Annual Report • Aug 29, 2014
Annual Report
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1 st Half of 2014
1
| GOVERNING AND MANAGING BODIES | 5 |
|---|---|
| KEY FIGURES | 7 |
| HIGHLIGHTS OF THE FIRST HALF | 10 |
| AWARDS AND RECOGNITION | 11 |
| PART I – INTERIM MANAGEMENT REPORT 1. STRATEGIC LINES 2. BUSINESS 2.1. Economic and regulatory environment 2.2. Mail 2.3. Express & Parcels 2.4. Financial Services 3. ECONOMIC AND FINANCIAL REVIEW AND CTT SHARE PERFORMANCE 4. COMMITMENT TO SOCIAL ISSUES 4.1. Human resources 4.2. Quality of service 4.3. Innovation and development 4.4. Sustainability 4.5. Corporate governance 5. MAIN RISKS 5.1. Risks faced by CTT 5.2. Risk management and internal control system 6. SUBSEQUENT EVENTS AND OUTLOOK |
12 12 15 15 19 27 29 33 44 44 46 48 49 51 56 56 56 58 |
| 7. DECLARATION OF CONFORMITY PART II – FINANCIAL STATEMENTS Interim condensed consolidated accounts |
60 61 61 |
| PART III – OTHER CORPORATE GOVERNANCE DOCUMENTS | 103 |
| PART IV – AUDIT REPORT | 109 |
| CONTACTS | 111 |
| Chairman: Vice-Chairman: |
Júlio de Lemos de Castro Caldas Francisco Maria de Moraes Sarmento Ramalho |
|---|---|
| Board of Directors | |
| Chairman: | Francisco José Queiroz de Barros de Lacerda (CEO) |
| Vice-Chairmen: | António Sarmento Gomes Mota (Chairman of the Audit Committee) Manuel Cabral de Abreu Castelo-Branco (Executive) |
| Members: | André Manuel Pereira Gorjão de Andrade Costa (Executive & CFO) Dionízia Maria Ribeiro Farinha Ferreira (Executive) Ana Maria de Carvalho Jordão Ribeiro Monteiro de Macedo (Executive) António Manuel de Carvalho Ferreira Vitorino Diogo José Paredes Leite de Campos (Member of the Audit Committee) Rui Miguel de Oliveira Horta e Costa 1 Nuno de Carvalho Fernandes Thomaz Parpública – Participações Públicas SGPS SA (Member of the Audit Committee) |
| Statutory Auditor: | KPMG & Associados, SROC, S.A., represented by Maria Cristina Santos |
|---|---|
| Ferreira | |
| Alternate Statutory | |
| Auditor: | Vítor Manuel da Cunha Ribeirinho |
| Chairman: | João Luís Ramalho de Carvalho Talone |
|---|---|
| Members: | José Gonçalo Ferreira Maury |
| Rui Manuel Meireles dos Anjos Alpalhão |
1 Co-opted by deliberation of the Board of Directors held on 29 July 2014 to replace José Alfredo de Almeida Honório, who resigned from the position of Non-Executive Director on 14 July 2014.
| € thousands or %, unless otherwise indicated | 1H14 | 1H13 (1) | r% |
|---|---|---|---|
| Revenues (2) | 353,503 | 350,617 | 0.8 |
| Operating costs excluding impairments, provisions, | |||
| depreciation and non-recurring costs | 287,250 | 290,442 | -1.1 |
| Recurring EBITDA (3) | 66,254 | 60,175 | 10.1 |
| Recurring EBIT (3) | 55,361 | 45,658 | 21.3 |
| Earnings before financial income and taxes | 54,936 | 47,541 | 15.6 |
| EBT | 51,768 | 46,223 | 12.0 |
| Net profit for the period | 36,038 | 31,818 | 13.3 |
| Net profit attributable to equity holders of parent company | 36,063 | 31,643 | 14.0 |
| Earnings per share of parent company (Euros) (4) | 0.24 | 0.21 | 14.0 |
| EBITDA margin | 18.7% | 17.2% | 1.5 p.p. |
| EBIT margin | 15.7% | 13.0% | 2.7 p.p. |
| Net margin | 10.2% | 9.0% | 1.2 p.p. |
| Return on Equity (ROE) | 13.7% | 12.0% | 1.7 p.p. |
| Return on Invested Capital (ROIC) | 9.2% | 8.5% | 0.7 p.p. |
| Return on Capital Employed (ROCE) | 9.5% | 8.1% | 1.4 p.p. |
| Capex | 2,742 | 4,288 | -36.0 |
| Operating free cash flow (5) | 65,861 | 29,186 | 125.7 |
| 30.06.2014 | 31.12.2013 | r% | |
| Assets | 1,274,536 | 1,100,134 | 15.9 |
| Liabilities | 1,024,601 | 824,200 | 24.3 |
| Equity | 249,935 | 275,934 | -9.4 |
| Share capital | 75,000 | 75,000 | - |
| Number of shares | 150,000,000 | 150,000,000 | - |
| Number of shares | 150,000,000 | 150,000,000 | - |
|---|---|---|---|
| Current ratio | 129.0% | 144.7% | -15.7 p.p. |
| Equity to Liability ratio | 24.4% | 33.5% | -9.1 p.p. |
| Adjusted Equity to Liability ratio (6) | 42.3% | 53.5% | -11.2 p.p. |
| Net debt (7) | -27,003 | -19,930 | 35.5 |
| Net debt / EBITDA (8) | -0.4 x | -0.2 x | -0.2 x |
| Tangible fixed asset coverage | 246.3% | 247.1% | -0.8 p.p. |
(1) Includes the subsidiary EAD; the 51% stake that CTT held in its capital was divested in the first semester of 2014.
(2) Revenues excluding non-recurring items.
(3) Before non-recurring revenues and costs.
(4) U p t o 3 0 October 2013, CTT's share capital was €87,325,000 composed of 17,500,000 shares with nominal value of €4.99. A General Meeting of CTT was held on this date during which an alteration in its share capital was deliberated, which was reduced t o €75,000,000 represented b y 150,000,000 shares with nominal value of €0.50. Considering the number of shares at 30.06.2013 the earnings / share stood at €1.81.
(5) Cash flow from operating activities not including the change in net Financial Services payables.
(6) Equity / (Total liabilities - Financial Services payables).
(7) Net debt includes liabilities related to healthcare, as a net value.
(8) If negative, this means a positive cash position.
| 1H14 | 1H13 | r% | |
|---|---|---|---|
| Addressed mail volume (million items) | 431.2 | 463.6 | -7.0 |
| Transactional mail | 369.2 | 391.6 | -5.7 |
| Editorial mail | 23.7 | 24.5 | -3.5 |
| Advertising mail | 38.3 | 47.5 | -19.5 |
| Unaddressed mail volume (million items) | 251.1 | 241.1 | 4.1 |
| Express & Parcels | |||
| Portugal (million items) | 6.7 | 5.7 | 17.6 |
| Spain (million items) | 6.5 | 6.2 | 5.4 |
| Financial Services | |||
| Payments (number of transactions; millions) | 33.0 | 35.8 | -7.6 |
| Savings and insurance (amounts placed; € millions) | 2,916.4 | 1,314.5 | 121.9 |
| Staff | |||
| Employees (FTE) (a) | 12,380 | 12,896 | -4.0 |
| Retail, Transport and Delivery Network | |||
| Post offices (b) | 624 | 625 | -0.2 |
| Postal agencies | 1,719 | 1,893 | -9.2 |
| PayShop agents | 3,878 | 3,915 | -0.9 |
| Postal delivery offices | 273 | 310 | -11.9 |
| Postal delivery routes | 4,687 | 4,808 | -2.5 |
| Fleet (number of vehicles) (c) | 3,436 | 3,453 | -0.5 |
(a) FTE = Full Time Equivalent.
(b) Includes mobile post offices (5 in 1H14 and 6 in 1H13), external postal counters (12 in 1H14 and 1 3 in 1H13) and partnership branches (5 in 1H14 and 1H13).
(c) Operational fleet.
| 1H14 | 1H13 | r% | |
|---|---|---|---|
| Customers | |||
| Customer satisfaction (%) (a) | 85.6 | - | - |
| Total number of operating units certified (ISO standard and retail and delivery networks certification) |
1,097 | 1,179 | -7.0 |
| Retail and delivery networks certification (% coverage) (b) | 99.7 | 96.9 | 2.8 p.p. |
| Overall Quality of Service Index (points) | 243.8 | 230.0 | 13.8 |
| Staff | |||
| Number of accidents (c) | 452 | 450 | 0.4 |
| Training (hours) (c) | 150,793 | 105,753 | 42.6 |
| Women in senior management positions (%) (c) | 43.3 | 43.8 | -0.5 p.p. |
| Community/Environment | |||
| Value chain - contracts with environmental criteria (%) (c) | 99 | 98 | 1 p.p. |
| Total CO2 emissions, scope 1 and 2 (kton.) (d) | 9.4 | 9.6 | -1.9 |
| Energy consumption (TJ) (d) | 161.7 | 165.6 | -2.4 |
| Weight of Eco product range in Direct Mail line (%) | 25.7 | 26.1 | -0.4 p.p. |
| Investment in the community (€ thousand) | 343 | 378 | -9.3 |
(a) Change of series - new methodology.
(b) Within the retail network 602 postal outlets were considered in the certification process, which excludes external postal counters, mobile post offices and partnership branches.
(c) Indicators relative to CTT (CTT SA and subsidiary companies).
(d) Indicators relative to CTT SA and CTT Expresso.
Signing of a Protocol with EDP, aimed at the joint exploration of business opportunities, including the contracting of EDP Commercial services in CTT's post offices.
Updating of the prices of the letters and the parcels within the universal postal service, following the decision of ICP-ANACOM not to oppose the pricing proposal submitted by CTT on 17 February 2014. Second phase of the updating of special prices applicable to bulk mail senders.
In the first half of 2014, CTT received the following distinctions / recognitions:
The accelerated technological development which has characterised the last decades, namely the growing use of the internet as a tool for the most diverse activities fostered by the evolution in communications, primarily mobile with the advent of smartphones, is the driving engine of all trends which affect the economy and particularly the sectors where CTT operates. Under these circumstances, the strong growth of e-commerce, which has propelled the growth of the Express & Parcels business, the inexorable tendency of electronic substitution of physical mail and the deepening of the process of full liberalisation of the postal service market constitute the three main trends of structural nature which are observed across all of Europe and constrain the strategies of postal operators. In recent years, the world's financial system has undergone a varied combination of changes and adaptations due to the financial crisis (subprime crisis) which occurred between 2007 and 2009, with banks suffering an erosion of confidence and credibility which characterised this sector.
Simultaneously with these structural trends, the recessive economic environment experienced in Portugal has worsened and exacerbated the rate of evolution of mail volumes and depressed the main markets of CTT, i.e., postal services (mail and parcels) and financial services, the latter primarily in the area of payments and transfers. However, the recovery of the country's level of economic activity, which has been observed for some quarters now, appears to be having positive impacts on various CTT businesses, reversing or mitigating the above-mentioned trends.
The privatisation of CTT, accomplished at the end of 2013 through an IPO, substantially changed the composition of the shareholder nature, with all the consequences derived thereof. Capital market requirements, in terms of rigour, transparency and performance of the company will intensify, with a view to the sustained creation of value for its shareholders, the achievement of further efficiency gains, stronger growth and financial profitability above the sector's average, which will also contribute, via higher market efficiency, to the transfer of value to consumers. With its varied shareholder structure based on national and above all international institutional investors, CTT has an additional challenge of communication with the market.
It is recognised that CTT possesses distinctive assets and competences derived from its history and unique position in the postal and financial services market and which strategically enhance its competitive advantages and distinguishing characteristics:
A strong brand / reputation in Portugal, highly trusted by the population;
Capacity of continuous management of operational efficiency;
The strategy that was defined and communicated at the time of the privatisation and the strong interest of investors in CTT have created additional responsibility, hence it is fundamental that the company continues totally focused and dedicated to delivering the results implicit in these expectations. Based on the main objectives of achieving sustainable growth and improving the profitability of each of its business units by leveraging the company's competitive advantages, CTT has defined the following strategic lines of action:
Maintenance of the clear market share leadership in Portugal and improvement of the EBITDA margins of the Mail business unit imply action at the following levels:
Based on the objective of benefiting from the growing presence of e-commerce in the Portuguese and Spanish markets and being one of the reference operators on the Iberian Peninsula, CTT has the following main lines of strategic action for its Parcels & Express business:
Transform the B2B offer to B2B + B2C, boosting the opportunity of growth of e-commerce. Develop a clear and common offer for the Iberian market, with a differentiated offer for the various segments;
The following three axes of strategic actions are planned for the Financial Services business unit, which should constitute one of the main sources of growth of CTT, leveraging its principal competences areas, i.e. trusted brand, vast Retail Network with national coverage and over 50 years of experience in the sale of financial products:
Based on this strategic formulation, and incorporating the objectives and lines of action of the different business units (Mail, Express & Parcels and Financial Services), the Transformation Programme, commenced in January 2013, will be continued and deepened in 2014 and beyond. For this purpose, CTT created a PMO unit (Project Management Office) to manage and supervise the various initiatives and their degree of accomplishment. The Transformation Programme is not a oneoff initiative, but rather, a continuous reality of transformation and adaptation of CTT to the challenges of the present and future. Over the next few years, new initiatives will be considered, developed and implemented under the programme to support the strategy described above, enabling management and resources focus in its pursuit.
The real growth of world GDP should reach around 3.6% in 2014 and increase gradually in the following years, according to the latest IMF forecasts. The disclosed data point to a slowdown of the growth of the advanced economies in the first quarter of the year, partly related to temporary factors such as the extremely low temperatures recorded in North America. The emerging markets showed a decline of growth due to weak internal demand, the reversal of the capital inflows into these economies and the lower margin of manoeuvre for new internal policies favourable to growth. The financial markets in the emerging economies stabilised but in many of these countries, the financial conditions became more restrictive since mid-2013, burdening economic activity still throughout 2014.
World trade has lost some of its dynamism since the end of 2013 as a result of strategies to ensure external balance of payments by various countries, in particular the USA, and is estimated to grow by 4.3% in 2014. As it is expected that the demand for imports by the main trading partners of the euro area will be lower than demand from the rest of the world, it is probable that external demand in the euro area will be somewhat weaker than the one worldwide.
During the first quarter of 2014, GDP in the euro area grew by 0.2% (0.9% year-on-year), recording its fourth consecutive quarterly increase. According to flash estimates published by Eurostat, the euro area GDP remained stable in the second quarter of 2014, increasing 0.7% compared with the same quarter of the previous year.
Inflation in the euro area measured by the harmonised indices of consumer prices (HICP) stood at 0.8% in June 2014. The current low inflation rate reflects a stagnation of prices of energy, food and non-energy industrial products, as well as a moderate increase in the prices of services. The supply surplus still existing in the euro area, which was the result of measures aimed at reducing internal demand and the high unemployment in various countries, does not place any pressure on prices, and for now enables expansionary measures without any fear of their inflationary effect.
Employment in the euro area stabilised in the second semester of 2013 and is forecast to record a modest increase in 2014. The unemployment rate fell in the last months, reaching 11.5% in June, the lowest value since September 2012. Labour productivity is projected to improve, reflecting the expected increase of the real growth of GDP and expected late response of job creation to the positive evolution of activity.
The economic activity in Portugal, in continuous decline since 2010, began a turnaround from the second quarter of 2013. This recovery has been driven by a significant growth of exports since 2012. The acceleration of domestic demand, in line with the increased confidence of the economic agents, contributed to the consolidation of GDP growth in the last quarter of 2013. However, the first quarter of 2014 was marked by a reduction of the level of economic activity, above all reflecting a less favourable evolution of exports, combined with a significant decrease of activity in the construction sector and some exceptional factors in the energy sector. According to data disclosed by Statistics Portugal (INE) in June, the GDP fell by 0.6% in the first quarter of 2014 compared to the previous quarter, while it grew 1.3% on a year-on-year basis.
Domestic demand showed a stronger positive contribution, moving from 0.5 p.p. growth in the fourth quarter of 2013 to 2.8 p.p. growth in the first quarter of 2014, mostly due to investment growth. Private consumption also contributed positively to this evolution, shifting from growth of 0.6% in the fourth quarter of 2013 to 1.5% year-on-year growth, particularly as a result of positive evolution of the automobile purchases component. The recovery of private consumption took place in a context of increased consumer confidence throughout 2013, reaching levels above the average of the last decade by early 2014.
According to the flash estimate published by INE, the GDP increased 0.6% in the second quarter of 2014 compared to the previous quarter and 0.8% on a year-on-year basis. The domestic demand had a less of a positive contribution to the year-on-year GDP growth, mainly due to the evolution of investment. On another hand, net external demand had less of a negative impact due to the reduction of imports of goods and services, even though the exports decelerated as well.
After the deflationary pressures in 2013, forecasts point to a relative stabilisation of inflation in 2014. In June, the HICP registered a year-on-year decline of -0.2%, reflecting a slight decrease of the deflation in the price of goods and a deceleration of the price of services. The average annual growth rate reached zero in June. At the same time, employment recorded year-on-year growth of 2.0% in the second quarter of 2014. The unemployment rate declined for a fifth consecutive quarter, to 13.9% in the second quarter of 2014 (compared to 16.4% in the second quarter of 2013).
The continuation of the good performance of exports, associated with the moderate growth of imports, enables a positive outlook for the funding capacity of the Portuguese economy in 2014, maintaining a profile of surplus financial resources as occurred in 2013, when the domestic funding capacity stood at 2.0% of GDP.
The approval of the Third Postal Directive (Directive 2008/6/EC) of the European Parliament and Council, of 20 February 2008, established the final schedule for the total liberalisation of the postal market, safeguarding a common universal postal service level for all users of the Member States of
the European Union (EU), and defined the common principles for the regulation of postal services in a free market environment.
In terms of the funding of the universal postal service, and since the provision of postal services reserved to a single provider as a means of funding has been abolished to enable market liberalisation, the new legal framework establishes a series of mechanisms that Member States can adopt to safeguard and fund the universal service. The new Directive also contains guidelines on how to calculate the net cost of the universal service. The provision of the universal service tends to operate at a loss in the EU, with the different countries having implemented measures to mitigate this cost without requiring direct compensation. The regulators, aware of the challenges faced by the postal sector and primarily the universal postal service provider, have permitted the diversification of activities and a more efficient allocation and use of the resources, always safeguarding the obligations stipulated in the European directive.
The Postal Law (Law number 17/2012, of 26 April, as amended by Decree-Law number 160/2013, of 19 November) was approved in 2012, transposing to the Portuguese legal system Directive 2008/6/EC of the European Parliament and Council, of 20 February 2008. The postal market in Portugal was fully opened to competition, eliminating some of the areas under the universal service which were reserved to CTT. However, for reasons of public order and security or general public interest, some activities and services may remain reserved up to 2020: i) placement of letter boxes on public routes; ii) the issue and sale of postal stamps with the mention of Portugal; and iii) the registered mail service used in legal or administrative proceedings.
The universal postal service includes the following services, of national and international scope:
In terms of funding of the universal service obligations, the providers are entitled to compensation of the net cost of the universal service when it constitutes an unfair financial burden, which should be carried out through a compensation fund supported by the postal service providers, the operation of which has yet to be defined. On 18 February 2014, the regulatory entity (ICP-ANACOM) issued its final decision on the methodology for the calculation of the net cost of the universal service provided by CTT as the sole provider of the universal service, as well as the concept of unfair financial burden for effects of compensation of the net cost of the universal postal service, including the underlying terms for its calculation.
Regarding the State contribution to the compensation fund for the financing of the universal service, Law 16/2014 of 4 April was published (amending Postal Law 17/2012, of 26 April), which specifies that contributions to the aforesaid fund should come from postal service providers which offer
services that, from the point of view of the user, are considered services exchangeable with those covered by the universal service.
The postal service provision framework establishes a system of licenses and permits, where the services covered by the scope of the universal service are subject to an individual license system and all other services, which include services for courier / express mail and the sending of addressed advertising, are subject to a general authorisation system.
On matters of access to postal networks and elements of the postal infrastructure, universal service operators are obliged to assure access to their networks through agreement to be concluded with the providers requesting such, with the regulatory entity being attributed various duties of intervention in this regard, namely if the parties are unable to reach an agreement.
As the concessionaire company of the universal postal service, CTT remains the universal service provider until 2020, with the Government having revised the basis of the concession pursuant to the system established in the Postal Law, through the publication of Decree-Law 160/2013, of 19 November. Under the latter, and in order to reflect these legislative modifications, an amendment to the concession contract was concluded on 31 December 2013.
According to the provisions in the Bases of the Concession of the Universal Postal Service and respective Concession Contract, at the end of January 2014, CTT sent ICP-ANACOM a proposal of indicators to be considered in the definition of the objectives of i) density with regard to postal establishments and other points of access to the postal network allocated to the concession; and ii) minimum service offers and respective quantification. This proposal was revised on 29 May and its probable decision submitted for public consultation on 26 June, in which ICP-ANACOM considers that the new proposal on the network density submitted by CTT generally responds to the issues raised by the regulator, where the regulator merely defined a few additional objectives and indicators, aimed at strengthening the guarantees for the existence of availability and accessibility of the universal service provision.
Pursuant to the new legal framework, the quality of service parameters and performance objectives associated to the provision of the universal service and the criteria to which price formulation should obey are now established by the regulatory entity. Until the establishment of these criteria, the quality and price arrangements concluded between CTT and the regulatory entity (ANACOM) on 10 July 2008, enforced during the three-year period of 2008-2010 will remain in force transitionally with respect to the universal service provision, being renewed for successive periods of one year, unless a notice of termination is given by either party.
The special prices of the postal services comprising the universal service offer applicable to bulk mail senders (as recently drawn up by article 4 of Decree-Law number 160/2013, of 19 November) were updated on 1 January, following a proposal communicated to the Regulator on 13 December 2013, with the second phase of the updating of this price list having taken place on 7 April, at the same time as with the price update for all other services of the universal postal offer. On this date, the remaining mail and parcel prices comprising the universal service were updated, and on 1 June the update of the prices of the editorial mail / newspapers, periodic and non-periodic publications took place, following decisions taken by ICP-ANACOM not to oppose the price proposals submitted by CTT on 17 February and 15 April, respectively.
In terms of the quality of the universal postal service, whose quantification of objectives and minimum quality of service levels are presented in the Quality of Service chapter, the arrangement in force for the year of 2014 maintains the high quality standards required for postal services in Portugal, which CTT has continuously surpassed.
The revenues1 of the Mail business unit reached 268.1 million Euros (73.2% of the consolidated total2 ) in the first semester of 2014, corresponding to a reduction of 1.9% relative to the same period of 2013. This decrease was effectively 1.2%, when adjusted for like-for-like comparison purposes, deducting 2 million Euros of revenues coming from the company EAD in 2013, a company which in 2014 is no longer being consolidated as a consequence of CTT's sale of the stake in its equity.
This business unit includes the postal services and business solutions provided by CTT SA (parent company), PostContacto, CTT Gest and Mailtec. CTT reached an agreement for the sale of EAD in the first half, company which was also included in this business unit. EAD specialised in archive and mailmanager solutions. Since this is not a core activity for the development of the mail business and as there is some internal know-how on this matter, the sale enabled better resource allocation to value generating activities.
Throughout the first six months of 2014, and while still in a context of some pressure from the point of view of cost control and optimisation of business processes by most of CTT's customers an improvement in the Mail business was registered, particularly in the second quarter. Although there has not yet been a recovery in advertising mail, in transactional mail the reduction of volumes (-5.7%) was in line with expectations and was mitigated by the effect of the aforesaid price updates which took place in January and April.
1Includes internal services rendered and intra-group transactions which are eliminated for the purposes of consolidation.
2Excluding revenues relative to the CTT Central Structure and intra-group eliminations amounting to -€12.7m in the first semester of 2014.
The decline of addressed mail volumes (including transactional and advertising mail) in the second quarter of 2014 year-on-year (-3.9%) was significantly less pronounced than in the first quarter of the year (-9.7%), which led to a variation of only -7.0% in total for the first semester.
The decline of transactional mail volumes shifted from -9.8% at the end of the first quarter to only -0.9% in the second quarter and ended the semester at -5.7%, thus confirming the impact of one-off factors which can affect a quarterly comparison. During a semester, the impact of factors such as the response of the business sector to price increases (including pre-buying of mail, moving forward or deferring mailing campaigns or communication actions) and the effect of the public holidays and Easter holidays is less pronounced. The visible signs of the country's economic recovery also contributed to the performance in the second quarter, namely the growth in domestic activity (impacting transactional mail). The following variations of volumes contributed to this overall scenario: ordinary mail (-5.5% in the semester; -0.9% in the second quarter), priority mail (-9.5%; +15.8%), registered mail (-7.0%; -5.7%), international mail (-3.2%; -4.4%) due to outbound mail (-8.7%; -10.1%) and green mail (-10.4%; +18.0%). Inbound international mail grew by 2.7% in the semester (+2.2% in the second quarter).
By the second quarter, editorial mail (-3.5%; -9.3%) and in particular addressed advertising mail (-19.5%; -24.7%) had not yet shown similar of recovery. In contrast, unaddressed advertising mail grew by 4.1% in the semester (11.2% in the second quarter). The advertising market already shows signs of recovery, although without any visible signs in terms of advertising through physical means (printed media and advertising mail). The competition of electronic means poses new challenges to the advertising and editorial mail sectors to recover their market share.
During the first semester of 2014, the following mail prices were updated:
PostContacto is the subsidiary responsible for the management of unaddressed mail at CTT, a leader of the market in which it operates with shares of 45% in terms of volume and 51% in revenue terms in 2013 (40% and 45% in 2012, respectively), according to the study conducted by IMR - Instituto de Marketing Research. It has a clear competitive edge in terms of (i) trust in the brand; (ii) capacity to deliver large volumes of advertising in the intended zones and with the desired timing; and (iii) the
ownership of a reliable database which enables the sending of unaddressed mail to specific populations, enhancing the effectiveness of communication.
The economic situation of the country, combined with the commercial aggressiveness of the competition and the concentration of demand in the retail sector, have been reflected not only in the streamlining of advertising volumes per campaign and in the applied price policy forcing lower margins, but also in more demanding standards required by customers in terms of quality of service, reduction of execution times and the supply of detailed and online information about campaigns. However, special note should be made of the renewal of the contracts with the major customers with first signs of recovery of the advertising market and private consumption, visible in particular during the second quarter, when some reversal of the downward trend became evident.
Consulting sales related to direct marketing increased in the first semester, with implementation in progress of a series of growth measures aimed at customer experimentation with advertising mail, maintenance and growth of customer investment in this area.
PostContacto is the only unaddressed advertising mail operator on a national scale, using an extremely flexible operating model, and has expanded its offer with the development of value added services (delivery of mail based on address lists, delivery at a convenient time, geocontact, handdelivery in pre-selected areas, logistics and crossborder delivery).
PostContacto delivered 251 million items of unaddressed mail during the first semester of 2014.
CTT continued to develop its offer of hybrid communication solutions, combining physical and digital communication. Business areas formerly disassociated are currently combined, such as ViaCTT, document production (through Mailtec Comunicação, a market leader), digitalisation and information technologies for the postal sector (through Mailtec Consultoria), which enables assuring greater coordination and the development of solutions that add value to CTT's offer and pave the way for new opportunities in relations with companies, creating value and differentiation.
CTT standardised value added solutions which meet market needs concerning processes of treating returned mail, registered mail and accounting documents. A partnership has been created to offer the local government sector a solution which will enable the simplifying of the entire process regarding the reception, verification, approval and accounting of supplier invoices. These standard solutions aim, on one hand to reduce costs and increase customer efficiency, and, on the other hand, to expedite the sales process for CTT.
A series of new electronic postal box functionalities were also introduced, aimed at improving the use of the service, such as the use of the citizen card to access the electronic postal box, and at the same time cutting costs in the operation of the service.
Regarding business customers in the international market, the Poland Post project was further developed in the first semester of 2014 with the delivery of a maintenance contract and award of a significant volume of new development services for the electronic postal service platform, launched
at the end of 2013. Efforts have also been made in the identification and realisation of business opportunities in other geographic regions, namely Angola, Mexico, Morocco and Bulgaria.
The Philately business reached 3.6 million Euros in revenues in the first half of 2014, an increase of 15% year-on-year.
The following factors contributed to this increase: (i) a 15.5% increase in the accumulated face value of stamp issues vs. the previous year; (ii) the sale of 35,000 sets of stamps "500 Years of Andreas Vesalius" to bpost, under the joint issue by Portugal and Belgium paying tribute to the great anatomist; (iii) the launch of 16 issues of commemorative stamps, the issue of definitive stamps, the booklet of self-adhesive stamps of Madeira, 11 postal stationery and 4 prestigious thematic books.
The topics illustrated by the commemorative issues covered many areas of human knowledge, as shown in the list presented in the table below:
| Commemorative issues and definitive issues | |
|---|---|
| 40 Years of the 25th April st Edition 400 Years of the 1 of "Peregrinação" by Fernão Mendes Pinto 500 Years of the Diocese of Funchal 500 Years of Blessed Friar Bartolomeu dos Mártires 800 Years of Notary Services in Portugal |
History |
| Major Characters of Portuguese History and Culture Unesco World Heritage – Garrison Border Town of Elvas and its Fortifications Major Awards of Portuguese Architecture 8 Centuries of the Portuguese Language |
Music, art and culture |
| Eusébio Forever 2014 World Cup in Brazil EUROPA – National Musical Instruments Gardens of Portugal Extreme Sports – Definitive Issue |
Sports and environment |
| CTT Public Company |
Privatisation |
| 500 Years of Andreas Vesalius (joint issue Portugal – Belgium) 150 Years of Diplomatic Relations between Portugal and Mexico |
Jointly with other countries |
As noted above, the following thematic books were launched with the usual major success:
The Retail Network manages the counter service and direct sales to final customers (individuals and small enterprises), and is the largest diversified commercial network at a national level with close proximity to the population. The company has increased the value of this asset, transforming it into a platform of convenience and multi-services (especially financial services), boosting its revenues, while fully complying with the universal service obligations.
The business strategy for the Retail Network is based on three fundamental axes:
By the end of the first semester of 2014, the Retail Network had 5,045 contact points with its customers and the population, composed of 624 post offices (607 own post offices, 12 external postal counters and 5 mobile post offices), 1,719 postal agencies (partnership branches) and 2,702 stamp sales points. The offer of services, under free service and in some cases available 24 hours per day, is complemented by 221 automatic stamp vending machines and 18 automatic mail product vending machines.
During the first semester of 2014, the main priorities of the management of the Retail Network included the development of the initiatives included in the Transformation Plan (2014-2016) to create satellite branches, characterised by operating under another principal (centralising) post office, aimed at the optimisation of resources while assuring quality of service and proximity to
customers. Higher operational efficiency was also promoted through management and supervisory teams visiting rounds.
In the context of the process of certification of customer counter service and in order to measure quality of service as perceived by the customer, a "Mystery Client" study was conducted, involving 601 post offices where different variables were assessed, namely how the customer is served, the appearance of the employees, their knowledge on products, the available information and appearance of the location. The obtained result was very positive, with 99.6% of favourable opinions, corresponding to an improvement in relation to the previous such study.
In addition to being an important channel for the sale of the products and services of all CTT business units, primarily Mail and Financial Services, the Retail Network promoted various initiatives to stimulate the growth of its remaining retail business, where we highlight the following three:
Solutions of proximity to the population for the public administration could play a very important role in the development of services of general economic interest (SGEI) within the CTT Retail Network.
In this context, special note should be made of the pilot project already operating in 24 post offices that will be expanded progressively to all CTT post offices following the protocol signed with the Government in 2013 for the creation of Citizen's Bureau Areas in the CTT Retail Network. The Government intends to install around 1,000 Citizen's Bureau Areas all over the country, having the CTT Retail Network as its principal partner. Driving license renewal, request of Social Security statements, land registry certificates or exemption from municipal property tax, submission of income tax returns or enrolment of students at school, are some of the tasks that could be performed at these locations to which 11 official entities are already associated.
It is foreseen that the definition of the economic model of this partnership will take place in the third quarter, benefiting from the experience of the pilot project, after which all the conditions will be met for the structuring of a longer lasting agreement between the Government and CTT.
The Transformation Program defines a series of actions and initiatives to be developed in Operations and Distribution during 2013-2016, with particular focus on 2013 and 2014. The development and implementation of the initiatives in 2013 greatly surpassed the objectives that had initially been established, thus enabling not only a reduction in operating costs, higher productivity levels and improved operating efficiency, but also greater integration with other CTT delivery networks.
In 2014, the Transformation Programme, apart from the continued reorganisation of the sorting, transport and distribution networks, is aimed at improving productivity and operational efficiency, and focused on deepening the integration between the Mail and Express & Parcels distribution networks.
The other initiatives for 2014 involve the streamlining and reorganisation of the operational cycle and are grouped into 3 major lines of action: sorting, transport and delivery.
During the first half of 2014, 2.3 million mail items were automatically sorted daily for the delivery routes. Close to 1.3 million (58.6%) were automatically sequenced (door-to-door) for 3,850 delivery routes of 170 postal delivery offices, representing 92.6% of the mail delivered daily by CTT.
The sorting network is composed of 3 production and logistics centres, 6 logistics support centres and 1 business mail centre. The activities of the production and logistics centres are supported by 43 automated machines (of which 14 are mail sequencing machines) and 72 video encoding posts.
The activities for the sorting of ordinary mail have been centralised in the two main production and logistics centres - Lisbon and Maia (Porto) - with shift work having been reorganised and higher efficiency promoted in the automation processes. The sorting activities have also been consolidated at Taveiro (Coimbra) production and logistics centre, namely concerning mailmanager and video encoding sorting that has been partially insourced and transferred to this centre, with the consequent reduction of outsourcing needs.
It is important to highlight the new configuration of the forwarding network at a national level, which implied the transfer of 27 postcodes of the Centre forwarding network to the North and South forwarding networks, enabling greater efficiency gains in the operating activities of the main production and logistics centres.
The second phase of the postal address georeferencing project "GEO10" has also been completed, implying that by the end of the first half of 2014 over 3.6 million addresses were georeferenced and characterised relative to 340 four-digit postcodes (138 municipalities), covering 85% of the Portuguese population and 45% of the territory of the country.
Postal automation continues to show excellent recognition results, with flats achieving decision rates for seven to ten-digit postcodes of 91% and 60%, respectively. Notwithstanding the above, in May 2014 the second phase of the project to improve the recognition and decision algorithms was implemented, which enabled gains above 4% in sorting to delivery routes and sequencing for flats and medium-sized mail items.
It should also be noted that in May, CTT obtained the renewal of the certificate recognising its active role in the construction of the model for Portuguese addressing, under the S42 programme. Among the total number of 192 member countries of the Universal Postal Union (UPU), Portugal continues in the restricted group of 32 certified countries in this programme.
The transport network operates with 233 heavy vehicles (including CTT's own fleet and a contracted fleet, as well as trailers), which travel approximately 43 thousand km/day.
Among the series of initiatives carried out, we highlight the reorganisation of the national transport network (named "primary", "secondary" and "tertiary" networks), the renegotiation of transport service contracts and the refurbishment of 209 vehicles. Special focus was given to environment and safety aspects, with the launch of 18 electric vehicles (10 light trucks and 8 scooters).
Particular note should also be made of the following initiatives:
The distribution network is composed of 273 postal delivery offices (CDP), including 93 delivery support centres, one delivery supporting service in Lisbon and another in Coimbra, and it manages 4,687 external delivery routes which cover around 231 thousand km/day.
The fleet provided for the delivery duties is primarily composed of light vehicles, motorcycles and bicycles, mostly electric. We highlight the introduction of new equipment supporting delivery, composed of hand carts, mail bags to carry bulkier mail and bags for automatically sequenced mail to facilitate delivery. Implementation of the above started at the end of the semester with the placement of 60 bags in 3 postal delivery offices of the Greater Lisbon area.
During the first semester of 2014, the main objective of the distribution activity was increased operational efficiency, based on four lines of action:
Along with the higher efficiency of the operation, reliability of processes and commitment to excellent quality of service, during the first semester of 2014 the focus continued to be placed on developing the network of postmen and women, as the preferred proximity channel and network for the sale of products and services.
The revenues1 of this business unit reached 62.7 million Euros (17.1% of the consolidated total2 ) in the first semester of 2014, corresponding to a 1% decrease in relation to the same period of 2013, as a result of the restructuring process which is underway in Spain and a change of the product mix with a greater weight of the business coming from e-commerce (B2C) and from large customers which placed pressure on the unit sales price.
This business unit involves the activities of CTT Expresso in Portugal, Tourline Express in Spain and CORRE in Mozambique.
In the first half of the year, CTT launched an Iberian offer for the Express & Parcels market through CTT Expresso and Tourline Express, providing its customers with the same delivery solutions for Portugal and Spain, and assuring an integrated, simplified and competitive Iberian service portfolio. Customers can now view the Iberian territory as a whole, with wider reaching solutions being available with similar speed characteristics, which assure deliveries on the next business day by mid-morning (10h00), lunchtime (13h00) and end of the day (19h00), and less urgent deliveries within a period of two business days (48h00). This new portfolio is a result of an Iberian strategy of the company under the theme of standardisation of its Express and Parcels services in Spain and Portugal, positioning CTT as one of the main operators in the region.
1 Includes internal services rendered and intra-group transactions which are eliminated for the purposes of consolidation.
2 Excluding revenues relative to the CTT Central Structure and intra-group eliminations amounting to -€12.7m in the first semester of 2014.
Interim Report
1 st Half of 2014
Aimed at meeting the need to assure more flexible deliveries in the B2C segment, a network of PuDo (pick-up / drop-off) points of convenience for collection and delivery of goods has been created in partnership with an Iberian retailer and at Tourline delegations, based on the CTT Retail Network, which not only supports the pick-up of parcels in post offices with longer opening hours and capillarity (pick-up aspect), but also allows for a flexible parcel dispatch service (drop-off aspect).
One of the opportunities arising from the rapid growth of e-commerce is embodied in the development of solutions to support customers in the pursuit of export activity through dispatch solutions aimed at the online segment, expanding the target market of these companies (e-tailers). In this context, CTT has joined the e-Commerce Interconnect Programme (e-CIP), a project of major strategic importance managed by the International Post Corporation (IPC), with a view to creating inter-connectivity between incumbent postal operators for the creation of a global offer competitive with that of large integrators.
In Portugal, CTT maintained its position of market leadership with a market share of 27.7% in the first quarter of 2014 (source: ANACOM). Particular note should be made of the launch, towards the end of the first semester of 2014, of the project aimed at integrating the Mail and Express & Parcels distribution networks, with expected future impact on the costs of this business unit. When completed, this project will enable even greater competitive advantages in terms of costs, namely in the last mile, and the possibility of a better product offer for the B2C segment.
In Spain, CTT is positioned among the top 10 companies in the Express & Parcels market, with a market share of approximately 4%, according to the CEP Iberia study conducted by IMR – Instituto de Marketing Research. An important effort has been made since early 2014 with respect to increasing the capillarity of the Tourline Express network, with the objective of strengthening the franchisee network. At the end of the first half of 2014, the Tourline Express network consisted of 234 points of sale, comprised of 176 franchisees, 30 own branches and 28 distributors. Furthermore, and in order to maintain a physical presence as a proximity factor, Tourline has 45 pick-up and drop-off points, mostly in traditional trade shops.
Notwithstanding the current commercial and operational activity, a plan to restructure the activity and franchisee network of Tourline Express was initiated in 2013, aimed at achieving tighter control over the network and higher quality of the franchisees, both in terms of commercial capacity and in terms of financial strength and management skills. This project entered a new stage in the first half of 2014, with a more active approach to the network restructuring, review of its capillarity and also of the pricing policy for the franchisees and final customers.
In Mozambique, CTT has been present in the Express & Parcels business since October 2010 with the company CORRE – Correio Expresso de Moçambique, whose share capital is 50% held by CTT and 50% by Empresa Nacional de Correios de Moçambique.
The company aims to achieve leadership of the domestic Express & Parcels market and become one of the most important players in the international flows to / from Mozambique. Most of the provinces are already covered, and in Maputo the company owns an operations centre, two own branches and
a presence at airport. CORRE products and services are also available at all post offices of Correios de Moçambique, with national coverage, which has contributed to the rapid expansion of the business.
CORRE's quality of service continues to win the trust of its customers, which is why the company has become the exclusive supplier of the largest commercial bank of Mozambique, in logistics, sorting and distribution activities for all its agencies. The instability experienced in the region in the shortterm has affected the activity and the quality of the services rendered, resulting also in a sharp escalation of costs (associated with security and policing, for example).
Close relations were maintained with SAPO (South African Post Office), to use the Johannesburg transit hub, thus enabling coverage of international routes with the different countries that are involved with this hub, as well as with CTT-Correios de Portugal which implements transit operations to European destinations.
The recurring revenues1 of this business unit reached 35.4 million Euros (9.7% of the consolidated total2 ) in the first semester of 2014, corresponding to an increase of 20.8% relative to the same period of 2013. This business unit includes the financial services provided by CTT SA and PayShop. In addition to the recurring revenues, Financial Services received a front-fee of 3 million Euros from BNP Paribas Personal Finance in the context of the new partnership for the sale and marketing of consumer credit products.
The execution of the strategy to expand CTT's Financial Services business continued in the first semester of 2014, including the strengthening of its position as a relevant financial operator in the Portuguese market, and the reinforcement of its position as the second largest business unit of CTT in terms of EBITDA. The initiatives involved in CTT's Transformation Programme for this business unit are based on the development of new products and services, within current product lines or the creation of new ones.
After a first quarter marked by strong growth of Financial Services revenues, of 19.9% in relation to the same period of 2013, the performance in the second quarter of 2014 was even more robust, indicating that the defined strategy enables growth for this business unit, placing it in an even more important position, both in terms of the CTT's business portfolio and in terms of the company's strategic development. The Financial Services business represents an important growth and profitability lever for CTT, a factor which differentiates the company from other European postal sector peers.
Savings products were those which most contributed to the strong growth of Financial Services activity and revenue, with the CTT Retail Network having placed 2.07 billion Euros in various marketed savings products (public debt certificates, capitalisation insurance and retirement savings
1 Includes internal services rendered and intra-group transactions which are eliminated for the purposes of consolidation.
2 Excluding revenues relative to the CTT Central Structure and intra-group eliminations amounting to -€12.7m in the first semester of 2014.
plans), achieving growth of circa 220% in relation to the same period of 2013. In 2013, capitalisation insurance had been the driving engine of the business unit, whereas in 2014 public debt certificates are preferred by customers. The strategy of building a diversified portfolio of partners and products allows CTT to provide the market with a competitive offering at all times. On the other hand, the strong growth of the portfolio of saving products subscribed through CTT supports easier placement in the future, as a result of potential renewals.
Regarding the remaining Financial Services product lines, the evolution of payments has confirmed the expected trend with revenue 6.4% below that recorded in the first semester of the previous year, primarily influenced by declines in mobile telephone top-ups penalised by the growing adherence of prepaid consumers to quadruple play communication packages. In this business unit, it should be noted that at the end of the first semester of 2014 the PayShop network stood at 3,878 payment points, a figure practically the same as in the previous year. This fact reveals the significant resilience of the network, even in an adverse economic context for retail.
In this segment, the introduction of new services thus continues together with the development of alternative forms of payment, which enables CTT to remain as the only operator with an integrated payment solution. This offer has been on the market since the beginning of the year, and is under negotiation with various potential customers.
In transfers, the expansion of social instalments and benefits payable through postal money order, under the new agreement signed with IGFSS (Institute of Financial Management of the Social Security), could enable a recovery of this business in the second semester. Alternatives have been under analysis by CTT with various international entities aimed at "modernising" the transfer segment since the beginning of the second quarter, making the most of the technological developments in the financial industry.
A special reference should be made to the signing, at the end of the second quarter, of an agreement between CTT and BNP Paribas Personal Finance for the sale and distribution of personal credit products throughout the CTT Retail Network and on the CTT website, thus enlarging the portfolio of financial products, adding a new partner and a new product line (personal credit), and pursuing the strategy of expansion of the Financial Services business. This process began in January 2014 with the selection of the partner and negotiation of the financial and operational conditions of the partnership, at the same time administering training to the entire Retail Network. The market launch took place in June with an initial offering of personal credit. The introduction of new products or solutions is under analysis, to be carried out in a phased manner so as to enable the adequate adjustment of the training and information process in the Retail Network.
A credit card offer will be launched in the fourth quarter of the year, with work undergoing in the preparation of all the necessary requirements and formulation of the product positioning and its comparative advantages.
Finally, we highlight the continued effort of technological incorporation, integration and automation of processes between the point of sale, the back-office area and partners, in a line of action which combines important improvements both in terms of the consumer's experience and quality of service, and enabling greater safety, strong efficiency gains and increased profitability of the
business unit. The possible reduction of the time of sale of products also enables the introduction of more financial products in the Retail Network without requiring a relevant reinforcement of the structure.
Security measures have also been adopted in the transport of valuables, in accordance with a prudent safety and security policy for life and property and in compliance with legal requirements, which is increasingly more important in view of CTT's growing role in the financial system. The inherent cost of these measures was fully offset by the aforesaid automation, with recurring operating costs declining by 0.4% in the first half of 2014, on a year-on-year basis.
The reduction in operating costs referred to above, combined with the strong increase of revenues, led to a 47.3% increase of the recurring EBITDA of this business unit. The fact that the higher growing savings products have a better commission structure s versus the other financial products and services also contributed to this increase. Faster future growth in the payments or transfers products might penalise the EBITDA margin, which is expected to remain around 50%.
After an in-depth study in collaboration with strategic consultants on the opportunity and feasibility of creating a Postal Bank, CTT formally applied for a license from Banco de Portugal on 5 August 2013. This project, which follows similar examples shown by most European postal operators and represents an old ambition of the company, identifies and quantifies a market opportunity for CTT in the context of the development of its Financial Services business, representing a growth option which the company will revisit during 2014.
The Board of Directors of Banco de Portugal deliberated, on 27 November 2013, to authorise the constitution of "Banco Postal S.A." under the terms of the project submitted on 5 August 2013 and based on certain assumptions to be verified. This authorisation is thus subject to a series of conditions, including: (i) the reaffirmation, by the new shareholders of CTT that the Postal Bank project will be implemented pursuant to the terms under which it was submitted and appraised by Banco de Portugal, including with regard to the geographic coverage of the branch network; (ii) demonstration that the indirect qualifying shareholders in Banco Postal, S.A., arising from the CTT privatisation process, meet the conditions that assure healthy and prudent management of the institution, under the terms and for the purposes stipulated in article 103 of the RGICSF (General Regime of Credit Institutions and Financial Companies); and (iii) updating of the economic and financial forecasts, namely based on the conditions offered in the partnerships to be developed. The partnership for the sale and distribution of consumer credit products, referred to above, will be one of the issues that must be incorporated in this revised analysis of the Postal Bank project.
The aforesaid authorisation also states that this is all conditional, prior to special registration at Banco de Portugal and consequently, to the start-up of the Postal Bank activity, pursuant to article 65 of the RGICSF, to Banco de Portugal verifying that the aforesaid conditions have been met.
As noted, with this authorisation, CTT is not obligated to constitute the Postal Bank, but rather has the choice, which may be developed or not and must always be approved by the competent governing bodies of CTT, in order to comply with the conditions imposed by Banco de Portugal.
The review, updating and details of the market research were started at the end of the second quarter of 2014, at the time of CTT's submission of the proposal on this project of possible constitution of the Postal Bank. This study aims to meet and address the main assumptions of the Business Plan. In this context, an in-depth analysis of the economic, financial and strategic model of the Postal Bank will be conducted (Business Plan), incorporating the results of this market research and current market scenario, namely in the financial industry, so that a decision can be taken by the Board of Directors during the fourth quarter of 2014.
The strategy of expansion of CTT's Financial Services is being implemented with the various initiatives referred to above, and is not dependent on any future decision concerning the Postal Bank. This option will enable accelerating this process, although it implies greater investment and increased company structure in this business unit related to the creation of a financial institution (back-office, compliance, etc.).
Independently, although related to the future decision on the Postal Bank, new financial products and / or new partnerships are under analysis to add to the current offer and assure the sustainability of the growth which this area has achieved. Health insurance and prepaid cards are some of the initiatives under study.
This section summarises the consolidated results achieved by CTT and the consolidated assets, liabilities and financial position of the company as at 30 June 2014. This section should be read in conjunction with the interim condensed consolidated financial statements and the accompanying notes. It should be noted that in the first half of 2014, CTT SA sold the 51% participation it held in the subsidiary EAD. Therefore this company is no longer included in the scope of CTT consolidation in 2014.
This analysis includes the consolidation of the activities of the parent company and of its subsidiaries (as included in note 7 of the consolidated financial statements).
In the first half of 2014, CTT achieved a consolidated net profit of 36.1 million Euros, 14.0% (4.4 million Euros) above that of the same period of the previous year. This result corresponds to consolidated earnings per share of 0.24 Euros and a return on equity of 13.7%, compared to 12.0% in the first half of 2013.
The operating activity generated earnings before non-recurring items, interest, taxes, impairments, depreciation and amortisation (recurring EBITDA) of 66.3 million Euros, 10.1% (+6.1 million Euros) above that obtained in the same period of the previous year, with an EBITDA margin of 18.7% compared to 17.2% in the first half of 2013.
These results reflect a favourable reduction in operating costs (excluding impairments, provisions, depreciation / amortisation and non-recurring costs) of 3.2 million Euros (-1.1%), as well as an increase of 2.9 million Euros (+0.8%) in revenues. In the first half of 2014, the non-recurring revenues and costs affecting the CTT results were negative by 0.4 million Euros.
As a result, earnings before interest and taxes reached 54.9 million Euros, 7.4 million Euros (+15.6%) above those recorded in the first half of 2013. Financial results were negative by 3.2 million Euros, representing a decline of 140.1% (-1.8 million Euros) relative to the same period of the previous year.
| Thousand Euros | s t Half 2014 1 |
s t Half 2013 1 |
r% 14/13 |
|---|---|---|---|
| Revenues | 353,503 | 350,617 | 0.8 |
| Sales and services rendered | 344,980 | 344,185 | 0.2 |
| Sales | 10,127 | 9,978 | 1.5 |
| Services rendered | 334,853 | 334,207 | 0.2 |
| Other operating income | 8,523 | 6,432 | 32.5 |
| Internal services rendered | 185 | 146 | 26.7 |
| Other revenues | 8,338 | 6,286 | 32.6 |
| Operating costs excluding impairments, provisions, depreciation and non-recurring costs |
287,250 | 290,442 | -1.1 |
| Cost of sales | 7,490 | 7,760 | -3.5 |
| External supplies and services | 114,315 | 115,591 | -1.1 |
| Staff costs | 161,189 | 161,964 | -0.5 |
| Current costs | 159,150 | 160,968 | -1.1 |
| Employee benefits | 2,039 | 996 | 104.8 |
| Other operating costs | 4,256 | 5,127 | -17.0 |
| Earnings before depreciation, impairments, non recurring results, interest and taxes (recurring EBITDA) |
66,254 | 60,175 | 10.1 |
| Impairment of inventories and accounts receivable, net | (402) | 1,917 | -120.9 |
| Provisions, net | 561 | 186 | 201.7 |
| Impairment of non-depreciable assets | - | 0 | - |
| Depreciation/amortisation and impairment of investments, net |
10,734 | 12,414 | -13.5 |
| Earnings before non-recurring results, financial income and taxes (recurring EBIT) |
55,361 | 45,658 | 21.3 |
| Company restructuring (costs) | 2,902 | (6,250) | -146.4 |
| Privatisation costs | 75 | - | - |
| Other non-recurring income and costs | (2,553) | 4,366 | -158.5 |
| Earnings before interest and taxes | 54,936 | 47,541 | 15.6 |
| Financial results, net | (3,470) | (1,319) | -163.1 |
| Gains/losses in associated companies | 303 | - | - |
| Earnings before taxes (EBT) | 51,768 | 46,223 | 12.0 |
| Income tax for the period | (15,731) | (14,405) | 9.2 |
| Net profit before non-controlling interests | 36,038 | 31,818 | 13.3 |
| Net profit attributable to non-controlling interests | (25) | 174 | -114.4 |
| Net profit for the period attributable to Equity holders | 36,063 | 31,643 | 14.0 |
Note: Revenues exclude non-recurring items.
| Revenues | ||||||
|---|---|---|---|---|---|---|
| Thousand Euros | s t Half 2014 1 |
s t Half 2013 1 |
r% 14/13 | |||
| Sales and services rendered | 344,980 | 344,185 | 0.2 | |||
| Sales | 10,127 | 9,978 | 1.5 | |||
| Services rendered | 334,853 | 334,207 | 0.2 | |||
| Other operating income | 8,523 | 6,432 | 32.5 | |||
| Internal services rendered | 185 | 146 | 26.7 | |||
| Other revenues | 8,338 | 6,286 | 32.6 | |||
| Revenues | 353,503 | 350,617 | 0.8 |
Note: Excluding non-recurring items.
It should be noted that the activity of EAD (sold in the first half of 2014 and therefore represented in the figures of the Mail business unit in 2013) amounted to 2.0 million Euros in the first half of 2013. Excluding this, CTT would have had a favourable revenue growth in the first half of 2014 of 4.9 million Euros (+1.4%) on a year-on-year basis.
The business of CTT is organized in the following segments:
| st Half 2014 - Revenues by segment 1 |
||||||
|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services |
Central CTT Structure |
Intragroup eliminations |
Revenues | |
| Sales and services rendered | 251,497 | 61,829 | 33,877 | 0 | (2,224) | 344,980 |
| Sales | 9,592 | 537 | 0 | 0 | (2) | 10,127 |
| Services rendered | 241,906 | 61,292 | 33,877 | 0 | (2,222) | 334,853 |
| Other operating revenues | 16,602 | 870 | 1,544 | 46,010 | (56,502) | 8,523 |
| Allocation to CTT central structure | 0 | 0 | 0.000 | 9,941 | (9,941) | 0 |
| Revenues | 268,099 | 62,699 | 35,421 | 55,951 | (68,667) | 353,503 |
Note: excludes non-recurring items.
| Thousand Euros | Express & Parcels |
Financial Services |
Central CTT Structure |
Intragroup eliminations |
Revenues | |
|---|---|---|---|---|---|---|
| Sales and services rendered | 255,992 | 62,643 | 27,710 | 0 | (2,160) | 344,185 |
| Sales | 9,324 | 670 | 0 | 0 | (16) | 9,978 |
| Services rendered | 246,668 | 61,974 | 27,710 | 0 | (2,144) | 334,207 |
| Other operating revenues | 17,301 | 667 | 1,608 | 42,775 | (55,919) | 6,432 |
| Allocation to CTT central structure | 0 | 0 | 0 | 10,116 | (10,116) | 0 |
| Revenues | 273,293 | 63,311 | 29,318 | 52,891 | (68,195) | 350,617 |
Note: excludes non-recurring items.
The Mail segment, which includes the core revenues of CTT and represents the greatest weight in terms of operational revenues with a total of 268.1 million Euros in the first half of 2014, decreased 1.9% in comparison to the same period of the previous year, driven by the decrease in addressed mail volumes (-7.0%), largely offset by the increase in average prices for USO services implemented in the first half of 2014 (4.4% on average).
The Express & Parcels segment recorded revenues of 62.7 million Euros, a decrease of 1.0% (-0.6 million Euros), mainly as a result of the impact of services rendered in Spain (-2.0 million Euros), largely offset by Portugal with a 1.3 million Euros increase.
Financial Services revenues of 35.4 million Euros, resulting primarily from fees paid for the services rendered, increased 20.8% (+6.1 million Euros) in the first half of 2014 relative to the same period of 2013. The growth of 129.1% in revenues from savings and insurance products is noteworthy, furthermore public debt securities sales grew by 638.9%, due to the increase of subscriptions values and associated commissions.
| Operating costs | ||||||
|---|---|---|---|---|---|---|
| Thousand Euros | s t Half 2014 1 |
s t Half 2013 1 |
r% 14/13 | |||
| Cost of sales | 7,490 | 7,760 | -3.5 | |||
| External supplies and services | 114,315 | 115,591 | -1.1 | |||
| Staff costs, of which | 161,189 | 161,964 | -0.5 | |||
| Current costs | 159,150 | 160,968 | -1.1 | |||
| Employee benefits | 2,039 | 996 | 104.8 | |||
| Other operating costs | 4,256 | 5,127 | -17.0 | |||
| Operating costs | 287,250 | 290,442 | -1.1 |
Recurrent external supplies and services costs decreased by 1.1% (-1.3 million Euros) in relation to the first half of 2013, of which 0.6 million Euros are explained by the ES&S value in the first half of 2013 of the subsidiary EAD, sold in 2014.
Efficiency measures – e.g. the renegotiation of equipment renting contracts, the increase of synergies within CTT with a greater use of internal resources, and insourcing of services, namely delivery and processing of business mail and some unaddressed mail – resulted in cost reductions in the first half of 2014.
In the first half of 2014 CTT had additional expenses with the repair of cargo vehicles and due to the renovation of a part of the fleet, and with the increase in the number of stores which had to transport monetary amounts, due to the legal obligation set by Law 34/2013 of 16 May.
Recurrent staff costs reached 161.2 million Euros, 0.8 million Euros less than in the same period of the previous year. Current staff costs (excluding employee benefits) decreased by 1.8 million Euros
1 COGS + ESS + Staff costs + other operating costs (excludes non-recurring items)
(-1.1%).The reduction in the average number of staff was to 4.7% (612 employees), enough to offset the impacts of the legal / regulatory changes resulting from the privatisation, which caused changes in compensation schemes (such as the cessation of the salary reductions and reintroduction of seniority-based payments) because CTT no longer is a State-sector company, as well as of the State Budget Law of 2013 which modified the contributory base of retirement discounts.
Recurrent costs associated with employee benefits, which essentially include health care and other post-retirement benefits at CTT SA, increased 1.0 million Euros, in relation to the first half of 2013, due to the fact that in 2013 some retirement dates were brought forward, which decreased the liabilities associated with future salaries.
The Mail business unit records a significant amount of operating costs since it includes the functions of sorting, mail transport, delivery and the Retail Network, areas of major significance, particularly in terms of the number of workers. In the first half of 2014 this segment incurred 223.6 million Euros of operating costs, a decrease of 7.1 million Euros, relative to the same period of the previous year.
| st Half 2014 - Operating costs by segment 1 |
|||||||
|---|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services |
Central CTT Structure |
Intragroup eliminations |
Operating costs |
||
| External supplies and services | 50,491 | 47,374 | 5,407 | 26,247 | (15,205) | 114,315 | |
| Staff costs | 120,494 | 11,945 | 1,681 | 27,069 | 0 | 161,189 | |
| Other costs | 42,709 | 838 | 9,086 | 2,635 | (43,522) | 11,746 | |
| Allocation to CTT central structure | 9,866 | 0 | 75 | 0 | (9,941) | 0 | |
| Operating costs | 223,560 | 60,157 | 16,249 | 55,951 | (68,667) | 287,250 |
Note: excludes non-recurring items.
| Thousand Euros | Express & Parcels |
Financial Services |
Central CTT Structure |
Intragroup eliminations |
Operating costs |
|
|---|---|---|---|---|---|---|
| External supplies and services | 53,697 | 45,878 | 4,980 | 24,328 | (13,292) | 115,591 |
| Staff costs | 122,013 | 11,753 | 1,542 | 26,655 | 0 | 161,964 |
| Other costs | 44,960 | 1,102 | 9,706 | 1,908 | (44,788) | 12,888 |
| Allocation to CTT central structure | 10,037 | 0 | 79 | 0 | (10,116) | 0 |
| Operating costs | 230,707 | 58,733 | 16,307 | 52,891 | (68,195) | 290,442 |
Note: excludes non-recurring items.
Recurring EBITDA1 amounted to 66.3 million Euros, corresponding to a margin of 18.7%, an increase of 1.5 percentage points relative to the value achieved in the first half of 2013, as a result of the operating costs reduction and revenue growth.
1 Recurring EBITDA = Operating results + amortisation and depreciation + net change of provisions and impairment losses (does not include non-recurring expenses, as company restructuring, impairment of investment properties, provisions for onerous contracts and labour contingencies).
| Recurring EBITDA | |||||
|---|---|---|---|---|---|
| Thousand Euros | s t Half 2014 1 |
s t Half 2013 1 |
r% 14/13 | ||
| Revenues | 353,503 | 350,617 | 0.8 | ||
| Operating costs excluding impairments, provisions, depreciation and non-recurring costs |
287,250 | 290,442 | -1.1 | ||
| Recurring EBITDA | 66,254 | 60,175 | 10.1 | ||
| Recurring EBITDA margin | 18.7% | 17.2% | 1,5 p.p. |
| st Half 2014 - Recurring EBITDA by segment 1 |
|||||||
|---|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services |
|||||
| Revenues | 268,099 | 62,699 | 35,421 | ||||
| Operating costs | 223,560 | 60,157 | 16,249 | ||||
| Recurring EBITDA | 44,539 | 2,543 | 19,172 | ||||
| Recurring EBITDA margin | 16.6% | 4.1% | 54.1% |
| st Half 2013 - Recurring EBITDA by segment 1 |
||||||
|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services |
||||
| Revenues | 273,293 | 63,311 | 29,318 | |||
| Operating costs | 230,707 | 58,733 | 16,307 | |||
| Recurring EBITDA | 42,585 | 4,578 | 13,011 | |||
| Recurring EBITDA margin | 15.6% | 7.2% | 44.4% |
In the first half of 2014, CTT recorded a net non-recurring cost of 0.4 million Euros, which includes: (i) 3.0 million Euros in other operating income from the front-fee from the exclusive partnership for the sale and distribution of consumer credit products. (ii) an increase of 0.5 million Euros related with the provision to meet contractual liabilities relating to onerous contracts of vacant buildings; (iii) a net increase of the provision for labour contingencies of 0.09 million Euros; (iv) the recognition of costs of 0.3 million Euros related to liabilities arising from agreements for suspension of employment contracts; (v) 0.5 million Euros related to compensations for suspension agreements and the respective reduction in employee benefits costs by 0.9 million Euros, due to the effect of reduced liabilities; (vi) 0.5 million Euros for termination of labour contracts by mutual agreement in the scope of the transformation programme; (vii) 0.08 million Euros associated with costs from the privatisation process of the company; (viii) net impairments and provisions of 2.5 million Euros resulting from restructuring and optimising the Tourline network and (ix) 0.04 million Euros of costs associated with the acquisition of Tourline customer portfolios, within the scope of the ongoing restructuring plan in the Express & Parcels segment.
| st Half 2014 - Non-recurring results 1 |
|||||||
|---|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services |
Central CTT Structure |
Intragroup eliminations |
Total | ||
| Other operating revenues | 0 | 0 | 3,000 | 0 | 0 | 3,000 | |
| External supplies and services | 0 | 0 | 0 | 75 | 0 | 75 | |
| Staff costs | 343 | 32 | 0 | 15 | 0 | 390 | |
| Other costs | 0 | 44 | 0 | 0 | 0 | 44 | |
| Non-recurring results that affect EBITDA |
(343) | (76) | 3,000 | (90) | - | 2,491 | |
| Impairment of inventories and accounts receivable, net |
0 | 1,926 | 0 | 0 | - | 1,926 | |
| Provisions net | 0 | 543 | 0 | 447 | - | 990 | |
| Non-recurring results that affect EBIT |
(343) | (2,545) | 3,000 | (537) | - | (425) |
In the first half of 2013 it should be noted that the non-recurring results were positive, by 1.9 million Euros, due to the gains of 8.4 million Euros resulting from the reformulation of the employee benefits related to the telephone subscription charge.
In the first half of 2014, the net financial results reached -3.2 million Euros, a decrease of 1.8 million Euros when compared to the same period of the previous year. The interest income was directly influenced by the sharp decrease in interest rates, falling by 46.5% in relation to 2013.
| Financial results | ||||||
|---|---|---|---|---|---|---|
| Thousand Euros | s t Half 2014 1 |
s t Half 2013 1 |
r% 14/13 | |||
| Interest income | 2,511 | 4,691 | -46.5 | |||
| Interest expenses | 5,982 | 6,010 | -0.5 | |||
| Interest expenses (financial) | 198 | 161 | 22.9 | |||
| Interest costs with employee benefits (accounting) | 5,783 | 5,848 | -1.1 | |||
| Gains/losses in associated companies | 303 | 0 | - | |||
| Financial results | (3,167) | (1,319) | -140.1 |
Interest expenses incurred in the first half of the year reached 6.0 million Euros, which includes the costs associated with employee benefits of 5.8 million Euros, and interest related to financial leasings and bank loans (0.2 million Euros).
Gains in associated companies reached 0.3 million Euros, related to the gain from the sale of the 51% participation in EAD and to profit appropriation for the first semester of 2014.
In the first half of 2014, CTT achieved a consolidated net profit attributable to equity holders of 36.1 million Euros, 14% above that of the same period of last year, corresponding to consolidated
| Reported | Recurring * | |||||
|---|---|---|---|---|---|---|
| Thousand Euros | s t Half 2014 1 |
s t Half 2013 1 |
s t Half 2014 1 |
s t Half 2013 1 |
r% 14/13 | |
| Revenues | 356,503 | 350,617 | 353,503 | 350,617 | 0.8 | |
| Operating costs | 287,758 | 284,193 | 287,250 | 290,442 | -1.1 | |
| EBITDA | 68,745 | 66,424 | 66,254 | 60,175 | 10.1 | |
| EBITDA margin | 19.3% | 18.9% | 18.7% | 17.2% | 1,5 p.p. | |
| EBIT | 54,936 | 47,541 | 55,361 | 45,658 | 21.3 | |
| EBIT margin | 15.4% | 13.6% | 15.7% | 13.0% | 2,7 p.p. | |
| Earnings Before taxes | 51,768 | 46,223 | 52,193 | 44,339 | 17.7 | |
| Income tax for the period | 15,731 | 14,405 | 15,860 | 13,818 | 14.8 | |
| Losses (gains) attributable to non-controlling interest |
(25) | 174 | (25) | 174 | -114.4 | |
| Net profit for the period | 36,063 | 31,643 | 36,359 | 30,347 | 19.8 |
earnings per share of 0.24 Euros, a net margin of 10.2% (9.0% in the first half of 2013) and a return on equity of 13.7% (12.0% in the first half of 2013).
* Recurring results exclude non-recurring items. The actual income tax of the reported accounts was considered.
Capex reached 2.7 million Euros, 36.0% below that of the same period of the previous year (4.3 million Euros), and was specifically directed towards computer systems, renovation and maintenance of buildings and reinforcement of productive infrastructures. As at 30 June 2014 there are intangible assets in progress of 3.2 million Euros related to information systems and technologies.
| Consolidated statement of financial position | |||||
|---|---|---|---|---|---|
| Thousand Euros | 30 June 2014 | 31 December 2013 r% 14/13 | |||
| Non-current assets | 376,542 | 391,697 | -3.9 | ||
| Current assets | 897,995 | 708,437 | 26.8 | ||
| Total assets | 1,274,536 | 1,100,134 | 15.9 | ||
| Equity | 249,935 | 275,934 | -9.4 | ||
| Total liabilities | 1,024,601 | 824,200 | 24.31 | ||
| Non-current liabilities | 328,658 | 334,742 | -1.82 | ||
| Current liabilities | 695,943 | 489,458 | 42.2 | ||
| Total equity and liabilities | 1,274,536 | 1,100,134 | 15.9 |
The increase of 174.4 million Euros (+15.9%) in total assets resulted mainly from the growth in cash and cash equivalents (131.0 million Euros, +24.0%) and other current assets related to postal financial services (53.3 million Euros, +2,760.5%).
Equity decreased 26.0 million Euros (-9.4%) relative to 31 December 2013, as a result of the dividend distribution for the year 2013 (60.0 million Euros), occurred in May, and is not yet fully offset by the results of the period (36.1 million Euros).
During the first half of the year the sale of 51% stake in EAD also took place, which resulted in a reduction of 1.6 million Euros in the non-controlling interests and of 0.8 million Euros in the respective goodwill.
The 200.4 million Euros (+24.3%) increase in liabilities resulted mostly from the 178.9 million Euros increase in financial services payables, which were a consequence of the Financial Services activity growth.
The employee benefits liabilities came to 296.0 million Euros in the first half of 2014, 0.8% less than in December 2013. The reformulation in 2013 of the telephone subscription benefit paid to retired employees allowed for a reduction of 8.4 million Euros in the liabilities.
| Liabilities with post-retirement employee benefits | |||||
|---|---|---|---|---|---|
| Thousand Euros | 30 June 2014 | 31 December 2013 | r% 14/13 | ||
| Liabilities | 296,020 | 298,543 | -0.8 | ||
| Healthcare | 263,740 | 263,371 | 0.1 | ||
| Staff (suspension agreements) | 17,204 | 19,744 | -12.9 | ||
| Other long term benefits | 15,077 | 15,428 | -2.3 |
During the first half of 2014, the free operating cash flow generated amounted to 191.4 million Euros, compared to 199.1 million Euros generated in the first half of 2013. The free cash flow generated totalled 131.0 million Euros, 25.3 million Euros (-16.2%) below that of the same period of the previous year. In the first half of 2014, 60 million Euros of dividends were paid, while in the first half of 2013 the net dividends paid reached 37.5 million Euros (50.0 million Euros gross dividends, less withholding tax of 12.5 million Euros).
| Cash flow | ||||||
|---|---|---|---|---|---|---|
| Reported | Recurring * | |||||
| Thousand Euros | s t Half 2014 1 |
s t Half 2013 1 |
r% 14/13 1st Half 2014 1st Half 2013 r% 14/13 | |||
| Cash flow from operating activities | 187,762 | 198,020 | -5.2 | 62,198 | 28,132 | 121.1 |
| Cash flow from investment activities | 3,663 | 1,054 | 247.5 | 3,663 | 1,054 | 247.5 |
| Capex | (3,658) | (2,184) | 67.5 | (3,658) | (2,184) | 67.5 |
| Other | 7,321 | 3,238 | 126.1 | 7,321 | 3,238 | 126.1 |
| Operating free cash flow | 191,425 | 199,074 | -3.8 | 65,861 | 29,186 | 125.7 |
| Cash flow from financing activities | (59,692) | (42,729) | 39.7 | (59,692) | (42,729) | 39.7 |
| Dividends | (60,000) | (37,500) | 60.0 | (60,000) | (37,500) | 60.0 |
| Change in consolidation perimeter | (697) | - | - | (697) | - | - |
| Net change in cash and cash equivalents (free cash flow) |
131,036 | 156,345 | -16.2 | 5,472 | (13,542) | 140.4 |
* Cash flow from operating activities excluding changes in net financial services payables.
At the end of the first half of 2014, net financial services payables increased by 125.6 million Euros, a fact reflected in the CTT cash and cash equivalents position, thus the operating free cash flow (without financial services payables, net) totalled 65.9 million Euros.
Financing is focused on financial leasing operations related to the construction of operating facilities and the acquisition of basic equipment (particularly in CTT SA and CTT Expresso) and on bank loans in Tourline and CORRE to fund operating activities, emphasising the cash pooling system used by CTT.
The calculated net debt is negative, which means CTT had ample liquidity after financial debt and liabilities with employee benefits. Net liquidity stood at 27.0 million Euros, increasing 7.1 million Euros (35.5%), due mostly to the increase of 5.5 million Euros (+2.3%) in net cash and the reduction of 2.5 million Euros (-0.8%) in liabilities with post-employment benefits.
| Net debt | ||||||
|---|---|---|---|---|---|---|
| Thousand Euros | 30 June 2014 | 31 December 2013 | r% 14/13 | |||
| Financial debt | 7,176 | 6,999 | 2.5 | |||
| Bank loans and other loans | 3,816 | 2,481 | 53.8 | |||
| Financial leasings | 3,360 | 4,518 | -25.6 | |||
| Net cash | 242,290 | 236,818 | 2.3 | |||
| Net financial debt | (235,114) | (229,819) | 2.3 | |||
| Liabilities with employee benefits | 296,020 | 298,543 | -0.8 | |||
| Deferred tax assets related to employee benefits | (87,910) | (88,655) | -0.8 | |||
| Net debt (incl. Liabilities with employee benefits) | (27,003) | (19,930) | 35.5 |
The Financial Services business unit gives CTT a large cash position and significant short-term liquid assets, arising from the financial partners in the various activities offered: (i) payment of social benefits, through postal money orders; (ii) marketing of insurance, with a special focus on capitalisation insurance products; (iii) postal savings certificates, on behalf of IGCP; and (iv) collection of tolls and other payments carried out in the Retail Network.
In the first half of 2014, CTT's own cash increased by 5.5 million Euros, reaching 242.3 million Euros.
| Net cash | |||||||
|---|---|---|---|---|---|---|---|
| Thousand Euros | 30 June 2014 | 31 December 2013 | r% 14/13 | ||||
| Net cash | |||||||
| (+) Cash and cash equivalents | 675,912 | 544,876 | 24.0 | ||||
| (-) Net Financial Services payables | (433,622) | (308,058) | 40.8 | ||||
| Net cash | 242,290 | 236,818 | 2.3 |
In the first semester of 2014, CTT share price appreciated 29.87%, in a period when the Portuguese PSI 20 index grew by 3.71% and the European postal sector companies' share prices fluctuated between a decrease of 16.87% (Post NL) and an increase of 29.84% (Bpost). It should be noted that CTT paid in this period a dividend of €0.40 per share, one of the highest of the Portuguese market and the postal sector.
The total shareholder return (TSR) in the first half of 2014 was 37.03% (capital gain + dividend, calculated on the basis of the share price as at 1 January 2014).
On 24 March, 2014 CTT shares joined the PSI 20 index, the main index of the Portuguese Stock Market. Changes in the composition of this index are made under the annual review Euronext Lisbon carries out in March. PSI 20 consists of shares issued by the 20 top listed companies in terms of free float market capitalisation. Eligible companies must meet the minimum criterion of share velocity (liquidity) and have a minimum free float. In addition, PSI 20 companies should in principle have a minimum free float market capitalisation of 100 million Euros.
During the first semester of the year, 94,729,181 CTT shares were traded at Euronext Lisbon stock exchange, corresponding to a daily average of 757,833 shares, which translates into an annualised ratio of 126% of the share capital.
Human resources management continued to be driven by the priorities of i) ongoing investment in qualification and training; and ii) optimisation and adjustment of staff, in order to respond to the market evolution and challenges faced by CTT, maintaining a sound social climate.
The need to reduce staff numbers was addressed by not replacing retiring employees, reducing the number of employees with fixed-term contracts and negotiating voluntary departure conditions with interested employees. Moreover, employees with special conditions were re-assessed, to assign them to more adequate jobs and to focus on mobility between the different businesses of CTT, promoting the insourcing of operating activities whenever possible.
As a result of the necessary policy of adjustment of human resources to the market evolution, as at 30 June 2014, the number of CTT employees (permanent staff and fixed-term contracts) came to 12,722, corresponding to 434 less (-3.3%) than in the first semester of 2013. This includes 7,173 employees in the area of operations and mail delivery (which includes around 5,000 postmen / postwomen) and 2,720 allocated to the Retail Network.
| 30.06.2014 | 30.06.2013 | r 2014/2013 | ||
|---|---|---|---|---|
| 10,344 | 10,660 | -316 | -3.0% | |
| Mail and Business Solutions | 7,624 | 7,887 | -263 | -3.3% |
| Retail Network | 2,720 | 2,773 | -53 | -1.9% |
| Express & Parcels | 1,176 | 1,174 | 2 | 0.2% |
| Financial Services | 103 | 104 | -1 | -1.0% |
| Other | 1,099 | 1,218 | -119 | -9.8% |
| Total, of which: | 12,722 | 13,156 | -434 | -3.3% |
| Permanent staff | 11,586 | 11,989 | -403 | -3.4% |
| Fixed-term contracts | 1,136 | 1,167 | -31 | -2.7% |
| Total in Portugal | 12,164 | 12,615 | -451 | -3.6% |
During the first semester, only 35 employees were recruited (24 by Tourline Express in Spain, 1 by PayShop, 4 by CTT Expresso and 6 by the parent company), while 97 employees left. Of those leaving, 34 retired, 52 left following termination of their employment contracts (including 18 who signed mutual agreements), and 11 passed away. Two employment suspension contracts were signed, one of which referred to an employee requesting retirement.
The first programme of identification and development of potential for new managerial staff for CTT and its subsidiary companies was launched in January 2014. This programme is covered by the human capital development policies, in a perspective of talent and skill management, aimed, on the one hand, at obtaining better knowledge of the employees' profiles and potential and, on the other hand, carrying out actions to develop personal skills, with a view to strengthening business capacity and competence. The programme underway covers a first group of 100 participants, with the involvement of their supervisors.
An annual process of performance assessment relative to 2013 was conducted, covering all employees and seeking to appraise the individual and team contribution towards the objectives and results achieved.
The investment in the acquisition and development of human capital skills during the first semester was strategically guided predominantly to:
The most intense training effort took place in the Retail Network. Regarding forms of organisation, special reference should be made to the growth of remote training, due to its strategic role in the creation and dissemination of courses directed at business and support activities.
During the first semester, CTT recorded 150,793 training hours (+43% year-on-year) which involved 23,106 participations (+18%).
To increase the value of its employees, through better skills and qualifications, both professional and academic, remains a strategic line of action for CTT.
Regarding recruitment and mobility, 299 job openings were advertised internally to fill vacant positions. Eighteen external internships were granted, 5 curricular, including one to a young person with special educational needs, and 13 professional. Twelve professional internships were
concluded, under the protocol with IEFP (Employment and Vocational Training Institute) and one under the agreement with Aveiro University.
During the second quarter of 2014, various initiatives were launched aimed at the development and strengthening of human capital, with active policies on training, career plans and variable remuneration indexed to short and medium-term objectives. Still under design for implementation during the second semester of 2014, these measures will reward performance, strengthen motivation, transparency and equity, retain valuable resources at the company and attracting new personnel.
The development of the Financial Services and Express & Parcels business units will require strengthening CTT's human capital, greater labour flexibility and the partial indexing of remunerations to future growth and profitability objectives. In this context, there might be an increase of staff costs, although these costs will be directly related to the company's ambitions of growth defined in the strategy under implementation.
In the area of hygiene, safety and ergonomics, in terms of prevention, a total of 104 interventions for assessment of working conditions and risks at CTT establishments were conducted during the first half of 2014. A total of 452 work-related accidents were reported, 0.4% more than in the same period of 2013. In the semester, one road accident with fatal consequences occurred during the commute to work, with third party liability.
We highlight the insourcing of the occupational safety services, with all the activities being assured by the company's technical staff.
The social support provided to CTT Social Work beneficiaries entailed a survey of the socio-economic status and specific problems faced by the individuals involved and their families, with a view to finding the most suitable solutions. In this context, the social support to beneficiaries followed approximately 670 cases (drug abuse, mental health, support to the elderly and social action) which led to 24 visits to institutions and homes, 324 personal interviews and around 3,000 telephone calls.
During the first semester of 2014, CTT maintained high levels of operating performance, with the OQSI (Overall Quality of Service Index) standing at 243.8 points, compared to an objective of 100. This result is over 13.8 points higher than that achieved in the same period of 2013.
The quality objectives for international mail defined by the EU Directive for the postal sector were largely exceeded in the Portuguese case.
The good operating performance has been reflected in positive perceptions by the customers: 85.6% of the customers state that CTT's overall quality of service is good or very good.
In the first semester, all the agreed variables exceeded the established objective values:
| Quality Levels | Minimum | Target | Score |
|---|---|---|---|
| Priority Mail | |||
| % Delivered the following day (Mainland) | 93.50 | 94.50 | 95.20 |
| % Delivered within two days (Azores and Madeira) |
84.00 | 87.00 | 94.30 |
| % Delivered within ten days | 99.75 | 99.85 | 99.93 |
| Ordinary Mail | |||
| % Delivered within three days | 95.50 | 96.30 | 97.70 |
| % Delivered within fifteen days | 99.77 | 99.86 | 99.89 |
| Newspapers and Periodicals | |||
| % Delivered within three days | 95.50 | 96.30 | 97.90 |
| International Mail | |||
| % Delivered within three days | 85.00 | 88.00 | 91.70 |
| % Delivered within five days | 95.00 | 97.00 | 98.80 |
| Parcels | |||
| % Delivered within three days | 90.50 | 92.00 | 94.40 |
| Waiting time at post offices | |||
| % Assisted within 10 minutes | 75.00 | 85.00 | 91.60 |
The Quality Certification of the Control Systems associated to the calculation of the Quality of Service Indices (QSI) was obtained in March 2014. With the exception of international mail (QSI 7 and 8), all the remaining eight QSI are certified.
In the first semester of the year, the effort to maintain the various already certified management systems at CTT and its subsidiaries continued, with work underway on the certification of new types of operating units.
During this period, a new application was submitted to the "Committed to Excellence", under the EFQM (European Foundation for Quality Management) European Model of Excellence, covering CTT's entire operational network: post offices, postal delivery offices and production and logistics centres. Consequently, three improvement actions are underway which will be assessed in the first quarter of 2015.
It should be noted that CTT was the first European postal operator to achieve the recognition of "Committed to Excellence".
The telephone (66%) and electronic mail (34%) were the communication channels predominantly used by customers to contact CTT, with the former losing weight to the detriment of the latter.
During the first semester of 2014, the telephone channel recorded 316,122 answered calls, representing 13% growth relative to the same period of 2013. This increase was due to the increased number of telephone calls placed through the CTT line (+18%) and telecommunications line (+16%), since use of ViaCTT (-20%) has been progressively declining.
The CTT line has various functionalities which have shown accentuated growth: letter / parcel tracking & tracing, which includes questions related to customs clearance (+24%), the toll payment service (+35%) and complaints (+49%). The downward trend of the postcode enquiry service continued
(-17%).
For electronic mail, 161 421 contacts were received, representing growth of 60% of this channel year-on-year, with particular use of the following functionalities: telecommunications (+8%), virtual shop (+10%), information (+25%), toll payment (+28%), complaints (+52%), postcodes (+60%) and international (+134% for questions related to customs clearance). The only exception was ViaCTT mailbox which decreased by 32%, due to the simplification of the password recovery process for access to the electronic mailbox.
CTT's mission and values highlight innovation as a guarantee to the fulfilment of the mission - today and in the future - and as a focus on the continuous search for new ideas, processes and solutions.
Therefore, various initiatives and projects were carried out in the context of innovation during the first semester of 2014, in particular:
The work of involvement and dialogue with the different stakeholders was maintained and deepened, as it is fundamental for the continued creation of share value. The quality of service reached 243.8 points compared to the target of 100 points set with the Regulator and 86% of the customers stated they were satisfied or very satisfied with the provided service.
A total of 151 thousand training hours of were provided to employees, 43% more than the same period of the previous year, with 23 thousand participations (+18%). On matters of occupational safety, 452 work-related accidents were reported, 0.4% more than in the same period of 2013 (one of which was a fatal road accident on the commute to work, with third-party liability). The absenteeism rate decreased by 0.4 points to 5.9%.
During the period under analysis, the Occupational Safety services were insourced, with 104 risk assessment interventions having taken place at CTT establishments. A new service provider was contracted for occupational medicine services as of February 2014, with close to 1,900 medical examinations having been conducted.
In the context of relations with the community, the Agreement of Adherence to the Companies Forum for Equality, of which CTT is a founding member, was renewed and CTT subscribed to the "Birth Rate Appeal", areas of work recognised through the attribution of the "Human Resources Portugal 2013" award.
Various social and environmental initiatives were supported to the value of approximately 343 thousand Euros (CAIS, Salvador, Half Marathons of Lisbon and Portugal Wheelchair Race, Portuguese Association against Leukaemia, Women's Race and Pirilampo Mágico). Three programmes were held for the collection of articles (Fight Against Poverty and Social Exclusion Project, Baby Bank and Movimento Reutilizar.org), which generated around 19 thousand solidarity packages. Around 100 CTT volunteers were mobilised in joint actions with the Portuguese Cardiology Foundation, the Food Bank Against Hunger, the Nature and Forestry Conservation Institute and Biodiversity4All.
The focus on clean technologies continued, with the launch, during the first semester of 2014, of 182 vehicles, 18 of which with electric motors, that will contribute to saving 42 thousand litres of fuel / year and to reduce over one thousand tons of CO2 emissions. Considering the total fleet, both CTT's own and leased, 1,139 vehicles were refurbished during the period. The Energy Rationalisation Agreement 2007-2013 was concluded for CTT's largest building at Cabo Ruivo, with a reduction of consumption of 14.5% and the focus on the energy rationalisation of the company's real estate properties continued, with the energy certification of over 48 facilities. During the period, energy consumption fell by 2.3% and CO2 emissions by 1.9%.
In the area of sustainable marketing, the process of participative offsetting of CTT's carbon emissions was approved and an international environmental standard was published for Eco portfolios, with CTT having been involved in its preparation. There has been a growing public presence of CTT's environmental programme in many forums and in the media. Confirming CTT's leadership on the matter, the "Environment Trusted Brand 2014" was awarded for the first time by the readers of the Reader's Digest Selections.
CTT's stakeholders, in particular its shareholder structure substantially changed with the company's privatisation process through an IPO, and is now composed of a diversified group of shareholders, mostly foreign institutional shareholders.
During the first semester of 2014, significant changes in the company's corporate governance model occurred.
Therefore, with the objective of adapting the Company's Articles of Association to the new shareholder structure after the privatisation as well as to the best practices applicable to listed companies issuers of shares admitted to trading on regulated markets, the shareholders approved, at the Extraordinary General Meeting held on 24 March 2014, the submitted proposals to amend the Articles of Association, which led to the alteration of the one-tier governance model to a two-tier Anglo-Saxon model, which is implemented as at the date of the present Interim Report as shown in the structure below.
According to this new governance model and as established in article 6 of CTT's Articles of Association, the company's statutory bodies are: the General Meeting, the Board of Directors, the Audit Committee and the Statutory Auditor.
The company also has, under the legal terms, a Company Secretary and an Alternate appointed by the Board of Directors.
The current Board of Directors is composed of five Executive Directors and six Non-Executive Directors and, from among them, a set of independent Directors.
According to this governance model, the Board of Directors, as established under number two of article 16 of the Articles of Association, delegated the company's current management to an Executive Committee, within the legally permitted limits.
Remain under the Board of Directors (i) the duties that, pursuant to the applicable law, the articles of association and its internal regulation, cannot be delegated to an Executive Committee, mainly including decisions of strategic nature, and (ii) the development of specific duties of supervision of the executive management, namely on matters of corporate governance, assessment and appointments, through Non-Executive Directors and / or the constitution of internal committees.
CTT's governance model now also includes a Remuneration Committee, elected at the General Meeting and responsible for establishing the remuneration of the members of the statutory bodies.
The Audit Committee is composed of three Non-Executive Directors and is entrusted with proposing, to the General Meeting, the election of the Statutory Auditor. The Statutory Auditor, jointly with the Audit Committee, supervises the company's activity as well as CTT's internal control, internal audit and risk management systems. The Audit Committee is also responsible for supervising the independence of the Statutory Auditor.
The Statutory Auditor and respective alternate currently in office were elected at the Annual General Meeting held on 5 May 2014, to complete the term of office 2012/2014 after the resignation of the previous Statutory Auditor on 8 April 2014.
Under this new structure of corporate governance, a Corporate Governance, Assessment and Nominating Committee was also created, responsible for the ongoing monitoring and supervision of matters related to the company's corporate governance, assessment and nominations, providing all the necessary support on these issues to the Board of Directors and the Remuneration Committee.
The current corporate governance structure is as follows:
(1) Corporate Governance, Assessment and Nominating Committee
| Members | Board of the General Meeting |
|---|---|
| Júlio de Lemos de Castro Caldas | Chairman |
| Francisco Maria Freitas de Moraes Sarmento Ramalho | Vice-Chairman |
| Members | Board of Directors | Executive Committee |
Audit Committee |
CGANC (1) | Independence (2) |
|---|---|---|---|---|---|
| Francisco José Queiroz de Barros de Lacerda | Chairman | Chairman | Member | ||
| António Sarmento Gomes Mota | Vice-Chairman | Chairman | Chairman | Yes | |
| Manuel Cabral de Abreu Castelo-Branco | Vice-Chairman | Member | |||
| André Manuel Pereira Gorjão de Andrade Costa | Member | Member | |||
| Dionízia Maria Ribeiro Farinha Ferreira | Member | Member | |||
| Ana Maria de Carvalho Jordão Ribeiro Monteiro de Macedo | Member | Member | |||
| António Manuel de Carvalho Ferreira Vitorino | Member | Member | Yes | ||
| Rui Miguel de Oliveira Horta e Costa(3) | Member | Member | Yes | ||
| Nuno Fernandes Thomaz | Member | Member | Yes | ||
| Diogo José Paredes Leite de Campos | Member | Member | Yes | ||
| Parpública-Participações Públicas (SGPS), S.A. | Member | Member |
(1) Corporate Governance, Assessment and Nominating Committee.
(2) The assessment of independence was conducted pursuant to number 5 of article 414 of the CSC and CMVM Recommendations of 2013 number II.1.7.
(3) Co-opted by deliberation of the Board of Directors held on 29 July 2014 to replace José Alfredo de Almeida Honório, who resigned from the position of Non-Executive Director on 14 July 2014.
| Members | Remuneration Committee |
|---|---|
| João Luís Ramalho de Carvalho Talone | Chairman |
| José Gonçalo Ferreira Maury | Member |
| Rui Manuel Meireles dos Anjos Alpalhão | Member |
The Annual General Meeting of 5 May 2014, under proposal of the Audit Committee, elected KPMG & Associados, SROC, S.A. to complete the term of office 2012/2014, represented by Maria Cristina Santos Ferreira, registered at the Chartered Accounts Association (OROC) under number 1010, as permanent Statutory Auditor and Vítor Manuel da Cunha Ribeirinho as Alternate Statutory Auditor. A KPMG & Associados, SROC, S.A. also performs the duties of External Auditor of the company.
In the first semester of 2014, CTT share capital was 75,000,000 Euros, which is fully underwritten and paid-up, represented by 150,000,000 shares with a nominal value of fifty cents each. The shares are registered and in book-entry form and there are no different categories of shares. Since 5 December 2013, as part of the privatization process of CTT, the total of shares representing the capital of the Company is admitted to trading on the regulated market of Euronext Lisbon.
On 31 December 2013, following the privatisation of CTT, 70.0% of the Company share capital was
held by private shareholders and 30.0% by the State (although with the votes that were imputed to it, this amounted to 36.36% of the voting rights). As of 3 January 2014, after the completion of the share stabilisation operations where the Stabilisation Manager under the Institutional Underwriting Agreement exercised the Underwriters' put option in respect to 2,253,834 shares corresponding to 1.5% of the share capital of CTT, the State holds a 31.5% stake (with an equal proportion of the voting rights) and the private sector shareholders hold the remaining 68.5%.
No limitations are defined in the Articles of Association of the Company regarding the transfer or ownership of Company shares.
The shares acquired by CTT employees under the offer reserved to them in the privatization process were subject to a lock-up period of 90 days as from the date of registration in their respective securities account, which ended on 5 March 2014.
The shares of the Company which are still held by Parpública – Participações Públicas (SGPS), S.A. (31.5%) and that were not included in the IPO can only be sold after the end of a period of 270 days from the date of admission to trading, if expressly authorised by the financial Institutions, the Global Coordinators of the Offer, subject to the fulfilment of a series of formal procedures to be undertaken by the Portuguese State when it deems appropriate.
At the Council of Ministers held on 26 June 2014, the Portuguese government approved a diploma that extends to different modalities the sale of the 31.5% stake that the Portuguese State still holds in CTT share capital. In addition to the conditions set forth in Decree-Law No. 129/2013, of 6 September, the privatisation of the remaining stake of PARPÚBLICA – Participações Públicas, SGPS, SA in the share capital of CTT – Correios de Portugal, S.A. may also be implemented through one or more operations of direct institutional sale as an autonomous modality of sale by private offering, which may be held through one or more processes with or without accelerated placement, aiming at the dispersion of shares by national or international qualified investors.
The Investor Relations of CTT aims to build strong relationships with shareholders, investors, analysts and capital markets, as well as with the Portuguese Securities Commission (CMVM) and Euronext Lisbon, by providing timely, clear and transparent information on the evolution of CTT's current business in economic, financial and governance terms.
During the first semester of the year, CTT issued 35 press releases, received and answered around 400 emails from and to small and large investors, took part in 8 roadshows and 6 conferences in New York, London, Frankfurt, Paris, Edinburgh and Lisbon, meeting with 137 investors. The company also hosted 16 reverse roadshows (investors visiting CTT) and held 24 conference calls with investors, including 2 result webcasts.
CTT increased the time dedicated to research analysts, so as to reach wide and diversified research coverage and increase awareness of the company in the capital markets, given its recent presence in such markets. Following this work with research analysts, CTT share coverage significantly grew during the first half of 2014 when 4 analysts, besides the 4 related to the banks that were involved in the Initial Public Offering (Caixa Geral de Depósitos, Banco Espírito Santo, JP Morgan, BBVA), initiated coverage of the CTT share. These 4 new analysts represent: 2 national banks (Millennium BCP and BPI) and 2 international banks (Morgan Stanley and Jefferies)1 .
On 30 June 2014, the closing market price of the CTT share was €7.26, while the average target price of the 8 analysts who cover it was €8.11. On that date, 50% of those analysts issued positive recommendations and another 50% neutral recommendations. No negative recommendations were issued.
CTT – Correios de Portugal, S.A. 2014 financial calendar includes the following company events:
| Event | Date |
|---|---|
| Full Year 2013 Results | 12 March 2014* |
| Extraordinary Shareholders' General Meeting | 24 March 2014 |
| Annual Shareholders' General Meeting | 5 May 2014 |
| st Quarter 2014 Results 1 |
7 May 2014** |
| Ex-dividend | 19 May 2014 |
| Dividend Payment | 22 May 2014 |
| st Half 2014 Results 1 |
30 July 2014*(1) |
| rd Quarter 2014 Results 3 |
4 November 2014** |
| Held in the 1st semester | To be held in the 2nd semester |
(*) Before market opening (**) After market close
(1) Published on 29 July, after market close
1 In July Royal Bank of Canada (RBC) and Berenberg also initiated coverage of the CTT share.
The most significant risks faced by CTT, which might potentially compromise achievement of the strategic and sustainable growth objectives, include those listed below. Their detailed description is presented in the Annual Report of 2013 (Part III – 1. Corporate Governance Report) and in the IPO Prospectus.
Moreover, there may be risks that are yet unknown or others which, in spite of currently being considered irrelevant, might become important in the future. All these factors may negatively affect CTT's business, financial situation, earnings or future prospects.
Risk management is performed by the Board of Directors in coordination with the heads of the different departments in order to identify, appraise and manage the uncertainties and threats which might influence the pursuit and the achievement of strategic and tactical objectives.
The Internal Audit and Risk Management departments support the Board of Directors in the ongoing appraisal of the established risk management procedures, in order to ensure:
The Risk Management department is responsible for maintaining a risk management model which is in line with the objectives of CTT and its subsidiaries, as well as centralised management of the risk management process.
The Internal Audit department is responsible for the systematic assessment of the adequacy and effectiveness of the internal control system, according to the risk level associated to the processes, systems and business units, namely the appraisal of its operative efficiency on the management of identified relevant risks.
There are internal information and communication mechanisms to follow and monitor the organisation's performance at various levels, based on the internal control system, as a management tool, concerning the following aspects:
On 22 July 2014, the Non-Executive Director José Alfredo de Almeida Honório resigned from his position, due to his recent co-optation as an Executive Director of another entity. For his replacement, the Board of Directors decided to co-opt Rui Miguel de Oliveira Horta e Costa on 29 July 2014. This co-optation will be submitted for ratification to the next General Meeting of the company.
The agreement with IGFSS (Institute of Financial Management of the Social Security) for the payment of additional social benefits through postal money order was formalised on 3 July 2014, supporting the growth of this product line in the second semester of 2014.
On 29 July 2014, following three invitations to tender subject to previous qualification, the Board of Directors deliberated to award the IT and communication services contracts regarding Basic Infrastructure Services, Helpdesk & Desktop Management Services, and Fixed Voice and Data Telecommunications Services. Although some legal steps are still ongoing, CTT expects to be able to formalise the above-mentioned contracts at the soonest possible date.
The tender procedures were launched and the contracts awarded for a period of 3 years, including an initial phase of 3 months, at the most, to transfer the services. As a result of these contract awards, CTT expects to obtain, starting from 2015, annual savings (excluding transition costs) of around 57% (14 million Euros) in the referred services vis-à-vis the former operating costs, which in 2014 are around 25 million Euros, as the annual cost of the referred services is estimated to be of around 11 million Euros.
Due to the more favourable macroeconomic environment, as well as the Transformation Programme initiatives implemented in 2013 and the new measures defined for 2014, CTT has strong expectations of being able to achieve the strategy set for 2014.
Nevertheless, it is important to consider that GDP growth in Portugal is expected to continue to be strongly influenced by growth of exports and not by a clear recovery of domestic consumption, the main demand driver of the products and services offered by CTT, particularly in the mail business. In this context, mail demand is expected to continue declining, not only in line with structural trends, but also owing to macroeconomic factors, albeit remaining above the natural long-term trend.
Concerning the implementation of Services of General Economic Interest (SGEI), it is foreseen that the definition of the economic model of this partnership will continue in the third quarter, benefiting from the experience of the pilot project, after which all the conditions will be met for the structuring of a longer lasting agreement between the Government and CTT.
E-commerce will continue to be the main driver of the Express & Parcels business. Growth in the B2B market, in Portugal or Spain, will not be driven as much by domestic GDP growth but rather by the
expected migration of Iberian retailers to online retail platforms. For this purpose, CTT is speeding up the implementation of the Transformation Programme initiatives aimed at the Express & Parcels business in 2014, not only to improve its logistics solutions offer for this market, but essentially to restructure and optimise the distribution networks in Portugal and Spain.
Regarding Financial Services, CTT will be able to consolidate its position as a relevant player in this market in 2014, not only through the savings products already available, but also by launching new products and services, with a view to driving business growth, increasing revenue and, first and foremost, contributing to increasing CTT's profitability. Independently, although related to the future decision on the Postal Bank, new financial products and / or new partnerships are under analysis to add to the current offer and promote the sustainability of the growth which this area has achieved. Health insurance and prepaid cards are some of the initiatives under study.
The company aims to achieve stable operating revenues. This objective is based on the expectation that the businesses experiencing growth (Financial Services and Express & Parcels) will offset the decline in mail revenues.
The Balance Sheet optimisation measures will continue, such as for example the optimisation of working capital. CTT will continue to manage the employee benefits with a view to the monetisation of the associated tax asset.
Based on the performance achieved in the first semester and on the outlook for the rest of 2014, the Board of Directors expects to be able to propose to the shareholders a minimum dividend of €0.435 per share, for the financial year 2014, payable in 2015.
Pursuant to article 246 of the Securities Market Code, the members of the Board of Directors and Audit Committee of CTT, identified below, state that, as far as they are aware, the interim condensed consolidated accounts relative to the first half of 2014 were prepared in conformity with the applicable accounting rules, providing a true and appropriate reflection of the assets and liabilities, financial situation and net income of CTT and the companies included in its consolidation perimeter, and that the management report faithfully presents the important events which occurred in the first half of 2014 and their impact on the interim condensed consolidated accounts, as well as the main risks and uncertainties for the second half of this year.
Lisbon, 29 July 2014
| ________ Francisco José Queiroz de Barros de Lacerda |
Chairman & CEO |
|---|---|
| ________ António Sarmento Gomes Mota |
Vice-Chairman of the Board of Directors Chairman of the Audit Committee |
| ________ Manuel Cabral de Abreu Castelo-Branco |
Vice-Chairman of the Board of Directors Executive Director |
| ________ André Manuel Pereira Gorjão de Andrade Costa |
Executive Director |
| ________ Dionizia Maria Ribeiro Farinha Ferreira |
Executive Director |
| ________ Ana Mª. de Carvalho Jordão Ribeiro Monteiro de Macedo |
Executive Director |
| ________ António Manuel de Carvalho Ferreira Vitorino |
Non-Executive Director |
| ________ Nuno de Carvalho Fernandes Thomaz |
Non-Executive Director |
| ________ Diogo José Paredes Leite de Campos |
Non-Executive Director |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2014 AND 31 DECEMBER 2013
Euros
| Unaudited | |||
|---|---|---|---|
| NOTES | 30.06.2014 | 31.12.2013 | |
| ASSETS | |||
| Non-current assets | |||
| Tangible fixed assets | 4 | 213,878,400 | 225,364,429 |
| Investment properties | 6 | 21,071,602 | 21,761,886 |
| Intangible assets | 5 | 12,525,900 | 13,049,308 |
| Goodwill | 8 | 24,297,705 | 25,083,869 |
| Investments in associated companies | 475,018 | 710,723 | |
| Other investments | 1,106,812 | 130,829 | |
| Other non-current assets | 834,115 | 1,951,139 | |
| Deferred tax assets | 1 8 |
102,351,984 | 103,645,256 |
| Total non-current assets | 376,541,536 | 391,697,439 | |
| Current assets | |||
| Inventories | 5,931,916 | 5,993,971 | |
| Accounts receivable | 140,224,785 | 135,589,645 | |
| Deferrals | 4,772,327 | 4,875,139 | |
| Other current assets | 71,153,953 | 17,102,436 | |
| Cash and cash equivalents | 675,911,963 | 544,875,803 | |
| Total current assets | 897,994,944 | 708,436,994 | |
| Total assets | 1,274,536,480 | 1,100,134,433 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 75,000,000 | 75,000,000 | |
| Reserves | 1 1 |
30,397,559 | 30,397,559 |
| Retained earnings | 1 1 |
84,381,869 | 83,367,465 |
| Other changes in equity | 1 1 |
24,114,295 | 24,548,756 |
| Net profit attributable to equity holders of parent company | 36,063,127 | 61,016,067 | |
| Non-controlling interests Total equity |
(21,696) 249,935,154 |
1,604,372 275,934,219 |
|
| Liabilities | |||
| Non-current liabilities | |||
| Medium and long term debt | 2,531,391 | 3,282,126 | |
| Employee benefits Provisions |
1 4 |
276,156,847 37,036,280 |
278,638,868 38,501,835 |
| Deferrals | 1 5 |
7,631,922 | 8,837,037 |
| Deferred tax liabilities | 1 8 |
5,301,925 | 5,481,878 |
| Total non-current liabilities | 328,658,365 | 334,741,744 | |
| Current liabilities | |||
| Accounts payable | 1 6 |
574,881,564 | 391,958,039 |
| Employee benefits | 1 4 |
19,863,101 | 19,904,186 |
| Income taxes payable | 13,633,618 | 93,968 | |
| Short term debt | 4,644,838 | 3,716,557 | |
| Deferrals | 3,708,398 | 4,103,751 | |
| Other current liabilities | 79,211,442 | 69,681,969 | |
| Total current liabilities | 695,942,961 | 489,458,470 | |
| Total liabilities | 1,024,601,326 | 824,200,214 | |
| Total equity and liabilities | 1,274,536,480 | 1,100,134,433 |
The attached notes are an integral part of these consolidated financial statements
Euros
| Unaudited | |||
|---|---|---|---|
| NOTES | 30.06.2014 | 30.06.2013 | |
| Revenues | 356,503,303 | 350,616,708 | |
| Sales and services rendered | 344,979,810 | 344,184,823 | |
| Other operating income | 11,523,493 | 6,431,885 | |
| Operating costs | (301,567,678) | (303,075,290) | |
| Cost of sales | (7,489,995) | (7,760,344) | |
| External supplies and services | (114,390,157) | (115,590,703) | |
| Staff costs | 1 7 |
(161,578,611) | (155,714,135) |
| Impairment of inventories and accounts receivable, net | (1,524,746) | (1,916,894) | |
| Provisions, net | (1,550,581) | (3,520,424) | |
| Depreciation/amortisation and impairment of investments, net | (10,734,067) | (13,445,462) | |
| Other operating costs | (4,299,521) | (5,127,328) | |
| Earnings before financial income and taxes | 54,935,625 | 47,541,418 | |
| Financial results | (3,167,300) | (1,318,781) | |
| Interest expenses | (5,981,673) | (6,009,535) | |
| Interest income | 2,511,280 | 4,690,754 | |
| Gains/losses in associated companies | 303,093 | - | |
| Earnings before taxes | 51,768,325 | 46,222,637 | |
| Income tax for the period | 1 8 |
(15,730,684) | (14,405,036) |
| Net profit for the period | 36,037,641 | 31,817,601 | |
| Net profit for the period attributable to: | |||
| Equity holders of parent company | 36,063,127 | 31,643,489 | |
| Non-controlling interests | (25,486) | 174,112 | |
| Earnings per share of the parent company | 0.24 | 0.21 |
The attached notes are an integral part of these consolidated financial statements
Euros
| Unaudited | |||
|---|---|---|---|
| NOTES | 30.06.2014 | 30.06.2013 | |
| Net profit for the period | 36,037,641 | 31,817,601 | |
| Adjustments from application of the equity method (non re-classifiable adjustment to profit and loss) | 1 1 |
(1,663) | (21,521) |
| Employee benefits (non re-classifiable adjustment to profit and loss) | 1 4 |
(618,010) | - |
| Deferred tax/Employee benefits (non re-classifiable adjustment to profit and loss) | 1 8 |
183,549 | - |
| Other changes in equity | 1 1 |
(1,600,582) | 49,408 |
| Other comprehensive income for the period after taxes Comprehensive income for the period |
(2,036,705) 34,000,936 |
27,887 31,845,488 |
|
| Attributable to non-controlling interests Attributable to shareholders of CTT |
(1,626,068) 35,627,004 |
174,112 31,671,376 |
The attached notes are an integral part of these consolidated financial statements.
| NOTES | Share capital | Reserves | Other changes in equity |
Retained earnings |
Net profit for the year |
Non-controlling interests |
Total | |
|---|---|---|---|---|---|---|---|---|
| Balance on 1 January 2013 | 87,325,000 | 28,628,508 | 33,079,577 | 87,105,292 | 35,735,268 | 1,607,508 | 273,481,153 | |
| Appropriation of net profit for the year of 2012 Share capital reduction Dividends |
12 | (12,325,000) - - (12,325,000) |
12,325,000 - (10,555,949) 1,769,051 |
- - - - |
- 35,735,268 (39,444,053) (3,708,784) |
- (35,735,268) - (35,735,268) |
- - (64,174) (64,174) |
- - (50,064,175) (50,064,175) |
| Adjustments from the application of the equity method Comprehensive income for the period Balance on 31 December 2013 Actuarial gains/losses - Health Care Net profit for the period Other movements |
11 11 |
- - - - 75,000,000 - |
- - - - 30,397,559 - |
- - - (8,530,821) 24,548,756 (8,530,821) |
- - - (29,043) 83,367,465 (29,043) |
61,016,067 - - - 61,016,067 61,016,067 |
89,218 (28,181) - - 61,038 1,604,372 |
61,105,285 (28,181) (8,530,821) (29,043) 275,934,219 52,517,241 |
| Balance on 1 January 2014 | 75,000,000 | 30,397,559 | 24,548,756 | 83,367,465 | 61,016,067 | 1,604,372 | 275,934,219 | |
| Appropriation of net profit for the year of 2013 Share capital reduction Dividends |
12 | - - - - |
- - - - |
- - - - |
- 61,016,067 (60,000,000) 1,016,067 |
- (61,016,067) - (61,016,067) |
- - - - |
- - (60,000,000) (60,000,000) |
| Actuarial gains/losses - Health Care Other movements Participation sale |
11 | - - - |
- - - |
- - (434,461) |
- - (1,663) |
- - - |
(6,482) (1,594,100) - |
(8,145) (1,594,100) (434,461) |
| Adjustments from the application of the equity method Balance on 30 June 2014 (Unaudited) Comprehensive income for the period Net profit for the period |
- - 75,000,000 - |
- - 30,397,559 - |
- - 24,114,295 (434,461) |
- - 84,381,869 (1,663) |
36,063,127 - 36,063,127 36,063,127 |
- (25,486) (1,626,068) (21,696) |
- 36,037,641 34,000,936 249,935,154 |
CTT-CORREIOS DE PORTUGAL, S.A.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 30 JUNE 2014 AND 31 DECEMBER 2013
Euros
1 st Half of 2014
The attached notes are an integral part of these consolidated financial statements
| Euros | |||
|---|---|---|---|
| Unaudited | |||
| NOTES | 30.06.2014 | 30.06.2013 | |
| Operating activities | |||
| Collections from customers | 329,512,504 | 302,354,354 | |
| Payments to suppliers | (117,965,818) | (117,207,713) | |
| Payments to employees | (144,088,546) | (148,391,066) | |
| Cash flow generated by operations | 67,458,140 | 36,755,575 | |
| Payments/receivables of income taxes | (1,518,202) | (2,925,055) | |
| Other receivables/payments | 121,821,696 | 164,189,431 | |
| Cash flow from operating activities (1) | 187,761,633 | 198,019,951 | |
| Investment activities | |||
| Receivables resulting from: | |||
| Tangible fixed assets | 774,000 | 167,389 | |
| Financial investments | 4,020,100 | 33,160 | |
| Interest income | 2,328,319 | 3,037,314 | |
| Dividends | 198,423 | - | |
| Payments resulting from: | |||
| Tangible fixed assets | (3,653,590) | (1,920,795) | |
| Intangible assets | (4,238) | (262,938) | |
| Cash flow from investment activities (2) | 3,663,014 | 1,054,131 | |
| Financing activities | |||
| Receivables resulting from: | |||
| Loans obtained | 2,820,000 | 2,691,527 | |
| Payments resulting from: | |||
| Loans repaid | (1,501,990) | (6,944,369) | |
| Interest expenses | (513,289) | (476,343) | |
| Finance leases | (496,287) | (499,485) | |
| Dividends | 12 | (60,000,000) | (37,500,000) |
| Cash flow from financing activities (3) | (59,691,566) | (42,728,670) | |
| Net change in cash and cash equivalents (1+2+3) | 131,733,082 | 156,345,412 | |
| Changes in the consolidation perimeter | (696,922) | - | |
| Cash and cash equivalents at the beginning of the period | 544,875,803 | 489,303,463 | |
| Cash and cash equivalents at the end of the period | 675,911,963 | 645,648,874 |
The attached notes are an integral part of these consolidated financial statements
Notes to the interim condensed consolidated financial statements (Amounts expressed in Euros)
| 1. | INTRODUCTION 1.1. CTT – Correios de Portugal, S.A. (parent company) 1.2. Activity |
67 67 68 |
|---|---|---|
| 2. | SIGNIFICANT ACCOUNTING POLICIES 2.1. Basis of presentation |
69 70 |
| 3. | SEGMENT REPORTING | 70 |
| 4. | TANGIBLE FIXED ASSETS | 74 |
| 5. | INTANGIBLE ASSETS | 76 |
| 6. | INVESTMENT PROPERTIES | 78 |
| 7. | COMPANIES INCLUDED IN THE CONSOLIDATION | 79 |
| 8. | GOODWILL | 81 |
| 9. | ACCUMULATED IMPAIRMENT LOSSES | 83 |
| 10. | EQUITY | 83 |
| 11. | RESERVES, OTHER CHANGES IN EQUITY AND RETAINED EARNINGS | 85 |
| 12. | DIVIDENDS | 86 |
| 13. | EARNINGS PER SHARE | 87 |
| 14. | EMPLOYEE BENEFITS | 87 |
| 15. | PROVISIONS, GUARANTEES PROVIDED, CONTINGENT LIABILITIES AND COMMITMENTS | 93 |
| 16. | ACCOUNTS PAYABLE | 96 |
| 17. | STAFF COSTS | 97 |
| 18. | INCOME TAX FOR THE YEAR | 98 |
| 19. | RELATED PARTIES | 101 |
| 20. | SUBSEQUENT EVENTS | 102 |
CTT – Correios de Portugal, S. A. – Public Company ("CTT", "Parent Company" or "Company"), with head Office at Avenida D. João II, nº 13, 1999-001 in Lisbon, had its origin in the "Administração Geral dos Correios Telégrafos e Telefones" a government department and its present legal form is the result of successive re-organizations carried out by the Portuguese state business sector in the Communications area.
Decree-Law Nr. 49.368 of 10 November 1969 founded the state-owned company CTT - Correios e Telecomunicações de Portugal, E. P., which started operating on 1 January 1970. By Decree-Law No. 87/92, of 14 May, CTT – Correios e Telecomunicações de Portugal, E. P., was transformed into a legal entity governed by private law, with the status of a state-owned public limited company. Finally, with the foundation of the former Telecom Portugal, S.A. by spin-off from Correios e Telecomunicações de Portugal, S.A. under Decree-Law No. 277/92 of 15 December, the Company's name was changed to the current CTT – Correios de Portugal, S.A.
On 31 January 2013 the Portuguese State through Dispatch No. 2468/12 – SETF, 28 December determined the transfer of the investment owned by the Portuguese State in CTT to Parpública – Participações Públicas, SGPS, S.A.
At the General Meeting held on 30 October 2013, the registered capital of CTT was reduced from 87,325,000 Euros to 75,000,000 Euros, being from that date onwards represented by 150,000,000 shares, as a result of a stock split which was accomplished through the reduction of the nominal value from 4.99 Euros to 0.50 Euros per share.
For the period ended 31 December 2013 CTT's capital was opened to the private sector. Thus, and supported by Decree-Law No. 129/2013 of 6 September and the Resolution of the Council of Ministers ("RCM") No. 62-A/2013, 10 October, RCM No. 62-B/2013 of 10 October and RCM No. 72- B/2013, 14 November, on 5 December, 2013 the first phase of the privatization of CTT's capital took place. On this date, 63.64% of the shares of CTT (95.5 million shares) were transferred to the private sector, of which 14% (21 million shares) were sold in Public Offering and 49.64% (74.5 million shares) through an Institutional Direct Sale. On 31 December, 2013 the Portuguese State, through Parpública – Participações Públicas, SGPS, S.A. held 30.00% by direct ownership and 6.36% by attribution of the shares of CTT.
On 30 June, 2014 Parpública – Participações Públicas, SGPS, S.A., holds 31.503% of CTT's share capital.
The shares of CTT are listed on Euronext Lisbon.
The interim condensed consolidated financial statements attached herewith are expressed in Euro as this is the functional currency of the Group.
These interim condensed consolidated financial statements were approved by the Board of Directors on 29 July 2014.
CTT and its subsidiaries ("CTT Group" or "Group"): CTT - Expresso – Serviços Postais e Logística, S.A., PostContacto – Correio Publicitário, Lda., Payshop (Portugal), S.A., CTT Gest - Gestão de Serviços e Equipamentos Postais, S.A., Mailtec Holding, SGPS, S.A. and their subsidiaries and Tourline Express Mensajería, SLU and its associates, establish, manage and operate the Universal Postal Service infrastructure and render financial services, which include the transfer of funds through current accounts and that might also be operated by a financial operator or a para-banking entity to be set up by the Group. In addition, CTT provides services that are complementary, as well as the marketing of goods or provision of services on its own account or on behalf of third parties, provided that these are related with the normal operations of the public postal network, namely, the provision of information, networks and electronic communication services, including related resources and services and a mobile virtual network operator (MVNO), with the trade mark "Phone-ix" operated by TMN - Telecomunicações Móveis Nacionais, S. A..
The postal service is provided by CTT under the Concession Contract of the Universal Postal Service signed on 1 September, 2000 between the Portuguese State and CTT. In addition to the services under concession, CTT can provide other postal services as well as develop other activities, particularly those which enable the use of the universal service network in a profitable manner, either directly or through incorporation or interests in companies or other forms of cooperation between companies. Among these activities the provision of services of public interest or general interest subject to conditions to be agreed with the State should be highlighted.
Following the amendments introduced by Directive 2008/6/EC of 20 February 2008 of the European Parliament and of the Council to the regulatory framework that governs the provision of postal services, it was transposed into national law in 2012 through the adoption of Law Nr. 17/2012, of 26 April ("new Postal Law"), with the amendments introduced in 2013 by Decree-Law Nr. 160/2013, of 19 November, revoking Law Nr. 102/99, of 26 July.
The new Postal Law establishes the legal regime for the provision of postal services in full competition in the national territory, as well as international services originating or terminating in the country.
Thus, as from the entry into force of the new Postal Law, the postal market in Portugal has been fully open to competition, eliminating areas within the universal service that were still reserved for the provider of the universal postal service CTT – Correios de Portugal, SA ("CTT"). However, on the grounds of the general interest, the following activities and services remained reserved: placement of
mailboxes on public roads for the acceptance of mail, issuance and sale of postage stamps with the word "Portugal" and registered mail used in legal or administrative proceedings.
According to the new Postal Law the universal postal service includes the following services, of national and international scope:
As a result of the new Postal Law, the Portuguese Government revised the basis of the concession, through the publication of Decree-Law Nr. 160/2013 of 19 November, after which the fourth amendment to the concession Contract of the Universal Postal Service was made on 31 December 2013.
Thus, the concession contract signed between the Portuguese State and CTT on 1 September, 2000, subsequently amended on 1 October, 2001, 9 September, 2003, 26 July, 2006 and 31 December 2013, covers:
As the Universal Postal Service incumbent operator, CTT remains the provider of universal postal services until 2020, ensuring the exclusivity of the reserved activities and services mentioned above.
Once the concession ends, in the event that it is not renewed, CTT may provide, together with any other operators, all the postal services, in a system of free competition, in accordance with a strategic and commercial policy, excluding the services granted by concession on an exclusive basis.
In summary, in view of the legal and regulatory framework in force, CTT considers that there are no grounds for the introduction of any relevant change to the accounting policies of the Company.
The adopted accounting policies, including financial risk management policies, are consistent with those followed in the preparation of the consolidated financial statements for the year ended 31 December 2013.
The interim condensed consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards ("IAS / IFRS") as adopted in the European Union as at 1 January 2014, and in accordance with IAS 34 - Interim Financial Reporting.
In accordance with IFRS 8, the Group discloses the segment financial reporting.
The Board of Directors regularly reviews segmental reports, using them to assess and report each business performance, as well as to allocate resources.
In 2014 the Business Solutions segment, existing in 2013, became part of the Mail segment.
With the sale in the first half of 2014 of the 51% EAD's participation, held by CTT, S.A., this company was excluded from the scope of the Mail segment in 2014.
The business of CTT is organized in the following segments:
The segments cover the three CTT business markets, as follows:
Besides the above mentioned segments, there are two sales channels, which are common to all businesses and products, the Retail Network and Large Customers. In this analysis, the Retail Network, which is connected to the obligations of the universal postal service concession, is included in the Mail segment and integrates internal revenues related to the provision of services to other segments, as well as the sale in its network of third party products and services.
The amounts reported in each business segment result from the aggregation of the subsidiaries and business units defined in each segment perimeter and the elimination of transactions between companies of the same segment.
The statement of financial position of each subsidiary and business unit are determined based on the amounts booked directly in the companies that compose the segment, including the elimination of balances between companies of the same segment, and excluding the allocation in the segments of the adjustments between segments.
The income statement captions for each business segment are based in the amounts booked directly in the companies' financial statements and related business units, adjusted by the elimination of transactions between companies of the same segment.
However, as CTT, S.A. has assets in more than one segment it was necessary to split its income and costs by the various operating segments. The Internal Services Rendered refers to services provided across the different CTT, S.A. business units, and the income is calculated according to standard activities valued through internally set transfer prices.
Initially, CTT, S.A. operating costs are allocated to the different segments by charging the internal transactions of services mentioned above. After this initial allocation, cost relating to corporate and support areas (Central Structure CTT) previously unallocated, are allocated among the segments Mail and Financial Services according to the average number of CTT, S.A. employees affected to each of these segments.
With the allocation of all costs, earnings before depreciation, provisions, impairments, financial results and taxes by segment, in the first half of 2014 and 2013, are defined as follows:
| 30.06.2014 | |||||||
|---|---|---|---|---|---|---|---|
| Euros | Express & Parcels |
Financial Services |
Central CTT Structure |
Intragroup eliminations |
Others non allocated |
Total | |
| Revenues | 268,099,137 62,699,491 38,421,206 56,041,038 (68,757,570) | - | 356,503,303 | ||||
| Sales and services rendered | 251,497,423 61,829,304 33,877,384 | - | (2,224,301) | - | 344,979,810 | ||
| Sales | 9,591,921 | 537,433 | - | - | (2,352) | - | 10,127,001 |
| Services rendered | 241,905,502 61,291,871 33,877,384 | - | (2,221,949) | - | 334,852,809 | ||
| Operating revenues external customers | 8,034,151 | 870,187 | 4,503,876 11,105,377 (12,990,099) | - | 11,523,493 | ||
| Internal services rendered | 8,567,563 | - | 39,946 34,904,598 (43,512,106) | - | - | ||
| Allocation central CTT structure | - | - | - | 10,031,063 (10,031,063) | - | - | |
| Operating costs | 223,991,968 60,232,673 16,250,175 56,041,038 (68,757,570) | - | 287,758,284 | ||||
| External supplies and services | 50,491,356 47,374,310 | 5,407,088 26,322,256 (15,204,853) | - | 114,390,157 | |||
| Staff Costs | 120,836,668 11,976,947 | 1,681,470 27,083,527 | - | - | 161,578,611 | ||
| Other costs | 8,633,672 | 881,416 | 190,942 | 2,093,033 | (9,548) | - | 11,789,516 |
| Internal services rendered | 34,075,124 | - | 8,894,761 | 542,222 (43,512,106) | - | (0) | |
| Allocation to central CTT structure | 9,955,148 | - | 75,915 | - | (10,031,063) | - | - |
| EBITDA(1) | 44,107,169 | 2,466,818 22,171,031 | - | - | - | 68,745,019 | |
| Depreciation/amortisation and impairment of investments, net |
7,555,430 | 1,131,252 | 280,529 | 1,383,409 | - | 383,447 | (10,734,067) |
| Impairment of inventories and accounts receivable, net |
(1,524,746) | ||||||
| Impairment of non-depreciable assets | - | ||||||
| Provisions net | (1,550,581) | ||||||
| Interest expenses | (5,981,673) | ||||||
| Interest income | 2,511,280 | ||||||
| Gains/losses in associated companies | 303,093 | ||||||
| Earnings before taxes | 51,768,325 | ||||||
| Income tax for the year | (15,730,684) | ||||||
| Net profit for the year | 36,037,641 | ||||||
| Non-controlling interests | (25,486) | ||||||
| Equity holders of parent company | 36,063,127 |
(1) Operating results + depreciation/amortisation + provisions and impairment losses, net
| 30.06.2013 | |||||||
|---|---|---|---|---|---|---|---|
| Euros | Express & Parcels |
Financial Services |
Central CTT Structure |
Intragroup eliminations |
Others non allocated |
Total | |
| Revenues | 273,292,650 63,310,652 29,317,988 | 46,073,139 | (61,377,721) | - | 350,616,708 | ||
| Sales and services rendered | 255,991,931 62,643,296 27,709,884 | - | (2,160,287) | - | 344,184,823 | ||
| Sales | 9,324,341 | 669,515 | - | - | (16,256) | - | 9,977,600 |
| Services rendered | 246,667,590 61,973,781 27,709,884 | - | (2,144,031) | - | 334,207,223 | ||
| Operating revenues external customers | 8,425,006 | 667,356 | 1,606,906 | 7,000,429 | (11,267,812) | - | 6,431,885 |
| Internal services rendered | 8,875,713 | - | 1,198 | 35,774,769 | (44,651,680) | - | - |
| Allocation central CTT structure | - | - | - | 3,297,941 | (3,297,941) | - | - |
| Operating costs | 224,369,687 58,873,699 16,253,706 | 46,073,139 | (61,377,721) | - | 284,192,510 | ||
| External supplies and services | 53,696,949 45,877,896 | 4,979,913 | 24,327,561 | (13,291,616) | - | 115,590,703 | |
| Staff Costs | 122,440,244 11,893,847 | 1,542,395 | 19,837,648 | - | - | 155,714,135 | |
| Other costs | 10,236,611 | 1,101,956 | 168,121 | 1,517,468 | (136,484) | - | 12,887,672 |
| Internal services rendered | 34,723,579 | - | 9,537,639 | 390,462 | (44,651,680) | - | 0 |
| Allocation to central CTT structure | 3,272,303 | - | 25,638 | - | (3,297,941) | - | - |
| EBITDA(1) | 48,922,963 | 4,436,953 13,064,282 | - | - | - | 66,424,198 | |
| Depreciation/amortisation and impairment of investments, net |
8,305,023 | 1,690,072 | 354,670 | 2,063,771 | - | 1,031,925 | (13,445,462) |
| Impairment of inventories and accounts receivable, net |
(1,916,894) | ||||||
| Impairment of non-depreciable assets | - | ||||||
| Provisions net | (3,520,424) | ||||||
| Interest expenses | (6,009,535) | ||||||
| Interest income | 4,690,754 | ||||||
| Gains/losses in associated companies | - | ||||||
| Earnings before taxes | 46,222,637 | ||||||
| Income tax for the year | (14,405,036) | ||||||
| Net profit for the year | 31,817,600 | ||||||
| Non-controlling interests | 174,112 | ||||||
| Equity holders of parent company | 31,643,489 |
(1) Operating results + depreciation/amortisation + provisions and impairment losses, net
The revenues are detailed as follows:
| Thousand Euros | 30.06.2014 | 30.06.2013 | |
|---|---|---|---|
| 268,099 | 273,293 | ||
| Transactional mail | 205,345 | 204,808 | |
| Press mail | 7,477 | 7,515 | |
| Parcels (USO) | 3,369 | 3,382 | |
| Advertising mail | 15,102 | 17,236 | |
| Retail | 7,872 | 8,414 | |
| Philately | 3,592 | 3,113 | |
| Business Solutions | 6,154 | 8,266 | |
| Other | 19,187 | 20,558 | |
| Express & Parcels | 62,699 - |
63,311 - |
|
| Financial Services | 38,421 - |
29,318 - |
|
| Central CTT Struture | 56,041 - |
46,073 - |
|
| Intragroup eliminations |
(68,758) | (61,378) | |
| 356,503 | 350,617 |
| 30.06.2014 | |||||||
|---|---|---|---|---|---|---|---|
| Assets | Express & Parcels |
Financial Services |
Central CTT Structure |
Non allocated assets |
Total | ||
| Intagible assets | 2,507,273 | 3,188,759 | 192,891 | 3,740,666 | 2,896,312 | 12,525,900 | |
| Tangible fixed assets | 182,576,963 | 11,438,882 | 834,929 | 16,877,810 | 2,149,816 | 213,878,400 | |
| Investment properties | 21,071,602 | 21,071,602 | |||||
| Goodwill | 7,299,356 | 16,592,248 | 406,101 | 24,297,705 | |||
| Deferred tax assets | 102,351,984 | 102,351,984 | |||||
| Accounts receivable | 140,224,785 | 140,224,785 | |||||
| Other assets | 84,274,141 | 84,274,141 | |||||
| Cash and cash equivalents | 675,911,963 | 675,911,963 | |||||
| 192,383,592 | 31,219,888 | 1,433,920 | 20,618,476 | 1,028,880,602 | 1,274,536,480 |
| Assets | Express & Parcels |
Financial Services |
Central CTT Structure |
Non allocated assets |
Total | |
|---|---|---|---|---|---|---|
| Intagible assets | 3,054,729 | 3,347,318 | 255,217 | 3,983,456 | 2,408,587 | 13,049,308 |
| Tangible fixed assets | 194,124,953 | 12,076,231 | 847,969 | 16,621,726 | 1,693,549 | 225,364,429 |
| Investment properties | 21,761,886 | 21,761,886 | ||||
| Goodwill | 8,085,520 | 16,592,248 | 406,101 | 25,083,869 | ||
| Deferred tax assets | 103,645,256 | 103,645,256 | ||||
| Accounts receivable | 135,589,645 | 135,589,645 | ||||
| Other assets | 30,764,237 | 30,764,237 | ||||
| Cash and cash equivalents | 544,875,803 | 544,875,803 | ||||
| 205,265,201 | 32,015,798 | 1,509,287 | 20,605,183 | 840,738,964 | 1,100,134,433 |
| 30.06.2014 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Other information | Express & Parcels |
Financial Services |
Central CTT Structure |
Total | |||||
| Medium and long term debt Bank loans |
1,553,442 | 977,949 | - | - | 2,531,391 | ||||
| Leasings | 1,553,442 | 977,949 | 2,531,391 | ||||||
| Short term debt | 323,309 | 4,321,530 | - | - | 4,644,839 | ||||
| Bank loans | - | 3,816,354 | 3,816,354 | ||||||
| Leasings | 323,309 | 505,176 | 828,485 | ||||||
| 1,876,752 | 5,299,478 | - | - | 7,176,230 | |||||
| 31.12.2013 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Other information | Express & Parcels |
Financial Services |
Central CTT Structure |
Total | |||||
| Medium and long term debt Bank loans |
2,047,077 | 1,235,049 | - | - | 3,282,126 | ||||
| Leasings | 2,047,077 | 1,235,049 | 3,282,126 | ||||||
| Short term debt | 729,676 | 2,986,881 | - | - | 3,716,557 | ||||
| Bank loans | 1,990 | 2,478,647 | 2,480,637 | ||||||
| Leasings | 727,686 | 508,233 | 1,235,919 | ||||||
| 2,776,753 | 4,221,930 | - | - | 6,998,683 | |||||
The Group CTT is domiciled in Portugal. The result of its sales and services rendered by geographical areas is disclosed below:
| Thousand Euros | 30.06.2014 | 30.06.2013 |
|---|---|---|
| Revenue - Portugal | 307,468 | 306,151 |
| Revenue - other countries | 37,511 | 38,034 |
| 344,980 | 344,185 |
The financial statements are subject to seasonality, however this does not affect comparability between identical periods in a given year. There are atypical/non-recurring factors that may affect comparability between equal periods of the several years such as the number of working days of the period (mobile holidays or weekend holidays), special events (elections, promotional campaigns for clients) which may impact the revenue to increase / decrease from one period to another.
During the period ended on 30 June 2014 and year ended on 31 December 2013, the movement which occurred in the carrying value of "Tangible fixed assets", as well as the respective accumulated depreciation, was as follows:
| 30.06.2014 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Land and natural resources |
Buildings and other constructions |
Basic equipment | Transport equipment |
Office equipment |
Other tangible fixed assets |
Tangible fixed assets in progress |
Advance payments to suppliers |
Total | |
| Tangible fixed assets | |||||||||
| Opening balance | 38,540,555 | 337,440,722 | 148,660,979 | 3,607,333 | 81,746,922 | 24,362,622 | 174,283 | 754,041 | 635,287,457 |
| Acquisitions | - | 296,291 | 664,833 | - | 86,210 | 142,679 | 488,449 | 101,250 | 1,779,712 |
| Disposals | - | (23,210) | - | - | (7,219) | (359) | - | - | (30,788) |
| Transfers and write-offs | - | 120,090 | (8,385,644) | (483,154) | (29,644,246) | (1,845,337) | (120,090) | - | (40,358,380) |
| Adjustments | - | 2,780 | 684,918 | (280,939) | (398,506) | (57,832) | - | - | (49,579) |
| Changes in the consolidation perimeter | (982,877) | (3,079,671) | (2,881,147) | (230,355) | (617,644) | - | - | - | (7,791,694) |
| Closing balance | 37,557,678 | 334,757,002 | 138,743,939 | 2,612,885 | 51,165,517 | 22,601,773 | 542,642 | 855,291 | 588,836,729 |
| Accumulated depreciation | |||||||||
| Opening balance | 3,899,830 | 176,151,489 | 131,057,686 | 3,387,271 | 76,683,934 | 18,742,818 | - | - | 409,923,028 |
| Depreciation for the period | - | 4,527,391 | 2,516,588 | 32,729 | 1,232,973 | 563,737 | - | - | 8,873,419 |
| Disposals | - | (23,210) | - | - | (7,020) | (359) | - | - | (30,588) |
| Transfers and write-offs | - | - | (8,383,434) | (483,154) | (29,806,442) | (1,663,876) | - | - | (40,336,906) |
| Adjustments | - | 1,270 | 218,869 | (210,948) | (10,014) | (1,603) | - | - | (2,426) |
| Changes in the consolidation perimeter | - | (611,746) | (2,041,810) | (219,443) | (595,199) | - | - | - | (3,468,198) |
| Closing balance | 3,899,830 | 180,045,195 | 123,367,899 | 2,506,456 | 47,498,232 | 17,640,717 | - | - | 374,958,329 |
| Net Tangible fixed assets | 33,657,848 | 154,711,808 | 15,376,040 | 106,430 | 3,667,285 | 4,961,056 | 542,642 | 855,291 | 213,878,400 |
| 31.12.2013 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Land and natural resources |
Buildings and other constructions |
Basic equipment | Transport equipment |
Office equipment |
Other tangible fixed assets |
Tangible fixed assets in progress |
Advance payments to suppliers |
Total | |
| Tangible fixed assets | |||||||||
| Opening balance | 44,445,963 | 379,539,356 | 148,886,925 | 3,603,033 | 80,895,249 | 23,433,801 | 230,108 | 150,174 | 681,184,609 |
| Acquisitions | 393,899 | 3,865,339 | 2,771,881 | 5,037 | 861,425 | 1,169,866 | 166,995 | 712,500 | 9,946,942 |
| Disposals | (376,886) | (3,443,845) | (1,256,101) | - | (50,122) | (1,030) | - | - | (5,127,984) |
| Transfers and write-offs | (19,706) | (34,538) | (1,741,726) | (8,823) | 50,094 | (189,454) | (222,820) | (111,684) | (2,278,657) |
| Adjustments | - | (80) | - | - | (8,913) | (33,919) | - | 3,051 | (39,861) |
| Other changes | (5,902,715) | (42,485,510) | - | 8,086 | (811) | (16,642) | - | - | (48,397,592) |
| Closing balance | 38,540,555 | 337,440,722 | 148,660,979 | 3,607,333 | 81,746,922 | 24,362,622 | 174,283 | 754,041 | 635,287,457 |
| Accumulated depreciation | |||||||||
| Opening balance | 4,200,150 | 194,808,481 | 128,603,899 | 3,243,403 | 73,670,810 | 17,581,154 | - | - | 422,107,897 |
| Depreciation for the period | - | 9,199,355 | 5,569,980 | 167,315 | 3,176,149 | 1,168,689 | - | - | 19,281,488 |
| Disposals | (26,370) | (2,019,718) | (1,256,101) | - | (49,689) | (203) | - | - | (3,352,081) |
| Transfers and write-offs | - | (2,226) | (1,860,092) | (8,823) | (107,664) | (6,869) | - | - | (1,985,674) |
| Adjustments | - | - | - | - | (5,862) | - | - | - | (5,862) |
| Other changes | (273,950) | (25,834,403) | - | (14,624) | 190 | 47 | - | - | (26,122,740) |
| Closing balance | 3,899,830 | 176,151,489 | 131,057,686 | 3,387,271 | 76,683,934 | 18,742,818 | - | - | 409,923,028 |
| Net Tangible fixed assets | 34,640,725 | 161,289,233 | 17,603,293 | 220,062 | 5,062,988 | 5,619,804 | 174,283 | 754,041 | 225,364,429 |
As at 30 June 2014 and 31 December 2013, Land and natural resources and Buildings and other constructions include 5,095,002 Euros and 5,205,814 Euros, respectively, related to land and property in co-ownership with PT Comunicações, S.A..
In the period ended on 30 June 2014, the caption changes in the consolidation perimeter relates to the balances of the company EAD that was sold in the first half of 2014.
As a result of the change in the Concession contract on 26 July 2006, at the end of the concession the assets included in the public and private domain of the State revert at no cost to the conceding entity, while before the previous change, all the assets allocated to the concession reverted to the Portuguese State. Since the postal network belongs exclusively to CTT, not being a public domain asset, only the assets that belong to the State revert to it, and as such, at the end of the concession CTT Group will continue to own its assets. The Board of Directors, supported by its legal advisors, believes that CTT's assets do not include any public or private domain assets of the Portuguese State.
During the period ended on 30 June 2014, the most significant movements in Tangible Fixed Assets were the following:
The movements associated to additions and disposals relate mostly of works to the capitalization of third party buildings of CTT, CTT Expresso and Tourline.
The amount in the additions caption relates to the acquisitions of bikes and trailers of 320 thousand Euros, upgrade system for TOP labelling machines worth about 54 thousand Euros and acquisition of payment terminals, by Payshop, totalling 180 thousand Euros.
The amount in the adjustments caption, relates to the reclassification to basic equipment, performed in CORRE, against the remaining balances of Tangible Fixed Assets.
The amounts under this heading are related to improvement works on own property.
The high amounts recorded under write-offs, with particular emphasis in Basic equipment and Office equipment, are due primarily to the write-offs at CTT of assets that were fully depreciated and which were acquired up to 2008.
The depreciation recorded amounting to 8,873,419 Euros (10,029,528 Euros on 30 June 2013), is stated in the heading "Depreciation/amortisation and impairment of investments, net".
Contractual commitments relative to Tangible Fixed Assets are as follows:
These commitments relate to the acquisition of sorting equipment developments of 397,000 Euros, improvements in OCR System (Optical code reading system) of 210,000 Euros, transportation vans with a value of 64,900 Euros, electric vans (67,000 Euros), sequencing by CP7 (7 digits postcode) in MARS machines (44,300 Euros), internal containers for tray holders of 41,800 Euros and notebooks and docking stations of 55,100 Euros.
During the period ended on 30 June 2014 and the year ended on 31 December 2013, the movements which occurred in the main categories of Intangible assets, as well as the respective accumulated amortisation, were as follows:
| 30.06.2014 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Development projects |
Computer Software |
Industrial property |
Other intangible assets |
Intangible assets in progress |
Advance payments to suppliers |
Total | ||||
| Intangible assets | ||||||||||
| Opening balance | 4,372,922 | 36,540,593 | 11,718,920 | 444,739 | 2,672,064 | - | 55,749,238 | |||
| Acquisitions | - | 137,380 | - | - | 825,312 | - | 962,692 | |||
| Transfers and write-offs | - | 1,376,398 | - | - | (302,057) | - | 1,074,342 | |||
| Adjustments | - | - | 1,618 | - | - | - | 1,618 | |||
| Changes in the consolidation perimeter | - | (316,797) | (60,846) | - | - | - | (377,643) | |||
| Closing balance | 4,372,922 | 37,737,574 | 11,659,692 | 444,739 | 3,195,320 | - | 57,410,246 | |||
| Accumulated amortisation | ||||||||||
| Opening balance | 4,350,799 | 30,479,661 | 7,472,614 | 396,856 | - | - | 42,699,930 | |||
| Amortisation for the period | 4,824 | 1,261,273 | 194,714 | 16,391 | - | - | 1,477,201 | |||
| Transfers and write-offs | (19,682) | 1,094,024 | - | - | - | - | 1,074,342 | |||
| Changes in the consolidation perimeter | - | (316,797) | (50,330) | - | - | - | (367,127) | |||
| Closing balance | 4,335,941 | 32,518,161 | 7,616,998 | 413,247 | - | - | 44,884,346 | |||
| Net intangible assets | 36,981 | 5,219,414 | 4,042,694 | 31,492 | 3,195,320 | - | 12,525,900 | |||
| 31.12.2013 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Development projects |
Computer Software |
Industrial property |
Other intangible assets |
Intangible assets in progress |
Advance payments to suppliers |
Total | ||||
| Intangible assets | ||||||||||
| Opening balance | 4,325,692 | 33,546,260 | 11,687,619 | - | 2,925,511 | 22,366 | 52,507,448 | |||
| Acquisitions | 47,230 | 961,720 | 10,554 | - | 2,027,086 | - | 3,046,590 | |||
| Transfers and write-offs | - | 2,032,613 | (28,086) | - | (2,356,239) | (22,366) | (374,078) | |||
| Adjustments | - | - | - | 444,739 | 75,706 | - | 520,445 | |||
| Other changes | - | - | 48,833 | - | - | - | 48,833 | |||
| Closing balance | 4,372,922 | 36,540,593 | 11,718,920 | 444,739 | 2,672,064 | - | 55,749,238 | |||
| Accumulated amortisation | ||||||||||
| Opening balance | 4,325,692 | 26,795,624 | 7,031,072 | - | - | - | 38,152,388 | |||
| Amortisation for the period | 25,107 | 3,684,037 | 440,712 | 396,856 | - | - | 4,546,712 | |||
| Other variations | - | - | 830 | - | - | - | 830 | |||
| Closing balance | 4,350,799 | 30,479,661 | 7,472,614 | 396,856 | - | - | 42,699,930 | |||
| Net intangible assets | 22,123 | 6,060,932 | 4,246,306 | 47,883 | 2,672,064 | - | 13,049,308 |
The license of the trademark Payshop International is booked under the caption Industrial Property of CTT Gest, in the amount of 1,200,000 Euros. This license has an indefinite useful life, therefore it is not amortised.
The heading of Computer Software, the amount of 1,133,699 Euros included in the Transfers and write-offs caption, respects to the reclassification occurred in CTT of the HR Access software which was previously classified under Office Equipment.
The transfers occurred on 30 June 2014 in Intangible Assets in progress refer to Computer Software, which were completed during the period.
The amounts of 168,031 Euros and 126,411 Euros, capitalized under Computer Software on intangible assets in progress as at 30 June 2014 and 30 June 2013, respectively, relate to staff costs incurred in the development of these projects.
As at 30 June 2014 intangible assets in progress relate to IT projects which are under development, of which the most relevant are:
| 30.06.2014 | |
|---|---|
| New humam resources management application | 846,120 |
| Certification of invoices | 375,676 |
| Information management software | 273,314 |
| Sales force automation | 170,936 |
| SAP archives | 115,982 |
| Invoice management | 110,604 |
| Mail products evolution | 97,258 |
| Occasional customers data base | 96,534 |
| Operational control security | 90,633 |
| Geo 10 (georeferencing system) | 84,904 |
| Treasury management system | 84,216 |
| Automatic processing addresses software | 69,006 |
| 2,415,183 |
The amortisation, amounting to 1,477,201 Euros (2,384,009 Euros at 30 June 2013) was recorded in the heading Depreciation / amortisation and impairment of investments, net.
There are no Intangible assets with restricted ownership or any carrying value relative to any Intangible assets which have been given as a guarantee for liabilities.
Contractual commitments relative to Intangible Assets are as follows:
The purchase commitments relate to developments in software for Litigation and Legal Advisory of 30,100 Euros and to the acquisition of PrintNet Licenses for Mailtec Group of 14,300 Euros.
As at 30 June 2014 and 31 December 2013, the Group has the following assets classified as Investment properties:
| 30.06.2014 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land and natural resources |
Buildings and other constructions |
Total | ||||||
| Investment properties | ||||||||
| Opening balance | 7,237,214 | 42,551,163 | 49,788,377 | |||||
| Disposals | (13,009) | (820,374) | (833,383) | |||||
| Closing balance | 7,224,205 | 41,730,789 | 48,954,994 | |||||
| Accumulated depreciation | ||||||||
| Opening balance | 273,950 | 26,146,036 | 26,419,986 | |||||
| Depreciation for the period | - | 383,447 | 383,447 | |||||
| Disposals | (1,251) | (525,296) | (526,546) | |||||
| Closing balance | 272,700 | 26,004,187 | 26,276,887 | |||||
| Accumulated impairment | ||||||||
| Opening balance | - | 1,606,505 | 1,606,505 | |||||
| Impairment losses | - | - | - | |||||
| Transfers/Adjustments | - | - | - | |||||
| Closing balance | - | 1,606,505 | 1,606,505 | |||||
| Net Investment properties | 6,951,506 | 14,120,097 | 21,071,602 |
| 31.12.2013 | |||||||
|---|---|---|---|---|---|---|---|
| Land and natural resources |
Buildings and other constructions |
Total | |||||
| Investment properties | |||||||
| Opening balance | 1,334,499 | 65,653 | 1,400,152 | ||||
| Transfers/Adjustments | 5,902,715 | 42,485,510 | 48,388,225 | ||||
| Closing balance | 7,237,214 | 42,551,163 | 49,788,377 | ||||
| Accumulated depreciation | |||||||
| Opening balance | - | 31,209 | 31,209 | ||||
| Depreciation for the period | - | 782,537 | 782,537 | ||||
| Transfers/Adjustments | 273,950 | 25,332,290 | 25,606,240 | ||||
| Closing balance | 273,950 | 26,146,036 | 26,419,986 | ||||
| Accumulated impairment | |||||||
| Opening balance | - | - | - | ||||
| Impairment losses | - | 1,104,392 | 1,104,392 | ||||
| Transfers/Adjustments | - | 502,113 | 502,113 | ||||
| Closing balance | - | 1,606,505 | 1,606,505 | ||||
| Net Investment properties | 6,963,264 | 14,798,622 | 21,761,886 |
These assets are not allocated to the Group's operating activities, nor have a specific future use.
The market value of these fixed assets, which are classified as investment property, in accordance with the valuations obtained as at the end of fiscal year 2013 which were conducted by independent entities, amounts to 29,374,185 Euros.
As at 30 June 2013 the impairment loss amounted to 1,031,268 Euros.
Depreciation for the period, amounting to 383,447 Euros (657 Euros on 30 June 2013) were recorded in the caption Depreciation / amortisation and impairment of investments (losses / reversals).
As at 30 June 2014 and 31 December 2013, the parent company, CTT – Correios de Portugal, SA and the following subsidiaries in which it holds control were included in the consolidation:
1 st Half of 2014
| 30.06.2014 | 31.12.2013 | ||||||
|---|---|---|---|---|---|---|---|
| Percentage of ownership | Percentage of ownership | ||||||
| Company name | Head office | Direct | Indirect | Total | Direct | Indirect | Total |
| Parent company: CTT - Correios de Portugal, S.A. |
Rua de S. José, 20 1166-001 Lisboa |
- | - | - | - | - | - |
| Subsidiaries: | |||||||
| PostContacto - Correio Publicitário, Lda. ("PostContacto") |
Rua de S. José, 20 1166-001 Lisboa |
100 | - | 100 | 95 | 5 | 100 |
| CTT Expresso - Serviços Postais e Logística, S.A. ("CTT Expresso") |
Lugar do Quintanilho 2664-500 São Julião do Tojal |
100 | - | 100 | 100 | - | 100 |
| Payshop Portugal, S.A. ("Payshop") |
Av. D. João II lote 01.12,03 1999-001 Lisboa |
100 | - | 100 | 100 | - | 100 |
| CTT GEST - Gestão de Serviços e Equipamentos Postais, S.A. ( "CTT Gest") |
Rua de S. José, 20 1166-001 Lisboa |
100 | - | 100 | 100 | - | 100 |
| Mailtec Holding, SGPS, S.A. ("Mailtec SGPS") |
Estrada Casal do Canas, Edificio Mailtec, 2720-092 Amadora |
100 | - | 100 | 100 | - | 100 |
| Mailtec Comunicação , S.A. (1) ("Mailtec TI") |
Estrada Casal do Canas, Edificio Mailtec, 2720-092 Amadora |
17.7 | 82.3 | 100 | 17.7 | 82.3 | 100 |
| Mailtec Consultoria , S.A. (2) ("Mailtec CON") |
Estrada Casal do Canas, Edificio Mailtec, 2720-092 Amadora |
10 | 90 | 100 | 10 | 90 | 100 |
| Mailtec Processos, Lda. (3) ("EQUIP") |
Estrada Casal do Canas, Edificio Mailtec, 2720-092 Amadora |
- | 100 | 100 | - | 100 | 100 |
| Tourline Express Mensajería, SLU. ("TourLine") |
Calle Pedrosa C, 38-40 Hospitalet de Llobregat (08908)- Barcelona |
- | 100 | 100 | 100 | - | 100 |
| EAD - Empresa de Arquivo de Documentação, S.A. (4) ("EAD") |
Parque Industrial Mata Lobos, Lote 2 Apartado 151 2950- 901Palmela |
- | - | - | 51 | - | 51 |
| Correio Expresso de Moçambique, S.A. ("CORRE") |
Av. Zedequias Manganhela, 309 Maputo - Moçambique |
50 | - | 50 | 50 | - | 50 |
| (1) Previous name - Mailtec -Tecnologias de Informação, S.A. |
(2) Previous name - DSTS - Desenvolvimento e e Integração de Tecnologia, S.A.
(3) Previous name - Equipreste - Sociedade Técnica de Serviços, Lda.
(4) The participation held on the subsidiary EAD was sold on 30.04.2014
The associated company CORRE is included in the consolidation due to the fact that the Group exercises effective control.
During the period ended on 30 June 2014 the participation in subsidiary Tourline Express Mensajeria, SLU, held by the parent company, was sold to its subsidiary CTT Expresso, SA. This transaction was done at net book value.
It also took place the sale of the 5% participation held by CTT Expresso, SA in PostContacto Ltd to the parent company, which now holds, directly, 100% of PostContacto, Lda. The sale was done at net book value.
None of these transactions had any impact in the consolidation perimeter.
As at 30 June 2014 and 31 December 2013 the Group held the following interests in joint ventures, accounted for through the equity method:
| 30.06.2014 | 31.12.2013 | ||||||
|---|---|---|---|---|---|---|---|
| Percentage of ownership | Percentage of ownership | ||||||
| Company name | Head office | Direct | Indirect | Total | Direct | Indirect | Total |
| Ti-Post Prestção de Serviços informáticos, ACE (" Ti-Post") |
R. do Mar da China, Lote 1.07.2.3 Lisbon |
49 | - | 49 | 49 | - | 49 |
| Postal Network - Prestação de Serviços de Gestão de Infra-Estruturas de Comunicações, ACE |
Av. Fontes Pereira de Melo, 40 Lisbon |
49 | - | 49 | 49 | - | 49 |
| PTP & F, ACE | Estrada Casal do Canas Amadora |
- | 51 | 51 | - | 51 | 51 |
As at 30 June 2014 and 31 December 2013, CTT held the following interests in associated companies accounted for through the equity method:
| 30.06.2014 | 31.12.2013 | ||||||
|---|---|---|---|---|---|---|---|
| Percentage of ownership | Percentage of ownership | ||||||
| Company name | Head office | Direct | Indirect | Total | Direct | Indirect | Total |
| Multicert - Serviços de Certificação Electrónica, S.A. | R. do Centro Cultural, 2 | ||||||
| ("Multicert") | Lisboa | 20 | - | 20 | 20 | - | 20 |
| Payshop Moçambique, S.A. (a) | R. da Sé, 114-4º. | - | 35 | 35 | - | 35 | 35 |
| Maputo - Moçambique | |||||||
| Mafelosa, SL (b) | Castellon Espanha | - | 25 | 25 | - | 25 | 25 |
| Urpacksur, SL (b) | Málaga Espanha | - | 30 | 30 | - | 30 | 30 |
(a) Company held by Payshop Portugal, S.A.
(b) Company held by Tourline Mensajeria S.A.
During the period ended on 30 June 2014, the consolidation perimeter was changed due to the sale of EAD's participation.
Following this transfer a gain of 256,383 Euros was recorded under the caption Gains / losses in associates in the consolidated income statement.
As at 30 June 2014 and 31 December 2013, the Goodwill was detailed as follows:
| Year of acquisition |
30.06.2014 | 31.12.2013 | |
|---|---|---|---|
| Mailtec Holding SGPS, S.A. (51%) Mailtec Consultoria, S.A. |
2004 2004 |
582,970 4,718 |
582,970 4,718 |
| Mailtec Comunicação, S.A. (51%) | 2004 | 69,767 | 69,767 |
| Payshop Portugal, S.A. | 2004 | 406,101 | 406,101 |
| Mailtec Holding SGPS, S.A. (49%) | 2005 | 6,641,901 | 6,641,901 |
| Tourline Express Mensajería, SLU | 2005 | 16,592,248 | 16,592,248 |
| EAD - Empresa de Arquivo de Documentação, S.A. | 2006 | - | 786,164 |
| 24,297,705 | 25,083,869 |
During the periods ended on 30 June 2014 and the year ended on 31 December 2013, the movements in Goodwill were as follows:
| 30.06.2014 | 31.12.2013 | |
|---|---|---|
| Opening balance | 25,083,869 | 25,528,608 |
| Transfer / adjustments | - | (444,739) |
| Disposals | (786,164) | - |
| Closing balance | 24,297,705 | 25,083,869 |
In the period ended 30 June 2014, following the sale of the participation in the company EAD, the Goodwill in the amount of 786,164 Euros, was eliminated.
In 2013 the amount of 444,739 Euros regarding Tourline's Fondos de Comércio was reclassified to Other intangible assets.
The recoverable amount of goodwill is assessed annually or whenever there is indication of an eventual loss of value. The recoverable amount is determined based on the value though a discounted cash flow methodology, considering the market conditions, the time value and business risks.
As at 31 December 2013, CTT performed an impairment test, therefore not having been identified at 30 June 2014 indicators of impairment, no new impairment tests were performed to this date.
As at 30 June 2014 and 31 December 2013, the impairment losses accounted were as follows:
| 30.06.2014 | |||||
|---|---|---|---|---|---|
| Company | Year of acquisition |
Initial value | Impairment losses for the period |
Accumulated impairment losses |
Carrying value |
| Payshop Moçambique, S.A. (a) | 2008 | 235,946 | - | 235,946 | - |
| 235,946 | - | 235,946 | - | ||
| 31.12.2013 | |||||
| Company | Year of acquisition |
Initial value | Impairment losses for the period |
Accumulated impairment losses |
Carrying value |
| Tourline Express Mensajería, SLU | 2005 | 20,671,985 | - | 4,079,737 | 16,592,248 |
| EAD - Empresa de Arquivo de Documentação, S.A. | 2006 | 1,082,015 | - | 295,851 | 786,164 |
| Payshop Moçambique, S.A. (a) | 2008 | 235,946 | - | 235,946 | - |
| 21,989,946 | - | 4,611,534 | 17,378,412 |
(a) Held by Payshop Portugal, S.A., a subsidiary of CTT Group
During the period ended on 30 June 2014 and the year ended on 31 December 2013, the following movements occurred in the impairment losses:
| 30.06.2014 | ||||||
|---|---|---|---|---|---|---|
| Opening balance |
Increases | Reversals | Utilization/ Transfers |
Changes in the consolidation perimeter |
Closing balance |
|
| Other non-current assets | ||||||
| Other accounts receivable | 1,296,044 | 188,399 | - | - | - | 1,484,443 |
| INESC loan | 1,397,613 | - | (1,000,852) | - | - | 396,761 |
| 2,693,657 | 188,399 | (1,000,852) | - | - | 1,881,204 | |
| Customers and Other current assets | ||||||
| Customers | 24,361,985 | 2,048,646 | (415,893) | 1,022 | (66,375) | 25,929,385 |
| Other accounts receivable | 9,098,933 | 1,236,029 | (668,742) | - | - | 9,666,220 |
| INESC loan | 49,740 | - | - | - | - | 49,740 |
| 33,510,658 | 3,284,675 | (1,084,635) | 1,022 | (66,375) | 35,645,345 | |
| Inventories | ||||||
| Merchandise | 1,812,893 | 37,736 | (4,967) | - | - | 1,845,662 |
| Raw, subsidiary and consumable | 685,925 | 104,390 | - | - | - | 790,315 |
| 2,498,818 | 142,126 | (4,967) | - | - | 2,635,977 | |
| 38,703,133 | 3,615,200 | (2,090,454) | 1,022 | (66,375) | 40,162,526 | |
| 31.12.2013 | ||||||
| Opening balance |
Increases | Reversals | Utilization | Transfers | Closing balance |
|
| Other non-current assets | ||||||
| Other accounts receivable | 1,123,171 | 172,873 | - | - | - | 1,296,044 |
| INESC loan | 1,455,643 | - | (58,030) | - | - | 1,397,613 |
| 2,578,814 | 172,873 | (58,030) | - | - | 2,693,657 | |
| Customers and Other current assets | ||||||
| Customers | 22,313,026 | 4,413,997 | (1,505,980) | (859,058) | - | 24,361,985 |
| Other accounts receivable | 8,924,866 | 730,691 | (147,512) | (84,410) | (324,702) | 9,098,933 |
| INESC loan | 49,740 | - | - | - | - | 49,740 |
| 31,287,632 | 5,144,688 | (1,653,492) | (943,468) | (324,702) | 33,510,658 | |
| Inventories | ||||||
| Merchandise | 1,903,511 | 4,906 | (95,524) | - | - | 1,812,893 |
| Raw, subsidiary and consumable | 715,248 | 28,623 | (13,846) | (44,100) | - | 685,925 |
| 2,618,759 | 33,529 | (109,370) | (44,100) | - | 2,498,818 | |
| 36,485,205 | 5,351,090 | (1,820,892) | (987,568) | (324,702) | 38,703,133 |
Impairment losses regarding tangible fixed assets, investment properties and goodwill are detailed respectively in Notes 4, 6 and 8.
As at 30 June 2014, the Company's share capital was composed of 150,000,000 shares with the nominal value of 0.50 Euros each. The share capital is fully underwritten and paid-up.
At the General Meeting held on 30 October, 2013, the registered capital of CTT was reduced from 87,325,000 to 75,000,000 Euros, being from that date forward represented by 150,000,000 shares, as a result of a stock split which was accomplished through the reduction of the nominal value of 4.99 Euros to 0.50 Euros per share. The amount of 12,325,000 Euros related to the reduction of the capital was transferred to Other reserves (Note 11).
As at 30 June 2014 and 31 December 2013 the Company's shareholders with, greater than or equal to 2% shareholdings are as follows:
| 30.06.2014 | |||
|---|---|---|---|
| Shareholder | Nr shares | % | Nominal value |
| Parpública - Participações Públicas (SGPS), SA (1) | 47,253,834 | 31.503% | 23,626,917 |
| Pioneer Asset Management, S.A. (2) | 3,128,282 | 2.086% | 1,564,141 |
| Standard Life Investments LTD (3) | 3,071,878 | 2.048% | 1,535,939 |
| BlackRock, Inc. (4) | 3,059,021 | 2.039% | 1,529,511 |
| JP Morgan Asset Management (UK) Limited (5) | 3,023,319 | 2.016% | 1,511,660 |
| Other shareholders | 90,463,666 | 60.309% | 45,231,833 |
| Total | 150,000,000 | 100.000% | 75,000,000 |
(1) Shares held by Parpública - Participações Públicas (SGPS), S.A., which in turn is fully owned by the Portuguese State.
(2) Participation of several funds indirectly managed by Pioneer Asset Management, S.A., owned by UniCredit S.p.A.
(3) Shares atributable to Vidacos Nominees.
(4) Participation of several companies controlled by BlackRock, Inc.
(5) JP Morgan Asset Management (UK) Limited is a subsidiary of JP Morgan Asset Management Holdings Inc.
| 31.12.2013 | |||
|---|---|---|---|
| Shareholder | Nr shares | % | Nominal value |
| Parpública - Participações Públicas (SGPS), SA (1) | 45,000,000 | 30.000% | 22,500,000 |
| Parpública - Participações Públicas (SGPS), SA (2) | 9,545,455 | 6.364% | 4,772,728 |
| Total (3) | 54,545,455 | 36.364% | 27,272,728 |
| Goldman Sachs International (4) | 7,496,479 | 4.998% | 3,748,240 |
| Deutsche Bank AG London (5) | 3,063,798 | 2.043% | 1,531,899 |
| Other shareholders (6) | 84,894,268 | 56.596% | 42,447,134 |
| Total | 150,000,000 | 100.000% | 75,000,000 |
(1) Shares held by Parpública – Participações Públicas (SGPS), SA, which in turn is fully owned by the Portuguese State.
As at 30 June 2014 and 31 December 2013, the heading "Reserves" was detailed as follows:
| 30.06.2014 | 31.12.2013 | |
|---|---|---|
| Legal reserves | 18,072,559 | 18,072,559 |
| Other reserves | 12,325,000 | 12,325,000 |
| 30,397,559 | 30,397,559 |
The commercial legislation establishes that at least 5% of the annual net profit must be allocated to reinforce the legal reserve, until it represents at least 20% of the share capital. This reserve is not
distributable except in the event of the liquidation of the Company, but may be used to cover losses after the other reserves have been used, or incorporated in the share capital.
This heading records the profits transferred to reserves that are not imposed by the law or statutes, nor constituted pursuant to contracts signed by the Company.
In 2013, the amount of 10,555,949 Euros was used for the payment of an extraordinary dividend (Note 12).
The balance of "Other reserves" as at 30 June 2014 and 31 December 2013, 12,325,000 Euros refers to the amount of reduction of the share capital and was transferred to this caption (Note 10).
During the period ended on 30 June 2014 and the year ended on 31 December 2013, the following movements were made in the heading Retained earnings:
| 30.06.2014 | 31.12.2013 | |
|---|---|---|
| Opening balance | 83,367,465 | 87,105,292 |
| Application of net profit of the prior year | 61,016,067 | 35,735,268 |
| Distribution of dividends (Note 12) | (60,000,000) | (39,444,051) |
| Adjustments from the application of the equity method | - | (29,043) |
| Other movements | (1,663) | - |
| Closing balance | 84,381,869 | 83,367,465 |
The Actuarial gains / losses associated to post-employment benefits, as well as the corresponding deferred taxes, are recognised in this heading (Note 14).
Thus, for the period ended on 30 June 2014 and the year ended 31 December 2013 the movements occurred in this heading were as follows:
| 30.06.2014 | 31.12.2013 |
|---|---|
| 24,548,756 | 33,079,577 |
| (618,010) | (11,680,870) |
| 183,549 | 3,150,049 |
| 24,114,295 | 24,548,756 |
At the General Assembly held on 5 May 2014, the Board approved the distribution of a dividend of 0.40 Euros per share (which took into consideration the 150,000,000 shares existing at 31.12.2013)
relative to 31 December 2013 and a total dividend of 60,000,000 Euros was paid in the month of May 2014.
At the General Assembly held on 30 May 2013, the Board approved the distribution of a dividend of 2.20 Euros per share (which took into consideration the 17,500,000 shares existing at 31.12.2012) relative to 31 December 2012 and a total dividend of 38,554,129 Euros was paid, which was subject to a withholding tax of 25% in June 2013. It was also decided to pay an extraordinary dividend in the amount of 11,445,871 Euros (0.65 Euro per share), which was also subject to withholding tax of 25% in June 2013.
For the extraordinary dividend "Other reserves" were used in the amount of 10,555,949 Euros and "Retained earnings" in the amount of 889,922 Euros.
During the periods ended on 30 June 2014 and 30 June 2013, the earnings per share were calculated as follows:
| 30.06.2014 | 30.06.2013 | |
|---|---|---|
| Net profit for the period attributable to equity holders of the parent company |
36,063,127 | 31,643,489 |
| Average number of ordinary shares | 150,000,000 | 150,000,000 |
| Earnings per share: | ||
| Basic | 0.24 | 0.21 |
| Diluted | 0.24 | 0.21 |
The basic earnings per share are calculated dividing the net profit attributable to equity holders of the parent company by the average ordinary shares.
In October 2013, the number of shares varied, from 17,500,000 to 150,000,000 following the capital reduction made to reserves and a stock split by reducing the nominal value. Thus, since the change in the number of shares did not comprise the inflow or outflow of Company funds, the calculation of earnings per share on 30 June 2013, took into account the number of existing shares on 31 December 2013 (150,000,000).
There are no dilutive factors of earnings per share.
Liabilities related to employee benefits refer to (i) post-employment benefits – health care and (ii) other benefits for employees. During the period ended on 30 June 2014 and the year ended on 31 December 2013, these liabilities presented the following movement:
| Total |
|---|
| 298,543,054 |
| (2,523,106) |
| 296,019,948 |
| Total |
| 303,316,360 |
| (4,773,306) |
| 298,543,054 |
The heading "Other long term benefits" liabilities essentially refer to the on-going staff reduction programme.
The details of liabilities related to employee benefits, are as follows:
| 30.06.2014 | 31.12.2013 | |
|---|---|---|
| Non-current liabilities | 276,156,847 | 278,638,868 |
| Current liabilities | 19,863,101 | 19,904,186 |
| 296,019,948 | 298,543,054 |
For the periods ended on 30 June 2014 and 30 June 2013, the costs related to employee benefits recognised in the consolidated income statement and the amount recognised directly in "Other changes in equity" were as follows:
| 30.06.2014 | 30.06.2013 | |
|---|---|---|
| Costs for the period | ||
| Health care (1) | 7,046,500 | 6,873,500 |
| Other long term benefits (2) | 144,035 | (6,847,115) |
| 7,190,535 | 26,385 | |
| Other changes in equity | ||
| Health care | (618,010) | - |
| (618,010) | - |
(1) Includes staff costs, other costs and interest expenses.
(2) Includes staff costs and interest expenses.
The impacts as at 30 June 2014 were obtained by the company supported on the actuarial study as at 31 December 2013.
CTT is responsible for financing the health care plan applicable to certain employees. In order to obtain the estimate of the liabilities and costs to be recognised for each period, an actuarial study is made by an independent entity every year, based on the Projected Unit Credit method, and according to assumptions that are considered adequate and reasonable, having, as at 31 December 2013, elaborated an actuarial study.
The main assumptions used in the actuarial study performed on 31 December 2013 are detailed as follows:
| 31.12.2013 | |
|---|---|
| Financial assumptions | |
| Discount rate | 4.00% |
| Salaries expected growth rate | 0% in 2013 and 2014 2.75% from that date |
| Pensions growth rate | Law no. 53-B/2006 (with ∆ GDP < 2%) |
| Inflation rate | 2.00% |
| Health costs growth rate | |
| - Infation rate | 2.00% |
| - Growhth due to ageing | 0% in 2013 and 2014 2% from that date |
| Demographic assumptions | |
| Mortality table | TV 88/90 |
| Disability table | Swiss RE |
The discount rate is estimated based on interest rates of private debt bonds with high credit rating ("AA" or equivalent) at the date of the actuarial study and with a duration equivalent to that of the liabilities with health care.
The maintenance of the discount rate to 4.00% was motivated by the Group's analysis of the evolution of the macroeconomic context taking into account a constant need to match the actuarial and financial assumptions to that reality.
The salaries expected growth rate was determined according to the salary policy defined by the Group.
The pensions expected growth rate was determined considering the estimated evolution of inflation and GDP growth rate.
The health care costs growth rate reflects the best estimate for the future evolution of these costs, considering the history of the plan's data.
The demographic assumptions are based on the mortality and disability tables considered appropriate for the actuarial assessment of this plan.
The evolution of the present value of the liabilities related to the health care plan has been as follows:
| 30.06.2014 | 31.12.2013 | 31.12.2012 | 31.12.2011 | 31.12.2010 | |
|---|---|---|---|---|---|
| Liabilities at the end of the period | 263,739,500 | 263,371,000 | 252,803,000 | 272,102,000 | 272,123,000 |
For the period ended on 30 June 2014 and the year ended on 31 December 2013, the movement which occurred in the present value of the defined benefits liability regarding the health care plan was as follows:
| 30.06.2014 | 31.12.2013 | |
|---|---|---|
| Opening balance | 263,371,000 | 252,803,000 |
| Service costs of the period | 1,912,500 | 3,882,000 |
| Interest cost of the period | 5,134,000 | 9,865,000 |
| Pensioners contributions | 1,807,007 | 3,552,478 |
| (Payment of benefits) | (8,525,517) | (17,249,738) |
| (Other costs) | (577,500) | (1,162,610) |
| Actuarial (gains)/losses | 618,010 | 11,680,870 |
| Closing balance | 263,739,500 | 263,371,000 |
During the periods ended on 30 June 2014 and 30 June 2013, the total costs for the period are recognised as follows:
| 30.06.2014 | 30.06.2013 | |
|---|---|---|
| Staff costs/employee benefits (Note 17) | 1,335,000 | 1,345,500 |
| Other costs | 577,500 | 595,500 |
| Interest expenses | 5,134,000 | 4,932,500 |
| 7,046,500 | 6,873,500 |
On 30 June 2014 the actuarial gains / (losses) amounting to 618,010 Euros (11,680,870 Euros as at 31 December 2013) were recognised in equity under the caption Other changes in equity, net of deferred taxes amounting to 183,549 Euros (3,150,049 Euros as at 31 December 2013).
The sensitivity analysis performed for the health care plan leads to the following conclusions:
(i) If there was an increase of 1 per cent in the growth rate of medical costs, keeping all the remaining variables constant, the liabilities of the health care plan would be 307,989 thousand Euros, increasing by approximately 16.9%.
(ii) If the discount rate was reduced 0.5 per cent and keeping all the remaining variables constant, the liabilities would increase by approximately 6.8%, amounting to 281,280 thousand Euros.
In certain situations, the Group has liabilities related to the payment of salaries in situations of "Suspension of contracts, redeployment and release of employment", the allocation of subsidies of "Support for termination of professional activity", which was eliminated as of 1 April 2013, the payment of the "Telephone subscription fee", "Pensions for work accidents", and "Monthly life annuity". In order to obtain the estimate of the value of these liabilities and the costs to be recognised for each period, every year, an actuarial study is made by an independent entity, based on the Projected Unit Credit method, and according to assumptions that are considered adequate and reasonable, and also prepared an actuarial study to an independent entity to assess the liabilities at the reporting date.
The main assumptions used in the actuarial study performed on 31 December 2013 are detailed as follows:
| 31.12.2013 | |
|---|---|
| Financial assumptions | |
| Discount rate | 4.00% |
| Salaries growth rate | 0% in 2013 and 2014 2.75% from that date |
| Pensions growth rate | Law no. 53-B/2006 (with ∆ GDP < 2%) |
| Inflation rate | 2.00% |
| Demographic assumptions | |
| Mortality table | TV 88/90 |
| Disability rate | Swiss RE |
For the determination of the Group's liabilities to employees in situations of "Suspension of contracts, redeployment and release of employment", salary growth rates of 0% were considered for 2013 and 2014, and 2.75% for the following years. The salary growth rate of 2.75% was applied to the remaining employee benefits, except for the "Telephone subscription fee" and "Support for cessation of professional activity" for which no value update was considered.
For the period ended on 30 June 2014 and the year ended on 31 December 2013, the movement of liabilities with other employee long-term benefits was as follows:
1 st Half of 2014
| 30.06.2014 | 31.12.2013 | |
|---|---|---|
| Suspension of contracts, redeployment and release of employment | ||
| Opening balance | 19,743,891 | 24,084,448 |
| Interest cost of the period | 345,103 | 844,267 |
| Liabilities relative to new beneficiaries | 275,987 | 1,914,115 |
| (Payment of benefits) | (2,607,314) | (7,459,833) |
| Curtailment | (908,166) | - |
| Actuarial (gains)/losses | 354,415 | 360,894 |
| Closing balance | 17,203,915 | 19,743,891 |
| Telephone subscription charge | ||
| Opening balance | 4,800,195 | 14,242,125 |
| Interest cost of the period | 89,272 | 451,814 |
| Curtailment | - | (8,211,129) |
| (Payment of benefits) | (139,625) | (1,445,398) |
| Actuarial (gains)/losses | (196,964) | (237,217) |
| Closing balance | 4,552,877 | 4,800,195 |
| Pension for accidentes at work | ||
| Opening balance | 7,004,370 | 7,563,939 |
| Interest cost of the period | 135,824 | 293,948 |
| (Payment of benefits) | (200,547) | (422,708) |
| Actuarial (gains)/losses | (18,105) | (430,809) |
| Closing balance | 6,921,541 | 7,004,370 |
| Monthly life annuity | ||
| Opening balance | 3,544,784 | 3,691,640 |
| Interest cost of the period | 69,857 | 145,503 |
| (Payment of benefits) | (52,676) | (108,120) |
| Actuarial (gains)/losses | 743 | (184,239) |
| Closing balance | 3,562,708 | 3,544,784 |
| Support for cessation of professional activity | ||
| Opening balance | 78,815 | 931,209 |
| Interest cost of the period | 9,312 | 18,624 |
| (Payment of benefits) | (35,479) | (871,064) |
| Actuarial (gains)/losses | (13,241) | 46 |
| Closing balance | 39,408 | 78,815 |
| Total closing balaces | 32,280,449 | 35,172,055 |
During the periods ended on 30 June 2014 and 30 June 2013, the total costs for the period were recognised as follows:
| 30.06.2014 | 30.06.2013 | |
|---|---|---|
| Staff costs/employee benefits (Note 17) Suspension of contracts, redeployment and release of employment Telephone subscription charge Pension for accidents at work |
(277,764) (196,964) (18,105) |
682,484 (8,445,339) - |
| Monthly life annuity Support for cessation of professional activity |
743 (13,241) |
- - |
| subtotal | (505,332) | (7,762,855) |
| Interest expenses | 649,368 144,035 |
915,740 (6,847,115) |
In the year ended 31 December 2013, the Ordinance 378-G/2013 of 31 December changed the retirement age from 65 to 66 for employees covered by the Social Security. This change had a more significant impact on liability in connection with the "Suspension of contracts, relocation and release of jobs" where the addition of the responsibility was approximately 642 thousand Euros.
In the year ended 31 December 2013, the Board of Directors of CTT, decided to substitute the payment from 1 January 2014 of the telephone subscription fee, with an equivalent measure to retired workers and surviving spouses who translated his benefit in replacing the financial support of a benefit in kind.
The sensitivity analysis done at 31 December 2013 for the Other long term benefits plans leads to the conclusion that, if the discount rate was reduced by 50bps, keeping everything else constant, this would give rise to an increase of liabilities for past services of approximately 3.1%, increasing to 36,262 thousand Euros.
For the period ended on 30 June 2014 and the year ended on 31 December 2013, in order to face legal proceedings and other liabilities arising from past events, the Group recognised provisions, which showed the following movement:
| 30.06.2014 | ||||||
|---|---|---|---|---|---|---|
| Opening | Closing | |||||
| balance | Increases | Reversals | Reduction | Transfers | balance | |
| Non-current provisions | ||||||
| Litigations | 10,868,975 | 3,543,291 | (2,569,269) | (1,685,452) | 814,840 | 10,972,385 |
| Investments in associated companies | 213,840 | - | - | - | - | 213,840 |
| Onerous contracts | 12,643,714 | 538,260 | - | (1,261,957) | - | 11,920,017 |
| Other provisions | 14,775,306 | 38,299 | - | (68,727) | (814,840) | 13,930,038 |
| 38,501,835 | 4,119,850 | (2,569,269) | (3,016,136) | - | 37,036,280 | |
| 31.12.2013 | ||||||
| Opening | Closing | |||||
| balance | Increases | Reversals | Reduction | Transfers | balance | |
|---|---|---|---|---|---|---|
| Non-current provisions | ||||||
| Litigations | 9,268,429 | 3,757,359 | (3,595,059) | (1,269,365) | 2,707,611 | 10,868,975 |
| Investments in associated companies | 220,816 | - | - | (6,976) | - | 213,840 |
| Onerous contracts | 13,212,379 | 1,844,338 | - | (2,413,003) | - | 12,643,714 |
| Other provisions | 13,894,565 | 4,387,527 | (746,183) | (377,694) | (2,382,909) | 14,775,306 |
| 36,596,189 | 9,989,224 | (4,341,242) | (4,067,038) | 324,702 | 38,501,835 |
The provisions for litigations are due to the liabilities arising from lawsuits brought against the Group and are estimated based on information from its lawyers.
The provision for investments in associated companies corresponds to the assumption by the Group of legal or constructive obligations regarding the associated company PayShop Moçambique, S.A..
During the period ended 30 June 2014 the provision to cover the estimate of the net present value of the expenditure associated with onerous contracts was increased by 538,260 Euros (1,844,338 Euros at 31 December 2013).
As at 30 June 2014 the amount provided for onerous contracts is 11,920,017 Euros (12,643,714 Euros at 31 December 2013).
As at 30 June 2014 the provision to cover any contingencies relating to employment litigation actions not included in the current court proceedings, and related to remuneration differences amounts to 11,697,352 Euros (12,512,193 Euros at 31 December 2013).
During the period ended 30 June 2014, in addition to the previously mentioned situations, this heading also includes the amount of 890,000 Euros, which arises from the assessment made by the management regarding the possibility of the enforcement of tax contingencies.
The net amount between increases and reversals of provisions was recorded in the Consolidated income statement under the headings "Provisions, net" and amounted to 1,550,581 Euros and 3,520,424 Euros as at 30 June 2014 and 30 June 2013, respectively.
As at 30 June 2014 and 31 December 2013 the Group had provided bank guarantees to third parties as follows:
1 st Half of 2014
| Description | 30.06.2014 | 31.12.2013 |
|---|---|---|
| Fundo de Pensões do Banco Santander Totta | 3,000,469 | - |
| Planinova - Soc. Imobiliária, S.A. | 2,033,582 | - |
| LandSearch, Compra e Venda de Imóveis | 1,775,310 | - |
| Novimoveste - Fundo de Investimento Imobiliário | 1,508,269 | - |
| Lusimoveste - Fundo de Investimento Imobiliário | 1,261,863 | - |
| Tribunais | 301,303 | 754,399 |
| Autoridade Tributária e Aduaneira | 515,000 | 390,000 |
| Lisboagás, S.A. | 190,000 | 190,000 |
| Autarquias | 157,274 | 153,674 |
| Sofinsa | 91,618 | 91,618 |
| Solred | 80,000 | 80,000 |
| Parc Logistics Zona Franca | 77,969 | 77,969 |
| Alfândega do Porto | 74,820 | 74,820 |
| Secretaria Geral do Ministério da Administração Interna | 28,547 | 14,000 |
| ACT Autoridade Condições Trabalho | 54,458 | 45,733 |
| PT PRO - Serv Adm Gestao Part, S.A. | 50,000 | 50,000 |
| DRCAL Direcção Regional Contencioso Administrativo Lisboa | - | 49,880 |
| Record Rent a Car (Cataluña, Levante) | 40,000 | 40,000 |
| SetGás, S.A. | 30,000 | 30,000 |
| ANA - Aeroportos de Portugal | 29,000 | 29,000 |
| Santa Casa da Misericórdia de Lisboa | 86,917 | 86,917 |
| TIP - Transportes Intermodais do Porto, ACE | 50,000 | 50,000 |
| Ministério Educação | 23,700 | 38,700 |
| EPAL - Empresa Portuguesa de Águas Livres | 21,433 | 21,433 |
| Natur Import (nave Barbera) | 18,096 | 18,096 |
| Portugal Telecom, S.A. | 16,658 | 16,657 |
| SPMS - Serviços Partilhados do Ministério da Saúde | - | 16,092 |
| Poczta Polska Uslugi Cyfrowe Sp | - | 257,783 |
| Petrogal, S.A. | 10,774 | 10,774 |
| Alquiler Nave Tarragona | 7,155 | 7,155 |
| TNT Express Worldwide | 6,010 | 6,010 |
| SMAS Torres Vedras | 4,001 | 4,001 |
| Infarmed IP | 3,856 | 8,223 |
| Instituto do emprego e formação profissional | 3,718 | 3,718 |
| Controlplan S.L | 3,400 | 3,400 |
| Inmobiliaria Ederkin | 7,800 | 7,800 |
| Instituto Infra-Estruturas Rodoviárias | 3,725 | 3,725 |
| Estradas de Portugal, EP | 5,000 | 5,000 |
| ARM - Águas e Resíduos da Madeira , SA | 4,752 | 4,752 |
| REN Serviços, S.A. | 9,818 | 9,818 |
| EMEL, S.A. | 19,384 | 19,384 |
| IFADAP | 1,746 | 1,746 |
| Casa Pia de Lisboa, I.P. | 1,863 | 1,863 |
| Martinez Estevez | 3,000 | 3,000 |
| Gexploma | 3,000 | 3,000 |
| Consejeria Salud | 6,433 | 6,433 |
| Universidad Sevilha | 4,237 | 4,237 |
| Fonavi, Nave Hospitalet | 40,477 | 40,477 |
| Other entities | 18,413 11,684,848 |
2,735 2,734,022 |
Relating the guarantees for lease contracts and according to the determinations in some of the contracts of the buildings occupied by the Company's services, having the Portuguese State ceased to hold the majority of the share capital of CTT- Correios de Portugal, S.A., bank guarantees on first demand must be provided. These guarantees have already been issued in the amount of 9,579,493 Euros with the exception of the guarantee related to the Conde Redondo building, whose landlord has not requested the mentioned guarantee at this stage.
There are contractual commitments related to tangible fixed assets and intangible assets that are detailed respectively in Notes 4 and 5.
During the period ended on 30 June 2014 and year ended on 31 December 2013, the heading "Accounts payable" showed the following composition:
| 30.06.2014 | 31.12.2013 | |
|---|---|---|
| Advances from customers | 3,011,689 | 2,826,481 |
| CNP money orders | 368,884,549 | 202,301,462 |
| Suppliers | 62,012,813 | 59,737,076 |
| Invoices pending confirmation | 9,990,627 | 8,816,225 |
| Fixed assets suppliers | 655,880 | 2,463,632 |
| Invoices pending confirmation (fixed assets) | 328,315 | 523,341 |
| Concession rent | 201,424 | 201,424 |
| Values collected on behalf of third parties | 5,141,334 | 4,180,724 |
| Postal financial services | 120,009,158 | 107,689,039 |
| Other accounts payable | 4,645,773 | 3,218,635 |
| 574,881,564 | 391,958,039 |
The value of "CNP money orders" refers to the money orders received from the National Pensions Centre (CNP), whose payment date to the corresponding pensioners must occur in the month after the closing of the period.
The increase in this caption is due to the payment of the holiday pay that occurs in the month of June.
The increase in this heading arises, mainly, from values collected related to taxes and savings certificates.
During the periods ended on 30 June 2014 and 30 June 2013, the composition of the heading "Staff Costs" was as follows:
| 30.06.2014 | 30.06.2013 | |
|---|---|---|
| Board of Directors and Audit Committee remuneration (Note 19) | 589,882 | 622,208 |
| Staff remuneration | 124,622,678 | 126,269,767 |
| Employee benefits | 829,669 | (6,417,355) |
| Indemnities | 1,390,030 | 1,021,697 |
| Social security charges | 27,523,172 | 27,606,743 |
| Occupational accident and disease insurance | 928,794 | 785,011 |
| Social welfare costs | 5,662,119 | 5,770,118 |
| Other staff costs | 32,267 | 55,946 |
| 161,578,611 | 155,714,135 |
In the periods ended 30 June 2014 and 30 June 2013, the fixed and variable remunerations attributed to the members of the statutory bodies of the different companies of the Group were as follows:
| 30.06.2014 | ||||||
|---|---|---|---|---|---|---|
| Executive Board of Directors |
Audit Committee /Statutory Accountant |
General Meeting of Shareholders |
Total | |||
| Fixed remuneration Variable remuneration |
471,023 - |
118,859 - |
- - |
589,882 - |
||
| 471,023 | 118,859 | - | 589,882 | |||
| 30.06.2013 | ||||||
| Board of Directors | Audit Committee /Statutory Accountant |
General Meeting of Shareholders |
Total | |||
| Fixed remuneration | 511,176 | 111,032 | - | 622,208 | ||
| Variable remuneration | - | - | - | - | ||
| 511,176 | 111,032 | - | 622,208 |
The variation in the heading "Staff remuneration" is mainly a result of the reduction in the average number of employees working for the Company.
During the period ended 30 June 2014 the caption "Indemnities" includes the amount of 525,977 Euros related to compensations paid in proceedings for termination of employment contracts by mutual agreement.
The social welfare costs are almost exclusively composed by health costs supported by the company with active employees and costs related to Health and Safety at work.
During the periods ended 30 June 2014 and 30 June 2013 the heading "Staff costs" includes the amounts of 384,636 Euros and 401,990 Euros, respectively, related to expenses with workers' representative bodies.
For the periods ended on 30 June 2014 and 30 June 2013, the average number of staff of the Group was 12,388 and 13,000 employees, respectively.
Companies with head office in Portugal are subject to tax on their profit through Corporate Income Tax ("IRC") at the normal tax rate of 23% (25% in 2013), whilst the municipal tax is established at a maximum rate of 1.5% of taxable profit, and the state surcharge is 3% of the taxable profit above 1,500,000 Euros and 5% of taxable profit above 7,500,000 Euros up to for 35,000,000 Euros and 7% on amounts exceeding the 35,000,000 Euros. Tourline is subject to income taxes in Spain, through income tax (Impuesto sobre Sociedades - "IS") at a rate of 30%, and the subsidiary CORRE is subject to corporate income tax in Mozambique ("IRPC").
Corporate income tax (IRC) is levied on CTT and its subsidiaries Postcontacto – Correio Publicitário, Lda., CTT – Expresso, S.A., Mailtec Holding, SGPS, S.A., Mailtec Comunicação, S.A., Mailtec Consultoria, S.A., Mailtec Processos, Lda., Payshop Portugal, S.A. ("Payshop"), and CTT GEST – Gestão de Serviços e Equipamentos Postais, S.A. ("CTT Gest"), through the Special Regime for the Taxation of Groups of Companies ("RETGS"). The remaining companies are taxed individually.
In the periods ended on 30 June 2014 and 30 June 2013, the reconciliation between the nominal rate and the effective income tax rate was conducted as follows:
| 30.06.2014 | 30.06.2013 | |
|---|---|---|
| Earnings before taxes | 51,768,325 | 46,222,637 |
| Nominal tax rate | 23.0% | 25.0% |
| 11,906,715 | 11,555,659 | |
| Tax Benefits | (136,249) | (223,737) |
| Accounting capital gains | (166,615) | (4,003) |
| Tax capital gains | 53,823 | 2,001 |
| Equity method | - | - |
| Provisions not considered in the calculation of deferred taxes | 123,800 | - |
| Impairment losses and reversals | (280,275) | 198,622 |
| Other situations, net | 1,169,648 | 723,467 |
| Adjustments related with - autonomous taxation | 298,075 | 306,221 |
| Adjustments related with - Municipal Surcharge | 705,142 | 551,127 |
| Adjustments related with - State Surcharge | 2,060,784 | 1,322,045 |
| Excess estimated income tax | (4,164) | (26,366) |
| Income taxes for the períod | 15,730,684 | 14,405,036 |
| Effective tax rate | 30.39% | 31.16% |
| Income taxes for the períod | ||
| Current tax | 14,548,876 | 11,278,152 |
| Deferred tax | 1,292,435 | 3,247,866 |
| Excess estimated income tax | (110,627) | (120,982) |
| 15,730,684 | 14,405,036 |
As at 30 June 2014 and 31 December 2013, the balance of deferred tax assets and liabilities was composed as follows:
| 30.06.2014 | 31.12.2013 | |
|---|---|---|
| Deferred tax assets | ||
| Employee benefits - health care | 78,330,632 | 78,221,187 |
| Employee benefits - other long term benefits | 9,578,911 | 10,433,440 |
| Deferred accounting capital gains | 2,873,432 | 3,229,688 |
| Impairment losses and provisions | 8,522,562 | 8,651,941 |
| Conversion adjustments - derecognition of inventories | 38,910 | 77,821 |
| Conversion adjustments - value deducted from staff debts | 9,346 | 18,692 |
| Tax losses carried forward | 2,432,702 | 2,432,702 |
| Impairment losses in tangible fixed assets | 441,333 | 452,859 |
| Other | 124,156 | 126,926 |
| 102,351,984 | 103,645,256 | |
| 30.06.2014 | 31.12.2013 | |
| Deferred tax liabilities | ||
| Revaluation of tangible fixed assets before IFRS | 4,127,083 | 4,288,852 |
| Suspended capital gains | 1,064,271 | 1,082,455 |
| Other | 110,571 | 110,571 |
| 5,301,925 | 5,481,878 |
As at 30 June 2014, expected deferred tax assets and liabilities to be settled within 12 months amount to 2,708,462 Euros and 359,906 Euros, respectively.
During the period ended on 30 June 2014 and the year ended on 31 December 2013, the movements which occurred under the deferred tax headings were as follows:
| 30.06.2014 | 31.12.2013 | |
|---|---|---|
| Deferred tax assets | ||
| Opening balances | 103,645,256 | 102,228,537 |
| Effect on net profit | ||
| Employee benefits - health care | (74,104) | 1,757,201 |
| Employee benefits - other long term benefits | (854,529) | (4,354,755) |
| Deferred accounting gains | (356,256) | (667,578) |
| Impairment losses and provisions | (129,379) | (105,163) |
| Impairment losses in tangible fixed assets | (11,526) | 307,246 |
| Derecognition of inventories | (38,911) | (79,395) |
| Value deducted from debts | (9,346) | (19,069) |
| Tax losses carried forward | - | 1,358,869 |
| Other | (2,770) | 69,314 |
| Effect on equity | ||
| Employee benefits - health care | 183,549 | 3,150,049 |
| Closing balance | 102,351,984 | 103,645,256 |
| 30.06.2014 | 31.12.2013 | |
| Deferred tax liabilities | ||
| Opening balances | 5,481,878 | 5,740,233 |
| Effect on net profit | ||
| Revaluation of tangible fixed assets before IFRS adoption | (161,769) | (240,583) |
| Suspended capital gains | (18,184) | (14,067) |
| Other | - | (3,705) |
| Closing balance | 5,301,925 | 5,481,878 |
The tax losses carried forward are entirety related to the losses of the subsidiary Tourline in the years 2008, 2009, 2011, 2012 and 2013. These losses may be tax reported in the next 15 years, except the tax loss related to 2012 and 2013, which may be carried forward in the next 18 years.
The sensitivity analysis performed allows us to conclude that a 1% reduction in the underlying rate of deferred tax would imply an immaterial increase in the income tax for the period.
Pursuant to the legislation in force, income tax returns are subject to review and correction by the tax authorities for a period of four years (five for Social Security), except when there have been tax losses, tax benefits have been received, or when inspections, claims or challenges are in progress, in which cases, depending on the circumstances, these periods are extended or suspended. Therefore,
the Group's income tax returns after 2010 may still be reviewed and corrected, since the income tax returns prior to this date have already been inspected.
CTT believes that any corrections arising from reviews / inspections by the tax authorities of these income tax returns will not have a significant effect on the consolidated financial statements as at 30 June 2014.
According to the Group's internal rules on financial reporting, the parties related to the Group are CTT shareholders, and other shareholders of companies in which the Group has a stake, the associated companies, joint ventures, and the members of the Board of Directors, the General Meeting, and the Audit Committee.
The terms or conditions applied between the Group's companies and the related parties are, as a rule, substantially identical to those which are normally contracted, accepted and applied between independent entities in comparable operations.
During the periods ended on 30 June 2014 and 30 June 2013, the following transactions took place and the following balances existed with related parties:
| 30.06.2014 | ||||||
|---|---|---|---|---|---|---|
| Accounts receivable current |
Accounts payable current |
Revenues | Dividends | Costs | ||
| Shareholders | - | - | - | 60,000,000 | - | |
| Other Group companies | ||||||
| Associated companies | 3,878 | 21,957 | 8,769 | - | 44,214 | |
| Jointly controlled | 29,160 | 17,533 | 112,329 | - | 90,975 | |
| Members of the | ||||||
| Executive Board of Directors | - | - | - | - | 471,023 | |
| General Meeting | - | - | - | - | - | |
| Audit Board | - | - | - | - | 118,859 | |
| 33,038 | 39,490 | 121,098 | 60,000,000 | 725,072 |
| 30.06.2013 | |||||||
|---|---|---|---|---|---|---|---|
| Accounts receivable current |
Accounts payable current |
Revenues | Dividends | Costs | |||
| Parpública, SGPS (a) | - | - | - | 50,000,000 | - | ||
| Other Group companies | |||||||
| Associated companies | 2,760 | - | 10,257 | - | 348 | ||
| Jointly controlled | 58,153 | 13,626 | 118,672 | - | 99,225 | ||
| Members of the | |||||||
| Board of Directors | - | - | - | - | 511,176 | ||
| General Meeting | - | - | - | - | - | ||
| Statutory Audit Board | - | - | - | - | 111,032 | ||
| 60,913 | 13,626 | 128,929 | 50,000,000 | 721,781 |
(a) CTT has availed of the exemption available in paragraph 25 of IAS 24, and therefore has not provided detailed disclosure of its transaction with the State of Portugal and related parties. A summary of the Group's transactions with the State of Portugal and it's related parties is included below:
1- CTT sells and render services to the State of Portugal and various of it's related entities.
2- CTT collets various payroll taxes and other taxes on behalf of the State of Portugal and is liable to Portuguese Corporate Tax on profits earned and to employes's Social Security Taxes on its payroll.
3- CTT accounts for VAT in Portugal.
4- CTT Group incurs in costs as result of services provided by several State of Portugal related parties, namely:
Energy costs;
Water Supply costs;
Air transportation costs.
The transactions and balances between subsidiaries are eliminated in the consolidation process and are not disclosed in this Note.
CTT has decided to award, following three invitations to tender subject to previous qualification, the IT and communication services contracts regarding Basic Infrastructure Services, Helpdesk & Desktop Management Services, and Fixed Voice and Data Telecommunications Services. Although the time limit to lodge opposition to the contract award decision has not yet expired, CTT expects to be able to formalise the above-mentioned contracts at the soonest possible date.
The tender procedures were launched and the contracts awarded for a period of 3 years, including an initial phase of 3 months, at the most, to transfer the services. As a result of these contract awards, CTT expects to obtain, starting from 2015, annual savings (excluding transition costs) of around 57% (14 million Euros) in the referred services vis-à-vis the former operating costs, which in 2014 are around 25 million Euros, as the annual cost of the referred services is estimated to be of around 11 million Euros.
Under the terms of articles 447 of the Portuguese Commercial Companies Code (CSC) and 16 of the Portuguese Securities Code (CVM)
As at 30 June 2014, based on the communications made to the Company, the qualifying holdings in CTT were as follows:
| Shares | % Share capital |
% Voting rights |
Date of the transaction |
|
|---|---|---|---|---|
| Parpública-Participações Públicas (SGPS), S.A. (1) | 47,253,834 | 31.503% | 31.503% | 03.01.2014 |
| Pioneer Asset Management, S.A. (2) | 3,128,282 | 2.086% | 2.086% | 10.01.2014 |
| Standard Life Investments LTD (3) | 3,071,878 | 2.048% | 2.048% | 09.05.2014 |
| BlackRock.Inc.(4) | 3,059,021 | 2.039% | 2.039% | 25.02.2014 |
| IP Morgan Asset Management (UK) Limited (5) | 3,023,319 | 2.016% | 2.016% | 19.05.2014 |
| Restantes acionistas | 90,463,666 | 60.309% | 60.309% | |
| TOTAL | 150,000,000 | 100.000% | 100.000% |
The updated information on qualifying holdings in the Company as at the date of approval of this report can be found at www.ctt.pt and the Securities Commission (CMVM) website, www.cmvm.pt.
Under the terms of paragraph 5(d) of article 66 and paragraph 1 of article 325-A of the CSC
The Annual General Meeting held on 5 May 2014 granted authorisation to the Board of Directors for the acquisition and sale of own shares by the Company and subsidiaries.
During the period that this report refers to the Company did not hold or trade own shares. As at the date of approval of this report the Company does not hold own shares.
Under the terms of paragraph 5 of article 447 of the CSC and article 14 of Regulation no. 5/2008 of CMVM
As at 30 June 2014, based on the communications made to the Company, the members of the Board of Directors and the Audit Committee held the number of Company shares indicated below:
| Board of Directors | No. of Shares as at 30.06.2014 |
|---|---|
| Francisco José Queiroz de Barros de Lacerda (a) | 3,110 |
| António Sarmento Gomes Mota (b) | |
| Manuel Cabral de Abreu Castelo-Branco (c) | 1,550 |
| André Manuel Pereira Gorião de Andrade Costa (d) | 3,110 |
| Dionizia Maria Ribeiro Farinha Ferreira (e) | |
| Ana Maria de Carvalho Jordão Ribeiro Monteiro de Macedo (e) | |
| António Manuel de Carvalho Ferreira Vitorino (f) | |
| José Alfredo de Almeida Honório (f) (h) | |
| Nuno Fernandes Thomaz (f) | |
| Diogo José Paredes Leite de Campos (g) | |
| Parpública - Participações Públicas, SGPC, S.A. (g) | 47,253,834 |
Under the terms of paragraph 5 of article 447 of the CSC
After the Extraordinary General Meeting of 24 March 2014, which elected the new corporate bodies, the Executive Committee of CTT redefined the list of senior officers of the Company which was communicated to the CMVM on 22 April 2014. The list presented below includes all senior officers in charge during the 1st half of 2014 and their respective related parties:
1 st Half of 2014
| No. of shares | TRANSACTIONS | No. of shares | |||||
|---|---|---|---|---|---|---|---|
| Board of Directors (a) | as at 31.12.2013 |
Date | No. of shares | Acquisition / Sale |
Price | as at 30.06.2014 |
|
| Francisco José Queiroz de Barros de Lacerda | 3,110 | 3,110 | |||||
| António Sarmento Gomes Mota | |||||||
| Manuel Cabral de Abreu Castelo-Branco | 1,550 | 1,550 | |||||
| André Manuel Pereira Gorião de Andrade Costa | 3,110 | 3,110 | |||||
| Dionizia Maria Ribeiro Farinha Ferreira | |||||||
| Ana Mª Carvalho Jordão Ribeiro Monteiro de Macedo | |||||||
| António Manuel de Carvalho Ferreira Vitorino | |||||||
| José Alfredo de Almeida Honório (b) | |||||||
| Nuno Fernandes Thomaz | |||||||
| Diogo José Paredes Leite de Campos | |||||||
| Parpública - Participações Públicas, SGPC, S.A. | 45,000,000 9,545,455 |
03.01.2014 | 2,253,834 9,545,455 |
$\left( c\right)$ (d) |
47,253,834 | ||
| Audit Board (e) | |||||||
| António Sarmento Gomes Mota | |||||||
| Diogo José Paredes Leite de Campos | |||||||
| Elsa Maria Roncon Santos | |||||||
| Statutory Auditor and External Auditor | |||||||
| PriceWaterhouseCoopers & Associados, SROC, Lda. (f) | |||||||
| losé Pereira Alves | |||||||
| Ana Maria Ávila de Oliveira Lopes Bertão | |||||||
| José Manuel Henriques Bernardo | ä, | ۰ | ä, | ||||
| KPMG & Associados, SROC, S.A. (g) | |||||||
| Maria Cristina Santos Ferreira | |||||||
| Vítor Manuel da Cunha Ribeirinho | |||||||
| Related Parties (BoD) | |||||||
| Alice Monjardino de Campos de Azevedo Soares (h) | 120 | 120 | |||||
| Manuel Mª Azevedo Soares de Abreu Castelo-Branco (h) | 1,550 | 1,550 | |||||
| Susana Gorião Costa (i) | 3,110 | 3,110 |
| No. of Shares | TRANSACTIONS | No. of Shares | ||||
|---|---|---|---|---|---|---|
| Other Managers (j) | as at | Date No. of Shares | Acquisition/ | Price | as at | |
| 31.12.2013 | Sale | 22.04.2014 (i) | ||||
| Alberto Alves Maria Pimenta | 1,000 | ä, | ä, | ä, | ä, | 1,000 |
| Ana Rita Baião Matos | 2,500 | ä, | 2,500 | |||
| Antónia Ascensão Rato | 2,500 | ÷ | 2,500 | |||
| António Augusto Labrincha Correia Marques | 500 | ä, | ä, | ä, | ä, | 500 |
| António Manuel Borges Vaz | 2,500 | ä, | ä, | ÷, | 2,500 | |
| António Pedro Ferreira Vaz da Silva | 240 | l, | 240 | |||
| Carla Maria Teixeira Gonçalves Veiga (k) | 2,500 | ÷ | × | ٠ | 2,500 | |
| Carla Salomé Preto Martins Marques da Cruz | 1,300 | 20,03,2014 | 1,300 | Sale | 7.80€ | 0 |
| Fernando Manuel Costa Afonso | 500 | 500 | ||||
| Filipe Jacinto Flores Ribeiro | 200 | ä, | ä, | ×. | ä, | 200 |
| Graça Maria Porto Temudo Pires de Oliveira | 2,500 | ä, | ÷. | ÷. | 2,500 | |
| Helena Maria Gameiro Carreira Rodrigues | ä, | |||||
| Hernâni Joaquim Mateus dos Santos | 1,000 | ä, | 1,000 | |||
| Isabel Maria Lemos Lourenço | 1,750 | 16.01.2014 20.03.2014 |
250 1,250 |
Sale Sale |
6.75E 8,00 € |
250 |
| João Domingues dos Santos da Cunha Leal | 620 | J. | 620 | |||
| João Manuel da Costa Araújo | 2,500 | 21.03.2014 | 1,500 | Sale | 8.00€ | 1,000 |
| João Pedro Namora Gonçalves | 2,800 | 19.03.2014 | 1,800 | Sale | 7.62€ | 1,000 |
| José Eduardo Dias de Mendonça David | 500 | ä, | ä, | ä, | ä, | 500 |
| Julieta Aurora Barracho Gomes Jorge Cainço | ä, | |||||
| Laura Maria Falcão da Costa | 300 | ä, | L. | ä, | ä, | 300 |
| Luís Miguel Soares Rodrigues | 2,500 | ä, | ä, | ä, | 2,500 | |
| Maria da Graça Farinha de Carvalho e Sousa Góis | 200 | ł. | 200 | |||
| Maria Helena Henriques Camacho | 800 | ä, | ٠ | ÷ | ÷ | 800 |
| Maria Margarida Jarego Colaço da Silva | 950 | ÷, | 950 | |||
| Maria Teresa Geraldes Caetano | ||||||
| Miguel Alexandre Ferreira Amaral Salema Garção | 3,130 | 13,03,2014 | 3,130 | Sale | 7.33 € | $\circ$ |
| Paulo José Carteiro Veiga | 2,500 | ÷, | 2,500 | |||
| Pedro Miguel Lourenco Salvador | J. | ä, | ||||
| Peter Jordanov Tsvetkov | 4,990 | ÷ | ÷ | ÷, | ÷ | 4,990 |
| Raul Manuel Matias Moreira | 1,000 | ä, | 1,000 | |||
| Rui Pedro Silva | 500 | ä, | ä, | J. | 500 | |
| Sílvia Maria Correia | 2,500 | ä, | ä, | ä, | 2,500 | |
| Related Parties (Other Managers) | ||||||
| Helena Augusta Monteiro Afonso Gonçalves (I) | 1,000 | ÷, | ä, | L, | 1,000 | |
| Ana Soraia Teixeira Vaz da Silva (m) | 240 | 240 | ||||
| Jaime Francisco Teixeira (m) | 240 | ä, | ä, | ÷ | 240 | |
| Maria José Cabrita da Silva (n) | 310 | 19,03,2014 | 310 | Sale | 7.62€ | o |
Under the terms of paragraph 5(e) of article 66 and articles 397and 398 of the CSC
During the first semester of 2014, no authorisations were given by the Board of Directors to any of its members to carry out business with the Company.
None of the current members of the Board of Directors of CTT has held any temporary or permanent position subject to an employment or self-employment contract at any company of CTT Group during the 1st half of 2014.
The list shown below indicates the internal and external appointments of the members of the managing and supervisory bodies of the Company:
| Members of the Board of Directors |
Internal Appointments | External Appointments |
|---|---|---|
| • Chairman & CEO of CTT – Correios de Portugal, S.A. | • Member of the Board of IPC – International Post Corporation |
|
| • Chairman of CTT Expresso – Serviços Postais e Logística • Non-Executive Director of Norfin Portuguese Property Group, S.A. |
||
| Francisco José Queiroz de | • Chairman of Tourline Express Mensajería, S.L.U. | • Member of the Remuneration Committee of Portugal Telecom, SGPS. S.A. |
| Barros de Lacerda | • Member of the Advisory Board of Nova School of Business & Economics |
|
| • Member of the Advisory Board of the Master in Finance, Católica Lisbon School of Business & Economics |
||
| • Member of the Supervisory Board of Cascais Yacht Club |
||
| • Chairman of the Audit Board of CTT – Correios d e Portugal, S.A. (1) |
• Chairman of the Board of SDC Investimentos, SGPS, S.A. |
|
| António Sarmento Gomes Mota |
• Chairman of the Audit Committee (2) | • Vice-Chairman of the Board of Directors of Soares d a Costa Construção, SGPS, S.A. |
| • Non-Executive Vice-Chairman of the Board of Directors | • Member of the General and Supervisory Board, of the | |
| (2) | Audit and of the Performance Analysis and Competitiveness Committees of EDP – Energias d e Portugal, S.A. |
|
| • Member of the Remuneration Committee of Portugal Telecom, SGPS. S.A. |
||
| • ice-Chairman of the Portuguese Institute of Corporate Governance |
||
| • Executive Vice-Chairman of CTT – Correios d e Portugal, S.A. |
||
| Manuel Cabral de Abreu | • Member of the Board of CTT Expresso – Serviços Postais e Logística, S.A. |
|
| Castelo-Branco | • Member of the Board of Tourline Express Mensajería, S.L.U. |
|
| • Member of the Board of Correio Expresso d e Moçambique, S.A. |
||
| • Chief Financial Officer (CFO) and Executive Director of CTT – Correios de Portugal, S.A. |
• Member of the Board of Eurogiro | |
| André Manuel Pereira | • Member of the Board of CTT Expresso – Serviços Postais e Logística, S.A. |
|
| Gorjão de Andrade Costa | • Member of the Board of Tourline Express Mensajería, S.L.U. |
|
| • Chairman of the Board of Payshop (Portugal), S.A. |
| Members of the Board of Directors |
Internal Appointments | External Appointments |
|---|---|---|
| • Executive Director of CTT – Correios de Portugal, S.A. | ||
| • Member of the Board of CTT Expresso – Serviços Postais e Logística, S.A. • Member of the Board of Tourline Express Mensajería, S.L.U. |
||
| • Chairman of the Board of Mailtec Holding, SGPS, S.A. | ||
| Dionizia Maria Ribeiro | • Chairman of the Board of Mailtec Comunicação, S.A. | |
| Farinha Ferreira | • Chairman of the Board of Mailtec Consultoria, S.A. | |
| • Chairman of the Board of CTT Gest – Gestão d e Serviços e Equipamentos Postais, S.A. • Chairman of the Management Board of PostContacto – Correio Publicitário, Lda. • Manager of Mailtec Processos, Lda. |
||
| • Executive Director of CTT – Correios de Portugal, S.A. | ||
| Ana Maria de Carvalho Jordão Ribeiro Monteiro de Macedo |
• Member of the Board of CTT Expresso – Serviços Postais e Logística, S.A. • Member of the Board of Tourline Express Mensajería, S.L.U. |
|
| • Non-Executive Director of CTT – Correios d e Portugal, |
• Chairman of the Audit Committee of Siemens Portugal | |
| S.A. | • Non-Executive Director of Áreas Portugal | |
| • President of Notre Europe – Instituto Jacques Delors, Paris |
||
| António Manuel de Carvalho Ferreira Vitorino |
• Chairman of the Board of the General Meeting of Finpro SGPS, S.A. • Chairman of the Board of the General Meeting of |
|
| Novabase SGPS, S.A. • Chairman of the Board of the General Meeting of Brisa – Auto-Estradas de Portugal, S.A. • Chairman of the Board of the General Meeting of Banco Santander Totta, S.A. |
||
| • Non-Executive Director of CTT – Correios d e Portugal, |
• Non-Executive Director of Agrocortex | |
| S.A. | • Executive Director of Cell2B | |
| • Non-Executive Director of EIP | ||
| Rui Miguel de Oliveira Horta e Costa (3) |
• Founder and Executive Director of Luz.on | |
| • Non-Executive Director of Vale do Lobo Resort | ||
| • Non-Executive Director of Winpower | ||
| • Member of the Iberian Consulting Board of ATKearney | ||
| • Non-Executive Director of CTT – Correios d e Portugal, S.A. |
• Non-Executive Director of Espírito Santo Saúde, SGPS, S.A. • Chairman of Bem Comum - Sociedade d e Capital d e Risco, S.A. • Manager of I Cook - Organização de Eventos, Lda. |
|
| Nuno Fernandes Thomaz | • Executive Director of Nutrinveste, SGPS, S.A. (4) | |
| • Vice-Chairman of the Forum for Competitiveness (5) | ||
| • Member of the Consulting Committee of the Portuguese Institute of Corporate Governance |
||
| Diogo José Paredes Leite de Campos |
• Non-Executive Director of CTT – Correios d e Portugal, S.A. • Member of the Audit Board of CTT – Correios d e Portugal, S.A. (1) • Member of the Audit Committee (2) |
• Chairman of the Audit Board of Banco Santander Consumer Portugal, S.A • Non-Executive Director of RES SGPS, S.A. |
| (1) Until the Extraordinary General Meeting of 24.03.2014 | ||
| (2) After the Extraordinary General Meeting of 24.03.2014 |
(3) Coopted by a decision of the Board of Directors of 29 July 2014 to replace José Alfredo de Almeida Honório, who resigned from the position of Non-Executive Director on 14 July 2014
(4) Term of office ended in March 2014
(5) Elected in April 2014
8 Based on our review, which was performed with the objective of obtaining moderate assurance, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated accounts for the six month period ended 30 June 2014, is not free of material misstatements that affect its compliance with IAS 34 – Interim Financial Reporting and that is not complete, true, current, clear, objective and lawful.
Lisbon, 30 July 2014
KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. (nr. 189) Represented by Maria Cristina Santos Ferreira (ROC nr. 1010)
Avenida D. João II, n.º 13 1999-001 Lisbon PORTUGAL Telephone: +351 210 471 836 Fax: +351 210 471 994
E-mail: [email protected] CTT Line 707 26 26 26 Business days and Saturdays from 8h to 22h
André Gorjão Costa
Peter Tsvetkov E-mail: [email protected] Telephone: +351 210 471 087 Fax: +351 210 471 994
Institutional Communication Department Press Advisor Fernando Marante E-mail: [email protected] Telephone: +351 210 471 800
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