3Q18 EARNINGS RELEASE São Paulo, November 8 th, 2018 JHSF Participações S.A. (B3: JHSF3) announces its operating and financial results for the third quarter of 2018. 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. The information held in this release, was not audited by the independent auditors. 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, generating rounding 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. 3Q18 HIGHLIGHTS (versus 3Q17) Consolidated 71.2% increase in Net Revenue; 152.0% increase in Gross Profit; 282.5% increase in Recurring Consolidated Ebitda, with Margin improvement of 22.2 percentage points; 505.5% increase in Net Income, with Margin improvement of 123.6 percentage points. Operational Highlights Shopping Malls: growth of 9.2% in Retailer Sales; Shopping Malls: improvement in all Sales Indicators: SSS +4.2%, SAS +4.2%, SSR +11.0% and SAR +10.7%. Shopping Malls: increase of 80 basis points in Occupancy Rate, reaching 94.6% (93.8% in 3Q17); Shopping Malls: Go live of Cidade Jardim online sales platform; Real Estate Development: Increase in Fazenda Boa Vista sale; Hotels and Restaurants: Improvement of all operational indicators and opening of Hotel Fasano in Belo Horizonte; Subsequent event: conclusion of Transaction with XP Malls Real Estate Investment Trust. 3Q18 Results Conference Call November 09, 2018 In English (simultaneous translation) 12:30 p.m. (New York time) 3:30 p.m. (Brasília time) Phone: +1 (646) 843-6054 Code: JHSF In Portuguese 3:30 p.m. (Brasília time) 12:30 p.m. (New York time) Phones: +55 (11) 2188-0155 Code: JHSF Investor Relations Thiago Alonso de Oliveira Mara Boaventura Dias André de Teive e Argollo Phone: +55 (11) 3702-5473 E-mail: ri@jhsf.com.br Website: ri.jhsf.com.br
Consolidated Result Consolidated Information (R$ million) 3Q18 3Q17 Var % Gross Revenue 150.7 89.6 68.3% Taxes on Revenue (14.6) (10.0) 45.3% Net Revenue 136.2 79.6 71.2% COGS (62.2) (50.2) 23.9% Gross Profit 74.0 29.4 152.0% Margin (% of Net Revenue) 54.3% 36.9% 17.4 p.p. Operating Expenses (33.3) (25.7) 29.4% Commercial Expenses (5.1) (3.1) 64.1% Administrative Expenses (22.4) (17.3) 29.6% Other Operating Expenses (5.8) (5.4) 8.7% Fair Value of Investment Properties 16.0 10.4 54.3% Operating Income 56.7 14.0 304.5% Depreciation and Amortization 5.4 3.5 53.2% EBITDA 62.1 17.5 254.2% Fair Value of Investment Properties (16.0) (10.4) 54.3% Non-recurring events (adjustments) 8.8 7.2 21.9% Adjusted EBITDA 54.9 14.3 282.5% Margin (% of Net Revenue) 40.3% 18.0% 22.2 p.p. Financial Result (28.6) (36.0) -20.6% Income Taxes and Social Contribution 90.3 (7.2) -1354.4% Net Income 118.4 (29.2) 505.5% Margin (% of Net Revenue) 86.9% -36.7% 123.6 p.p. Results by Business 3Q18 Income Statement (R$' million) Recurring Hotel & RE Income Restaurants Development Holding Consolidated Gross Revenue 56.8 46.7 47.3 150.7 Taxes on Revenue (7.7) (5.0) (1.8) (14.6) Net Revenue 49.1 41.6 45.5 136.2 COGS (14.7) (34.7) (12.8) (62.2) Gross Profit 34.4 7.0 32.7 74.0 Margin (% of Net Revenue) 70% 17% 72% 54% Operating Expenses (14.6) (5.6) (5.9) (7.3) (33.3) Commercial Expenses (0.7) 0.0 (4.4) (0.0) (5.1) Administrative Expenses (9.4) (4.9) (1.4) (6.7) (22.4) Other Operating Expenses (4.5) (0.7) (0.1) (0.6) (5.8) Fair Value of Investment Properties 16.0 0.0 0.0 0.0 16.0 Operating Income 35.8 1.4 26.8 (7.3) 56.7 Depreciation and Amortization 2.5 1.6 0.1 1.3 5.4 EBITDA 38.3 3.0 26.8 (6.0) 62.1 Non-recurring events (adjustments) 6.9 0.5-1.4 8.8 Adjusted EBITDA 29.2 3.5 26.8 (4.6) 54.9 Margin (% of Net Revenue) 59% 8% 59% 40% Net Financial Result (28.6) Income Taxes and Social Contribution 90.3 Net Income 118.4 Margin (% of Net Revenue) 87% 2
Recurring Income Results Shopping Malls Retail TOTAL Income Statement(R$' million) 3Q18 3Q17 Var. 3Q18 3Q17 Var. 3Q18 3Q17 Var. Gross Revenue 51.5 42.1 22% 5.3 2.7 94% 56.8 44.8 27% Taxes on Revenue (6.2) (4.9) 27% (1.5) (0.8) 95% (7.7) (5.7) 36% Net Revenue 45.3 37.2 22% 3.8 2.0 94% 49.1 39.1 25% COGS (11.6) (6.3) 85% (3.2) (0.8) 281% (14.7) (7.1) 108% Gross Profit 33.7 30.9 9% 0.6 1.1-44% 34.4 32.0 7% Margin (% of Net Revenue) 74.4% 83.2% -8.7 p.p. 16.6% 57.6% -40.9 p.p. 70.0% 81.9% -11.9 p.p. Operating Expenses (11.0) (4.8) 130% (3.6) (2.8) 29% (14.6) (7.6) 93% Commercial Expenses (0.5) (0.7) -33% (0.2) (0.2) 4% (0.7) (0.9) -26% Administrative Expenses (6.4) (3.5) 82% (2.9) (2.5) 19% (9.4) (6.0) 56.0% Other Operating Expenses (4.0) (0.5) 652% (0.5) (0.1) 274% (4.5) (0.7) 579% Fair Value of Investment Properties 16.0 10.4 54% - - - 16.0 10.4 54% Operating Income 38.8 36.5 6% (3.0) (1.7) 79% 35.8 34.9 3% Depreciation and Amortization 2.6 0.6 362% (0.1) 0.0-378% 2.5 0.6 310% EBITDA 41.4 37.1 11% (3.1) (1.6) 91% 38.3 35.5 8% Provisions 4.0 2.6 54% - - - 4.0 2.6 54% Other 2.9 - - - - 2.9 - - Fair Value of Investment Properties (16.0) (10.4) 54% - - - (16.0) (10.4) 54% Adjusted EBITDA 32.3 29.3 10% (3.1) (1.6) 90% 29.2 27.7 5.4% Adjusted EBITDA Margin (% Net Revenue) 71.2% 78.8% -7.6 p.p. 59.4% 70.7% -11.3 p.p. Adjusted NOI 42.8 36.2 18.0% Adjusted NOI Margin (% Gross Revenue) 83.0% 86.1% -3.1 p.p. [The remainder of this page was intentionally left blank] 3
Management Comments 1 Strategy JHSF Management is focused on developing and managing real estate assets geared towards business with recurring revenues and on serving high-income individuals or mixed-use projects. 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 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 integrity internal mechanisms and procedures as well as in audit, ombudsman and in the effective application of ethics and conduct codes. AMMENDMENT OF BINDING MEMORANDUM OF UNDERSTAND The Company released to the market in October 19th a material fact informing the conclusion of the acquisition by XP Malls Real Estate Investment Trust of minority stakes in shopping malls controlled by JHSF Malls. The final value of the Transaction was approximately R$ 650,000,000.00 (six hundred and fifty million reais). The Company acquired approximately R$ 110,000,000.00 (one hundred and ten million reais) in shares of XP Malls. Approximately R$ 450 million of the proceeds from the Transaction will be used to reduce the Company's gross indebtedness and the balance of the Transaction value will be selectively used for the expansion of the Gross Leasable Area of shopping centers and for the conclusion of the current phase of Catarina Executive Airport. The conclusion of the Transaction contributes to the improvement of the Company's Capital structure and enhances the quality and liquidity of the assets developed and operated by the Company. About the Transaction: it consists of minority stakes sales in 4 developed projects, including 16.99% of Shopping Cidade Jardim property, 32% of Catarina Fashion Outlet property, 49.0% of the SPE that owns a stake in Shopping Bela Vista, 49.99 % of the SPE that owns a stake in Shopping Ponta Negra, in addition to 30% of the Shops project, in implementation phase. [The remainder of this page was intentionally left blank] 1 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. 4
Our Business Recurring Income We have been developing and managing shopping malls since 1999, and focusing our projects on niches. This business unit comprises: (i) JHSF Malls: a Company s subsidiary which consolidates the operations of shopping malls 2 and mall services 3 ; and (ii) Retail: high-end international brands such as Ralph Lauren, Emilio Pucci, Rene Caovilla e Aquazzura. 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 5,000 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. Hotels and Restaurants Hotel and Restaurant operations under the Fasano brand, includes 6 hotels in operation (São Paulo, Rio de Janeiro, Fazenda Boa Vista, Punta del Este, Angra dos Reis and Belo Horizonte), as well as 20 restaurants in 6 cities (São Paulo, Rio de Janeiro, Brasília, Angra dos Reis, Punta del Este and Belo Horizonte). The potential growth of this division, in short term, will derive from 2 new hotels in Brazil (Salvador and Trancoso), where we will also develop new restaurants activities. 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. Our plans also include the business of real estate recurring income through the development of 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. We are considering expanding the concept of recurring income to part of our existing inventory. Executive Airport Refers to the São Paulo Catarina Executive Airport, under construction. The inauguration of this project is scheduled for 2019. 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] 2 Shopping Cidade Jardim ( SCJ ), Shopping Bela Vista ( SBV ), Shopping Ponta Negra ( SPN ) and Catarina Fashion Outlet ( CFO ). 3 Administration, parking and supply of energy and telecommunications. 5
Company s Operational Environment in 3Q18 FGV IBRE Consumer Confidence Index September/2018 93.0 89.2 88.2 90.8 88.9 88.1 89.5 86.9 In September, the Consumer Confidence Index reached 82.1 points, main due to the electoral political scenario 4. 84.3 82.1 84.2 83.8 82.1 4.4 Monthly Variation of the Flow in Shopping Malls (%) 3.8 3.8 3.9 3.0 1.3 1.5 0.1 1.0-1.4 2.3 In September 2018, the index measuring the number of visits to shopping malls kept the positive trend for the second month in a row and rose 2.3% 5. -2.8-3.3 250.0 200.0 infohb Index (sep/17 - sep/18) 64% 62% 60% At the end of September, the Brazilian Hotel sector registered growth in all operating indicators: Occupancy Rate +9.0%, Average Daily +1.3% and REVPAR +10.4%. 6 150.0 100.0 58% 56% 54% 50.0 52% 50% 0.0 48% Average Daily RevPAR Ocuppancy Rate 4 Source: Sondagem de Expectativas do Consumidor Índice de Confiança do Consumidor September 2018. 5 Source: Ibope Inteligência 6 Source: infohb September 2018. 6
Abrainc fipe Index (ago/17-ago/18) In the Real Estate sector, in August, net sales totaled 7,466 units (-3.0% vs. Aug/17). Cancellations dropped -4.0% and the launches totaled 5,891 units, growth of 20.2%. 7 Net Sales Launches Cancellations Recurring Income In 3Q18, the shopping malls managed by the Company registered 9.2% increase in retailer sales in comparison with 3Q17. Operating indicators also presented a positive performance: SSS +4.2%, SAS +4.2%, SSR +11.0% and SAR +10.7%. Occupancy Cost increased 80 basis points, reaching 94.6%. Hotels and Restaurants In 3Q18 the Hotel division presented an improvement in its Consolidated indicators (Average Daily +7.3%; Occupancy Rate +3.8%; and REVPAR +11.4%), showing a positive trend to the sector. The consolidated operating indicators of the Restaurant division recorded an increase of 5.2% in the average Couvert and 4.0% in the Number of Couverts, when compared to 3Q17. Real Estate Development The Real Estate Development kept its strategy of selling inventories, focusing its commercial efforts on the Fazenda Boa Vista and of Horto Bela Vista projects. The business division also had the launch of Fazenda Boa Vista Sports House. Executive Airport Currently in the pre-operational phase, the construction works of São Paulo Catarina Executive Airport is under construction and will be inaugurated at the end of 1H19. This phase will have 3,000 sq.m. of hangars, 8,500 sq.m. of patios, which began construction in October/18, as well as 2,470 meters of runway that is already under paving. Capital Market Other Information 3Q18 3Q17 Var % Shares Outstanding EOP (million) 526 526 0% Closing Price (R$) 1.13 2.34-52% Market value (R$ million) 595 1,230-52% Average volume (R$ thousand) 1,087 3,252-67% Average number of trades daily 531 1,577-66% 7 Source: ABRAINC/FIPE Indicators August 2018. 7
Management Board of Directors José Auriemo Neto Chairman Luiz Gonzaga de Mello Belluzo Independent Member Osvaldo Roberto Nieto Independent Member Richard Barczinksi Independent Member Ariovaldo dos Santos Independent Member Eduardo Silveira Camara Member Thiago Alonso de Oliveira Member Statutory Management Thiago Alonso de Oliveira Chief Executive Officer, Chief Financial Officer and Investor Relations Officer Wilmar Silva Rodriguez Executive Vice President João Alves Meira Neto Chief Legal Officer Statutory Audit Committee Ademir José Scarpin Sitting Member Osvaldo Roberto Nieto Sitting Member Ariovaldo dos Santos Sitting Member The Financial Reports were analyzed and approved for disclosure by the Board of Directors at the meeting held on November 8 th, 2018, having been previously examined by a meeting of the Statutory Audit Committee on November 8 th, 2018. The comments on the Company s consolidated performance are available on the Company s headquarter and on the investor relations website ri.jhsf.com.br. Audit According 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, up to December 31, 2018, are exclusively related to the auditing process of the Financial Reports. Arbitration The Company is bound to arbitration by the Market Arbitration Chamber, pursuant to the Arbitration Clause in its Bylaws. 8
Comments on the 3Q18 Consolidated Financial Statements Gross and Net Revenue Revenue (R$' million) 3Q18 3Q17 Var % Gross Revenue 150.7 89.6 68.3% Recurring Income 56.8 44.8 26.7% Hotels and Restaurants 46.7 43.9 6.3% RE Development 47.3 0.9 5216.3% Net Revenue 136.2 79.6 71.2% Recurring Income 49.1 39.1 25.5% Hotels and Restaurants 41.6 39.9 4.3% RE Development 45.5 0.5 8976.9% When compared to 3Q17, the Consolidated Gross Revenue grew 68.3% due to the following factors: In Recurring Income 8, the shopping malls had a positive operational performance: SSR (+11.0%) and SAR (+10.7%), with an increase in retailer sales (+9.2%), impacting the variable rent and higher average occupancy rate of the portfolio (+80 basis points), in addition to higher sales in the Retail segment. In Hotel and Restaurant, the positive highlight was the Hotel performance with improvement in all operating indicators (Average Daily +7.3, Occupancy Rate +3.8% and RevPAR +11.4% in comparison with 3Q17). The Restaurant segment registered an increase in the number of Couverts (+4.0%) and also in the average Couvert (+5.2%). In Real Estate Development, the growth in 3Q18 was due to the net sales increase in the Fazenda Boa Vista project. Cost of Goods and Services Sold (COGS) Cost of Goods Sold - COGS (R$' million) 3Q18 3Q17 Var % Consolidated COGS (62.2) (50.2) 23.9% Recurring Income (14.7) (7.1) 108.0% Hotels and Restaurants (34.7) (34.9) -0.6% RE Development (12.8) (8.2) 55.4% Consolidated Cost of Goods Sold (COGS) rose 23.9% when compared to 3Q17. Each business segment presented the variations of the table above as follows: In the Recurring Income an increase of COGS was registered, due to the higher volume of purchase of electricity in order to supply the contracts, as well as a purchase price higher than in 3Q17. In addition, there was a greater sale of merchandise inventory in the Retail segment. In Hotel and Restaurant business, the costs were in line with 3Q17 numbers. In Real Estate Development the cost growth was lower than the revenue increase due to the sales rise in this quarter. 8 The Recurring Income business comprises: (i) JHSF Malls (formerly Shopping Malls and Other Services); and (ii) Retail. 9
Gross Profit Gross Profit (R$' million) 3Q18 3Q17 Var % Consolidated Gross Profit 74.0 29.4 152.0% Margin (% of Net Revenue) 54.3% 36.9% Recurring Income 34.4 32.0 7.2% Margin (% of Net Revenue) 70.0% 81.9% Hotels and Restaurants 7.0 5.0 38.0% Margin (% of Net Revenue) 16.7% 12.6% RE Development 32.7 (7.7) -522.1% Margin (% of Net Revenue) 71.8% -1544.8% Due to the revenues and costs dynamics, the consolidated gross profit had positive variation with a margin increase, mainly as a result of: In Recurring Income, the Shopping Malls gross profit growth (higher rental income and better result of the energy trading company) surpassed the decrease in Retail, resulting in a gross result of 7.2% in comparison with 3Q17. In Hotel and Restaurant the gross result and margin growth improvement were a result of cost program that the Administration have implemented since 2018. In Real Estate Development, the improvement in results was from the higher sale of the Fazenda Boa Vista. Operating Expenses Operating Expenses (R$' million) 3Q18 3Q17 Var % Consolidated Operating Expenses (33.3) (25.7) 29.4% Recurring Income (14.6) (7.6) 92.7% Commercial (0.7) (0.9) -25.7% Administrative (9.4) (6.0) 56.0% Other (4.5) (0.7) 578.8% Hotels and Restaurants (5.6) (4.7) 18.9% Commercial - - - Administrative (4.9) (4.1) 19.8% Other (0.7) (0.6) 12.4% Real Estate Development (5.9) 4.0-247.8% Commercial (4.4) (2.2) 99.4% Administrative (1.4) (2.2) -34.8% Other (0.1) 8.4-100.7% Holding (7.3) (17.5) -58.5% Commercial - - - Administrative (6.7) (5.0) 34.3% Other (0.6) (12.5) -95.3% Operating Expenses rose 29.4% vs. 3Q17, mainly impacted by: In the Recurring Income business, the increase in administrative expenses was due to the 2017 variable remuneration payment (in the previous year it was carried out in 2Q17), reinforcement of Retail and E-commerce structure and marketing expenses of the 10- year commemorations of Shopping Cidade Jardim. The increase in Other Expenses is due to expenses with the online sales platform (Cidade Jardim Online) and with celebrations of the 10 years of Shopping Cidade Jardim. In the Hotel and Restaurant business, the growth of Administrative Expenses refers to the higher labor costs due to layoffs of the dismissal program. In Real Estate Development, the growth in expenses is due to higher sales volume, which impacted on higher commercial expenses, thus offsetting reductions in administrative expenses. In 3Q17 a reversal of provision for doubtful accounts was made, which did not occur again in 3Q18. In Holding, there was a reduction in total expenses, mainly due to the reduction of expenses with third-party services (other expenses). The increase in administrative occurred due to the payment of bonuses (as explained in the Recurring Income), in addition to the implementation of Audit, Internal Controls and Risk Management areas. 10
Investment Properties and Fair Value Appreciation of Investment Properties (R$' million) 3Q18 3Q17 Var % Appreciation of Investment Properties 16.0 10.4 54.3% Fair Value of Investment Properties (R$' million) Sep-18 Sep-17 Var % Fair Value of Investment Properties 2,763.0 2,441.8 13.2% As a result of the subsequent event and the sale of minority stakes in malls, the Management recognized the adjustments to the properties values in 3Q18, as well as the launch of the amounts related to the expansion of CFO III and IV. Adjusted EBITDA and EBITDA Reconciliation The Ebitda adjusted to non-recurring expenses and revenues for the Company s business and its margin have increased as shown below: Adjusted EBITDA (R$' million) 3Q18 3Q17 Var % Adjusted EBITDA 54.9 14.3 282.5% Margin (% of Net Revenue) 40% 18% Recurring Income 29.2 27.7 5.4% Margin (% of Net Revenue) 59% 71% Hotels and Restaurants 3.5 1.3 171.2% Margin (% of Net Revenue) 8% 3% RE Development 26.8 (11.5) -332.9% Margin (% of Net Revenue) 59% -2300% Holding (4.6) (3.1) 48.0% The non-recurring expenses comprises: M&A expenses, stock options program and taxes credit of the Shopping Malls segment. EBITDA and Adjusted EBITDA Reconciliation (R$' million) 3Q18 3Q17 Var % Net Income 118.4 (29.2) -505.5% Income Taxes and Social Contribution (90.3) 7.2-1354.4% Financial Result 28.6 36.0-20.6% Depreciation and Amortization 5.4 3.5 53.2% Fair Value of Investment Properties (16.0) (10.4) 54.3% EBITDA 46.1 7.1 545.5% Non-recurring expenses 8.8 7.2 Adjusted EBITDA 54.9 14.3 282.5% Margin (% of Net Revenue) 40% 18% 22.2 p.p. [The remainder of this page was intentionally left blank] 11
Net Financial Result Consolidated Financial Result (R$' million) 3Q18 3Q17 Var % Consolidated Financial Result (28.6) (36.0) -20.6% The Company s Consolidated Financial Result improved when compared to 3Q17, reflecting the deleveraging process. Income Taxes and Net Income Deferred income tax generated a credit in the income due to reversal of deferred tax provision on the fair value of the properties for investments. Income Taxes, Social Contribution and Net Income (R$' million) 3Q18 3Q17 Var % Income Before Taxes and Social Contribution 28.1 (22.0) 227.9% Income Taxes and Social Contribution 90.3 (7.2) -1354.4% Net Income 118.4 (29.2) 505.5% 3Q18 Net Income improved when compared to 3Q17. [The remainder of this page was intentionally left blank] 12
Consolidated Cash and Cash Equivalents and Debt Cash and Equivalents and Indebtedness (R$' million) Sep-18 Sep-17 Var. R$ million Var. % Gross Debt (1,432.7) (1,316.1) (116.6) 9% Cash, Equivalents and Interest earnings bank deposits 29.0 48.0 (19.0) -40% Accounts receivable ("on balance") 247.7 307.6 (59.9) -19% Net Debt (1,156.0) (960.5) (195.5) 20% Average Total Debt Maturity (in years) 4.6 3.9 0.7 17% Average Total Debt Maturity (%) 9.5% 11.6% -2.1 p.p. -18% Consolidated Debt: The Company s debt has a long-term profile, with 80% to mature over 12 months period (duration of 4.6 years). We closed 3Q18 with an average nominal cost of debt of 9.5% (11.6% in September 2017). It is worth noting the increase in the medium term debt maturity, which was 4.6 years (3.9 in 3Q17), positively impacted by the Company s indebtedness renegotiation at the end of 2017, which extended the grace period. Moreover, Last October the Company concluded the sale of five minority stakes in shopping malls. The transaction was around R$ 650 million, of which R$ 450 million will be used to debt payment. Consolidated Debt Indices (September 2018) Consolidated Debt Profile (Managerial allocation) TJLP 7% IPCA 6% UMBNDES 3% Airport 10% H&R 9% CDI 83% RE Development 37% Recurring Income 44% Consolidated Gross Debt Amortization Schedule ¹ (R$ million) 211 244 213 180 172 170 166 94 11 11 3 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 ¹ Duration of 4.6 years. [The remainder of this page was intentionally left blank] 13
Cash, Equivalents and Securities: The Management decided to use exceeding cash values to reduce the Company s debt. Consolidated Accounts Receivable Indices (base September 2018) CDI Prefixed 1% 10% INCC 6% TR 11% IPCA 8% IGP-M 64% Receivables from Real Estate Development generated nearly R$1.9 million in income during 3Q18. The Company uses the portfolio of real estate receivables performed as collateral for certain contracted financing lines, essentially those managed by the Real estate units. [The remainder of this page was intentionally left blank] 14
Shopping Ponta Negra RECURRING INCOME 15
SHOPPING MALLS: OPERATING INDICATORS Portfolio Location Opening % JHSF before XP % JHSF after XP Total GLA (sq.m) JHSF GLA (sq.m) JHSF GLA (sq.m.) after XP Shopping Cidade Jardim São Paulo - SP May-08 67.0% 50.01% 37,575 25,175 18,791 Shopping Bela Vista Salvador - BA Jul-12 51.0% 26.01% 51,070 26,046 13,283 Shopping Ponta Negra Manaus - AM Aug-13 80.0% 40.01% 35,214 28,171 14,089 Catarina Fashion Outlet São Roque -SP Oct-14 100.0% 68.00% 29,530 29,530 20,080 Operating Highlights ¹ 3Q18 Total GLA (sq.m) 153,389 JHSF GLA (sq.m) 108,922 Total Malls 4 Sales (R$' million) 519 Same Store Sales (SSS) % 4.2% Same Area Sales (SAS) % 4.2% Same Store Rent (SSR) % 11.0% Same Area Rent (SAR) % 10.7% Occupancy Cost (%) 10.2% Leased Area (%) 94.6% RELEASE Cidade Jardim Online (www.cidadejardim.com.br) Integration with retailers inventory Consecrated brands: Aquazzura, Emilio Pucci, Giorgio Armani, Omega, René Caovilla, Alexandre de Paris, Trousseau, Cruise, Baletto, Silvia Furmanovich, among others. Addition of new brands on a weekly basis Guarantee of exchange of products in the physical store of Shopping Cidade Jardim 16
RETAILER SALES Growth of 9.2% in the consolidated, highlighting the performance of Shopping Ponta Negra and Shopping Cidade Jardim. (R$' million) 475 519 3Q17 3Q18 OCCUPANCY COST Consolidated occupancy rate reached 10.2%, 0.4 p.p higher than in 3Q17. 10.2% 9.8% 3Q17 3Q18 OCCUPANCY RATE Consolidated occupancy rate reached 94.6%, an improvement of 0.8 p.p vs. 3Q17. 93.8% 94.6% 3Q17 3Q18 17
SSS, SAS, SSR e SAR All sales and rent operational indicators had a positive performance in comparison with 3Q17. It is important mentioning that JHSF constantly takes actions make its shopping malls more attractive to retailers and to the public, with improvements in the mix of stores and seasonal events. SSS SAS SSR SAR 7.0% 7.4% 11.0% 10.7% 4.2% 4.2% 2.3% 2.7% 3Q17 3Q18 3Q17 3Q18 FLOW OF PEOPLE Consolidated flow of people grew 7.6% during 3Q18. 18
Fasano Angra dos Reis Hotel HOTELS AND RESTAURANTS 19
FASANO 9 HOTELS In the Hotel division, the Consolidated indicators presented an improvement in comparison between 3Q18 and 3Q17 (Average Daily +7.3%; Occupancy Rate +3.8%; and REVPAR +11.4%), showing a positive trend to the sector. Average Daily (R$) Occupancy Rate (%) REVPAR (R$) 1,679 1,802 53.5% 55.5% 1,001 898 3Q17 3Q18 3Q17 3Q18 3Q17 3Q18 Last October the Hotel Fasano in Belo Horizonte was inaugurated, Hotel Fasano in Salvador will be inaugurated by the end of this year and Trancoso will be inaugurated in 2019. The aforementioned operations already generate pre-operational fees and will not demand CAPEX from the Company, since it will only be the operator of the respective assets. Fasano Hotels Portfolio (Next Openings) Location Total Rooms Opening Hotel Fasano Salvador Salvador - BA 70 4Q18 Hotel Fasano Trancoso Trancoso - BA 40 2Q19 RESTAURANTS The number of couverts increased +4.0% in comparison with 3Q17 and the couvert increased +5.2% also in comparison with 3Q17. Number of Couverts Average Couvert (R$) 162,196 168,644 193 203 3Q17 3Q18 3Q17 3Q18 The table below illustrate the gross revenues from all Hotels and Restaurants, which increased 10.1% quarter over quarter. Gross Revenues - Total 3Q18 3Q17 Var % Hotels 18,234 16,373 11.4% Restaurants 34,247 31,305 9.4% TOTAL 52,482 47,679 10.1% 9 JHSF owns 65% of HMI, the holding company controlling Fasano s operations. 20
Fazenda Boa Vista Porto Feliz REAL ESTATE DEVELOPMENT AND AIRPORT 21
REAL ESTATE DEVELOPMENT In 3Q18, contracted sales of the Real Estate Development were positively impacted by the sales performance of Fazenda Boa Vista. Contracted Sales (in R$ million) 3Q18 3Q17 Var % Fazenda Boa Vista 50.1 (4.4) - Horto Bela Vista 2.4 2.5-3% Outros - 1.8 - Total 52.6 (0.1) - Note: net of cancellation In 3Q18, cancellations of R$3.2 million were registered, impacting the revenue and the results of this division. The table below shows the breakdown of Real Estate Development s Gross Revenue: Gross Revenue (R$' million) 3Q18 3Q17 Var % Fazenda Boa Vista 43.6 (4.1) -1155% Horto Bela Vista 2.6 2.5 3% Other 1.1 2.5-55% Gross Revenue 47.3 0.8 5478% Taxes on Revenue (1.8) (0.3) 432% Net Revenue 45.5 0.5 8977% RECENT PROJECTS Fazenda Boa Vista Sports Houses: Location: Lake Area 30 units for sale: house + land 13 units of 576.79 sq.m. and 17 units of 532.79 sq.m. Sale value: approximately R$5 million Sport Complex: o o Practice of triathlon Cycling and running circuits will total 3.4 km o. 22
AIRPORT Currently in the pre-operational phase, the construction works of São Paulo Catarina Executive Airport is under construction and will be inaugurated at the end of 1H19. This phase will have 3,000 sq.m. of hangars, 8,500 sq.m. of patios, which began construction in October/18, as well as 2,470 meters of runway that is already under paving. São Paulo Catarina Executive Airport - September/2018 Work phase: Earth-moving completed and beginning of construction and building edification. [The remainder of this page was intentionally left blank] 23
ANNEX 24
Consolidated Income Statements - Managerial 10 [thousand BRL] 3Q18 3Q17 Δ % Gross Revenue 150,745 89,571 68% Recurring Income 56,791 44,809 27% Hotels & Restaurants 46,650 43,872 6% Real Estate Development 47,303 890 5216% Taxes on Revenue (14,552) (10,012) 45% Net Revenue 136,193 79,558 71% Recurring Income 49,099 39,135 25% Hotels & Restaurants 41,637 39,922 4% Real Estate Development 45,457 501 8977% Cost of Goods Sold (62,218) (50,206) 24% Gross Profit 73,975 29,352 152% % over Revenues 54% 37% 17 p.p. Commercial Expenses (5,058) (3,083) 64% General and Administrative Expenses (22,384) (17,267) 30% Other Operating Expenses (5,843) (5,376) 9% Fair Value of Investment Properties 16,049 10,402 54% Income before Financial Result and Taxes 56,739 14,029 304% % over Revenues 42% 18% 24 p.p. Financial Result (28,607) (36,029) -21% Financial Revenues 15,927 (1,421) -1221% Financial Expenses (44,533) (34,608) 29% Income before Taxes and Social Contribution 28,132 (22,000) -228% % over Revenues 21% -28% 48 p.p. Income Taxes and Social Contribution 90,300 (7,197) -1355% Net Income 118,432 (29,197) -506% % over Revenues 87% -37% 124 p.p. 10 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. 25
Consolidated Balance Sheet BRL thousand September/2018 December/2017 Assets 4,665,492 4,484,415 Current 330,676 321,996 Cash and equivalents 5,836 9,126 Interest earnings bank deposits 23,153 23,786 Accounts receivable 125,608 122,111 Properties held for sale 113,593 110,214 Other current assets 28,495 23,165 Recoverable taxes and contributions 28,340 29,149 Expenses to appropiate 5,651 4,445 Non-Current 4,334,816 4,144,185 Accounts receivable 122,073 103,119 Taxes and deffered contributions 705 433 Properties held for sale 497,394 501,104 Other non-current assets 21,386 25,720 Credit with related parties 143,241 96,550 Investments 884 3,536 Fixed assets 689,338 640,592 Investment property 2,762,969 2,676,788 Intangible 96,826 96,343 Liabilities 2,417,823 2,318,401 Current 434,094 351,934 Suppliers 49,011 42,867 Loans, financing and debentures 187,207 131,349 Social, labor and tax obligations 45,125 32,820 Deferred income and social contributions taxes 9,975 11,784 Other obligations 14,175 14,268 Advances from clients / Right of Use 113,772 104,017 Dividends to be paid 14,829 14,829 Non-Current 1,983,728 1,966,467 Loans, financing and debentures 1,245,487 1,206,968 Social, labor and tax obligations 12,548 11,675 Taxes and deffered contributions 423,754 501,641 Other obligations 123,429 123,023 Other debts 3,293 433 Debt with related parties 86,729 55,113 Provisions 19,901 21,504 Advances from clients / Right of Use 30,360 7,883 38,227 38,227 Shareholder's Equity 2,247,669 2,147,600 Capital stock 916,463 915,254 Options granted recognized 33,251 32,074 Reserve earnings 1,286,135 1,188,255 Loss for the Period 0 0 Treasury stock (414) (414) Adjustment at fair value of securities available for sale (13,923) (13,867) Minority interest 26,157 26,298 Total Liabilities and Shareholder's Equity 4,665,492 4,484,415 26
Consolidated Cash Flow [BRL thousand] 09-2018 09-2017 Restated Earnings Before Income Taxes (EBIT) 40,868 588 Expenses (revenues) not affecting cash flow 60,072 27,278 Variation in current and non-current assets and liabilities (4,453) (20,218) Cash Flow from Operating Activities 96,487 7,648 Income and social contribution taxes paid (88,341) (103,486) Net operating cash flow 8,146 (95,838) Cash Flow from Investing Activities (82,322) 243,364 Cash Flow from Financing Activities 70,886 (203,038) Cash Flow generated (used) in the period (3,290) (55,512) 27
Glossary 28
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): 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. 29