Poland

(1)

THIS DOCUMENT IS NOT AN INVESTMENT RECOMMENDATION AND SHALL BE USED EXCLUSIVELY FOR ACADEMIC PURPOSES (SEE DISCLOSURES AND DISCLAIMERS AT END OF DOCUMENT)

See more information at WWW.NOVASBE.PT Page 1/39

M

A

S

T

E

R

S

I

N

F

I

N

A

N

C

E

M

A

S

T

E

R

S

I

N

F

I

N

A

N

C

E

Q

U

I

T

Y

R

E

S

E

A

R

C

H

We’ve downgraded our PT from €14.31 to €13.98 driven by the

riskier Portuguese profile and tougher macroeconomic

outlook. Both our sales and EBITDA margins estimates (2011E-2013E) for all domestic business units suffered cuts, reflecting the measures imposed by the Troika’s agreement. As a result, our valuation for Portugal was reduced in 10.80%, meaning -2.31% in our PT and our recommendation has changed to HOLD.

 Poland - Polish operations are the major source of value creation: We place our hope in Biedronka whose LfL sales and EBITDA margin grew 11.7% and 60bp in 1Q11. We expect sales to grow at a CAGR of 10.8% in 2010 (local currency).

Biedronka’s expansion plan will allow JMT to benefit from high growth rates as long as the food retail market converges to European standards and Biedronka enlarges its market share gap to its direct competitors. Polish operations account for 78.6% of our

JMT’s value.

 Portugal - we expect the group to consolidate its positioning: Portuguese operations account for 21.4% of our enterprise value and we forecast sales and net income to increase at a CAGR of 4.7% and 8.2% in the next 10 years, reflecting the deterioration in private consumption and the mature stage of the food retail market. Nevertheless, the group was able to increase its profits by 33.5% in 1Q2011 YoY thanks to Biedronka,

corresponding to €56.4Mn.

 Going Abroad is a Top priority: JMT plans to enter a new geography in 2012. The most likely format is discount and mass markets should remain key.

JERÓNIMO MARTINS

,

SGPS

C

OMPANY

R

EPORT

F

OOD RETAIL 06 JUNE 2011

S

TUDENT

:

M

ARGARIDA

C

ARREIRA

mst16000228@fe.unl.pt

Premium position in Poland leads to

_…

…positive results

in the Portuguese stock market.

Recommendation: HOLD

Vs Previous Recommendation BUY

Price Target FY11 (PT): 13.98 _€

Vs Previous Price Target 14.31 €

Price (as of 3-Jun-11) 13.59 _€

Reuters: JMT.LS, Bloomberg: JMT PL

52-week range (€) 6.84-13.70

Market Cap (€m) 8,552.09

Outstanding Shares (m) 629.293

Source: Bloomberg

Source: financeyahoo.com

(Values in € millions) 2010 2011E 2012E Revenues 8,691.0 9,528.0 10,197.1

EBITDA 653.1 672.27 719.67

EBITDA margin (%) 7.5% 7.1% 7.1%

Net Profit 281.0 272.6 273.3

EPS 0.446 0.433 0.434

P/E 25.57 32.27 33.45

RoE (%) 24.8% 19.3% 17.0%

EV/EBITDA 10.98 13.1 12.2

Capital Expenditures 434.2 685.6 724.5 Source: Company’s reported Data and NOVA ER Team estimates Company description

Jerónimo Martins SGPS (JMT) is a Portuguese company operating in the food retail market in the distribution, industry and services areas, in Portugal and Poland. In Portugal, it operates under the brands Pingo Doce and Recheio while in Poland it operates with its hard discount model,

Biedronka. JMT is also involved in the food industry and in the services area.

JMT vs PSI20

(2)

JERÓNIMO MARTINS,SGPS COMPANY REPORT

PAGE 2/39

Company overview

Company description

Jerónimo Martins SGPS (JMT) is a Portuguese company in the food sector operating in the distribution, industry and services areas. Currently, the company conducts activities in Portugal (mainland and Madeira) and Poland. Nevertheless, the group is searching for new markets to increase its international position. In Portugal, JMT maintains its recognition as the second largest portuguese food retail group, right after Sonae Distribuição. While in Portugal it operates with the brands Pingo Doce (retail) and Recheio (cash&carry), in Poland it stands with its hard discount model, Biedronka. JMT is also involved in the food industry over its joint-ventures with Gallo Worldwide and Unilever. In the service sector, it offers marketing services, food services and further represents international brands in Portugal. Brands like Olá, Hussel, Jeronymo, Chili’s, Ben & Jerry’s and Caterplus are also part of JMT’s portfolio.



Business Units description

With a total of 353 stores in Portugal (340 in Portugal mainland and 13 in Madeira), Pingo Doce (PD) is leader in the supermarket segment with 12.1% market share1 (see Appendix 1). Relying on Portugal’s largest outlet network,

PD has achieved a sales growth of 9.9% in 2010. Among the main differentiation factors are its every day low prices strategy, its strong private label (60% of PD

total sales), its always fresh perishables and finally its ready to eat Meal Solutions. Unlike other retailers like Lidl, PD intends to be a price follower instead of a price leader. In specific product categories (around 500 references),

PD is forced to offer the same prices as Lidl. Since 2010, the group no longer owns Feira Nova being all of those stores converted into PD ones. In Madeira, sales have grown 7.9%, suffering losses due to the storms occurred on 2010, which affected two of JMT’s most representative stores (Anadia and Dolce Vita).

Recheio is the leader in the food wholesale segment, with 39 cash&carry stores and 3 food service platforms, which posted a 4.6% sales growth in 2010. Mainly aiming at satisfying clients from the HoReCa (Hotels, Restaurants and

Café’s) and traditional retail channels, its main differentiation efforts have been

increasing perishables (14.9% of its total sales) and its private labels,

MasterChef, Gourmês and Amanhecer (70% of its total sales). It presents a

1 According to Euromonitor International, PD became leader in 2008, surpassing Continente (8.2%) with a market share of 10.6%. Source: Company data

Exhibit 1–JMT Net sales Breakdown in 2010 (%)

Source: Company data

Exhibit 2–PD’s Number of stores evolution

Exhibit 3–Recheio’s type of clients in

(4)

PAGE 4/39

market share of 38%.

In Poland, JMT occupies a relevant position in the food retail market with its solid hard discount format Biedronka. It is the leader in its segment with a market

share of 10.5% and has 1,649 stores. Its assortment is composed by 7% of non food products, 56% exclusive brands and 37% corresponding to other brands. Due to the potential of the Polish market, Biedronka has grown rapidly in the last 5 years and constituted 55% of the company’s sales in 2010. It is present in 9 Polish regions out of 16 and is recognized by more than 92% of Poles.

In 1949, JMT entered the food industry through its joint-venture with Unilever. In

2007, with the merger of Fima VG, Lever Elida and Olá, a new company emerged, Unilever Jerónimo Martins (UJM). Today, UJM is the biggest manufacturer of the food mass market, home care and personal care products in Portugal. Regarding services, in 1972 Jerónimo Martins Distribuição de Produtos deConsumo (JMD) was born. Due to its knowledge of the Portuguese consumer and distinct markets, JMD’s core activities are the exclusive representation of a set of international brands in Portugal, mostly market leaders.

Shareholder structure

Currently, JMT’s capital is formed by 629,293,220 ordinary shares whose major shareholder, with 56.1%, is Sociedade Francisco Manuel Soares dos Santos

which is controled by Alexandre Soares dos Santos, the Chairman of the Board of Directors of JMT, and his sons. Heerema Holding Company through Asteck S.A. owns 10%, Carmignac Gestión 3%, BNP Paribas Investment Partners

owns 2.03% and the remaining 29% are free floating and own shares (see Appendix 2). This structure alows for a certain stability as Soares dos Santos guarantees the continuity of JMT’s strategy2. Nevertheless, despite having the majority of JMT, Soares dos Santos’ family cannot make decisions without geeting the agreement of a substantial percentage of shareholders in issues like the dividends policy3 for instance. The shareholders’ structure also varies among business units. The company owns only 51% of PD while the remaining participation belongs to Ahold, a Dutch food retail group. In Madeira only 75.5% are owned by JMT. The remaining are detained by Lidosol and J. G. Camacho. Regarding industry, Unilever owns 55% of UJM similarly to Gallo Worlwide, that controls 55% of its own company. The remaining business units are entirely

2 Moreover, according to Código das Sociedades Comerciais, article 386º, nº3, JMT cannot merge, be sold or dissolved without the acceptance of 2/3 of the votes in general assembly.

3 According to Código das Sociedades Comerciais, section IV,article 294º, nº1, the payout ratio can only be changed by acceptance of at least 75% of the social capital in general assembly.

Exhibit 4–Biedronka’snumber of stores evolution

Exhibit 5– Shareholder Structure

(5)

PAGE 5/39

owned by JMT.

Macroeconomic Analysis

Portugal

Portugal is currently in a very delicate situation, dealing with a serious recession particularly due to its high budget deficit (9.1% of GDP in 2010 and 10.1% in 2009), lack of competitiveness and the need of deep structural adjustments. According to the EU rules, the Portuguese deficit should be lower than 3% of its GDP, very distant from the ones achieved in the last decade. As a way of fighting its deficit, in 2011, the government increased VAT from 21% to 23% in the revenues side and it has also cut 5% on civil servant wages on the expenditure side. However, the obtained results were not enough. This fragility is even more obvious when examining public solvability4, resulting in high yields of sovereign debt and continuous downgrades on credit ratings (Portugal current rating is

BBB-, according to S&P). Perceiving the high level of uncertainty and the

Portuguese risky profile, international investors are speculating negatively, strongly conditioning access of Portuguese banks to funding and leaving the economy with tough liquidity problems. Moreover, with 10.638Mn of inhabitants, Portugal presented the highest unemployment rate of the last 10 years in 2010 (10.83%) and a poor GDP growth rate of 1.4%. Unable to turn around this situation, on April 6th Portugal was forced to ask for external assistance to the

Troika, following Ireland and Greece. €78Bn were agreed and interests of 3.25%-4.25% and 5.5%-6.5% will be paid to the IMF and the EU, respectively. The event wasn’t, however, enough to calm down international markets and spreads on

sovereign debt haven’t stopped growing, achieving values of 11.89% and 9.72%

for 5 and 10-year treasury bonds, respectively, on May 2nd. Most concerns by the German Finance Minister about the eventual need to restructure Greece’s debt in June also jeopardized the very similar Portuguese case. It also led investors to speculate about a possible departure from the Euro by Greece, representing the failure of the EU model. In fact, Portugal may not meet its financial obligations if interest rates prove to be higher than its growth potential. IMF forecasts include negative or low values of GDP growth rate in 2012 (-0.5%) and 2013 (0.9%). Measures imposed by the Troika’s agreement like the dismissal of 8,000 civil

servants, cuts on pensions higher than €1,500, 50% reduction on overtime

income, higher indirect taxes and higher VAT on electricity (from 6% to 13%-23%),

4 Portuguese sovereign debt corresponded to 93% of GDP in 2010.

Exhibit 6– Portuguese real GDP growth (%)

Source: IMF for past and future values

(6)

PAGE 6/39

among others, are leading to a pessimistic evaluation from the Portuguese

consumers and consequent decrease on families’ disposable income, with 61.3%

believing its financial situation will worsen. 1Q11 already shows evidence that consumers are cutting back on spending, specially on non-basic purchases,

with food retail sales decreasing by 1.6% YoY. As food inflation has been of 2.4% since 1Q10, the fall on food retail sales was, in fact, of 4% YoY, in real terms. Hence, w_{e’ve cut our}JMT valuation for Portugal by 10.8%5, as we expect both retail and non retail activities to be affected by consumers’ retrenchment. Services and Industry (non retail) suffered higher cuts as consumers are trading down from manufacturer brands to private labels. Although less affected due to its based on food assortment, our PD and Recheio estimates were also reduced as we believe

they’ll not be able to avoid the negative impact on consumption. However, as

JMT’s sales are mostly focused in Poland6 (55% of total sales) and its economy

has been able to grow consistently, JMT performed positively as shown by the 1Q11 results (consolidated sales growth of 14.7%7 YoY).

Contrarily to Portugal, Poland, with a population of 38.200Mn inhabitants, has been one of the fastest growing countries in the EU. Further affected by the European economic crisis, Poland was the only country in the EU to maintain positive

GDP growth during the economic downturn period (2008-2010). This performance was only possible thanks to 4 factors: i) Poland had access to structural funds given by the EU which contributed to boost the economy, ii) The zloty devaluation has supported Polish production by making polish goods more competitive and increasing exports, iii) imports decreased in 2009 by 9.3%, and finally iv) its conservatively managed banking system was little exposed to toxic assets. Moreover, Polish exports are highly dependent on the German economic growth, as Germany is by far its most significant trading partner (1/4 of polish exports). Polish exports are mainly natural resources like coal, silver, iron and salt and also automobiles, machinery, furniture and chemicals supported by a healthy industrial sector. This growth is sustainable as long as Poland still shows large differences from the European standards8. Last year, Poland’s economy was able to expand by 3.817% and IMF forecasts point a growth of 3.833% for this year. Triggered by this economic positivism, the zloty has appreciated, reaching 3.964 (Dec 2010)

5 The impact on JMT’s main inputs is explained later in the Operational Forecasts chapter.

6 As extremely dependent of the Polish economy, JMT is very exposed to zloty variations, supporting a high exchange rate risk. 7 In 1Q11, Biedronka, PD, Recheio, Madeira, Industry and Services presented sales growth rates of 21.8%, 4.6%, 3.7%, 15.9%, - 4.6% and - 4.8%, respectively.

8 In Poland, GDP per capita equaled $12,300.1 (2010) while in Germany it was of $40,831.7 (2010). Source: IMF for past and future values

Exhibit 10– Polish unemployment rates (% of total labor force)

Source: IMF for past and future values

Exhibit 8– Portuguese Food retail sales and CPI YoY(%)

(7)

PAGE 7/39

against 4.1006 (Dec 2009) per Euro. Nevertheless, rising demands to fund health care, education and the state pension system caused the public sector budget deficit to rise to 7.9% of GDP in 2010, a number above the required European target of 3%. According to a report by S&P, Poland’s current rating of A- might be in danger of being lowered if structural reforms of its public finances are not

implemented. The good growth news is deflecting attention from the country’s fast -growing debt9. It is important to mention that the Polish Euro adhesion was postponed indefinitely thanks to the European crisis.

Since 2010, food inflation has been increasing, reaching values of 5.5% in 1Q11. Despite the negative impact of the timing of Easter in 1Q1110, food retail sales were able to grow 0.6% YoY. Following this tendency, mainly due to its strong LfL sales growth (11.7%11) and its increase on selling area (13.0% when compared to 1Q10)

Biedronka was able to present good results in 1Q11, with a sales growth of 21.8%.

Biedronka counts for 78.6% of our JMT’s PT and we expect sales to grow at 2 digits in 2011 (10.4%) and 2012 (11.1%).

Food Retail Sector Overview

Food Retail Trends

Traditionally, the percentage change of householders’ income is highly correlated to the GDP growth, which is converted into a correlation around 0.97. Nevertheless, even having a direct impact on general consumption, high variations in disposable income are not translated into high variations in food spending. As an essential good, demand for food is quite inelastic and food

consumption does not grow exponentially when income experiences that behavior. That’s mainly why the industry is seen as a very defensive one against recessions. Instead, the variations that may occur relate to _consumers’ choices, selecting cheaper products during a recession period or expensive ones otherwise. According to INE, in the last 10 years, Portuguese householders have been spending on average 14.1% of their incomes in food related goods. We believe that this percentage will tend to decrease to 13.6% in 2020 at a CAGR of -0.65%, mainly due to the increase of the PL’s share12 driven by the severe austerity measures implemented. Similarly, according to Eurostat, in 2006 Poles spent approximately 18.2% of their disposable income in food. This percentage has been

9 In 2010, public debt counted for 55% of GDP.

10 In 2010, Easter was on April 4th while in 2011, it was on April 24th.

11 Biedronka’saverage basket inflation was 4%, meaning that Biedronka was able to raise prices below the market average (5.5%). 12 Having a current private label share of 33%, we believe that in 2020 Portugal will achieve a PL share of 45%, following the behavior of Switzerland (the European most developed country in terms ofPL).

Exhibit 12 – Portuguese Householders’

food expenditure

Source: INE and IMF

Exhibit 11– Polish Food retail sales and CPI YoY(%)

(8)

PAGE 8/39

1Q 2010

2Q 2010

3Q 2010

4Q 2010

22.5% 24.0% 26.3% 27.1%

decreasing at a CAGR of -1.5% since 2000, mainly due to consumers’ purchasing power increase and rising importance of non food categories, diversifying their consuming patterns. We believe this percentage will reach a value of 16.2%13 in 2020, following the same trend as Portugal.

Over the last years, the European ongoing economic crisis has been changing customers’ behavior. Following IGD, consumers have adjusted their priorities, becoming more value conscious, price sensitive and rational in their purchases. As a consequence, Private Labels (PL) and Eat-at-Home tend to evolve rapidly. According to JMT,in Portugal (1Q11), PD’s number of shopping trips increased, being however, somehow neutralized by a reduction in the value of the average ticket14, showing that consumers are already reducing their spending.

Furthermore, they opt to shop around (proximity) and as more rational buyers, their time shopping has increased. On the other hand, in Portugal, there’s an aging population tendency, which together with a bigger concern with health is resulting in a higher demand for healthy products.

On the supply side, the change in consumers’ behavior has forced most retailers to optimize and reduce their assortments (simplifying their offer) as a way to reduce costs and achieve efficiency in stock management. For instance, PD’s

positioning changed from a premium concept to an “every day low price” model, reducing its offer from 15,000 references to 5,500. Moreover, Portuguese retailers are holding higher costs due to higher raw materials’ prices and VAT, resulting in an EBITDA margins reduction. According to Deloitte, the retailers’ ability to limit their costs is the key to maintain lower prices and achieve profitability during an economic crisis. Retailers like JMT are investing in the rationalization of their logistics network, so they can increase their efficiency gains and maintain their EBITDA margins.

The food retail market is a seasonal activity, selling progressively more from quarter to quarter. Contrarily to the 4th quarter, people tend to buy less during the 1st quarter due to the already spent incomes during Christmas celebrations. Similarly, customers tend to spend more during the 3rd quarter than in the 2nd, as it corresponds to holidays when the vacation subsidy is granted. Additionally, companies in this sector are characterized by high liquidity ratios since they receive from customers immediately and pay to suppliers later on, allowing for implementing ambitious investment plans.

13 Poland presented a PL share of 14% in 2009 and we believe it will reach the current Portuguese PL share (33%) in 2020. 14 In 2010, the value of the average ticket of PDwas around €12 to €15.

Exhibit 13– Changes in European shopping patterns (October 2008)

Exhibit 14– JMT sales by quarters in 2010, as a percentage of total sales

Source: The Institute of Grocery

(9)

PAGE 9/39

Private Labels’ Phenomenon

Since the 1970’s, the Private Label market has been suffering a vast

transformation process. PLs that were previously perceived by customers as cheap, of inconsistent quality and brand copies, are nowadays competing in quality. According to AC Nielsen, PLs are an option in terms of quality against Manufacturer Brands (MBs) for 39% of the Polish householders and 99% of the Portuguese homes. Usually, customers acquiring these products reveal a high degree of satisfaction (87%) and only 3% presented some kind of complaint. In most cases, PLs are produced through partnerships with manufacturers. Furthermore, TNS Worldpanel data reveals that, even after the economy improves, 95% of the Portuguese people will continue to purchase PLs. Following this, JMT

has been making an effort to increase its PL portfolio, not only because of

consumers’ changes but also as a way of differentiation and protection against the

increased pressure from competition. In 2010, PLs corresponded to 38% of PD’s

total sales and 17.1% of Recheio’stotal sales (see Appendix 3). Furthermore, PD

managed to increase its PL’s weight on sales to 42% in 1Q11 against 39% YoY.In Portugal, JMT shows a PL’s share of 33.7%, slightly higher than the 33% of the overall market, meaning PLs are one of the critical differentiation pillars of JMT’s

distribution business models.

In fact, PLsare growing faster than MBs,representing currently a European market share of 35%15 (Europe is the region with the highest share of PLs). Apparently, this growing tendency is highly correlated with the growing presence of hard

discounters16 and also the high level of retailer concentration measured by the

sum of the 5 top retailers’ market share. All the 5 most developed countries

regarding PLs have a retailer concentration of over 60%. Switzerland is the 1st ranked with a 46% PLs’ share and a concentration of 69%. Portugal presents a current retailer concentration of 54% (see Exhibit 19) and a PLs’ share of 33%17. The prevailing reasons behind this effect are the retailers’ aims for higher market shares, being able to create brand awareness which guarantees consumers’ loyalty. In contrast, emergent markets like Poland, which have a very fragmented retail market, have a far less developed PLs market (15%15 in 2009).

More important is to understand the PLsbuyers’ profile and their motivations in the purchasing moment. Currently, as mentioned, price plays an important role at the moment of decision, which contributes to increase PLs’ sales against MBs’.

15 Source: AC Nielsen

16 Hard discounters as Aldi or Lidl that mostly sell PLs are expanding their presence. For instance, PLs count for 95% of Aldi’s sales. 17

Source: TNS Worldpanel data

PLs are an option for 99% of the Portuguese homes and 39% of the Polish

householders.

Exhibit 15–Relation between PLs’

share and Retailers Concentration (%) (2009)

Source: AC Nielsen and Planet Retail

data

(10)

PAGE 10/39

Following an AC Nielsen study, 81% of the householders admitted to compare prices between PLsandMBsso as to decide which product to purchase. Actually, 79% of the global consumers confess to change purchasing habits to reduce expenses. Therefore, more than half agreed that PL products are not only consumed by people with lower incomes. For JMT, PLs play an important role in the assortment as in 2010 consumers’ demand for these products increased, regarding their level of quality. In Portugal the average price differential

between PLs and MBs is around -42%18_{. In this sense, the PL market seems to}

be resistant to economic fluctuations since they maintained a steady and

growing business throughout economic increases or decreases. When compared to other nations, the Portuguese is one of the most pessimistic, with a confidence index of 45, leading to the preference for cheaper alternatives. Thus, MBs have been losing sales for two successive years. When looking at the cumulative benefits for a range of 80 categories, customers in Europe can achieve an

average saving of 37%15

. The demand for competitive prices is a reality and while customers save, retailers can be presented with higher margins as they have more control on production costs and activities such as marketing or distribution. The bottom PL value driver is the wide range of categories that this sector manages to offer. However, 35% of European consumers agreed that PLs are not suitable for products where quality really matters. Consumers may easily adopt PLs when it comes to dog food, refrigerated food or home cleaning products among others, but when it comes to personal care, baby food,

cosmetics and alcoholic beverages they’re less convinced about their quality.

Regarding this PLs growing tendency, our sales estimations for Portugal and

Poland were lowered, believing that the percentage of householders’ income

spent in food related goods will decrease at a CAGR of -0.65% and -0.81% in Portugal and Poland, respectively.

The Portuguese Retail Market

The food retail market in Portugal is currently achieving a certain level of maturity and will tend to stagnation, with companies heavily competing between each other. EBITDA margins will tend to be squeezed not only because of the fierce competition felt but also because of the low price strategies implemented. At this time, the Traditional Market (TM) accounts for 23% of the entire market, while Modern Grocery Distribution (MGD) corresponds to 77%, around €15,442.4Mn.

18 Source: AC Nielsen –“The Power of Private Label 2005”

Regarding this PLs growing tendency, our sales estimations for Portugal and Poland were lowered.

Exhibit 17 – Portuguese MGD market

(€ Mn)

79% of the global consumers confess to change purchasing habits to reduce expenses.

Exhibit 16– Average price differential between PLs and MBs by country in 2005 (%)

Source: AC Nielsen –“The Power of Private Label 2005”

(11)

PAGE 11/39

Retailers Market

shares 2009 2010

Sonae Distribuição 16.4% 17.1%

Jerónimo Martins 13.1% 13.7% Os Mosqueteiros 10.0% 9.5% Cia Portuguesa de

Hipermercados SA 7.5% 7.9%

Lidl 6.0% 5.8%

Dia Portugal

Supermercados 4.2% 4.0% E Leclerq 2.7% 2.8% Others 40.1% 39.2%

(Mn €) Overall Market MGD

JMT

sales 2010 20,061 15,442 2,884 2011E 20,016 15,598 3,210 2012E 20,018 15,791 3,276 2013E 20,338 16,241 3,391 2014E 20,782 16,800 3,533 2015E 21,341 17,465 3,698 2016E 21,969 18,200 3,879 2017E 22,689 19,028 4,081 2018E 23,526 19,972 4,314 2019E 24,513 21,066 4,579 2020E 25,566 22,242 4,869 CAGR 2.5% 3.7% 5.4%

In 2010, the 5 Portuguese top retailers accounted for 54% of the overall market, suggesting a high retailers’ concentration. However, it still presents a small concentration comparing to other European countries like Germany or Switzerland, with 63% and 69%, respectively. According to Euromonitor,

supermarkets in Portugal had the highest growth rate over the past 5 years (CAGR of 10.7%) against hypermarkets (CAGR of 2.7%) and discounters (CAGR of 1.1%) (see Appendix 4). This trend shows that supermarkets have managed to bring together low prices and convenience. In contrast, discounters presented a stable behavior, which is not only related to the discounters’ slow down on new openings during 2009 and 2010, but also with Minipreço’s negative results during the same period.

In the past, both Sonae and JMT, the two biggest players of the market, were able to grow through organic expansion and M&A operations. In 2007, JMT

bought Plus in Portugal and Poland while Sonae bought Carrefour, as a way of reinforcing their positions in the market. Currently, due to its consistent negative results, Minipreço has been creating some speculation and rumors about a possible sale. Moreover, Carrefour has started to decrease its investment in

Minipreço in 2009. Yet, there is no official buyer on the radar although Sonae

and Group Auchan seem to be interested in it. However, we believe the competition authorities would not allow for a possible acquisition by Sonae

without some restrictions, regarding its current market share.

Owning stores in similar locations, of similar dimension, also competing in price and offering a wide range of PLs, Minipreço and Lidl became PD’s main rivals.

Sonae, instead, is more focused on hypermarkets and non food specialized retail outlets. Currently, Sonae is operating only under the brand Continente.

Fighting between each other, retailers are investing significantly in solid marketing campaigns and outlet design in order to increase their brand awareness and attract more consumers than their peers. Both JMT and Sonae

have been largely investing in TV ads. While JMT reinforces its PD’s policy for quality at low prices, Sonae promotes its brand Continente. The discount leader,

Lidl, so far not investing on TV ads in order to maintain its very low prices, is now competing by using marketing tools and developing PL luxury products.

In the medium-term, we believe there is still a little room for growth due to the significant gap existing between Portugal and European countries. Following Alisuper that went bankrupt (2011), we believe smaller players such as

Sampedro will go out of business without the ability to survive the fierce

Exhibit 19 –Portuguese retailers’

market shares (%)

Source: Euromonitor International

Source: Euromonitor International,

Company dataand ER Team estimates

Exhibit 20 – Portuguese MGD forecasts

Exhibit 18 – Sales in Grocery Retailing

(12)

PAGE 12/39

competition. Hence, further consolidation opportunities will occur. According to

Euromonitor International, MGD was able to grow at a CAGR of 6.8% in the past 5 years. Believing traditional market will continue to shrink, we expect MGD to increase to 87% in 2020, growing at a CAGR of 3.8% in the next 10 years (see Appendix 5 for methodology).

We consider that PD was able to positively differentiate itself from its peers in the past through its strategic moves. Hence, despite the negative impact on

householders’ consumption, we believe PD and Recheio will keep on increasing

their market shares as they have been enlarging their PL offer.

T

Polish Food Retail Market

As developed economies evolve into stagnation, emergent economies play a crucial role for international retailers. In contrast to Portugal, currently, the

grocery retail market in Poland is very fragmented and is in a development stage, just like it was in Portugal 10/15 years ago. MGD accounts only for 51%

of the total market while the remaining relates to Traditional Market. Contrarily to TM (lost around 7,000 outlets in 2010), MGD was able to grow at a CAGR of 12.8% over the past 5 years. Following the same trend, we believe TM will lose to MGD, growing at a CAGR of 7.4% in the next 5 years and reaching a relation of 70%-30% in 2020 (see Appendix 5 for methodology).

The three modern formats, i.e., hypermarkets, supermarkets and discount stores,

have increased their market shares in the last 5 years. Nevertheless, Portugal 2010 2011E 2012E 2013E 2014E 2015E 2020E

GDP Growth rate 1.4% -1.5% -0.5% 0.9% 1.0% 1.2% 2.3%

Inflation rate 1.4% 2.4% 1.4% 1.4% 1.4% 1.6% 1.9%

Confidence índex 0.4% 0.2% 0.3% 0.5% 1.0% 1.1% 1.5%

Growth rate of a mature market 0.82% 0.72% 0.72% 0.72% 0.68% 0.68% 0.55%

% spent in food related goods 14.5% 14.4% 14.3% 14.2% 14.1% 14.0% 13.6%

MGD Growth rate 3.40% 1.07% 1.30% 2.91% 3.50% 4.02% 5.64%

Poland 2010 2011E 2012E 2013E 2014E 2015E 2020E

GDP Growth rate 3.8% 3.8% 3.6% 3.7% 3.7% 3.9% 4.2%

Inflation rate 2.6% 4.1% 2.9% 2.6% 2.5% 2.5% 2.5%

Growth rate of an in development market 1.56% 1.56% 1.56% 1.56% 1.23% 1.23% 1.10%

% spent in food related goods 17.6% 17.5% 17.3% 17.2% 17.0% 16.9% 16.2%

MGD Growth rate 7.3% 8.8% 7.4% 7.3% 6.7% 6.9% 7.1%

Exhibit 24 – Evolution of Polish Food retail market by formats (%)

Source: INE, IMF, Euromonitor International and Nova ER Team for estimates

Exhibit 22 – Polish MGD market (PLN Mn)

Source: Euromonitor International

Source: Eurostat, IMF, Euromonitor International and Nova ER Team for estimates

Exhibit 23 – Polish MGD growth rate forecasts

(13)

PAGE 13/39 Retailers Market

shares 2009 2010

Jeronimo Martins

Dystrybucja _{10.2% 10.9%}

Tesco Polska 5.8% 5.7%

Carrefour Polska 4.9% 5.1%

Auchan Sp zoo 4.1% 4.2%

ZKiP Lewiatan '94

Holding _3.9% _4.0% Real _3.6% _3.4% Eurocash 2.7% 3.1%

Lidl Polska 2.8% 2.7%

Kaufland Polska

Markety 2.5% 2.7%

Grupa E Leclerc 1.5% 2.2%

Netto _1.9% _1.8%

Others 56.1% 54.2%

independent small grocers still account for a large percentage in the market (25.3%) operating with 97,820 stores. Discounters presented the highest

growth rate over the past 5 years (CAGR of 19.4%)19_{, resulting in an increase}

of 7.8% in market share. The format was able to perform successfully during the economic downturn mainly due to the wide selection of lower priced PL products. According to the Polish press, the number of customers buying from discounters has also increased from 16% in 2009, to 24%. The observed interest in this format results mainly from price sensitive consumers and a more positive attitude towards it among people of higher economic status.

The grocery retail market in Poland is mainly led by multinational companies as they possess additional market experience and larger budgets to invest. The 5 biggest chains of the market are Jerónimo Martins Dystrybucja, Tesco Polska, Carrefour Polska, Group Auchan and ZKIP Lewiatan which represent 29.9% of the overall market, a concentration far below the European values and suggesting high growth opportunities. Holding almost 65% of the hard discount segment Biedronka is the leader in its segment with a market share of

10.9%. Having a great advantage over its peers in terms of the number of stores

due to its Plus acquisition (1,649 stores against 400 from Lidl and 212 from

Netto), Biedronka competes mainly against Netto, Lidl and Aldi. In 2009, the Polish market showed signals of consolidation, with E Leclerc buying 25 Billa

supermarkets while JMT acquired 12 Carrefour Express stores.

According to PMR Research, Biedronka was considered the most often

attended store in 2009 with 40% adhesion, followed by Real (36%). Consumers

not only mentioned its very low prices but also considered its brand as solid. JMT

has been aware about the possible growth opportunities of Biedronka and has drafted an ambitious stores’ expansion plan for the future, reaching the 3,000 stores in 2015.

Valuation

With the aim of discounting each cash flow with the appropriate cost of capital (WACC), we’ve divided our valuation of Jerónimo Martins SGPS into six

business units, Retail Mainland (Pingo Doce), Recheio, Madeira, Biedronka,

Industry and Services, according to two criterions: retail format and domestic or international operations. JMT’s value was computed by making use of the

Discounted Cash Flow model, on a sum of the parts basis, with explicit

19

Followed by supermarkets (CAGR of 15.2%) Source: Euromonitor International

tional

Exhibit 24– Valuation Approach

(14)

PAGE 14/39

forecasts up to 2020. Along our analysis we’ve come out with a conservative

point of view when performing forecasts as we have not included in our analytical approach any scenario that could bring additional uncertainty to our analysis.

Thus, we’ve only considered current reliable scenarios aligned with the

company’s guidelines. We took into account the IMF intervention in Portugal

given that it became a reality on April 7th. Additionally, some likely future scenarios will be explored later in further chapters.

Operational Forecasts

With the aim of computing Free Cash Flows (FCF)20, value drivers of each business unit were initially found for computing sales, Net Working Capital variation (∆NWC) and CAPEX. The key value drivers of our model are related with the number of stores and their area, sales per sqm,EBITDA margins, activity ratios and costs of revamping and opening new stores. Our calculation of sales was based on the stores’ expansion plan (selling area in sqm) and sales/sqm evolution (measure of store performance) for all business units with the exception of industry and services, in which cases a constant selling area was assumed. Retail Mainland

Analyzing PD’s past performance during the last 5 years, we realize PD

managed to increase its sales from €1,612Mn to €2,756Mn at a CAGR of 11.3%.

This performance was only possible thanks to its selling area expansion (CAGR of 19.2%) and rise in the sales/sqm ratio (CAGR of 2.8%). The high number of new openings in 2008 presented on Exhibit 25 is related to the Plus acquisition.

Having in mind that the Portuguese food retail market has achieved a mature stage, it will not allow for aggressive expansion plans. Therefore, according to information published during the investor’s day, we believe PD’s new openings will smoothly decrease during the next 10 years, converging into 2 openings in 2020 and contributing to a low selling area CAGR of 0.7% (see Exhibit 63 of Appendix 6). We highlight the fact that there’re still 18 Plus stores left to convert which are expected to be concluded in 2012 (9 each year).

20

FCF = Operational Cash Flow + Cash Flow from Investing Operational Cash Flow = EBIT(1-t) + Depreciation – ∆NWC

Cash Flow from Investing = Investment in non-current liabilities – Investment in non-current assets – CAPEX

Find out the value drivers of each business unit

Project FCF until 2020 and compute the terminal

value of JMT

Discount FCF at the appropriate WACC

SOTP: Reach the total value of JMT

Exhibit 26 – Valuation Approach

Make Forecasts, including the JMT’s strategic plan

and guidelines

Exhibit 27 – Retail Mainland new openings forecasts

(15)

PAGE 15/39

Regarding stores performance (sales/sqm growth rate), we expect it to evolve smoothly, at a CAGR of 2.6% in the next 5 years. After 2015 the majority of stores will be selling at full capacity. The sales/sqm growth rate was estimated based on i) the overall supermarkets’ sales growth rate and ii) the stores’ capacity to sell products, that is, a recently opened store does not sell the same as a mature one21. As stated before, in the past 5 years, supermarkets were able to grow at a higher CAGR than the overall Modern Grocery Distribution market, 10.7% against 6.8%. Believing PD will contribute to maintain this tendency, we

forecast a CAGR of 3.2% for supermarkets_’ sales for the next 5 years. 3.2% is

far below the previous 10.7%, as we’ve cut our estimates for 2011, 2012 and

2013 to 1.73%, 1.96% and 3.59%, respectively, taking into account the negative impact on householders’ incomes and consumption given the Troika’s agreement. Thus, we expect sales to grow at a modest CAGR of 5.5%22.

Regarding PD’s EBITDA margins, we evoke that PD’s EBITDA margin has suffered a contraction of 20bp last year (7.0% in 2009 to 6.8% to 2010). We believe this fall was related with high investments in advertising. For the future, we forecast a PD’s EBITDA margin increase to 7.0% until 2012, and a decrease thereafter, converging to values of 2010 (6.8%) and remaining constant afterwards.

We believe the EBITDA margins’ increase will be mainly driven by the total

conversion of Feira Nova and Plus into PD stores. Feira Nova conversion will

not only contribute to lower operating costs due to the reduction in selling area and more focused assortment in food, but also to increase sales’ productivity as all the investment of restructuring was already done in 2010. Similarly, in 2012, all Plus stores will be converted, 9 in 2011 and 9 in 2012, further contributing to increase EBITDA margins.

From 2013 onwards, we believe EBITDA margin will decrease and remain constant at 6.8%. During the next 3 years, JMT will invest in restructuring and rationalizing its logistics network. This transformation will be translated in a reduction of 2 distribution centers from the current 7, as 40% of PD’s clients are mainly concentrated in Lisbon and Porto. JMT will only start benefiting from higher cost efficiency and consequent reduction in distribution costs after 2013. We suppose this supply chain restructure will contribute in part to fight against

21 We’ve assumed that a 1-year store only sells 55% of its capacity, a 2-year one sells 75% and a 3-year one sells at full capacity. 22 By adding the new openings’ selling area to the already existing selling area of the previous year (1,170m2

is the average area of a PD

store), we achieved PD’stotal selling area (sqm). By using the forecasted sales/sqm ratio, we were able to compute total sales.

Exhibit 28 – Retail Mainland sales forecasts

Source: Company data and Nova ER Team for forecasts

Exhibit 29 – EBITDA margin of JMT’s peers (European Western countries) in 2010

(16)

PAGE 16/39

the fierce competition that characterizes a mature market as well as the

increasing tendency on raw materials’ prices.

Recheio

Currently, the wholesale market is in a mature stage, with the 5 top players of

the market representing 82.3%23_{of the consumption in 2009. The two main}

players in terms of dimension are Recheio and Makro with market shares of 38% and 21.7%, respectively. Over the past years, the wholesale market in Portugal has been declining mainly due to the TM’s decreasing tendency and the actual economic crisis. As mentioned before, in 2010, TM’s decreasing tendency persisted, with some traditional retailers leaving the market. This resulted in the loss of some clients, affecting significantly small wholesalers with less

diversified clients’ portfolios. On the other hand, HoReCa channel was able to

recover in 2010 from the crisis effects felt in 2009, mostly favoring the biggest wholesalers of the market. In 2010, according to INE, the accommodation and food service activities showed a positive growth rate of 1.4%, representing a HoReCa growth rate of 4.5%. Nevertheless, we believe HoReCa channel will not be able to avoid the negative impact driven by the fall in householders’ disposable income. We think in the next 2 years (2011 and 2012) householders will tend to cut on their vacations and restaurants spending (tendency to eat at home), contributing to the decrease of HoReCa’s sales. Despite the actual economic adversities, Recheio’s sales did not present negative growth rates during the years of economic slowdown. Recheio has been able to increase its market share in the previous 5 years, with sales growing at a CAGR of 5.02%. Moreover, its effort on increasing its PL offer and the investment done in advertisement campaigns, mainly falling upon the beverages category,

contributed to reach a sales’ growth rate of 3.7% (0.4% LfL) in 1Q11.

23 Source: Company data

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 2,755.8 3,070.6 3,138.3 3,253.9 3,395.1 3,559.3 4,726.3 EBITDA 186.0 214.9 219.7 221.3 230.9 242.0 321.4 EBITDA margin (%) 6.8% 7.0% 7.0% 6.8% 6.8% 6.8% 6.8% Depreciation 88.52 89.75 90.71 91.31 91.83 92.37 96.31 EBIT 97.50 125.19 128.97 129.95 139.04 149.66 225.07 EBIT margin (%) 3.5% 4.1% 4.1% 4.0% 4.1% 4.2% 4.8%

Exhibit 30 – Retail mainland Operational Forecasts

Source: Company data and Nova ER Team for estimates

Exhibit 31–Hotels’ total income in

Portugal

Source: INE

(17)

PAGE 17/39

Since the wholesale market is already in a high stage of maturity, we believe there won’t be much room for further growth. We expect Recheio to open only 3 stores during the next 10 years, according to the company guidelines. We estimate sales area to reach 133.826m2 in 2020, growing at a modest CAGR of 0.8% (see Exhibit 64 of Appendix 6).

Because this business unit is more affected by the macroeconomic environment than the Retail Mainland unit, we’ve considered a sales growth rate based only on the GDP growth rate, inflation rate and the PLs effect24. In the previous 5 years, Recheio managed to present a sales’ productivity CAGR of 2.7% and a sales CAGR of 5.02%. Nevertheless, according to our forecasts, sales productivity and sales are expected to grow at a modest CAGR of 2.0% in the next 10 years, aligned with the inflation rate values between 2016 and 2020. Currently, as a way of fighting against the difficulties in the TM’s segment, JMT

focused on implementing a new project called Amanhecer. Itsmain objective is to increase Recheio’s sales through 40,000 already existent customers from this segment. The main business idea is to create a franchising chain of traditional

retailers under the name Amanhecer, whose products are obliged to be at least

80% from the current 130 references of products from the PL brand

Amanhecer. On the other hand, JMT gives support to the store brand and helps on issues like the revamping diagnosis, logistics, transportation, marketing, advertisement and retailers’ formation. The group predicts to open between 20 and 25 stores until the end of this year and to achieve 220 references of products. As a recent project, it is still marginal at the moment and thus only limited data is available. However, we believe it will contribute to increase sales and fight against the negative tendency on EBITDA margins regarding competition. For the following years we expect EBITDA margins to decrease and remain stable at 6.1%.

24 Knowing that a recently opened store does not sell the same as a mature one, we’ve also incorporated that information in our model, assuming that a 1-year store will only sell 55% of its capacity, a 2-year one sells 75% and a 3-year one sells at full capacity.

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 719.1 721.7 727.3 725.2 728.7 744.6 861.4 EBITDA 44.2 44.0 44.4 44.2 44.4 45.4 52.5 EBITDA margin (%) 6.2% 6.1% 6.1% 6.1% 6.1% 6.1% 6.1% Depreciation 9.18 9.77 10.57 10.89 11.21 11.52 13.08 EBIT 35.04 34.25 33.79 33.35 33.24 33.90 39.47 EBIT margin (%) 4.9% 4.7% 4.6% 4.6% 4.6% 4.6% 4.6%

We believe Amanhecer will contribute to increase sales and fight against the

negative tendency on EBITDA margins regarding competition.

Exhibit 34 –Recheio Operational Forecasts

Exhibit 32–Recheio’s new openings forecasts

Exhibit 33 –Recheio’ssales forecasts Source: Company data and Nova ER Team for forecasts

(18)

PAGE 18/39

Madeira

The food retail market in Madeira is in a stage of high stability and we do not expect JMT to open more stores in the next 10 years. Therefore, according to our predictions we expect JMT to maintain its current selling area of 14.300m2. Our sales forecasts are expected to grow at a 3.2% CAGR in the next 5 years, slightly below the 4.7% obtained in the past 5 years (see Exhibit 65 of Appendix 6). Driven by the floods that occurred in Feb 2009, 2 of the most important PD of Madeira were affected, triggering a 10bp decrease in EBITDA margin in 2010, from 4.8% to 4.7%. However, as the reconstruction investment was done in 2010 and they are already operating in the market, we expect EBITDA margin to reach 2009 values again and remain constant on the 10following years.

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 128.7 142.2 142.6 145.0 147.6 150.8 174.4 EBITDA 6.0 6.8 6.8 7.0 7.1 7.2 8.4 EBITDA margin (%) 4.7% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8% Depreciation 3.83 4.01 4.17 4.33 4.48 4.63 5.34 EBIT 2.15 2.82 2.67 2.63 2.60 2.61 3.03 EBIT margin (%) 1.7% 2.0% 1.9% 1.8% 1.8% 1.7% 1.7%

Biedronka

Biedronka is the most important business unit of JMT as it counted for 55.3% of the

company’s total sales in 2010. Regarding the positive economic environment lived

in Poland and the potential growth of the food retail market, JMT has established

an ambitious plan of expansion for Biedronka. In 1Q11, Biedronka counted for

66% of the total stores opened by MGD in Poland. According to the group’s guidelines and information made available during its investor’s day presentation, 1,428 stores are expected to open until 2015 corresponding to 3,000 stores and 585 in the following 5 years, expecting to own 3,500 stores in 2020. Thus, a large increase in stores is expected until 2015, slowing down progressively thereafter until 2020. We expect the stores’ number to grow at a CAGR of 7.8% until 2020. Sales productivity will decrease until 2015 at a CAGR of -2.6% due to the high number of openings and increase thereafter at a CAGR of 3.7%. Most of retailers are concentrated on large and medium sized cities, where the number of new attractive locations is limited. In contrast, rural areas and small sized cities are

far from saturation and mainly dominated by traditional retail. Hence, Biedronka

Exhibit 36– MadeiraOperational Forecasts

Exhibit 35 – Madeirasales forecasts

Exhibit 37–Biedronka’s new openings forecasts

(19)

PAGE 19/39

might consider taking over some small and independent players in order to gain new locations to further expand its chain. Moreover, having an expansion team

per each Polish region like Biedronka, responsible for searching for new

locations, increases the capacity of growing organically and inorganically.

Beyond searching for growth opportunities, it is crucial to analyze the suppliers’ capacity to answer to this rapid growth. As local and small providers, they

cannot produce products for all Biedronka stores, not even if they were specialized in only one product. In 2010, around 90% of the food products sold by Biedronka

were bought from local suppliers. Currently, the group pursues a tremendous bargaining power over suppliers as they’re market leaders and deal with 450 local providers in order to diversify the risk of failure and rapidly respond to market opportunities. Moreover, a procurement sustainability policy was established in 2010, which ensures a supplier selection process based on strict and demanding criteria, allowing lasting business relations to be built. Regarding the higher number of openings, we believe Biedronka will probably need to enlarge its suppliers’ portfolio. Nonetheless, following JMT past ability to accomplish its expansion plans, we believe the proposed objectives are perfectly reachable and so, we expect a selling area CAGR of 7.7% for the next 10 years (see Exhibit 66 of Appendix 6). Hence, and believing there will be a significant improvement in families’ living standards of middle class as long as Poland converges to EU standards, we forecast a sales CAGR of 8.4% for the next 10 years.

Regarding EBITDA margins, we expect a smoothly decrease on margins to 6.8% until 2015, regarding the higher operational costs driven by the ambitious investment plan during this period. Afterwards we expect it to recover until it reaches 7.3% mainly due to the progressive increment on sales coming from mature stores. It is only forecasted a 50bp increase as competition is expected to be higher in the future. Aligned with our expectations, Biedronka’sEBITDA margin has increased 60bp from 6.5% to 7.1% in 1Q11 YoY.

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 4,805.9 5,311.5 5,906.1 6,324.6 7,141.2 7,677.6 10,729.0 EBITDA 386.9 377.1 419.3 436.4 492.7 522.1 783.2 EBITDA margin (%) 8.1% 7.1% 7.1% 6.9% 6.9% 6.8% 7.3% Depreciation 84.88 119.56 155.34 188.79 232.72 270.68 321.98 EBIT 301.99 257.56 264.00 247.61 260.02 251.40 461.24 EBIT margin (%) 6.3% 4.8% 4.5% 3.9% 3.6% 3.3% 4.3%

Exhibit 39–Biedronka Operational Forecasts

Exhibit 38 –Biedronka’ssales forecasts

(20)

PAGE 20/39

Industry

When comparing to the previous business units, industry will be more affected by the current macroeconomic environment. As mentioned before, people are more price sensitive, opting more for PLs than MBs. Moreover, the purchasing power is expected to decrease in line with the wages restraints imposed by the Troika. Therefore, we expect sales to increase at a CAGR of 2.1%, aligned with the GDP expected behavior. In 1Q11, sales fell by 4.6% mainly due to the Easter negative impact. For 2011 our expectations include a 0.14% growth on sales. Regarding EBITDA margins, we believe in a fall of 0.3% until 2013, remaining stable at 14.3% thereafter.

Services

We forecast a sales CAGR of 2.1% and we expect EBITDA margins to remain stable at 1.6%. The absence of Easter in 1Q11 had a direct and significant impact in Hussel’s sales, resulting in a sales’ fall of 4.8%.

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 86.5 86.6 86.9 88.3 89.9 91.9 106.3 EBITDA 1.4 1.4 1.4 1.4 1.5 1.5 1.7 EBITDA margin (%) 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% Depreciation 1.28 1.24 1.22 1.19 1.17 1.15 1.09 EBIT 0.14 0.18 0.21 0.26 0.31 0.36 0.65 EBIT margin (%) 0.2% 0.2% 0.2% 0.3% 0.3% 0.4% 0.6%

Investment Forecasts: CAPEX

With the aim of computing CAPEX, we’ve looked upon investments related to the

opening stores, current stores_’ revamping, Plus stores conversion and

finally costs related with distribution centers.According to information released,

JMT predicts to spend €1.7Bn during the next 3 years, from which 75% will be € Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 195.1 195.4 195.9 199.2 202.7 207.2 239.7 EBITDA 28.4 27.9 28.0 28.5 29.0 29.6 34.3 EBITDA margin (%) 14.5% 14.3% 14.3% 14.3% 14.3% 14.3% 14.3% Depreciation 3.09 3.16 3.24 3.32 3.40 3.47 3.88 EBIT 25.28 24.78 24.78 25.17 25.60 26.15 30.40 EBIT margin (%) 13.0% 12.7% 12.6% 12.6% 12.6% 12.6% 12.7%

Exhibit 40 – IndustryOperational Forecasts

Exhibit 41– ServicesOperational Forecasts

Source: Company Data