 3Q16 Var. % Appreciation of Investment Properties 10.4 (3.7) -380% The Fair Value of Investment Properties ( IPs ), using the discounted cash flow method, booked an appreciation of R$10.4 million in 3Q17. Depreciation and Amortization Depreciation and Amortization (R$' million) 3Q17 3Q16 Var. % Consolidated Depreciation and Amorization % Recurring Income % Hotels and Restaurants % RE Development % Holding % Adjusted EBITDA and EBITDA Reconciliation Adjusted EBITDA (R$' million) 3Q17 3Q16 Var. % Adjusted EBITDA % Margin (% of Net Revenue) 18% 43% Recurring Income % Margin (% of Net Revenue) 71% 59% Hotels and Restaurants % Margin (% of Net Revenue) 3% 20% RE Development (11.5) (13.0) -11% Margin (% of Net Revenue) -2296% 821% Holding (3.1) % In 3Q16, Holding Adjusted EBITDA was positively impacted by assets, by that time, available for sale (R$25.3 million). Excluding this effect, 3Q16 Adjusted EBITDA would total R$17.9 million. EBITDA and Adjusted EBITDA Reconciliation (R$' million) 3Q17 3Q16 Var. % Net Income (29.2) (55.7) -48% Income Taxes and Social Contribution % Financial Result % Depreciation and Amortization % EBITDA % Fair Value of Investment Properties (Shopping Malls) (10.4) % Expenses related to M&A of Malls, in 2016 (Holding) Provisions % Other Adjusted EBITDA % Margin (% of Net Revenue) 18% 43% -58% 13

14 Net Financial Result Consolidated Financial Result (R$' million) 3Q17 3Q16 Var. % Consolidated Financial Result (36.0) (88.1) -59% Financial Revenues (1.4) % Financial Expenses (34.6) (96.4) -64% The Company s Consolidated Financial Result declined 59% compared to 3Q16, reflecting the deleveraging process in 2016 and the drop of the basic interest rate (82% of the Company s debt is post-fixed and linked to the CDI rate). 3Q17 Consolidated Financial Expenses comprised: (i) interest on loans and financing of R$30.7 million; (ii) monetary adjustment of R$2.0 million; (iii) payment to JHSF Rio Bravo Fazenda Boa Vista FII, a real estate fund, in the amount of R$0.9 million; and (v) other expenses of R$1.0 million. In 3Q17, Consolidated Financial Revenues were negative due to the reversion of interest, as consequence of cancellations at that time. Income Taxes and Net Income Income Taxes, Social Contribution and Net Income (R$' million) 3Q17 3Q16 Var. % Income Before Taxes and Social Contribution (22.0) (79.2) -72% Income Taxes and Social Contribution (7.2) (1.8) 301% Discontinued Operations % Net Income (29.2) (55.7) -48% In 3Q17, the Company recorded a loss of R$29.2 million. In 3Q16, Net Income was positively impacted by assets, by that time, available for sale (R$25.3 million). Excluding this effect, 3Q16 Net Income would total a loss of R$77.4 million. [The remainder of this page was intentionally left blank] 14

15 Consolidated Cash and Cash Equivalents and Debt Cash and Equivalents and Indebtedness (R$' million) sep/17 jun/17 Difference Var. % Gross Debt (1,316.1) (1,287.0) % Cash, Equivalents and Interest earnings bank deposits % Accounts receivable ("on balance") % Net Debt (960.5) (892.3) % Duration (in years) Average Total Debt Maturity (%) 11.6% 13.5% Cash, Equivalents and Securities: The consolidated cash position is still lower than historical average, in accordance to Management s decision to use exceeding cash values to reduce the Company s debt. Consolidated Debt: The Company s debt has a long-term profile, with 80% to mature over 12 months period (duration of 3.9 years). We closed 3Q17 with an average nominal cost of debt of 11.6% (13.5% in March 2017). Consolidated Debt Indices (base September 2017) Consolidated Debt Profile (Managerial) [The remainder of this page was intentionally left blank] 15

16 Consolidated Gross Debt Amortization Schedule ¹ ² (R$ million) ¹ Includes costs to be amortized of R$39.5 million. ² Duration of 3.9 years R$' million Total Total Maturity ,356 Commercial banks Development banks th Issue of Debentures ² ¹ Includes costs to be amortized of R$39.5 million. ² Includes the 1 st issue of the subsidiaries. Consolidated Accounts Receivable Indices (base September 2017) [The remainder of this page was intentionally left blank] 16

17 Shopping Cidade Jardim RECURRING INCOME 17

18 SHOPPING MALLS: OPERATING INDICATORS RETAILER SALES 12 Retailer Sales reached R$ million in 3Q17, an increase of 10.4% vs. 3Q16, highlight to the sales growth of 32.9% recorded in SPN, as consequence of the new openings. (R$' million) Q16 4Q16 1Q17 2Q17 3Q17 OCCUPANCY RATE Increase of 120 basis points in the Consolidated Occupancy Rate, in comparison to 3Q16. Comparing to 2Q17, it rose 10 basis points. 92.6% 91.5% 93.1% 93.7% 93.8% 3Q16 4Q16 1Q17 2Q17 3Q17 12 SMT sales were excluded from 2016 Retail Sales. 18

19 SSS, SAS, SSR and SAR The growth in sales indicators reflects the moment of consumption recovery in Brazil and actions that JHSF adopted to make its shopping malls more attractive to retailers and to the public, with improvements in the mix of stores and seasonal events. The growth in rent indicators was impacted by punctual discounts necessary to adjust the occupancy cost of certain retailers, aiming the sustainability of these operations. SSS SAS 7.0% 7.4% 3.8% 2.1% 2.1% 2.8% 4.8% 5.6% -0.1% -0.7% 3Q16 4Q16 1Q17 2Q17 3Q % 11.0% SSR SAR 7.3% 3.5% 3.0% 1.7% 0.6% 0.9% 2.3% 2.7% 3Q16 4Q16 1Q17 2Q17 3Q17 [The remainder of this page was intentionally left blank] 19

20 OCCUPANCY COST Boosted by sales increasing (+10.4% vs. 3Q16), Consolidated Occupancy Cost dropped 170 basis points in comparison to 3Q16, with improvement in the four shopping malls of JHSF portfolio. 11.5% 11.7% 10.2% 10.3% 9.8% 3Q16 4Q16 1Q17 2Q17 3Q17 Breakdown of 3Q17 Shopping Mall Revenue Breakdown of 3Q17 Revenue by Shopping Mall [The remainder of this page was intentionally left blank] 20

21 Fasano Las Piedras Hotel HOTELS AND RESTAURANTS 21

22 FASANO HOTELS AND RESTAURANTS 13 In 3Q17, São Paulo and Fazenda Boa Vista Hotels presented growth in REVPAR (+6%), while REVPAR in Rio de Janeiro was 68% lower than in 3Q16, due to: (i) the Olympic Games, in 2016; and (ii) the market downturn in the hotel sector in Rio de Janeiro during Consolidated Indicators are presented according to the table below: Hotels Consolidated 3Q17 3Q16 % Average Daily (R$) 1,707 2, % Occupancy Rate (%) 54% 61% -10.9% REVPAR (R$) 921 1, % The inauguration of the hotel in Angra dos Reis is scheduled for 4Q17, and the operations in Belo Horizonte and Salvador for 2H18. In addition, the opening of the hotel in Trancoso is scheduled for These operations are already generating pre-operational fees and will not require Company s CAPEX, since we will only operate those assets. ***** During 3Q17, Restaurants in São Paulo presented growth in Gross Revenue of around 10%, due to the increase in the number of Couverts Sold (+15%) and the reduction of Average Couvert (-5%). Restaurants in Rio de Janeiro, by the same reasons above described, registered a decrease of 20% in Gross Revenue, as a result of the reduction in the number of Couverts Sold (-14%) and in the Average Couvert (-5%). Consolidated Indicators are presented in the table below: Restaurants Consolidated 3Q17 3Q16 % Number of Couverts 154, , % Average Couvert (R$) % The potential growth in this division, in the short term, will come from the 4 new hotels mentioned above, in which we also will develop new restaurants. 13 JHSF owns 65% of HMI, the holding company controlling Fasano s operations. 22

23 Fazenda Boa Vista Porto Feliz REAL ESTATE DEVELOPMENT 23

24 REAL ESTATE DEVELOPMENT In 3Q17 net contracted sales of the Real Estate Development division were negatively impacted by the cancellations of the Fazenda Boa Vista project. Contracted Sales (in R$ million) 3Q17 2Q17 1Q17 4Q16 3Q16 Fazenda Boa Vista (4.4) 19.3 (4.3) 20.3 (38.3) Horto Bela Vista (2.3) Other 1.8 (4.4) 0.8 (57.6) (19.0) Total (0.1) (36.7) (59.6) The table below shows the breakdown of Real Estate Development s Gross Revenue: Gross Revenue (R$' million) 3Q17 3Q16 Δ % Fazenda Boa Vista (4.1) % Horto Bela Vista % Other 2.5 (17.4) -115% Gross Revenue 0.9 (3.0) -129% Taxes on Revenue (0.4) % Net Revenue 0.5 (1.6) -132% [The remainder of this page was intentionally left blank] 24

25 EXHIBITS 25

26 Consolidated Income Statements - Managerial 14 [thousand BRL] 3Q17 3Q16 Δ % Gross Revenue 89, ,336-19% Recurring Income 44,809 68,555-35% Hotels & Restaurants 43,872 44,708-2% Real Estate Development 890 (2,926) -130% Taxes on Revenue (10,012) (10,744) -7% Net Revenue 79,558 99,592-20% Recurring Income 39,135 60,385-35% Hotels & Restaurants 39,922 40,788-2% Real Estate Development 501 (1,581) -132% Cost of Goods Sold (50,206) (54,828) -8% Gross Profit 29,352 44,764-34% % over Revenues 37% 45% -8 p.p. Commercial Expenses (3,083) (4,365) -29% General and Administrative Expenses (17,267) (25,591) -33% Other Operating Expenses (5,376) (2,139) 151% Fair Value of Investment Properties 10,402 (3,717) -380% Income before Financial Result and Taxes 14,029 8,952 57% % over Revenues 18% 9% 9 p.p. Financial Result (36,029) (88,147) -59% Financial Revenues (1,421) 8, % Financial Expenses (34,608) (96,358) -64% Income before Taxes and Social Contribution (22,000) (79,194) -72% % over Revenues -28% -80% 52 p.p. Income Taxes and Social Contribution (7,197) (1,794) 301% Discontinued Operations - 25,256 - Net Income (29,198) (55,731) -48% % over Revenues -37% -56% 19 p.p. 14 The amounts above reflect management allocation by Business Unit in the Company s Management view. In their total figures, the balances are equal to the accounting numbers presented in the Quarterly Information (ITR), but they may differ in terms of allocation between Business Units or between result lines. 26

27 Consolidated Balance Sheet [thousand BRL] 3Q17 2Q17 1Q17 Assets 4,464,170 4,492,062 4,446,647 Current 489, , ,752 Cash and equivalents 14,141 31,545 8,360 Interest earnings bank deposits 33,814 31,755 45,933 Accounts receivable 146, , ,700 Inventory 225,653 95, ,487 Other current assets 30,771 47,817 34,860 Recoverable taxes and contributions 27,918 29,250 30,804 Expenses to appropiate 10,888 15,049 19,608 Non-Current 3,974,575 4,064,409 3,622,895 Accounts receivable 161, , ,681 Taxes and deffered contributions ,992 Inventory 405, , ,952 Other non-current assets 9,386 36,126 36,115 Credit with related parties 92,289 58,291 48,336 Investments 3,691 3,787 4,203 Fixed assets 761, , ,117 Investment property 2,441,819 2,426,098 2,365,497 Intangible 98,565 87,962 88,002 Liabilities 2,303,866 2,298,284 2,190,241 Current 468, , ,633 Suppliers 53,469 62,035 67,944 Loans, financing and debentures 264, , ,484 Social, labor and tax obligations 34,377 32,377 28,499 Deferred income and social contributions taxes 13,283 14,416 16,412 Other obligations 50,498 74, ,294 Dividends to be paid 53,056 53,056 - Non-Current 1,834,925 1,843,880 1,871,608 Loans, financing and debentures 1,051,863 1,069,263 1,113,493 Social, labor and tax obligations 12,939 12,682 12,632 Taxes and deffered contributions 486, , ,706 Other obligations 262, , ,350 Provisions 21,569 22,131 22,427 Shareholder's Equity 2,160,304 2,193,778 2,256,408 Capital stock 915, , ,183 Capital reserves 31,358 31,993 30,294 Reserve earnings 552, , ,127 Profits to realize 718, , ,604 Treasury stock (414) (414) (414) Retained earnings (losses) (44,898) (13,804) (17,700) Adjustment at fair value of securities available for sale (22,797) (19,878) (7,650) Minority interest 11,127 9,952 13,964 Total Liabilities and Shareholder's Equity 4,464,170 4,492,062 4,446,647 27

28 Consolidated Cash Flow 15 [thousand BRL] 3Q17 2Q17 1Q17 Cash Flow from Operating Activities Earnings Before Income Taxes (EBIT) (22.001) (4.095) Expenses (revenues) not affecting cash flow Depreciation and amortization Equity in net income of subsidiaries (30) 214 (48) Interest and monetary variations on loans Adjustments to present value (257) (1.596) 134 Interest capitalized into fixed asset under construction (7.714) (7.838) (7.938) Commercial expenses - Amortizations of stand Provision for doubtful accounts (116) Provision for contingencies (526) (332) (806) Provision for stock options plan (635) Fair value of investment properties (10.402) (54.421) (34.838) Variation in current and non-current assets and liabilities Accounts receivable Properties for sale (1.218) 82 (3.802) Sales to be appropriated (1.572) Related parties (22.561) (6.860) (37.565) Other assets (1.953) (8.072) Advances from clients (8.607) (4.138) (9.026) Other liabilities Income and social contribution taxes paid (1.051) (354) (1.949) Cash Flow from Investing Activities (9.905) (18.622) (12.622) Sale (Acquisition) of marketable securities Acquisition of fixed and intangible assets (10.180) (18.621) (12.623) Sale of fixed and intangible assets - (1) 1 Cash Flow from Financing Activities (9.836) ( ) Additions of new loans and financing Payment of debentures (94.311) Payment of loans and financing (47.128) (50.305) ( ) Transactions with related parties Cash Flow generated (used) in the period (17.404) (61.293) Cash at the beginning of the period Cash at the end of the period Cash position by the end of quarter is net of financial applications. 28

29 GLOSSARY 29

30 Glossary EBITDA: Net income for the period plus income taxes, net financial expenses from financial income and depreciation, amortization and depletion. The calculation of EBITDA may be adjusted for non-recurring items, which contribute to the information on the potential gross cash in the Company s operations. Adjusted EBITDA does not have a standardized meaning and our definition may not be comparable to those used by other companies. Gross Leasable Area (GLA): This represents the areas available for leasing in shopping malls. GLA owned by the Company: This refers to the share JHSF owns in the malls. Occupancy Rate: This is the area leased divided by the GLA of each shopping mall at the end of the period in question. Occupancy Cost: It is the occupancy cost of a store as a percentage of sales. It includes rent and other expenses (condo and promotion fund expenses). RevPar (Revenue per Available Room): It is a metric that combines the occupancy rate and the average daily rate, representing guestroom revenue per available room. RevPAR is calculated by multiplying the occupancy rate by the average daily rate in a given period. Same Store Rent (SSR): This is the ratio of the rent charged for a given area in the current period in comparison with the same period in the prior year. Same Store Sales (SSS): This is the ratio of the sales of given stores in the current period in comparison with the sales of the same stores in the same period of the prior year. Same Area Rent (SAR): This is the ratio of the rent charged for a given area in the current period in comparison with the same period in the prior year. Same Area Sales (SAS): This is the ratio of the sales of a given area in the current period in comparison with the sales of the same area in the same period of the prior year. 30