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CTT-Correios de Portugal
Quarterly Report • May 4, 2023
1911_iss_2023-05-04_226c1632-2611-4b20-b725-a5a2ee7491cf.pdf
Quarterly Report
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Table of Contents
| 1 | st Quarter 2023 Consolidated Results |
3 |
|---|---|---|
| 1. | Operational and financial performance | 5 |
| 2. | Other highlights | 15 |
| 3. | Subsequent events | 16 |
| Interim condensed consolidated financial statements | 19 |
CTT - Correios de Portugal, S.A. 1 st Quarter 2023 Consolidated Results
- Revenues1 reached €241.8m in 1Q23 (+€7.0m; +3.0% y.o.y), growing across all business units, except Mail & Other, broken down as follows: Financial Services & Retail (+€16.8m; +141.6% y.o.y); Banco CTT (+€6.0m; +21.4% y.o.y); Express & Parcels (+€3.3m; +5.4% y.o.y); and Mail & Other (-€19.1m; -14.3% y.o.y).
- Mail & Other was negatively impacted in 1Q23, when compared with 1Q22, by two effects that occurred in that period: (i) the revenues from the laptop sale project (€21.5m) in the business solutions segment in 1Q22; and (ii) additional revenues from international outbound mail in February 2022 due to the rerun of legislative elections in the European constituency (€3.5m).
- Express & Parcels revenues reached €64.7m in 1Q23 (+€3.3m), achieving a quarterly growth in absolute terms similar to the annual growth of 2022 compared to 2021.
- Banco CTT continued to grow in 1Q23, with a positive performance of the net interest income, which amounted to €22.0m (+€5.6m; +34.2% y.o.y), underpinned by the growth of the consumer credit portfolio (auto), mortgage and other loans.
- Financial Services & Retail revenues registered a positive evolution in 1Q23, continuing the trend that began in 2022, as a result of the greater attractiveness of public debt certificates, especially savings certificates, in a context of interest rates more favourable to this savings product.
- Recurring EBIT stood at €25.7m in 1Q23 (+€19.0m; +285.3% y.o.y) with a margin of 10.6% (2.8% in 1Q22). It grew in all business units, except Express & Parcels.
- Operating cash flow stood at €44.2m in 1Q23 (+€33.8m; +326.4 % y.o.y).
- Net profit2 of €16.1m in 1Q23, an increase of €10.7m vis-à-vis 1Q22.
| € million | ||||
|---|---|---|---|---|
| 1Q22 | 1Q23 | Δ | Δ% | |
| Revenues1 | 234.7 | 241.8 | 7.0 | 3.0% |
| Mail & Other | 133.5 | 114.4 | (19.1) | (14.3%) |
| Express & Parcels | 61.3 | 64.7 | 3.3 | 5.4% |
| Banco CTT | 28.0 | 34.1 | 6.0 | 21.4% |
| Financial Services & Retail | 11.9 | 28.7 | 16.8 | 141.6% |
| Operating costs 3 | 212.7 | 201.0 | (11.7) | (5.5%) |
| EBITDA4 | 22.0 | 40.8 | 18.8 | 85.2% |
| Depreciation & amortisation | 15.4 | 15.1 | (0.2) | (1.6%) |
| Recurring EBIT | 6.7 | 25.7 | 19.0 | » |
| Specific items | (2.7) | 0.7 | 3.4 | 127.1% |
| EBIT | 9.4 | 25.0 | 15.6 | » |
| Financial results (+/-) | (2.1) | (3.1) | (1.0) | (46.4%) |
| Income tax for the period | 1.8 | 5.7 | 3.9 | » |
| Non-controlling interests | 0.0 | 0.0 | (0.0) | (138.9%) |
| Net profit for the period2 | 5.4 | 16.1 | 10.7 | » |
Consolidated results
1 Excluding specific items.
2 Attributable to equity holders.
3 From 2021 onwards, operating costs (EBITDA) include impairments and provisions; also, the impact of the leases covered by IFRS16 is presented pursuant to this standard.
4 Excluding depreciation & amortisation and specific items.
1. Operational and Financial Performance
Consolidated revenues
CTT's consolidated revenues amounted to €241.8m in 1Q23, an increase of €7.0m (+3.0%) compared to 1Q22 that reflects the growth in all business units, except Mail & Other, broken down as follows: Financial Services & Retail (+€16.8m; +141.6% y.o.y); Banco CTT (+€6.0m; +21.4% y.o.y); Express & Parcels (+€3.3m; +5.4% y.o.y); and Mail & Other (-€19.1m; -14.3% y.o.y).
Mail & Other
In 1Q23, the revenues of Mail & Other amounted to €114.4m (-€19.1m; -14.3% y.o.y). This decline versus 1Q22 was the result of two factors: (i) the revenues from the laptop sale project (€21.5m) in the business solutions segment in 1Q22; and (ii) additional revenues from international outbound mail in February 2022 due to the rerun of legislative elections in the European constituency (€3.5m).
Excluding those effects, the revenues of this business unit would have grown in 1Q23 (+€5.9m; +5.4% y.o.y).
In 1Q23, transactional mail revenues reached €92.0m (+€2.3m; +2.5% y.o.y), mainly due to the very positive performance of registered mail revenues (+€5.0m; +16.0% y.o.y) boosted by the growth of contractual customers, especially the government and banking & insurance sectors. International outbound mail decreased by €2.5m (-19.4% y.o.y) penalised by the additional revenues from the legislative elections in 1Q22. Excluding this impact, the revenues from international outbound mail would have grown by €1.0m (+10.0% y.o.y). International inbound mail posted a growth of €0.2m (+3.7% y.o.y) as a result of the increase in revenues generated by the new offer aimed at international integrators, which offset the decline that has been observed in postal operators (terminal dues). There was a decline of €0.3m in ordinary mail (-0.8% y.o.y) and €0.2m in priority mail (-9.8% y.o.y) while green mail stabilised (+0.1% y.o.y).
The remaining business lines posted: (i) growth in parcels of the universal postal service (+€0.2m; +12.5% y.o.y), editorial mail (+€0.0m; +0.5% y.o.y) and other mail products and services (+€0.4m; +52.4% y.o.y); and (ii) decline in advertising mail (-€1.2m; -27.5% y.o.y) and philately (-€0.1m; -7.4% y.o.y).
In philately, it is noteworthy the issue of the 1st Portuguese Crypto Stamp under the motto "Collect the Future" in both physical and NFT (Non-Fungible Token) format.
In 1Q23, business solutions recorded revenues of €11.4m (-€20.8m; -64.7% y.o.y). However, excluding the effect of the additional sale of laptops that took place in 1Q22 this segment would have grown €0.7m (+6.5% y.o.y). CTT continues to reinforce its focus on the Business Process Services and Contact Center areas by attracting and implementing new businesses in different sectors. Of note is the significant growth in: (ii) the solution of management of administrative offences and administrative proceedings, as new municipalities have joined it; and (ii) digital components with the provision of services for sending documents (invoices) with Qualified Electronic Signature pursuant to Decree-Law no. 28/2019, of 15 February, with CTT currently producing and sending several million digitally signed documents per month.
On 1 March 2023 there was an update of the prices of postal services provided in the scope of the universal service5 basket of letter mail, editorial mail and parcels services, defined in accordance with the Pricing Criteria set out in the Universal Postal Service Price Convention for the 2023-2025 period, which was entered into by the National Authority for Communications (ANACOM), the Consumer Directorate-General and CTT. For 2023 this update corresponds to a 6.24% average annual price variation, which also reflects the effect of the update of the special prices for bulk mail.
The average price change of the universal postal service5 in 1Q23 was +6.55%.
Mail volumes
In 1Q23, addressed mail volumes declined by 5.2% y.o.y. Excluding the one-off volumes of international outbound mail in February 2022, due to the rerun of the legislative elections in the European constituency, this decrease would have been 4.4% y.o.y
Mail volumes
| Million items | ||||
|---|---|---|---|---|
| 1Q22 | 1Q23 | Δ | Δ% | |
| Transactional mail | 104.5 | 100.9 | (3.6) | (3.5%) |
| Advertising mail | 8.4 | 6.0 | (2.4) | (28.7%) |
| Editorial mail | 6.9 | 6.7 | (0.2) | (2.6%) |
| Addressed mail | 119.8 | 113.6 | (6.2) | (5.2%) |
| Unaddressed advertising mail | 109.9 | 76.4 | (33.5) | (30.5%) |
In 1Q23, transactional mail volumes decreased by 3.5% y.o.y.
Ordinary mail slightly decreased (-4.4% y.o.y) as a consequence of the intrinsic trend in the postal sector primarily due to the digital transformation of communications.
International outbound mail decreased by 25.2% y.o.y. (-7.5% y.o.y excluding the volumes from the legislative elections).
Despite the decline in international inbound mail (-7.8% y.o.y), there was an improvement compared to 4Q22 (+9.3%), reversing the downward trend that began in the 2nd half of 2021 due to the fact that, on 1 July 2021, the abolition of the VAT exemption on postal items below €22 (de minimis) came into force, leading to the need for customs clearance of all items of extra-EU origin. This resulted in an increase in customs transit times due to a complex and one-by-one process, which, ultimately, led to the migration of this type of flows to express networks.
In the opposite direction, registered mail volumes grew (+17.5% y.o.y) in 1Q23, driven by the dynamics of contractual customers, especially the government and banking & insurance sectors.
Addressed advertising mail volumes decreased by 28.7% y.o.y. and unaddressed advertising mail decreased by 30.5% y.o.y. The increase in the price of paper has led some of the customers to opt for a more digital strategy. Also the fact that there were some campaigns in 1Q22 which were not replicated this year adversely affected performance in this quarter.
During this period the following CTT Ads offers were disseminated: "Creativity", "Database" (to leverage the Direct Mail product line), "Create Campaigns" and "Digital Media". New partnerships with various entities were launched to expand and complement the digital advertising offer, thus seeking to anticipate the customers' needs.
5 Includes letter mail, editorial mail and parcels of the universal postal service, excluding international inbound mail.
Express & Parcels
Express & Parcels revenues amounted to €64.7m in 1Q23 (+€3.3m; +5.4% y.o.y), thus achieving a quarterly growth in absolute terms similar to the annual growth of 2022 compared to 2021.
Revenues in Portugal recorded €33.9m in 1Q23 (+€2.9m; +9.3% y.o.y) and volumes totalled 8.6 million items (+14.3% y.o.y).
CEP revenues amounted to €30.6m in 1Q23 (+€3.0m; +10.9% y.o.y), with a 12.9% y.o.y. increase of volumes per working day and high quality of service levels. This growth was driven essentially by ecommerce (B2C) customers, particularly large global marketplaces and national and international esellers.
The banking documents delivery product line recorded revenues of €1.1m in 1Q23 (-0.5% y.o.y) in a context of continued reduction of the capillarity of banking networks, as well as of lower collection/ delivery frequency.
Revenues of the cargo product line amounted to €1.0m in 1Q23 (-25.9% y.o.y), a reduction related to the change in the operating strategy, which aimed at repositioning this product line within positive margin levels (the contribution margin6 in 1Q23 was 13.5%). This implied the exit of some customers as well as the withdrawal from some activity sectors without operating synergies.
The logistics product line, which is a pillar of the development of the vertical integration strategy with CEP, recorded revenues of €0.9m in 1Q23 (+27.9% y.o.y). This strong growth was underpinned by the recovery of a major customer and a three-month logistics operation won in response to a public tender.
CTT continued to roll out its 24-hour locker (Locky) strategy allowing clients to pick up their parcels with maximum convenience, 24 hours a day, every day of the week (24/7) in most lockers. As at the end of March 2023, CTT's Locky network comprised 606 units in various locations around the country, namely in hospitals, intermodal transport platforms, shopping centres, university campuses, physical retail networks, parking lots, gas stations or, in the case of private lockers, in condominiums and in office/ business areas.
Revenues in Spain stood at €29.7m in 1Q23 (+0.6% y.o.y), with 9.3 million items and an average unit revenue growth of 9.5% y.o.y.
CTT Express began its new customer clearance service with the opening of a new unit in San Fernando de Henares, which meets the needs of extra-EU clients. It is thus positioned as an operator that adds value at any stage of the supply chain, both for customers and addressees.
Revenues in Mozambique in 1Q23 amounted to €1.1m (+29.9% y.o.y). This growth was driven by a partnership with a freight forwarder in Africa which started at the end of 1Q22.
6 Revenues minus direct operating costs (excludes overheads, essentially buildings and fleet).
Banco CTT
Banco CTT revenues reached €34.1m in 1Q23 (+€6.0m; +21.4% y.o.y).
Revenue growth was due to the positive performance of net interest income, which totalled €22.0m in 1Q23 (+€5.6m; +34.2% y.o.y). Interest received increased by €9.4m compared to 1Q22, and interest paid increased by €3.9m compared to 1Q22 due to the increase in interest rates on customer deposits and securitisations of auto loans.
Interest from consumer credit amounted to €12.7m in 1Q23 (+€2.1m; +19.4% y.o.y) and auto loans reached a loan portfolio net of impairments of €784.0m (+3.1% vs. December 2022). Auto loans production stood at €66.8m in 1Q23 (+10.8% y.o.y).
The cartão Universo consumer credit portfolio generated revenues of €5.8m in 1Q23 (+€1.2m; +26.9% y.o.y), with a balance sheet volume, net of impairments, of €321.8m in 1Q23 (-€32.0m; -9.0% vs. December 2022). The end of the partnership by 31 December 2023 will entail a progressive reduction of the portfolio which, given the current economic environment, particularly regarding the associated interest rates and cost of risk, will allow Banco CTT to gain strategic options in the management of its portfolio.
Interest from mortgage loans stood at €3.8m in 1Q23 (+€2.9m; +315.8% y.o.y), considering that in 1Q23 Euribor rates are higher than in 1Q22, when they were negative. Base interest rates for mortgage loans reflected strong growth as a result of the rise in key interest rates defined by the European Central Bank (ECB), due to the increase in inflation in the Euro area. The mortgage loan portfolio net of impairments totalled €671.8m in 1Q23 (+2.0% vs. December 2022). Mortgage loan production amounted to €49.2m in 1Q23 (+€10.3m; +26.4% y.o.y).
Also worthy of note is the interest received on other credit relating to the application of surplus liquidity at Banco de Portugal, which increased by €2.4m in 1Q23 compared with 1Q22.
Commissions received in this business unit reached €11.2m in 1Q23, (+€0.7m; +6.2% y.o.y). Noteworthy are the following positive contributions in 1Q23: (i) commissions from accounts and cards, which amounted to €3.0m (+€0.3m; +12.2% y.o.y), (ii) payments, which totalled €4.6m (+€0.3m; +7.9% y.o.y); and (iii) insurance amounting to €0.9m (+€0.1m; +15.9% y.o.y).
In terms of less favourable performance, as a result of the current economic context, there was a retraction: (i) in savings products (off-balance sheet) with a reduction of €11.4m, -1.3% compared to December 2022 in the net off-balance volume, with the respective commissions received amounting to €1.2m (+€0.0m; +3.0% y.o.y) which corresponds to a net off-balance sheet volume of €880.4m; and (ii) in commissions received on consumer credit (off-balance sheet) with €0.6m (-€0.1m; -17.7% y.o.y).
Customer deposits (Banco CTT consolidation) stood at €2,241.4m in March 2023 (-1.7% vs. December 2022), with a 25.1% increase in fixed-term deposits and a 12.1% reduction in current account deposits compared to December 2022. The number of accounts was 612k (10k more than in December 2022).
The loan-to-deposit ratio reached 79.5% as at the end of March 2023.
The cost of risk (consolidated and accumulated as at March 2023) stood at 1.4%, down by 0.1 p.p. compared to December 2022, due to the decrease in the customer loan portfolio, especially consumer credit (Universo credit card).
Financial Services & Retail
Financial Services & Retail revenues amounted to €28.7m in 1Q23 (+€16.8m; +141.6% y.o.y). There was a positive evolution in revenues in 1Q23, as a result of the higher attractiveness of public debt certificates, especially Savings Certificates, against an interest rate backdrop more in favour of this savings product.
Financial services (excluding other revenues) obtained revenues of €25.0m (+€17.2m; +223.2% y.o.y).
Public debt certificates (Savings Certificates and Treasury Certificates Savings Growth) posted revenues of €23.2m in 1Q23 (+€17.5m; +306.7% y.o.y).
Subscriptions of these certificates amounted to €7,543.6m in 1Q23, an average of €117.9m/day (€18.5m/day in 1Q22), which compares to €8,138.0m throughout 2022. This is the outcome of a new interest rate conjuncture that places public debt as a more interesting investment alternative.
These positive results in public debt certificates made it possible to absorb the less favourable performance of money orders, which recorded revenues of €1.1m in 1Q23 (-€0.3m; -20.9% y.o.y). The additional issues of social benefits in 1Q22, created under the current macroeconomic framework, did not occur in 1Q23, which was also burdened by the structural decline resulting from the substitution of this means of payment.
It should be noted that CTT reinforced the commercial dynamism of non-banking financial products in the beginning of 2Q23, in the area of non-life insurance, including auto, health, personal accidents, multi-risk, etc., by entering into a distribution agreement with Generali.
Retail products and services (excluding other revenues) reached €3.4m in revenues in 1Q23 (-€0.7m; -17.1% y.o.y).
This reduction is in line with the strategy CTT has defined for the retail network of discontinuing some products, including scratch cards, and repositioning its retail network as a service platform, including: (i) the offer of self-services including the distribution of mail and express and parcels products and services; (ii) the distribution of public debt; (iii) the marketing of insurance products; and (iv) the provision of convenience services for citizens. Aimed at improving customer service and experience, a strategy of digital channels and self-services is also being developed, focusing on the search for complementarity between physical and digital and between in-store and self-service.
Operating Costs
Operating costs totalled €216.8m in 1Q23 (-€8.5m; -3.8% y.o.y).
Operating Costs
| € million | ||||
|---|---|---|---|---|
| 1Q22 | 1Q23 | Δ | Δ% | |
| Staff costs | 91.8 | 97.7 | 5.9 | 6.5% |
| ES&S | 85.3 | 84.8 | (0.5) | (0.6%) |
| Impairments & provisions | 5.7 | 8.0 | 2.3 | 39.4% |
| Other costs | 29.9 | 10.4 | (19.4) | (65.1%) |
| Operating costs (EBITDA) | 212.7 | 201.0 | (11.7) | (5.5%) |
| Depreciation & amortisation | 15.4 | 15.1 | (0.2) | (1.6%) |
| Specific items | (2.7) | 0.7 | 3.4 | 127.1% |
| Corporate restructuring costs and strategic projects |
0.7 | 1.0 | 0.4 | 56.1% |
| Other non-recurring revenues and costs |
(3.4) | (0.3) | 3.1 | 91.4% |
| Operating costs | 225.4 | 216.8 | (8.5) | (3.8%) |
Staff costs increased by €5.9m (+6.5% y.o.y) in 1Q23, mostly as a result of the salary increase and the increase in the national minimum wage (+€4.2m), which constituted an additional effort by the company due to the current economic situation. Additionally, the growth in the contact centre activity and document management of the Mail & Other corporate solutions business line, as well as in the Express & Parcels activity, also contributed to this evolution in costs.
External supplies & services costs decreased by €0.5m (-0.6% y.o.y), essentially due to the impact of elections in 1Q22 (-€3.3m). This effect was partially offset by the growth in direct costs of services associated to growing businesses, especially in Express & Parcels (+€2.7m).
Impairments and provisions increased by €2.3m in 1Q23 (+39.4% y.o.y), as a result of the growth in the auto loans and the Universo credit card portfolios.
Other costs decreased by €19.4m (-65.1% y.o.y), mainly due to the business solutions laptop sale project that took place in 1Q22 (-€20.7m y.o.y).
Depreciation & amortisation decreased by €0.2m (-1.6% y.o.y) in 1Q23, positively impacted by the revision of the useful life of some assets (-€0.9m). This effect was partly offset by investment in IT systems (+€0.2m), furniture (+€0.1m), and to new building and vehicle lease contracts which impacted amortisation (+€0.3m), due to the IFRS 16 accounting standard.
Specific items amounted to €0.7m in 1Q23, due to: (i) restructuring costs, namely suspension agreements of employment contracts (+€0.3m); (ii) strategic projects (+€0.7m); (iii) the change of head office building (-€0.2m); and (iv) gross gains from the appreciation of contracted derivatives (-€0.1m).
Staff
On 31 March 2023, the number of CTT employees (permanent employees and fixed-term employees) was 12,918, up 349 compared to 31 March 2022 (+2.8% y.o.y).
| 31.03.2022 | 31.03.2023 | Δ | Δ% | |
|---|---|---|---|---|
| Mail & Other | 10,774 | 10,792 | 18 | 0.2% |
| Express & Parcels | 1,305 | 1,583 | 278 | 21.3% |
| Banco CTT | 460 | 506 | 46 | 10.0% |
| Financial Services & Retail | 30 | 37 | 7 | 23.3% |
| Total, of which: | 12,569 | 12,918 | 349 | 2.8% |
| Permanent | 11,360 | 11,379 | 19 | 0.2% |
| Fixed-term contracts | 1,209 | 1,539 | 330 | 27.3% |
| Portugal | 11,898 | 11,982 | 84 | 0.7% |
| Other geographies | 671 | 936 | 265 | 39.5% |
Headcount
There was an increase in the number of employees in all business units, mainly in the Express & Parcels business unit (+278) and Banco CTT (+46). The Mail & Other business unit also presented a slight increase, as a result of the increment in the activity of the contact centre and the document management of the business solutions area, which was partially compensated by the prosecution of the Human Resources optimisation programme underway mainly in the central structure.
Together, the areas of operations and distribution within the mail network (4,996 employees, of whom 4,006 are delivery postmen and women) and the retail network (2,234 employees) represented circa 63.5% of CTT's permanent staff.
Recurring EBIT
Recurring EBIT stood at €25.7m in 1Q23 (+€19.0m; +285.3% y.o.y), with a margin of 10.6% (2.8% in 1Q22). All business units, except Express & Parcels, posted recurring EBIT growth: Financial Services & Retail by +€12.8m, +245.6% y.o.y; Banco CTT by +€0.9m, +25.3% y.o.y; as well as Mail & Other by +€6.0m, +181.3% y.o.y. In Express & Parcels (-€0.7m; -50.1% y.o.y), the decline was due to the increased costs associated with the expansion of sorting centres and the increase in fuel prices, and in Portugal there was also a decrease in the average revenue per item due to the change of the product mix (greater flows of smaller items).
Recurring EBIT by business unit
| € million | ||||
|---|---|---|---|---|
| 1Q22 | 1Q23 | Δ | Δ% | |
| EBIT by business unit | 6.7 | 25.7 | 19.0 | » |
| Mail & Other | (3.3) | 2.7 | 6.0 | » |
| Express & Parcels | 1.3 | 0.7 | (0.7) | (50.1%) |
| Banco CTT | 3.4 | 4.3 | 0.9 | 25.3% |
| Financial Services & Retail | 5.2 | 18.1 | 12.8 | » |
Financial results and Net profit
The consolidated financial results amounted to -€3.1m (-€1.0m; -46.4% y.o.y).
Financial Results
| € million | ||||
|---|---|---|---|---|
| 1Q22 | 1Q23 | Δ | Δ% | |
| Financial results | (2.1) | (3.1) | (1.0) | (46.4%) |
| Financial income, net | (2.1) | (3.1) | (1.0) | (49.0%) |
| Financial costs and losses | (2.2) | (3.5) | (1.3) | (58.5%) |
| Financial income | 0.1 | 0.4 | 0.3 | » |
| Gains/losses in subsidiaries, associated companies and joint ventures |
(0.0) | (0.0) | 0.0 | 84.1% |
Financial costs and losses incurred amounted to €3.5m, mainly incorporating financial costs related to post-employment and long-term employee benefits of €1.8m, the most significant increase of which is due to the increase in the discount rate in the 2022 valuation, interest expense associated to finance leases liabilities linked to the implementation of IFRS 16 for an amount of €0.8m and interest expense on bank loans for an amount of €0.7m.
In 1Q23, CTT obtained a consolidated net profit attributable to equity holders of €16.1m, which is €10.7m above 1Q22. The evolution of consolidated net income was positively impacted by the growth of recurring EBIT (+€19.0m) and negatively affected by (i) the worsening of net financial results (-€1.0m), (ii) the unfavourable evolution of the corporate income tax for the period (+€3.9m), (iii) specific items, as in 1Q22 CTT registered a gain of €2.7m as compared to a loss of €0.7m registered in 2023, as mentioned above.
Investment
Capex stood at €5.6m in 1Q23 (-€0.4m; -6.2% y.o.y).
This evolution is justified above all by the investment made in sorting centres as of late. CTT maintains its focus on improving IT systems, especially in the area of Express & Parcels where investment in IT systems to support the business was reinforced.
Cash flow
In 1Q23, the Company generated an operating cash flow of €44.2m (+€33.8m; +326.4% y.o.y). The growth of operating cash flow is primarily explained by (i) the favourable performance in terms of generated EBITDA (+€18.8m to €40.8m), as well as by (ii) the very positive evolution of working capital (+€15.4m). The €2.7m reduction in the non-cash items at the EBITDA level was offset by higher cash costs related with specific items (a deterioration of €3.4m). On the other hand, the capex in 1Q23 was broadly stable as compared to 1Q22.
In terms of working capital, the evolution observed results from a positive performance of EBITDA-related items, reflecting a more efficient management of accounts receivable which positively impacted the average collection period, as well as investment-related items which performed positively in terms of the average payment deadlines.
Cash flow
| € million | ||||
|---|---|---|---|---|
| 1Q22 | 1Q23 | Δ | Δ% | |
| EBITDA | 22.0 | 40.8 | 18.8 | 85.2% |
| Non-cash items* | (2.3) | 0.4 | 2.7 | 119.1% |
| Specific items ** | 2.7 | (0.7) | (3.4) (127.1%) | |
| Capex | (5.9) | (5.6) | (0.4) | (6.2%) |
| Δ Working capital | (6.2) | 9.2 | 15.4 | » |
| Operating cash flow | 10.4 | 44.2 | 33.8 | » |
| Employee benefits | (4.2) | (4.4) | (0.2) | (5.8%) |
| Tax | 0.0 | (0.1) | (0.1) | « |
| Free cash flow | 6.2 | 39.7 | 33.4 | » |
| Debt (principal + interest) | (4.0) | 34.7 | 38.7 | » |
| Acquisition of own shares | (1.6) | 0.0 | 1.6 | 100.0% |
| Disposal of buildings | 0.0 | 0.0 | 0.0 | 0.0% |
| Change in adjusted cash | 0.6 | 74.4 | 73.8 | » |
| Δ Liabilities related to Financial Serv. & others and |
||||
| Banco CTT, net | (118.2) | 59.2 | 177.3 | 150.1% |
| Δ Other | 5.8 | (1.0) | (6.9) (117.8%) | |
| Net change in cash | (111.7) | 132.5 | 244.2 | » |
*Impairments, Provisions and IFRS 16 affecting EBITDA.
**Specific items affecting EBITDA.
Consolidated balance sheet
Consolidated balance sheet
| € million | ||||
|---|---|---|---|---|
| 31.12.2022 | 31.03.2023 | Δ | Δ% | |
| Non-current assets | 2,253.3 | 2,255.0 | 1.8 | 0.1% |
| Current assets | 1,804.2 | 1,890.8 | 86.6 | 4.8% |
| Assets | 4,057.5 | 4,145.8 | 88.3 | 2.2% |
| Equity | 224.9 | 241.0 | 16.1 | 7.2% |
| Liabilities | 3,832.6 | 3,904.8 | 72.2 | 1.9% |
| Non-current liabilities | 789.4 | 803.2 | 13.7 | 1.7% |
| Current liabilities | 3,043.1 | 3,101.6 | 58.5 | 1.9% |
| Equity and consolidated liabilities | 4,057.5 | 4,145.8 | 88.3 | 2.2% |
The key aspects of the comparison between the balance sheet as at 31.03.2023 and that as at 31.12.2022 are as follows:
- Assets grew by €88.3m, largely due to the growth in cash and cash equivalents following the significant increase of amounts received as advances for the payment of money orders (+€132.5m), partly attenuated by the decrease in other banking financial assets (-€48.3m) as a result of the bank applications made by Banco CTT in Banco de Portugal.
- Equity increased by €16.1m following the net profit attributable to shareholders of the CTT Group in 1Q23 in the amount of €16.1m.
• Liabilities increased by €72.2m, mostly due to the increase in accounts payable (+€93.1m) largely due to the amounts received as advances for the payments of money orders, and the increase of debt following the contracted commercial paper programmes (+€27.3m). In the opposite sense, there was a decrease in banking clients' deposits and other loans (-€35.1m) and other banking financial liabilities (-€14.2m).
The CTT Group consolidated balance sheet excluding Banco CTT from the full consolidation perimeter and accounting it as a financial investment measured by the equity method would be as follows:
Consolidated balance sheet with Banco CTT under equity method
| € million | ||||
|---|---|---|---|---|
| 31.12.2022 | 31.03.2023 | Δ | Δ% | |
| Non-current assets | 687.9 | 682.1 | (5.8) | (0.8%) |
| Current assets | 566.0 | 733.1 | 167.1 | 29.5% |
| Assets | 1,253.9 | 1,415.2 | 161.3 | 12.9% |
| Equity | 225.2 | 241.3 | 16.1 | 7.1% |
| Liabilities | 1,028.7 | 1,173.9 | 145.2 | 14.1% |
| Non-current liabilities | 331.1 | 364.9 | 33.8 | 10.2% |
| Current liabilities | 697.6 | 809.0 | 111.4 | 16.0% |
| Equity and consolidated liabilities | 1,253.9 | 1,415.2 | 161.3 | 12.9% |
Liabilities related to employee benefits
Liabilities related to employee benefits (post-employment and long-term benefits) stood at €208.3m in March 2023, down by €1.9m compared to December 2022, broken down as specified in the table below:
Liabilities related to employee benefits
| € million | ||||
|---|---|---|---|---|
| 31.12.2022 | 31.03.2023 | Δ | Δ% | |
| Total liabilities | 210.2 | 208.3 | (1.9) | (0.9%) |
| Healthcare | 190.4 | 189.4 | (1.0) | (0.5%) |
| Healthcare (321 Crédito) | 1.0 | 1.0 | 0.0 | 2.8% |
| Suspension agreements | 10.3 | 9.4 | (0.9) | (9.0%) |
| Other long-term employee benefits | 5.1 | 5.1 | (0.0) | (0.9%) |
| Other long-term benefits (321 Crédito) | 0.2 | 0.2 | 0.0 | 2.7% |
| Pension plan | 0.2 | 0.2 | (0.0) | (1.9%) |
| Other benefits | 3.0 | 3.0 | 0.0 | 0.0% |
| Deferred tax assets | (59.5) | (59.1) | 0.4 | 0.7% |
| Current amount of after-tax liabilities | 150.7 | 149.2 | (1.5) | (1.0%) |
These liabilities related to employee benefits are associated with deferred tax assets amounting to €59.1m, which brings the current amount of liabilities related to employee benefits net of deferred tax assets associated with them to €149.2m.
Consolidated net debt
| € million | ||||
|---|---|---|---|---|
| 31.12.2022 | 31.03.2023 | Δ | Δ% | |
| Net debt | 29.8 | (17.3) | (47.1) | « |
| ST & LT debt | 196.0 | 223.3 | 27.3 | 14.0% |
| of which Finance leases (IFRS16) | 125.9 | 118.2 | (7.7) | (6.1%) |
| Adjusted cash (I+II) | 166.2 | 240.6 | 74.4 | 44.8% |
| Cash & cash equivalents | 456.5 | 589.0 | 132.5 | 29.0% |
| Cash & cash equivalents at the end of the period (I) | 410.8 | 544.4 | 133.6 | 32.5% |
| Other cash items | 45.7 | 44.6 | (1.0) | (2.3%) |
| Other Financial Services liabilities, net (II) | (244.6) | (303.8) | (59.2) | (24.2%) |
Consolidated net debt
The key aspects of the comparison between the consolidated net debt as at 31.03.2023 and that as at 31.12.2022 are as follows:
- Adjusted cash increased by €74.4m, as the positive performance of the operating cash flow (+€44.2m) offset the payment of employee benefits (-€4.4m) and tax payments (-€0.1m), as well as the contracting of commercial paper programmes (+€34.7m).
- Short-term & long-term debt increased by €27.3m essentially due to the combined effect of the decrease in lease liabilities (-€7.7m) and the increase in bank loans (+€35.0m) as a result of the above-mentioned commercial paper programmes.
CTT Group net debt excluding Banco CTT from the full consolidation perimeter and accounting it as a financial investment measured by the equity method would be as follows:
| Consolidated net debt with Banco CTT under equity method | |||||||
|---|---|---|---|---|---|---|---|
| ---------------------------------------------------------- | -- | -- | -- | -- | -- | -- | -- |
| € million | ||||
|---|---|---|---|---|
| 31.12.2022 | 31.03.2023 | Δ | Δ% | |
| Net debt with Banco CTT under equity method | 192.6 | 150.1 | (42.5) | (22.1%) |
| ST & LT debt | 192.0 | 219.6 | 27.6 | 14.4% |
| of which Finance leases (IFRS16) | 122.0 | 114.5 | (7.4) | (6.1%) |
| Adjusted cash (I+II) | (0.5) | 69.6 | 70.1 | » |
| Cash & cash equivalents | 361.2 | 518.9 | 157.7 | 43.7% |
| Cash & cash equivalents at the end of the period (I) | 361.2 | 518.9 | 157.7 | 43.7% |
| Other cash items | (0.0) | (0.0) | (0.0) | « |
| Other Financial Services liabilities, net (II) | (361.7) | (449.4) | (87.6) | (24.2%) |
2. Other highlights
Regulatory issues
As announced to the market on 26 January 2023, the prices of the letter mail, editorial mail and parcels services covered by the Universal Postal Service Price Convention, were updated effective 1 March 2023. This update corresponded to an average annual price variation of 6.58%. The overall average annual price variation, also reflecting the effect of the update of special prices for bulk mail, is 6.24%.
Main ESG milestones achieved
At the beginning of 2023, CTT committed to pursuing the objectives of the Faster, Better and Greener transformation programme, including its environmental, social and governance dimensions, as defined in the sustainability programme for the 2025-2050 period.
In the environmental dimension, the evolution of the electrification of the "green" fleet for the last mile was 0.6 percentage points, from 15.3% of the total number of vehicles at the end of 2022 to 15.9% on 31 March. In the whole CTT fleet, the number of "green" vehicles is already 665, mostly electric and in activity for last-mile distribution. It should be recalled that CTT's commitment is to reach a net-zero carbon balance by 2030, with 50% "green" vehicles in the last mile by 2025 and 100% by 2030. For this purpose, CTT reinforced its investment in the last-mile fleet with the goal of doubling the electrification of this segment of its own fleet as early as 2023.
CTT reinforced its efforts to incorporate recycled materials in its offer, in the first quarter of 2023, and extended its scope to philatelic products and Banco CTT. If we consider this extension, on 31 March 2023, 49.4% of CTT's offer in Portugal already incorporated recycled and reused materials. Considering only the mail, express and parcels offer in Portugal, there was a positive trend already in the first quarter, with an increase in the incorporation of recycled materials to 59.2%, compared to 54.9% at the end of 2022. CTT's commitment is to incorporate recycled and reused material in 80% of its offer by 2025 and reach 100% by 2030.
On the internal social front, CTT has the ambition to ensure full gender parity in top and middle management by 2025. At the end of the 1st quarter of 2023, women (the under-represented gender) represented 39.5% of the leadership functions in the top and middle management of CTT and its subsidiaries (in line with the trend seen at the end of 2022). Additionally, the implementation of the Fast Track CTT leadership programme is underway, aiming to strengthen the role of CTT's leaders, aligning the mission, vision and respective values. This programme relies on the active participation of its leaders and aims to better prepare them to respond to current and future challenges.
In relation to external social impact, the commitment to ensure that 1% of recurring EBIT is invested in social impact programmes by 2025 was practically achieved (the ascertained value was 0.97%) at the end of 2022. In the first three months of 2023, donations to social institutions were an additional 157 thousand euros, reaching 0.61% of the recurring EBIT. This value will be adjusted throughout the year, when some of the already planned donations, of more relevant values, will take place.
CTT also reinforced the invitation to participate in social and volunteer programmes for workers and their families, who responded positively to the call. To be highlighted are the EPIS Mentoring and Tutoring programme, which kicked off with a face-to-face meeting at Seixal Secondary School on 6 January, the blood collection initiative and the planting in Serra da Estrela of trees donated by CTT clients who joined the 9th edition of the participative citizenship initiative "A Tree for the Forest". In total, 100 volunteer workers dedicated a total of 443 hours (more than 4 hours per worker) to these initiatives until 31 March 2023.
Finally, it is also worth highlighting that CTT was elected for the 16th time as Trusted Brand by the Portuguese, through a survey carried out by the Reader's Digest Selections, leading in the Mail and Logistics Services category.
Outlook for 2023
Following the robust 1Q23 performance, particularly in the Financial Services and Banco CTT business units, CTT revised upward the guidance for 2023. Thus, the Company expects to achieve a recurring EBIT of at least €80m (compared to the previously communicated 10% growth to a €70m level).
Risk outlook is maintained, as follows: (1) high geopolitical uncertainty; and (2) macro risks will continue to be relevant and persistent, namely inflation, cost of energy and raw materials.
As mentioned above, revenue and recurring EBIT guidance reflects continued growth and transformation, notwithstanding a challenging environment.
3. Subsequent events
The Annual General Meeting held on 20 April 2023 approved the appropriation of results relative to the 2022 financial year as proposed by the Board of Directors, including the payment of a €0.125 gross dividend per share.
The General Meeting also passed a resolution on a share capital reduction of €717,500.00 for the purpose of releasing excess capital, by means of the cancellation of 1,435,000 shares representing 0.997% of the share capital, already acquired in connection with the share buyback programme, as well as on the related reserves.
On 21 April 2023, the CTT share capital reduction in the amount mentioned above was registered before the Commercial Registry Office, whereby 1,435,000 shares held by the Company were cancelled. CTT's share capital thus became 71,957,500.00 Euros, represented by 143,915,000 shares with the nominal value of fifty cents per share. Paragraphs 1 and 2 of Article 4 of the Articles of Association were amended accordingly.
Final Note
This press release is based on CTT – Correios de Portugal, S.A. interim condensed consolidated financial statements for the three months of 2023, which are attached hereto.
Lisbon, 4 May 2023
The Board of Directors
This information to the market and the general public is made under the terms and for the purposes of article 29-Q of the Portuguese Securities Code. It is also available on CTT website at: https://www.ctt.pt/grupo-ctt/investidores/comunicados/index?language_id=1
CTT – Correios de Portugal, S.A.
Guy Pacheco Market Relations Representative of CTT
Nuno Vieira Director of Investor Relations of CTT
Contacts:
Email: [email protected] Telephone: + 351 210 471 087
Disclaimer
This document has been prepared by CTT – Correios de Portugal, S.A. (the "Company" or "CTT") exclusively for communication of the financial results of the first quarter of 2023 (1Q23) and has a mere informative nature. This document does not constitute, nor must it be interpreted as, an offer to sell, issue, exchange or buy any financial instruments (namely any securities issued by CTT or by any of its subsidiaries or affiliates), nor any kind of solicitation, recommendation or advice to (dis)invest by CTT, its subsidiaries or affiliates.
Distribution of this document in certain jurisdictions may be prohibited, and recipients into whose possession this document comes shall be solely responsible for informing themselves about and observing any such restrictions. In particular, this press release and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States of America (including its territories and possessions), Canada, Japan or Australia or to any other jurisdiction where such an announcement would be unlawful.
Hence, neither this press release nor any part of it, nor its distribution, constitute the basis of, or may be invoked in any context as, a contract, or compromise or decision of investment, in any jurisdiction. Thus being, the Company does not assume liability for this document if it is used with a purpose other than the above.
This document (i) may contain summarised information and be subject to amendments and supplements and (ii) the information contained herein has neither been independently verified, nor audited or reviewed by any of the Company's advisors or auditors. Thus being, given the nature and purpose of the information herein and, except as required by applicable law, CTT does not undertake any obligation to publicly update or revise any of the information contained in this document. This document does not contain all the information disclosed to the market about CTT, thus its recipients are invited and advised to consult the public information disclosed by CTT in www.ctt.pt and in www.cmvm.pt. In particular, the contents of this press release shall be read and understood in light of the financial information disclosed by CTT, through such means.
By reading this document, you agree to be bound by the foregoing restrictions.
Forward-looking statements
This document contains forward-looking statements. All the statements herein which are not historical facts, including, but not limited to, statements expressing our current opinion or, as applicable, those of our directors regarding the financial performance, the business strategy, the management plans and objectives concerning future operations and investments are forward-looking statements. Statements that include the words "expects", "estimates", "foresees", "predicts", "intends", "plans", "believes", "anticipates", "will", "targets", "may", "would", "could", "continues" and similar statements of a future or forward-looking nature identify forward-looking statements.
All forward-looking statements included herein involve known and unknown risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results, performance or achievements to differ materially from those indicated in these statements. Any forward-looking statements in this document reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the results of our operations, growth strategy and liquidity, and the wider environment (specifically, market developments, investment opportunities and regulatory conditions).
Although CTT believes that the assumptions beyond such forward-looking statements are reasonable when made, any third parties are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of CTT, what could cause the models, objectives, plans, estimates and / or projections to be materially reviewed and / or actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Forward-looking statements (in particular, the objectives, estimates and projections as well as the corresponding assumptions) do neither represent a commitment regarding the models and plans to be implemented, nor are they guarantees of future performance, nor have they been reviewed by the auditors of CTT. You are cautioned not to place undue reliance on the forward-looking statements herein. All forward-looking statements included herein speak only as at the date of this document. Except as required by applicable law, CTT does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
3 Months Report 2023
Interim condensed consolidated
financial statements
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CTT-CORREIOS DE PORTUGAL, S.A.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 AND 31 MARCH 2023 (Euros)
| Unaudited | |||
|---|---|---|---|
| NOTES | 31.12.2022 | 31.03.2023 | |
| ASSETS | |||
| Non-current assets | |||
| Tangible fixed assets | 4 | 303,205,780 | 295,299,824 |
| Investment properties | 6 | 6,183,979 | 6,131,870 |
| Intangible assets | 5 | 69,408,609 | 68,435,401 |
| Goodwill | 80,256,739 | 80,256,739 | |
| Investments in associated companies | 481 | 481 | |
| Other investments | 961,394 | 961,394 | |
| Financial assets at fair value through profit or loss | 26,219,905 | 24,191,223 | |
| Debt securities at amortised cost | 8 | 409,388,745 | 389,667,099 |
| Other non-current assets | 1,177,648 | 1,263,351 | |
| Credit to banking clients | 10 | 1,287,676,223 | 1,321,260,064 |
| Other banking financial assets | 9 | 961,446 | 350,503 |
| Deferred tax assets | 26 | 67,823,608 | 67,202,432 |
| Total non-current assets | 2,253,264,557 | 2,255,020,381 | |
| Current assets | |||
| Inventories | 8,040,976 | 7,980,392 | |
| Accounts receivable | 147,130,876 | 147,265,207 | |
| Credit to banking clients | 10 | 489,888,789 | 461,378,817 |
| Income taxes receivable | 23 | 1,102,700 | 8,268 |
| Prepayments | 11 | 9,011,875 | 12,325,811 |
| Financial assets at fair value through profit or loss | 26,478,525 | 26,587,722 | |
| Debt securities at amortised cost | 8 | 128,391,899 | 153,094,006 |
| Other current assets | 76,482,423 | 79,649,948 | |
| Other banking financial assets | 9 | 461,226,081 | 413,492,323 |
| Cash and cash equivalents | 12 | 456,469,298 | 589,008,781 |
| 1,804,223,442 | 1,890,791,275 | ||
| Non-current assets held for sale | 200 | 200 | |
| Total current assets | 1,804,223,642 | 1,890,791,475 | |
| Total assets | 4,057,488,199 | 4,145,811,856 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 14 | 72,675,000 | 72,675,000 |
| Own shares | 15 | (10,826,390) | (10,826,390) |
| Reserves | 15 | 53,844,057 | 53,844,057 |
| Retained earnings | 15 | 64,647,067 | 101,046,457 |
| Other changes in equity | 15 | 6,857,207 | 6,857,207 |
| Net profit | 36,406,519 | 16,135,054 | |
| Equity attributable to equity holders | 223,603,460 | 239,731,385 | |
| Non-controlling interests | 1,326,016 | 1,309,603 | |
| Total equity | 224,929,476 | 241,040,988 | |
| Liabilities | |||
| Non-current liabilities | |||
| Medium and long term debt | 18 | 136,197,923 | 171,830,497 |
| Employee benefits | 185,257,617 | 183,702,998 | |
| Provisions | 19 | 12,632,267 | 12,270,479 |
| Debt securities issued at amortised cost | 21 | 445,226,206 | 425,859,137 |
| Prepayments | 11 | 260,886 | 258,086 |
| Deferred tax liabilities | 26 | 9,847,476 | 9,249,242 |
| Total non-current liabilities | 789,422,375 | 803,170,439 | |
| Current liabilities | |||
| Accounts payable | 20 | 525,211,751 | 618,274,282 |
| Banking clients' deposits and other loans | 22 | 2,245,329,918 | 2,210,279,108 |
| Employee benefits | 22,091,681 | 21,734,607 | |
| Income taxes payable | 23 | — | 4,432,006 |
| Short term debt | 18 | 59,756,744 | 51,473,567 |
| Financial liabilities at fair value through profit or loss | 26,344,517 | 24,262,400 | |
| Debt securities issued at amortised cost | 21 | 351,654 | 433,097 |
| Prepayments | 11 | 3,678,140 | 10,812,581 |
| Other current liabilities | 114,161,276 | 127,873,138 | |
| Other banking financial liabilities | 9 | 46,210,667 | 32,025,643 |
| Total current liabilities | 3,043,136,348 | 3,101,600,429 | |
| Total liabilities | 3,832,558,723 | 3,904,770,868 | |
| Total equity and liabilities | 4,057,488,198 | 4,145,811,856 |
CTT-CORREIOS DE PORTUGAL, S.A.
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTH PERIODS ENDED 31 MARCH 2022 AND 31 MARCH 2023 Euros
| NOTES | Unaudited | Unaudited | |
|---|---|---|---|
| 31.03.2022 | 31.03.2023 | ||
| Sales and services rendered | 3 | 209,578,237 | 210,190,917 |
| Financial margin | 16,407,396 | 22,011,867 | |
| Other operating income | 8,759,838 | 9,588,593 | |
| 234,745,471 | 241,791,377 | ||
| Cost of sales | (25,473,870) | (4,905,904) | |
| External supplies and services | (85,939,317) | (85,638,490) | |
| Staff costs | 24 | (92,018,805) | (98,058,994) |
| Impairment of accounts receivable, net | (1,281,248) | (1,665,205) | |
| Impairment of other financial banking assets | (3,780,615) | (6,283,772) | |
| Provisions, net | 19 | (658,302) | (22,203) |
| Depreciation/amortisation and impairment of investments, net | (15,379,662) | (14,830,212) | |
| Net gains/(losses) of assets and liabilities at fair value through profit or loss | 3,805,592 | 147,633 | |
| Other operating costs | (4,695,853) | (5,599,817) | |
| Gains/losses on disposal/ remeasurement of assets | 44,392 | 24,992 | |
| (225,377,688) | (216,831,972) | ||
| 9,367,783 | 24,959,405 | ||
| Interest expenses | 25 | (2,199,332) | (3,486,309) |
| Interest income | 25 | 111,114 | 375,321 |
| Gains/losses in subsidiary, associated companies and joint ventures | (40,649) | (6,480) | |
| (2,128,867) | (3,117,468) | ||
| Earnings before taxes | 7,238,916 | 21,841,937 | |
| Income tax for the period | 26 | (1,826,317) | (5,716,167) |
| Net profit for the period | 5,412,599 | 16,125,770 | |
| Net profit for the period attributable to: | |||
| Equity holders | 5,388,750 | 16,135,054 | |
| Non-controlling interests | 23,851 | (9,285) | |
| Earnings per share: | 17 | 0.04 | 0.11 |
The attached notes are an integral part of these financial statements.
CTT-CORREIOS DE PORTUGAL, S.A.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE MONTH PERIODS ENDED 31 MARCH 2022 AND 31 MARCH 2023 Euros
| NOTES | Unaudited | Unaudited | |
|---|---|---|---|
| 31.03.2022 | 31.03.2023 | ||
| Net profit for the period | 5,412,599 | 16,125,770 | |
| Adjustments from application of the equity method (non re-classifiable adjustment to profit and loss) | 15 | 19,392 | (7,128) |
| Changes to fair value reserves | 15 | (1,398) | — |
| Other changes in equity | 19,392 | (7,128) | |
| Other comprehensive income for the period after taxes | 37,386 | (14,256) | |
| Comprehensive income for the period | 5,449,985 | 16,111,513 | |
| Attributable to non-controlling interests | 43,243 | (16,414) | |
| Attributable to shareholders of CTT | 5,406,744 | 16,127,927 |
The attached notes are an integral part of these financial statements.
CTT-CORREIOS DE PORTUGAL, S.A.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2022 AND 31 MARCH 2023
Euros
| NOTES | Share capital | Own Shares | Reserves | Other changes in equity |
Retained earnings |
Net profit for the year |
Non controlling interests |
Total | |
|---|---|---|---|---|---|---|---|---|---|
| Balance on 31 December 2021 | 75,000,000 | (6,404,963) | 67,078,351 | (43,998,612) | 43,904,074 | 38,404,113 | 563,106 | 174,546,069 | |
| Capital Decrease | (2,325,000) | 17,152,548 | (14,827,548) | — | — | — | — | — | |
| Appropriation of net profit for the year of 2021 | — | — | — | — | 38,404,113 | (38,404,113) | — | — | |
| Dividends | — | — | — | — | (17,656,441) | — | — | (17,656,441) | |
| Acquisition of own shares | 15 | — | (21,573,976) | — | — | — | — | — | (21,573,976) |
| Share plan | 15 | — | — | 1,620,000 | — | — | — | — | 1,620,000 |
| (2,325,000) | (4,421,428) | (13,207,548) | — | 20,747,671 | (38,404,113) | — | (37,610,417) | ||
| Other movements | 15 | — | — | — | — | — | — | 827,244 | 827,244 |
| Actuarial gains/losses - Health Care, net from deferred taxes | 15 | — | — | — | 50,855,819 | — | — | — | 50,855,819 |
| Changes to fair value reserves | 15 | — | — | (26,746) | — | — | — | — | (26,746) |
| Adjustments from the application of the equity method | 15 | — | — | — | — | (4,678) | — | — | (4,678) |
| Net profit for the period | — | — | — | — | — | 36,406,519 | (64,334) | 36,342,185 | |
| Comprehensive income for the period | — | — | (26,746) | 50,855,819 | (4,678) | 36,406,519 | 762,910 | 87,993,824 | |
| Balance on 31 December 2022 | 72,675,000 | (10,826,390) | 53,844,057 | 6,857,207 | 64,647,067 | 36,406,519 | 1,326,016 | 224,929,476 | |
| Appropriation of net profit for the year of 2022 | — | — | — | — | 36,406,519 | (36,406,519) | — | — | |
| — | — | — | — | 36,406,519 | (36,406,519) | — | — | ||
| Other movements | 15 | — | — | — | — | — | — | (7,128) | (7,128) |
| Adjustments from the application of the equity method | 15 | — | — | — | — | (7,128) | — | — | (7,128) |
| Net profit for the period | — | — | — | — | — | 16,135,054 | (9,285) | 16,125,770 | |
| Comprehensive income for the period | — | — | — | — | (7,128) | 16,135,054 | (16,413) | 16,111,514 | |
| Balance on 31 March 2023 | 72,675,000 | (10,826,390) | 53,844,057 | 6,857,207 | 101,046,457 | 16,135,054 | 1,309,603 | 241,040,988 |
The attached notes are an integral part of these financial statements.
CTT-CORREIOS DE PORTUGAL, S.A.
CONSOLIDATED CASH FLOW STATEMENT FOR THE THREE MONTH PERIODS ENDED 31 MARCH 2022 AND 31 MARCH 2023
Euros
| Unaudited | Unaudited | ||
|---|---|---|---|
| NOTES | 31.03.2022 | 31.03.2023 | |
| Cash flow from operating activities | |||
| Collections from customers | 208,445,349 | 223,437,428 | |
| Payments to suppliers | (123,965,452) | (112,232,332) | |
| Payments to employees | (72,504,968) | (75,517,392) | |
| Banking customer deposits | 44,920,394 | (35,827,082) | |
| Credit to bank clients | (52,144,212) | (10,122,242) | |
| Cash flow generated by operations | 4,751,111 | (10,261,620) | |
| Payments/receivables of income taxes | 31,238 | (99,345) | |
| Other receivables/payments | (45,418,458) | 101,011,986 | |
| Cash flow from operating activities (1) | (40,636,109) | 90,651,021 | |
| Cash flow from Investing activities | |||
| Receivables resulting from: | |||
| Tangible fixed assets | 3,360 | 3,360 | |
| Financial investments | 2 | — | |
| Investment in securities at fair value through other comprehensive income | 8 | 1,470,500 | — |
| Investment in securities at amortised cost | 8 | 187,881,491 | — |
| Demand deposits at Bank of Portugal | — | 23,185,900 | |
| Applications at the Central Bank | — | 48,200,000 | |
| Other banking financial assets | 9 | 2,335,000 | 5,320,000 |
| Interest income | 16,917 | 466,601 | |
| Payments resulting from: | |||
| Tangible fixed assets | (4,466,844) | (2,826,513) | |
| Intangible assets | (7,075,478) | (5,850,504) | |
| Investment in securities at fair value through other comprehensive income | 8 | (1,146,911) | — |
| Investment in securities at amortised cost | 8 | (233,643,726) | (4,933,000) |
| Demand deposits at Bank of Portugal | (1,325,700) | — | |
| Other banking financial assets | 9 | (3,250,000) | (4,200,000) |
| Cash flow from investing activities (2) | (59,201,389) | 59,365,844 | |
| Cash flow from financing activities | |||
| Receivables resulting from: | |||
| Loans obtained | 18 | 33,934,486 | 73,388,066 |
| Payments resulting from: | |||
| Loans repaid | 18 | (34,189,027) | (38,878,904) |
| Interest expenses | (101,654) | (242,811) | |
| Confirming | 18 | (3,636,486) | — |
| Lease liabilities | 18 | (7,990,527) | (8,868,615) |
| Debt securities issued at amortised cost | 9 | (4,081,971) | (19,363,764) |
| Acquisition of own shares | 15 | (1,628,781) | — |
| Cash flow from financing activities (3) | (17,693,960) | 6,033,972 | |
| Net change in cash and cash equivalents (1+2+3) | (117,531,458) | 156,050,837 | |
| Cash and equivalents at the beginning of the period | 856,957,546 | 410,798,975 | |
| Cash and cash equivalents at the end of the period | 12 | 739,426,088 | 566,849,811 |
| Cash and cash equivalents at the end of the period | 739,426,088 | 566,849,811 | |
| Sight deposits at Bank of Portugal | 21,263,500 | — | |
| Outstanding checks of Banco CTT / Checks clearing of Banco CTT | 5,503,166 | 22,185,121 | |
| Impairment of slight and term deposits | (6,762) | (26,151) | |
| Cash and cash equivalents (Balance sheet) | 766,185,993 | 589,008,781 |
The attached notes are an integral part of these financial statements.
CTT – CORREIOS DE PORTUGAL, S.A.
Notes to the interim condensed consolidated financial statements (Amounts expressed in Euros)
TABLE OF CONTENTS
| INTERIM CONSOLIDATED FINANCIAL STATEMENTS | 19 |
|---|---|
| 1. INTRODUCTION |
25 |
| 2. SIGNIFICANT ACCOUNTING POLICIES |
26 |
| 2.1 New standards or amendments adopted by the Group | 26 |
| 2.2 Basis of Presentation |
27 |
| 3. SEGMENT REPORTING |
27 |
| 4. TANGIBLE FIXED ASSETS |
35 |
| 5. INTANGIBLE ASSETS |
42 |
| 6. INVESTMENT PROPERTIES |
44 |
| 7. COMPANIES INCLUDED IN THE CONSOLIDATION |
46 |
| 8. DEBT SECURITIES |
50 |
| 9. OTHER BANKING FINANCIAL ASSETS AND LIABILITIES |
53 |
| 10. CREDIT TO BANKING CLIENTS | 55 |
| 11. PREPAYMENTS | 61 |
| 12. CASH AND CASH EQUIVALENTS | 62 |
| 13. ACCUMULATED IMPAIRMENT LOSSES | 64 |
| 14. EQUITY | 65 |
| 15. OWN SHARES, RESERVES, OTHER CHANGES IN EQUITY AND RETAINED | 67 |
| EARNINGS | |
| 16. DIVIDENDS | 70 |
| 17. EARNINGS PER SHARE | 70 |
| 18. DEBT | 71 |
| 19. PROVISIONS, GUARANTEES PROVIDED, CONTINGENT LIABILITIES AND | 73 |
| COMMITMENTS | |
| 20. ACCOUNTS PAYABLE | 77 |
| 21. DEBT SECURITIES AT AMORTISED COST | 78 |
| 22. BANKING CLIENTS' DEPOSITS AND OTHER LOANS | 83 |
| 23. INCOME TAXES RECEIVABLE /PAYABLE | 83 |
| 24. STAFF COSTS | 84 |
| 25. INTEREST EXPENSES AND INTEREST INCOME | 88 |
| 26. INCOME TAX FOR THE PERIOD | 89 |
| 27. RELATED PARTIES | 93 |
| 28. OTHER INFORMATION | 94 |
1. Introduction
CTT – Correios de Portugal, S.A. ("CTT" or "Company"), with head office at Avenida dos Combatentes, 43, 14th floor, 1643-001 in Lisbon, had its origin in the "Administração Geral dos Correios Telégrafos e Telefones" government department and its legal form is the result of successive re-organisations carried out by the Portuguese state business sector in the communications area.
Decree-Law no. 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 the Order 2468/12 – SETF, of 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 to 75,000,000 Euros, being from that date onward 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.
During the financial year ended 31 December 2013, CTT's capital was opened to the private sector. Supported by Decree-Law no. 129/2013, of 6 September, and the Resolution of the Council of Ministers ("RCM") no. 62-A/2013, of 10 October, the RCM no. 62-B/2013, of 10 October, and RCM no. 72- B/2013, of 14 November, the first phase of privatisation of the capital of CTT took place on 5 December 2013. From this date onward, 63.64% of the shares of CTT (95.5 million shares) were owned by the private sector, of which 14% (21 million shares) were sold in a Public Offering and 49.64% (74.5 million shares) by Institutional Direct Selling. On 31 December 2013 the Portuguese State, through Parpública - Participações Públicas, SGPS, S.A. held 36.36% of the shares of CTT, 30.00% by holding and 6.36% by allocation.
On 5 September 2014, the second phase of the privatisation of CTT took place. The shares held by Parpública - Participações Públicas, SGPS, S.A., which on that date represented 31.503% of CTT's capital, were subject to a private offering of shares ("Equity Offering") via an accelerated book-building process. The Equity Offering was addressed exclusively to institutional investors.
At the meeting of the Company's Board of Directors held on 16 March 2022, it was unanimously decided to approve the implementation of a Buy-back programme for the Company's own shares, including the related terms and conditions, with the sole purpose of reducing the Company's share capital through the cancellation of shares acquired under the aforementioned programme, subject to prior approval by the General Meeting.
At the General Meeting held on 21 April 2022, a resolution was approved regarding the maximum number of shares to be acquired under the Buy-back Programme.
Subsequently, on 7 November 2022, the Company's share capital reduction in the amount of 2,325,000 euros, through the cancellation of 4,650,000 shares representing 3.1% of the share capital, was registered in the Commercial Register Office, with the Company's share capital to be composed of 145,350,000 shares with the nominal value of 0.50 Euros each.
The financial statements attached herewith are expressed in Euros, as this is the main currency of the Group's operations.
The shares of CTT are listed on Euronext Lisbon.
These financial statements were approved by the Board of Directors and authorised for issue on 4 May 2023.
2. Significant accounting policies
The accounting policies adopted, including financial risk management policies, are consistent with those followed in the preparation of the consolidated financial statements for the year ended 31 December 2022, except for the new standards and amendments effective from 1 January 2023.
2.1 New standards or amendments adopted by the Group
The standards and amendments recently issued, already effective and adopted by the Group in the preparation of these financial statements, are as follows:
- IFRS 17 Insurance Contracts IFRS 17 applies to all insurance contracts (i.e., life, non-life, direct insurance and reinsurance), regardless of the type of entities that issue them, as well as some guarantees and some financial instruments with discretionary participation features. In general terms, IFRS 17 provides an accounting model for insurance contracts that is more useful and more consistent for issuers. In contrast to the requirements of IFRS 4, which are based on previously adopted local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects.
- Amendments to IFRS 17 Insurance contracts Initial application of IFRS 17 and IFRS 9 – Comparative information - This amendment to IFRS 17 refers to the presentation of comparative information on financial assets in the initial application of IFRS 17.
The amendment adds a transition option that allows an entity to apply an "overlay" in the classification of a financial asset in the comparative period(s) presented in the initial application of IFRS 17. The "overlay" allows all financial assets, including those held in connection with noncontract activities within the scope of IFRS 17, to be classified on an instrument-by-instrument basis in the comparative period(s) in line with how the entity expects these assets to be classified in the initial application of IFRS 9.
- Amendments to IAS 1 Disclosure of Accounting Policies These amendments are intended to assist the entity in the disclosure of 'material' accounting policies, previously designated as 'significant' policies. However, due to the non-existence of this concept in the IFRS standards, it was decided to substitute the concept "materiality", a concept already known by the users of the financial statements. When assessing the materiality of accounting policies, the entity must consider not only the size of transactions but also other events or conditions and their nature.
- Amendments to IAS 8 Definition of accounting estimates The amendment clarifies the distinction between changes in accounting estimates, changes in accounting policy and the correction of errors. Additionally, it clarifies how an entity uses measurement techniques and inputs to develop accounting estimates.
• Amendments to IAS 12 – Deferred tax relating to assets and liabilities arising from a single transaction.
The amendment clarifies that payments that settle a liability are tax deductible, however it is a matter of professional judgment whether such deductions are attributable to the liability that is recognised in the financial statements or to the related asset. This is important in determining whether there are temporary differences in the initial recognition of the asset or liability.
Thus, the initial recognition exception is not applicable to transactions that gave rise to equal taxable and deductible temporary differences. It is only applicable if the recognition of an active lease and a passive lease gives rise to taxable and deductible temporary differences that are not equal.
The Group did not register significant changes with the adoption of these standards and interpretations.
2.2 Basis of preparation
The interim condensed consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards ("IAS / IFRS") as adopted by the European Union as at 1 January 2023, and in accordance with IAS 34 - Interim Financial Reporting.
The consolidated financial statements were prepared under the assumption of going concern and are prepared under the historical cost convention, except for the financial assets and liabilities accounted at fair value.
3. Segment 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 communicate each segment performance, as well as to decide on how to allocate resources.
The business of CTT is organised in the following segments:
- Mail CTT Contacto, S.A., CTT Soluções Empresariais, S.A., New Spring Services S.A., CTT IMO - Sociedade Imobiliária, S.A. MedSpring, S.A., CTT IMO Yield, S.A., CTT Services, S.A and CTT, S.A. excluding:
- Business related to postal financial services and retail products Financial Services & Retail;
- The business of payments related with collection of invoices and fines, Western Union transfers, integrated solutions and tolls – Bank.
- Express & Parcels includes CTT Expresso S.A., CORRE S.A., Fundo Inovação Techtree and Open Lockers, S.A.;
- Financial Services & Retail Postal Financial Services and the sale of products and services in the retail network of CTT, S.A.;
- Bank Banco CTT S.A., S.A., Payshop S.A., 321 Crédito S.A. and CTT's payment business (mentioned above).
The business segregation by segment is based on management information produced internally and presented to the "chief operating decision maker".
The segments cover the three CTT business areas, as follows:
- Postal Market, covered by the Mail segment;
- Express and Parcels Markets, covered by the Express & Parcels segment; and
- Financial Market, covered by the Financial Services and Bank segments.
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 is 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 for each business segment is based on 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 several operating segments. The Internal Services Rendered refer to services provided across the different CTT, S.A. business areas, and the income is calculated according to standard activities valued through internally set transfer prices. The Mail segment provides internal services essentially related to the retail network (included in the Mail segment). Additionally, the Financial Services Segment uses the Retail network to sell its products. The use of the Retail network by other segments, as Express & Parcels and CTT Bank is, equally, presented in the line "Internal Services Rendered".
Initially, CTT, S.A. operating costs are allocated to the different segments by charging the internal transactions for the services mentioned above. After this initial allocation, costs relating to corporate and support areas (CTT Central Structure) are allocated by nature to the Mail segment and others.
The consolidated income statement by nature and segment of the three months of 2022 and 2023 are as follows:
| 31.03.2022 | |||||
|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services & Retail |
Bank | Total | |
| Revenues | 133,466 | 61,348 | 11,889 | 28,042 | 234,745 |
| Sales and services rendered | 132,460 | 61,240 | 11,760 | 4,118 | 209,578 |
| Sales | 23,304 | 32 | 3,269 | — | 26,605 |
| Services rendered | 109,156 | 61,208 | 8,491 | 4,118 | 182,973 |
| Financial Margin | — | — | — | 16,407 | 16,407 |
| Other operating income | 1,006 | 108 | 129 | 7,517 | 8,760 |
| Operating costs - EBITDA | 126,645 | 56,789 | 6,632 | 22,633 | 212,699 |
| Staff costs | 77,343 | 7,318 | 250 | 6,895 | 91,806 |
| External supplies and services | 26,933 | 48,752 | 571 | 9,066 | 85,322 |
| Other costs | 23,978 | 656 | 3,231 | 1,987 | 29,852 |
| Impairment and provisions | 581 | 530 | 390 | 4,219 | 5,720 |
| Internal services rendered | (2,190) | (467) | 2,190 | 466 | (1) |
| EBITDA | 6,821 | 4,559 | 5,257 | 5,409 | 22,046 |
| Depreciation/amortisation and impairment of investments, net |
10,121 | 3,224 | 25 | 2,010 | 15,380 |
| EBIT recurring | (3,300) | 1,335 | 5,232 | 3,399 | 6,666 |
| Specific items | 759 | 170 | — | (3,631) | (2,702) |
| Business restructurings | 133 | 81 | — | — | 214 |
| Strategic studies and projects costs | 377 | 62 | — | — | 439 |
| Other non-recurring income and expenses | 249 | 27 | — | (3,631) | (3,355) |
| EBIT | (4,059) | 1,165 | 5,232 | 7,030 | 9,368 |
| Financial results | (2,129) | ||||
| Interest expenses | (2,199) | ||||
| Interest income | 111 | ||||
| Gains/losses in subsidiary, associated companies and joint ventures |
(41) | ||||
| Earnings before taxes (EBT) | 7,239 | ||||
| Income tax for the period | 1,826 | ||||
| Net profit for the period | 5,413 | ||||
| Non-controlling interests | 24 | ||||
| Equity holders of parent company | 5,389 |
| 31.03.2023 | |||||
|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services & Retail |
Bank | Total | |
| Revenues | 114,352 | 64,660 | 28,723 | 34,057 | 241,791 |
| Sales and services rendered | 113,006 | 64,448 | 28,283 | 4,453 | 210,191 |
| Sales | 2,360 | — | 2,440 | — | 4,799 |
| Services rendered | 110,647 | 64,448 | 25,844 | 4,453 | 205,392 |
| Financial Margin | — | — | — | 22,012 | 22,012 |
| Other operating income | 1,345 | 212 | 440 | 7,591 | 9,589 |
| Operating costs - EBITDA | 102,171 | 60,450 | 10,611 | 27,730 | 200,962 |
| Staff costs | 80,034 | 8,761 | 1,246 | 7,689 | 97,730 |
| External supplies and services | 22,725 | 51,100 | 393 | 10,632 | 84,850 |
| Other costs | 4,861 | 550 | 2,608 | 2,393 | 10,411 |
| Impairment and provisions | 930 | 593 | 7 | 6,441 | 7,971 |
| Internal services rendered | (6,378) | (553) | 6,357 | 575 | — |
| EBITDA | 12,180 | 4,210 | 18,113 | 6,327 | 40,830 |
| Depreciation/amortisation and impairment of investments, net |
9,496 | 3,543 | 33 | 2,068 | 15,139 |
| EBIT recurring | 2,684 | 667 | 18,080 | 4,259 | 25,691 |
| Specific items | 644 | 140 | — | (54) | 731 |
| Business restructurings | 180 | 150 | — | — | 330 |
| Strategic studies and projects costs | 691 | — | — | — | 691 |
| Other non-recurring income and expenses | (227) | (10) | — | (54) | (290) |
| EBIT | 2,040 | 527 | 18,080 | 4,313 | 24,959 |
| Financial results | (3,118) | ||||
| Interest expenses | (3,486) | ||||
| Interest income | 375 | ||||
| Gains/losses in subsidiary, associated companies and joint ventures |
(7) | ||||
| Earnings before taxes and non-controlling interests (EBT) |
21,842 | ||||
| Income tax for the period | 5,716 | ||||
| Net profit for the period | 16,126 | ||||
| Non-controlling interests | (9) | ||||
| Equity holders of parent company | 16,135 |
As at 31 March 2023, the specific items amounted to 0.7 million euros, are due to: (i) restructuring costs, namely suspension agreements of employment contracts (+€0.3m); (ii) strategic projects (+ €0.7m); (iii) the change of head office building (-€0.2m); and (iv) gross gains from the appreciation of contracted derivatives (-€0.1m.
The revenues are detailed as follows:
| Thousand Euros | 31.03.2022 | 31.03.2023 |
|---|---|---|
| 133,466 | 114,352 | |
| Transactional mail | 89,756 | 92,029 |
| Editorial mail | 3,119 | 3,135 |
| Parcels (USO) | 1,748 | 1,966 |
| Advertising mail | 4,216 | 3,058 |
| Philately | 1,069 | 991 |
| Business Solutions | 32,179 | 11,365 |
| Other | 1,380 | 1,809 |
| Express & Parcels | 61,348 | 64,660 |
| Portugal | 30,992 | 33,890 |
| Parcels | 27,647 | 30,649 |
| Cargo | 1,414 | 1,048 |
| Banking network | 1,080 | 1,076 |
| Logistics | 675 | 864 |
| Other | 176 | 253 |
| Spain | 29,548 | 29,720 |
| Mozambique | 809 | 1,050 |
| Financial Services & Retail | 11,889 | 28,723 |
| Savings & Insurance | 6,051 | 23,616 |
| Money orders | 1,417 | 1,121 |
| Payments | 196 | 239 |
| Retail | 4,128 | 3,422 |
| Other | 97 | 325 |
| Bank | 28,042 | 34,057 |
| Net interest income | 16,407 | 22,012 |
| Interest income (+) | 17,479 | 26,756 |
| Interest expense (-) | (1,072) | (4,744) |
| Fees & commissions income (+) | 10,743 | 11,211 |
| Credits | 1,378 | 1,210 |
| Savings & Insurance | 1,906 | 2,062 |
| Accounts and Cards | 3,014 | 3,339 |
| Payments | 4,418 | 4,571 |
| Other comissions received | 27 | 29 |
| Other | 892 | 834 |
| 234,745 | 241,791 |
The revenue detail, related to sales and services rendered and financial margin, for the three-months periods ended 31 March 2022 and 31 March 2023, by revenue sources, are detailed as follows:
| 31.03.2022 | |||||
|---|---|---|---|---|---|
| Nature | Express & Parcels |
Financial Services & Retail |
Bank | Total | |
| Postal Services | 128,035,512 | — | — | — 128,035,512 | |
| Express services | — | 61,240,267 | — | — | 61,240,267 |
| Merchandising products sales | — | — | 411,429 | — | 411,429 |
| PO Boxes | — | — | 385,136 | — | 385,136 |
| International mail services (*) | 4,424,838 | — | — | — | 4,424,838 |
| Financial Services fees | — | — | 10,963,008 | 20,525,444 | 31,488,452 |
| "Sales and Services rendered" and "Financial Margin" total |
132,460,350 | 61,240,267 | 11,759,573 | 20,525,444 225,985,634 |
(*) Inbound Mail
| 31.03.2023 | |||||||
|---|---|---|---|---|---|---|---|
| Nature | Express & Parcels |
Financial Services & Retail |
Bank | Total | |||
| Postal Services | 108,835,879 | — | — | — 108,835,879 | |||
| Express services | — | 64,447,868 | — | — | 64,447,868 | ||
| Merchandising products sales | — | — | 316,575 | — | 316,575 | ||
| PO Boxes | — | — | 451,413 | — | 451,413 | ||
| International mail services (*) | 4,170,521 | — | — | — | 4,170,521 | ||
| Financial Services fees | — | — | 27,515,280 | 26,465,250 | 53,980,530 | ||
| "Sales and Services rendered" and "Financial Margin" total |
113,006,400 | 64,447,868 | 28,283,268 | 26,465,250 232,202,786 |
(*) Inbound Mail
| The assets by segment are detailed as follows: |
|---|
| ------------------------------------------------ |
| 31.12.2022 | |||||||
|---|---|---|---|---|---|---|---|
| Assets (Euros) | Express & Parcels |
Financial Services & Retail |
Bank | Non allocated assets |
Total | ||
| Intangible assets | 29,226,579 | 7,734,013 | 364,038 | 25,708,809 | 6,375,169 | 69,408,609 | |
| Tangible fixed assets | 213,252,192 | 81,844,891 | 36,878 | 5,452,949 | 2,618,871 | 303,205,780 | |
| Investment properties | — | — | — | — | 6,183,979 | 6,183,979 | |
| Goodwill | 16,216,237 | 2,955,753 | — | 61,084,749 | — | 80,256,739 | |
| Deferred tax assets | — | — | — | — | 67,823,608 | 67,823,608 | |
| Accounts receivable | — | — | — | — 147,130,876 | 147,130,876 | ||
| Credit to bank clients | — | — | — 1,777,565,012 | — | 1,777,565,012 | ||
| Financial assets at fair value through profit or loss |
— | — | — | 52,698,430 | — | 52,698,430 | |
| Debt securities at amortised cost |
— | — | — | 537,780,644 | — | 537,780,644 | |
| Other banking financial assets |
— | — | — | 462,187,527 | — | 462,187,527 | |
| Other assets | 10,775,826 | 25,379,275 11,326,793 | 35,289,719 | 14,005,884 | 96,777,497 | ||
| Cash and cash equivalents | — | 23,442,625 | — | 130,359,498 302,667,177 | 456,469,298 | ||
| Non-current assets held for sale |
— | — | — | 200 | 200 | ||
| 269,470,834 141,356,557 11,727,709 3,088,127,536 546,805,564 | 4,057,488,199 |
| 31.03.2023 | |||||||
|---|---|---|---|---|---|---|---|
| Assets (Euros) | Express & Parcels |
Financial Services & Retail |
Bank | Non allocated assets |
Total | ||
| Intangible assets | 31,809,512 | 8,699,295 | 364,869 | 24,846,783 | 2,714,941 | 68,435,401 | |
| Tangible fixed assets | 207,695,059 | 80,189,927 | 29,954 | 5,348,403 | 2,036,481 | 295,299,824 | |
| Investment properties | — | — | — | — | 6,131,870 | 6,131,870 | |
| Goodwill | 16,216,237 | 2,955,753 | — | 61,084,749 | — | 80,256,739 | |
| Deferred tax assets | — | — | — | — | 67,202,432 | 67,202,432 | |
| Accounts receivable | — | — | — | — 147,265,207 | 147,265,207 | ||
| Credit to bank clients | — | — | — 1,782,638,881 | — | 1,782,638,881 | ||
| Financial assets at fair value through profit or loss |
— | — | — | 50,778,945 | — | 50,778,945 | |
| Debt securities at amortised cost |
— | — | — | 542,761,105 | — | 542,761,105 | |
| Other banking financial assets |
— | — | — | 413,842,826 | — | 413,842,826 | |
| Other assets | 11,677,847 | 27,047,687 | 7,971,430 | 35,248,930 | 20,243,752 | 102,189,645 | |
| Cash and cash equivalents | — | 29,158,980 | — | 101,248,994 458,600,807 | 589,008,781 | ||
| Non-current assets held for sale |
— | — | — | 200 | — | 200 | |
| 267,398,655 148,051,642 | 8,366,253 3,017,799,816 704,195,490 | 4,145,811,856 |
The non-current assets acquisitions by segment, are detailed as follows:
| 31.12.2022 | ||||||
|---|---|---|---|---|---|---|
| Express & Parcels |
Financial Services & Retail |
Bank | Non allocated assets |
Total | ||
| Intagible assets | 10,687,971 | 3,967,727 | 125,669 | 3,897,385 | — | 18,678,753 |
| Tangible fixed assets | 20,153,598 | 23,903,875 | — | 1,561,666 | 458,948 | 46,078,087 |
| 30,841,569 | 27,871,602 | 125,669 | 5,459,051 | 458,948 | 64,756,839 |
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| Express & Parcels |
Financial Services & Retail |
Bank | Non allocated assets |
Total | ||
| Intagible assets | 833,997 | 1,324,126 | 20,015 | 878,290 | — | 3,056,429 |
| Tangible fixed assets | 1,037,898 | 1,422,120 | — | 224,413 | — | 2,684,432 |
| 1,871,895 | 2,746,247 | 20,015 | 1,102,703 | — | 5,740,860 |
The detail of the underlying reasons to the non-allocation of the following assets to any segment, is as follows:
- "Intangible assets" (2,714,941 Euros): the unallocated amount is related to part of the intangible assets in progress, which are allocated to the underlying segment in the moment they become firm assets;
- "Tangible fixed assets" (2,036,481 Euros): This amount corresponds to a part of the tangible fixed assets in progress and advances payments to suppliers, which are allocated to the related segment at the time of the transfer to firm assets;
- "Investment properties" (6,131,870 Euros): These assets are not allocated to the operating activity, which is why they are not allocated to any segment;
- "Deferred tax assets" (67,202,432 Euros): These assets are mainly comprised of deferred tax assets associated with employee benefits, being those related to the CTT, S.A. Health Plan the most relevant amount, as detailed in note 26 - Income tax for the period. CTT, S.A. is allocated to different segments, as already mentioned, the allocation of these assets to the different segments does not seem possible to be carried out reliably;
- "Accounts receivables" (147,265,207 Euros): This amount cannot be allocated, due to the existence of multi-products customers, whose receivable amounts correspond to more than one segment;
- "Other assets" (20,243,752 Euros): This amount is mainly related to investments in associated companies and investments in joint ventures, that are not allocated to the operating activity, which is why they are not allocated to any segment, as well as some captions of prepayments and other current and non-current assets, mostly related to CTT S.A., which are allocated to different segments and this allocation is not possible to be carried out reliably;
- "Cash and cash equivalents (458,600,807 Euros): the unallocated amount is related, essentially, to the cash and cash equivalents of CTT S.A., as this company concentrates the business segments' Mail, Financial Services & Retail and Bank, and it is not possible to split the amounts of cash and bank deposits by each CTT's businesses.
Debt by segment is detailed as follows:
| 31.12.2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Other information (Euros) | Express & Parcels |
Financial Services & Retail |
Bank | Total | |||||
| Non-current debt | 86,221,715 | 47,207,447 | 14,320 | 2,754,441 | 136,197,923 | ||||
| Bank loans | 40,706,101 | — | — | — | 40,706,101 | ||||
| Lease liabilities | 45,515,614 | 47,207,447 | 14,320 | 2,754,441 | 95,491,822 | ||||
| Current debt | 43,016,079 | 15,550,912 | 18,221 | 1,171,532 | 59,756,744 | ||||
| Bank loans | 21,588,169 | 7,783,898 | — | — | 29,372,066 | ||||
| Lease liabilities | 21,427,911 | 7,767,015 | 18,221 | 1,171,532 | 30,384,678 | ||||
| 129,237,794 | 62,758,359 | 32,541 | 3,925,972 | 195,954,667 |
| 31.03.2023 | |||||
|---|---|---|---|---|---|
| Other information (Euros) | Express & Parcels |
Financial Services & Retail |
Bank | Total | |
| Non-current debt | 124,478,660 | 44,787,924 | 10,703 | 2,553,211 | 171,830,497 |
| Bank loans | 47,717,982 | — | — | — | 47,717,982 |
| Commercial Paper | 34,923,258 | — | — | — | 34,923,258 |
| Lease liabilities | 41,837,419 | 44,787,924 | 10,703 | 2,553,211 | 89,189,257 |
| Current debt | 34,480,549 | 15,870,728 | 17,296 | 1,104,994 | 51,473,567 |
| Bank loans | 14,804,858 | 7,796,857 | — | — | 22,601,716 |
| Commercial Paper | (114,824) | — | — | — | (114,824) |
| Lease liabilities | 19,790,514 | 8,073,871 | 17,296 | 1,104,994 | 28,986,676 |
| 158,959,208 | 60,658,652 | 27,999 | 3,658,205 | 223,304,065 |
The Group is domiciled in Portugal. The result of its Sales and services rendered by geographical segment is disclosed below:
| Thousand Euros | 31.03.2022 | 31.03.2023 |
|---|---|---|
| Revenue - Portugal | 167,880 | 163,339 |
| Revenue - other countries | 41,698 | 46,852 |
| 209,578 | 210,191 |
The revenue rendered in other countries, includes the revenue from the Express & Parcels rendered in Spain by CTT Expresso branch in this country, in the amount of 28,413 thousand Euros (31 March 2022: 28,352 thousands of euros).
4. Tangible fixed assets
During the year ended 31 December 2022 and the three-months period ended 31 March 2023, the movements occurred in Tangible fixed assets, as well as the respective accumulated depreciation, were as follows:
| 31.12.2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 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 |
Rights of use |
Total | |
| Tangible fixed assets | ||||||||||
| Opening balance | 35,623,210 | 340,476,500 | 169,083,615 | 3,607,398 | 72,055,630 | 27,369,691 | 3,612,902 | 4,763,076 | 256,671,618 | 913,263,640 |
| Acquisitions | 510,894 | 4,542,226 | 175,677 | 2,448,334 | 1,112,055 | 6,899,239 | 1,008,038 | — | 16,696,462 | |
| New contracts | — | — | — | — | — | — | — | — | 32,163,406 | 32,163,406 |
| Disposals | (14,309) | (209,892) | (761,272) | — | (29,279) | — | — | — | — | (1,014,752) |
| Transfers and write-offs |
2,475,616 | 8,272,318 | (135,248) | (191,361) | (74,613) | (6,509,623) | (5,618,537) | (55,207,647) | (56,989,095) | |
| Remeasurements | — | — | — | — | — | — | — | — | 23,981,383 | 23,981,383 |
| Adjustments | — | 1,332 | 22,017 | 1,676 | 24,510 | 160,119 | 16,292 | — | (4,192) | 221,754 |
| Closing balance | 35,608,901 | 343,254,451 | 181,158,903 | 3,649,503 | 74,307,835 | 28,567,252 | 4,018,810 | 152,577 | 257,604,568 | 928,322,799 |
| Accumulated depreciation | ||||||||||
| Opening balance | 3,562,627 | 229,858,304 | 138,852,469 | 3,441,543 | 66,789,717 | 21,267,005 | — | — | 153,184,938 | 616,956,602 |
| Depreciation for the period |
— | 9,017,208 | 7,044,204 | 62,669 | 1,717,246 | 1,377,100 | — | — | 29,389,515 | 48,607,942 |
| Disposals | (824) | (137,555) | (760,152) | — | (18,325) | — | — | — | — | (916,856) |
| Transfers and write-offs |
— | (68,992) | (89,374) | — | (191,361) | (74,921) | — | — | (43,177,040) | (43,601,687) |
| Adjustments | — | 526 | 65,316 | 1,429 | 2,300 | 1,547 | — | — | 347,773 | 418,891 |
| Closing balance | 3,561,803 | 238,669,491 | 145,112,462 | 3,505,640 | 68,299,578 | 22,570,731 | — | — | 139,745,187 | 621,464,892 |
| Accumulated impairment | ||||||||||
| Opening balance | — | — | — | — | — | 19,460 | — | — | — | 19,460 |
| Increases | — | 218,840 | — | — | — | (3,335) | — | — | 3,417,162 | 3,632,667 |
| Closing balance | — | 218,840 | — | — | — | 16,125 | — | — | 3,417,162 | 3,652,127 |
| Net Tangible fixed assets |
32,047,098 | 104,366,119 | 36,046,441 | 143,862 | 6,008,257 | 5,980,396 | 4,018,810 | 152,577 | 114,442,220 | 303,205,780 |
| 31.03.2023 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 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 |
Rights of use |
Total | |
| Tangible fixed assets | ||||||||||
| Opening balance | 35,608,901 | 343,254,451 | 181,158,903 | 3,649,503 | 74,307,835 | 28,567,252 | 4,018,810 | 152,577 | 257,604,568 | 928,322,799 |
| Acquisitions | — | 133,007 | 759,864 | — | 174,648 | 325,166 | 1,082,384 | 18,583 | — | 2,493,653 |
| New contracts | — | — | — | — | — | — | — | — | 190,779 | 190,779 |
| Disposals | — | — | (145,405) | — | — | — | — | — | — | (145,405) |
| Transfers and write-offs |
— | 851,264 | — | — | 97,866 | (6,186) | (851,264) | (46,420) | 45,261 | |
| Terminated contracts |
— | — | — | — | — | — | — | (1,248,177) | (1,248,177) | |
| Remeasurements | — | — | — | — | — | — | — | 258,451 | 258,451 | |
| Adjustments | — | (517) | (43,452) | (1,124) | (1,024) | (797) | — | — | — | (46,913) |
| Closing balance | 35,608,901 | 344,238,205 | 181,729,910 | 3,648,378 | 74,579,326 | 28,885,435 | 4,249,930 | 171,160 | 256,759,201 | 929,870,446 |
| Accumulated depreciation | ||||||||||
| Opening balance | 3,561,803 | 238,669,491 | 145,112,462 | 3,505,640 | 68,299,578 | 22,570,731 | — | — | 139,745,187 | 621,464,892 |
| Depreciation for the period |
— | 2,488,222 | 1,137,811 | 16,732 | 429,100 | 364,261 | — | — | 7,971,548 | 12,407,673 |
| Disposals | — | — | (145,405) | — | — | — | — | — | — | (145,405) |
| Transfers and write-offs |
— | — | — | — | — | (6,186) | — | — | (32,181) | (38,367) |
| Terminated |
| — | — | — | — | — | — | — | (1,248,177) | (1,248,177) | |
|---|---|---|---|---|---|---|---|---|---|
| — | (231) | (20,943) | (688) | (1,128) | (527) | — | — | 59,681 | 36,165 |
| 3,561,803 | 241,157,481 | 146,083,925 | 3,521,684 | 68,727,551 | 22,928,279 | — | — | 146,496,058 | 632,476,781 |
| Accumulated impairment | |||||||||
| fixed assets | 32,047,098 | 102,955,672 | 35,645,985 | 126,694 | 5,851,775 | 5,941,031 | 4,249,930 | 171,160 | 108,310,479 | 295,299,824 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net Tangible | ||||||||||
| Closing balance | — | 125,052 | — | — | — | 16,125 | — | — | 1,952,664 | 2,093,841 |
| Reversals | — | (93,789) | — | — | — | — | — | — | (1,464,498) | (1,558,287) |
| Opening balance | — | 218,840 | — | — | — | 16,125 | — | — | 3,417,162 | 3,652,127 |
The depreciation recorded in the Group amounting to 12,407,673 Euros (11,656,888 Euros on 31 March 2022), is booked under the caption Depreciation/amortisation and impairment of investments, net.
As at 31 March 2023, Land and natural resources and Buildings and other constructions include 450,417 Euros (458,441 Euros as at 31 December 2022), related to land and property in co-ownership with the company MEO – Serviços de Comunicações e Multimédia, S.A..
According to the concession contract in force (Note 1), at the end of the concession, the assets included in the public and private domain of the State revert automatically, at no cost, to the conceding entity. As 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 will continue to own its assets. The Board of Directors, supported by CTT's accounting records and the statement of Directorate General of Treasury and Finance ("Direção Geral do Tesouro e Finanças"), the entity responsible for the Information System of Public Buildings ("Sistema de Informação de Imóveis do Estado" – SIIE) concludes that CTT's assets do not include any public or private domain assets of the Portuguese State.
As under the concession contract, the grantor does not control any significant residual interest in CTT's postal network and CTT being free to dispose of, replace or encumber the assets that integrate the postal network, IFRIC 12 - Service Concession Agreements is not applicable to the universal postal service concession contract.
In the first quarter of 2023, the Group reviewed the useful lives of some classes of tangible fixed assets, of which the following stand out: computer equipment from the office equipment class, essentially extending them from 3 to 6 years; ii) sorting machines, from basic equipment class, essentially extending them from 8 to 15 years; and iii) improvement works on third-party buildings in the Buildings and other constructions class, in which case their useful life was evaluated together with the underlying lease term. The review of the useful life was carried out based on the analysis of the historical average effective use of the assets allocated to the underlying class taking into account their current estimated economic life, as well as the analysis of the useful lives practised for similar assets by the Peer Groups of CTT Group. Changes in useful lives are accounted for prospectively. The impact of this change results in a reduction in depreciation in the three-month period ended 31 March 2023 of 465 thousand euros and an estimated reduction for the year 2023 of 1,830 thousand euros.
During the three-months period ended 31 March 2023, the most significant movements in Tangible Fixed Assets were the following:
Buildings and other constructions:
The movements associated with acquisitions and transfers concern to capitalisation works in own and third-party buildings in several CTT and CTT Expresso facilities.
Basic equipment:
The amount relating to acquisitions mainly concerns the acquisition of various postal equipment for the amount of 172 thousand Euros by CTT Expresso and the acquisition of lockers for the amount of 295 thousand Euros by Open Lockers.
Office equipment:
The amount relating to acquisitions mainly concerns the acquisition of furniture in the amount of 39 thousand Euros, at CTT, as well as the acquisition of several micro-computer equipment in the amount of 40 thousand Euros and the acquisition of furniture worth 22 thousand Euros at CTT Expresso.
Other tangible fixed assets:
The acquisitions caption essentially includes prevention and safety equipment in the amount of approximately 96 thousand Euros and the acquisition of fixed communication equipment for an approximate amount of 156 thousand Euros at CTT.
Tangible fixed assets in progress and advance payments to suppliers:
Under the tangible fixed assets in progress acquisitions caption and advances payments suppliers are, essentially, booked the work in progress in the new headquarters building - Green Park at CTT.
Rights of Use
The rights of use recognised are detailed as follows, by type of underlying asset:
| 31.12.2022 | ||||
|---|---|---|---|---|
| Buildings | Vehicles | Other assets |
Total | |
| 221,150,166 | 33,910,310 | 1,611,141 256,671,618 | ||
| 24,666,056 | 3,892,932 | 3,604,418 | 32,163,406 | |
| (55,627,031) | 901,179 | (481,795) (55,207,647) | ||
| 23,900,634 | 80,749 | — | 23,981,383 | |
| (6,272) | 2,080 | — | (4,192) | |
| 214,083,554 | 38,787,250 | 4,733,764 257,604,568 | ||
| 135,142,142 | 17,015,249 | 1,027,547 153,184,938 | ||
| 21,125,315 | 7,383,869 | 880,331 | 29,389,515 | |
| (42,812,311) | (273,521) | (91,208) (43,177,040) | ||
| 268,566 | 79,207 | — | 347,773 | |
| 113,723,712 | 24,204,805 | 1,816,670 139,745,187 | ||
| — | — | — | — | |
| 3,417,162 | — | — | 3,417,162 | |
| 3,417,162 | — | — | 3,417,162 | |
| 96,942,681 | 14,582,445 | 2,917,094 114,442,220 | ||
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| Buildings | Vehicles | Other assets |
Total | |||
| Tangible fixed assets | ||||||
| Opening balance | 214,083,554 | 38,787,250 | 4,733,764 257,604,568 | |||
| New contracts | 140,342 | 50,437 | — | 190,779 | ||
| Transfers and write-offs | — | (46,420) | — | (46,420) | ||
| Terminated contracts | (1,248,177) | — | — | (1,248,177) | ||
| Adjustments | 258,451 | — | — | 258,451 | ||
| Closing balance | 213,234,170 | 38,791,267 | 4,733,764 256,759,201 | |||
| Accumulated depreciation | ||||||
| Opening balance | 113,723,712 | 24,204,805 | 1,816,670 139,745,187 | |||
| Depreciation for the period | 5,854,572 | 1,864,314 | 252,662 | 7,971,548 | ||
| Transfers and write-offs | — | (32,181) | — | (32,181) | ||
| Terminated contracts | (1,248,177) | — | — | (1,248,177) | ||
| Adjustments | 59,681 | — | — | 59,681 | ||
| Closing balance | 118,389,788 | 26,036,937 | 2,069,332 146,496,058 | |||
| Accumulated impairment | ||||||
| Opening balance | 3,417,162 | — | — | 3,417,162 | ||
| Reversals | (1,464,498) | — | — | (1,464,498) | ||
| Closing balance | 1,952,664 | — | — | 1,952,664 | ||
| Net Tangible fixed assets | 92,891,717 | 12,754,330 | 2,664,432 108,310,479 |
The depreciation recorded, in the amount of 7,971,548 Euros (6,972,133 Euros on 31 March 2022), is booked under the caption "Depreciation/amortisation and impairment of investments, net."
As at 31 December 2022, the caption "Transfers and write-offs" essentially books the adjustment of the right of use associated with the lease agreement of the former CTT headquarters building - Edifício Báltico, following the remeasurement of the underlying liability, carried out within the scope of the decision to change headquarters premises. During 2022, an amendment to the lease in force was identified, embodied in a negotiation process in the pre-completion phase, which i) not being a separate lease; and ii) reducing the lease term, resulted in the adjustment of the right of use corresponding to a gross amount of 52,413 thousand euros and accumulated amortisations in the amount of 40,990 thousand euros, which together with the adjustment of the corresponding lease liability in the amount of 14,847 thousand euros, originated a gain of 3,424 thousand euros recognised under the caption "Gains/losses on sale/remeasurement of assets". Additionally, on 31 December 2022, a new amendment to the aforementioned lease agreement was recorded due to a breach of agreed precontractual conditions which, once again, i) not being a separate lease; and ii) increasing the lease term, implied the remeasurement and recognition of the liability for the remaining term of the lease contract, in the amount of 14,231 thousand Euros, taking into account the discount rate in force on the date of this new amendment, as well as the corresponding right-of-use asset recognised under "Remeasurements" caption, in the same amount. Also with reference to 31 December 2022, an impairment loss was recognised for the aforementioned right of use, in the amount of 3,636 thousand Euros, corresponding to the period in which there is an expectation that the right of use do not generate economic benefits for the Group because the building is vacant. Additionally, an amount of 4,282 thousand Euros was recognised under the caption "New Contracts", relating to the lease agreement for the new CTT headquarters building – Green Park. As at 31 March 2023, the amount recorded under "reversals" caption corresponds to the contract period that has already elapsed, the impairment being reversed in proportion to the depreciation of the right of use.
The information on the liabilities associated with these leases as well as the interest expenses can be found disclosed on Debt (Note 18) and Interest expenses and income (Note 25), respectively.
For the three-months period ended 31 March 2023, no interest on loans was capitalised, as no loans were directly identified attributable to the acquisition or construction of an asset that requires a substantial period of time (greater than one year) to reach its status of use.
According to the analysis of impairment triggers as at 31 March 2023, no events or circumstances were identified that indicate that the amount for which the Group's tangible fixed assets are recorded may not be recovered.
Other information
The real estate assets of CTT are comprised of two portfolios with different characteristics:
- Yield Portfolio:
As disclosed in a notice to the market on 19 June 2022, CTT is in exclusive negotiations, with a third party, for the management of this portfolio, which essentially comprises (1) the properties associated with the retail network of CTT and (2) warehouses and logistics and distribution centers of CTT's operational network in Portugal. As a result of this negotiation, on 31 October 2022, the company CTT IMO Yield, S.A. was created, with the purpose of holding and managing this income portfolio (note 7).
The management of this Yield Portfolio aims at the exploitation, internally and with third parties, of properties that are part of CTT's current and future network and which currently do not have relevant real estate development opportunities.
- Development Portfolio
Regarding to the Development Portfolio, this comprises, among others, properties that may become, in the near future, non-essential for CTT's logistics networks and which have a potential for real estate development and promotion in specific projects.
There are no tangible fixed assets with restricted ownership or any carrying value relative to any tangible fixed assets which have been given as a guarantee of liabilities.
The contractual commitments related to Tangible fixed assets at 31 March 2023, amount to 1,683,349 Euros.
5. Intangible assets
During the year ended 31 December 2022 and the three-months period ended 31 March 2023, the movements which occurred in the main categories of the Intangible assets, as well as the respective accumulated amortisation, were as follows:
| 31.12.2022 | ||||||
|---|---|---|---|---|---|---|
| Development projects |
Computer Software |
Industrial property |
Other intangible assets |
Intangible assets in progress |
Total | |
| Intangible assets | ||||||
| Opening balance | 4,380,552 148,350,779 | 18,820,229 | 1,497,893 | 11,867,286 184,916,739 | ||
| Acquisitions | — | 2,324,541 | 861,415 | — | 17,112,475 | 20,298,431 |
| Transfers and write-offs | — | 18,791,615 | (114,634) | (1,053,154) (19,594,954) | (1,971,127) | |
| Adjustments | — | — | 24,387 | — | 50,177 | 74,564 |
| Othe movements - PPA NewSpring Services |
— | — | — | 1,864,330 | — | 1,864,330 |
| Closing balance | 4,380,552 169,466,935 | 19,591,397 | 2,309,070 | 9,434,984 205,182,938 | ||
| Accumulated amortisation Opening balance |
4,379,539 102,371,559 | 13,099,884 | 1,497,893 | — 121,348,875 | ||
| Amortisation for the period | 1,013 | 14,211,222 | 1,572,482 | 481,118 | — | 16,265,834 |
| Transfers and write-offs | — | (686,343) | (114,564) | (1,053,154) | — | (1,854,061) |
| Adjustments | — | — | 13,682 | — | — | 13,682 |
| Closing balance | 4,380,552 115,896,437 | 14,571,483 | 925,857 | — 135,774,330 | ||
| Accumulated impairment | ||||||
| Opening balance | — | — | — | — | 60,617 | 60,617 |
| Impairment losses for the period | — | — | — | — | (60,617) | (60,617) |
| Closing balance | — | — | — | — | — | — |
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| Development projects |
Computer Software |
Industrial property |
Other intangible assets |
Intangible assets in progress |
Total | |
| Intangible assets | ||||||
| Opening balance | 4,380,552 169,466,935 | 19,591,397 | 2,309,070 | 9,434,984 205,182,938 | ||
| Acquisitions | — | 1,247,487 | 165,890 | — | 1,643,052 | 3,056,429 |
| Transfers and write-offs | — | 6,716,409 | — | — | (6,814,326) | (97,917) |
| Adjustments | — | — | (8,113) | — | — | (8,113) |
| Closing balance | 4,380,552 177,430,831 | 19,749,174 | 2,309,070 | 4,263,710 208,133,337 | ||
| Accumulated amortisation | ||||||
| Opening balance | 4,380,552 115,896,437 | 14,571,483 | 925,857 | — 135,774,330 | ||
| Amortisation for the period | — | 3,525,662 | 312,844 | 90,210 | — | 3,928,716 |
| Adjustments | — | — | (5,109) | — | — | (5,109) |
| Closing balance | 4,380,552 119,422,100 | 14,879,219 | 1,016,066 | — 139,697,936 | ||
| Accumulated impairment | ||||||
| Opening balance | — | — | — | — | — | — |
| Closing balance | — | — | — | — | — | — |
| Net intangible assets | — | 58,008,731 | 4,869,956 | 1,293,003 | 4,263,710 | 68,435,401 |
The amortisation for the period ended 31 March 2023, amounting to 3,928,716 Euros (3,670,607 Euros as at 31 March 2022) was recorded under Depreciation / amortisation and impairment of investments, net.
In the first quarter of 2023, the Group reviewed the useful lives of some classes of intangible assets, in particular application software, belonging to the Computer Software class, extending them from 3 to 6 years. The review of the useful life was carried out based on the analysis of the historical average effective use of the assets allocated to the underlying class, taking into account their current estimated economic life. Changes in useful lives are accounted for prospectively. The impact of this change
results in a reduction in amortisation in the three-month period ended 31 March 2023 of 551 thousand euros and an estimated reduction for the year 2023 of 1,772 thousand euros.
In the period ended 31 December 2022, the caption "Other movements - PPA NewSpring Services" refers to the customer contracts portfolio acquired as part of the NewSpring Services' shares acquisition transaction, and determined within the PPA scope (note 7).
The caption Industrial property includes the license of the trademark "Payshop International" of CTT Contacto, S.A., in the amount of 1,200,000 Euros. This license has an indefinite useful life, therefore it is not amortised, being subject to impairment tests on a minimum annual basis or when there are indications of impairment.
The transfers occurred in the period ended 31 March 2023 from Intangible assets in progress to Computer software refer to IT projects, which were completed during the year.
The amounts of 2,270,912 Euros and 553,157 Euros were capitalised in computer software and in Intangible assets in progress as at 31 December 2022 and 31 March 2023, respectively, related to staff costs incurred in the development of these projects.
During the period ended 31 March 2023, the most significant movements in Intangible assets were the following:
Computer software:
The acquisitions item essentially includes acquisitions by CTT Expresso of the "Application Integration" software in the amount of 343 thousand Euros, in the "Micro IO" software in the amount of 270 thousand euros, in the "SalesForce" software in the amount of 247 thousand Euros.
Industrial property:
The acquisitions item essentially includes the acquisitions, by CTT, of "Desk Management" licenses in the amount of 161 thousand Euros.
The intangible assets in progress as at 31 March 2023 refer to IT projects that are being developed, the most significant being the following:
| 31.03.2023 | |
|---|---|
| ERP - SAP Success Factors | 707,489 |
| New Ecosystem Operations - Software | 403,940 |
| Client Area B2B - Software | 374,842 |
| Client Area B2C - Software | 271,453 |
| Gateway | 261,472 |
| 2,019,196 |
The Group has not identified any relevant uncertainties regarding the conclusion of ongoing projects, nor about their recoverability.
Most of the projects are expected to be completed in 2023.
Regarding the economic period of 2022, the Group are still identifying and quantifying the expenses incurred, as disclosed in Note 26.
There are no Intangible assets with restricted ownership or any carrying value relative to any Intangible assets which have been given as a guarantee of liabilities.
In the three-months period ended 31 March 2023, no interest on loans was capitalised, as no loans were directly identified attributable to the acquisition or construction of an asset that requires a substantial period of time (greater than one year) to reach its status of use.
Contractual commitments related intangible assets at 31 March 2023, amount to 3,983,665 Euros.
6. Investment properties
During the year ended 31 December 2022 and the three-months period ended 31 March 2023, the Group has the following assets classified as properties:
| 31.12.2022 | ||||||
|---|---|---|---|---|---|---|
| Land and natural resources |
Buildings and other constructions |
Total | ||||
| Investment properties | ||||||
| Opening balance | 2,889,422 | 11,230,168 | 14,119,589 | |||
| Disposals | (27,175) | (177,275) | (204,450) | |||
| Closing balance | 2,862,247 | 11,052,892 | 13,915,139 | |||
| Accumulated depreciation | ||||||
| Opening balance | 158,649 | 7,240,580 | 7,399,229 | |||
| Depreciation for the period | — | 210,263 | 210,263 | |||
| Disposals | (3,081) | (128,433) | (131,513) | |||
| Closing balance | 155,569 | 7,322,410 | 7,477,979 | |||
| Accumulated impairment | ||||||
| Opening balance | — | 392,936 | 392,936 | |||
| Impairment for the period | — | (139,754) | (139,754) | |||
| Closing balance | — | 253,181 | 253,181 | |||
| Net Investment properties | 2,706,679 | 3,477,300 | 6,183,979 |
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| Land and natural resources |
Buildings and other constructions |
Total | ||||
| Investment properties | ||||||
| Opening balance | 2,862,247 | 11,052,892 | 13,915,139 | |||
| Closing balance | 2,862,247 | 11,052,892 | 13,915,139 | |||
| Accumulated depreciation | ||||||
| Opening balance | 155,569 | 7,322,410 | 7,477,979 | |||
| Depreciation for the period | — | 52,110 | 52,110 | |||
| Closing balance | 155,569 | 7,374,520 | 7,530,088 | |||
| Accumulated impairment | ||||||
| Opening balance | — | 253,181 | 253,181 | |||
| Closing balance | — | 253,181 | 253,181 | |||
| Net Investment properties | 2,706,679 | 3,425,191 | 6,131,870 |
These assets are not allocated to the Group operating activities, being in the market available for lease.
The market value of these assets, which are classified as investment property, in accordance with the valuations obtained at the end of the fiscal year 2022 which were conducted by independent entities, amounts to 10,200,003 Euros.
The depreciation for the three-months period ended 31 March 2023, of 52,110 Euros (53,148 Euros on 31 March 2022) was recorded in the caption Depreciation/amortisation and impairment of investments, net.
For the three-months period ended 31 March 2023, the rents amount charged by the Group for properties and equipment leases classified as investment properties was 8,184 Euros (31 March 2022: 9,769 Euros).
7. Companies included in the consolidation
Subsidiary companies
As at 31 December 2022 and 31 March 2023, the parent company, CTT - Correios de Portugal, S.A. and the following subsidiaries were included in the consolidation:
| Place of Head office business |
31.12.2022 | 31.03.2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| Company name | Percentage of ownership | Percentage of ownership | ||||||
| Direct | Indirect | Total | Direct | Indirect | Total | |||
| Parent company: | ||||||||
| CTT - Correios de Portugal, S.A. |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
— | — | — | — | — | — |
| Subsidiaries: CTT Expresso - Serviços Postais e Logística, S.A. ("CTT Expresso") |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
100 | — | 100 | 100 | — | 100 |
| Payshop Portugal, S.A. ("Payshop") |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
— | 100 | 100 | — | 100 | 100 |
| CTT Contacto, S.A. ("CTT Con") |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
100 | — | 100 | 100 | — | 100 |
| CTT Soluções Empresariais, S.A. |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor |
||||||
| ("CTT Sol") | 1643-001 Lisbon | 100 | — | 100 | 100 | — | 100 | |
| Correio Expresso de Moçambique, S.A. ("CORRE") |
Mozambique | Av. 24 de Julho, Edificio 24, n.º 1097, 3.º Piso, Bairro da Polana Maputo - Moçambique |
50 | — | 50 | 50 | — | 50 |
| Banco CTT, S.A. ("BancoCTT") |
Portugal | Building Atrium Saldanha 1 Floor 3 1050 -094 Lisbon |
100 | — | 100 | 100 | — | 100 |
| Fundo Inovação TechTree ("TechTree") |
Portugal | Av Conselheiro Fernando de Sousa, 19 13º Esq 1070-072 Lisboa |
60 | 40 | 100 | 60 | 40 | 100 |
| 321 Crédito - Instituição Financeira de Crédito, S.A. ("321 Crédito") |
Portugal | Avenida da Boavista, Nr 772, 1.º, Boavista Prime Bulding 4100-111 Oporto |
— | 100 | 100 | — | 100 | 100 |
| NewSpring Services, S.A. ("NSS") |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
— | 100 | 100 | — | 100 | 100 |
| CTT IMO - Sociedade Imobiliária, S.A. ("CTTi") |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
100 | — | 100 | 100 | — | 100 |
| Open Lockers, S.A. ("Lock") |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
— | 66 | 66 | — | 66 | 66 |
| MedSpring, S.A. ("Med") |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
— | 100 | 100 | — | 100 | 100 |
| CTT Services, S.A. ("Serv") |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
— | 100 | 100 | — | 100 | 100 |
| CTT Imo Yield, S.A. ("IMOY") |
Portugal | Avenida dos Combatentes Nr. 43, 14º Floor 1643-001 Lisbon |
100 | — | 100 | 100 | — | 100 |
Regarding to the company CORRE, as the Group has the right to variable returns arising from its involvement and the ability to affect those returns, it is included in the consolidation.
On 26 January 2022, CTT IMO was subject to a capital increase in the form of supplementary capital in the amount of 7,150,000 Euros.
On 9 March 2022, the entity MedSpring, S.A., owned by NewSpring Services, was established, whose corporate purpose is insurance mediation in the category of insurance agent.
As at 31 March 2022, CTT - Correios de Portugal, S.A. and CTT - Soluções Empresariais - S.A. proceeded with the sale of their investments in Open Lockers, S.A., of 25.5% and 15%, respectively, to CTT Expresso - Serviços Postais e Logística, S.A., which now concentrates the CTT Group's investments in the entity. Therefore, this operation did not result in a change in the equity interests held by the Group.
On 20 April 2022, CTT Expresso subscribed for a share capital increase in the subsidiary Open Lockers, through a contribution in kind, in the amount of 492,232 Euros. The capital increase was subscribed in proportion to the shareholding held by each of the shareholders, CTT Expresso and Yun Express, and with the issuance of 750,000 new shares with no par value, ordinary, nominative and with an issue value of 1 euro each .
On 27 June 2022, the company HCCM - Outsourcing Investiment, S.A. was subject to a merger by incorporation into the company CTT Soluções Empresariais, S.A., through the global transfer of the assets of the merged company to the acquiring company, and subsequent dissolution of the merged company. The present merger operation is part of the simplification process of the CTT Group's corporate structure. The merger took effect on 1 January 2022.
On 30 June 2022, Open Lockers was subject to a capital increase in the form of supplementary capital in the amount of 396,000 Euros.
As part of a corporate reorganisation in the Group, on 8 July 2022 the Board of Directors of Banco CTT approved the sale of its subsidiary Payshop Portugal, and its terms, to CTT - Correios de Portugal, S.A., with its implementation is still dependent on the contract signature with the buyer and the nonopposition of the regulator, which is expected to occur within 1 year. Therefore, as at 31 March 2023, at the level of the individual and consolidated accounts of Banco CTT, Payshop's assets and liabilities are classified as discontinued assets and liabilities. This reclassification does not, however, have an impact on the consolidated accounts of the CTT group.
On 29 July 2022, Open Lockers was subject to a capital increase in the form of supplementary capital in the amount of 792,000 Euros.
On 31 October 2022, CTT - Correios de Portugal, S.A. established the subsidiary CTT IMO Yield, S.A. The business purpose of this company is the leasing and management of real estate, as well as the purchase and sale of real estate. As disclosed in note 4, this company was incorporated with the purpose of owning and managing CTT's real estate yield portfolio and will essentially comprise (1) properties associated with CTT's retail network and (2) warehouses and logistics centres and delivery offices of CTT's operational network in Portugal.
On 30 November 2022, the company CTT Services, S.A., owned by CTT Soluções Empresariais, was established, whose corporate purpose is to provide backoffice technical services, advice, support and logistical support for technological activities and document processing and production, the provision of services and "Know-how" to companies in the area of new technologies, as well as the provision of services in the area of technical and commercial support, software development, information technology projects and consultancy for carrying out studies and IT advisory .
On 29 March 2023, Open Lockers was subject to a capital increase in the form of supplementary capital in the amount of 396,000 Euros.
Joint ventures
As at 31 December 2022 and 31 March 2023, the Group held the following interests in joint ventures, registered through the equity method:
| 31.12.2022 | 31.03.2023 | |||||||
|---|---|---|---|---|---|---|---|---|
| Company name | Place of business |
Head office | Percentage of ownership | Percentage of ownership | ||||
| Direct | Indirect | Total | Direct | Indirect | Total | |||
| NewPost, ACE | Portugal | Av. Fontes Pereira de Melo, 40 Lisboa |
49 | — | 49 | 49 | — | 49 |
| PTP & F, ACE | Portugal | Estrada Casal do Canas Amadora |
51 | — | 51 | 51 | — | 51 |
| Wolfspring, ACE | Portugal | Urbanização do Passil, nº100- A 2890-852 Alcochete |
— | 50 | 50 | — | 50 | 50 |
On 13 January 2022, the investment in Mktplace - Comércio Eletrônico, S.A., (Dott) (corresponding to 50% of the share capital of the entity), was sold to Worten - Equipamentos para o Lar, S.A., holder of the remaining shareholder participation.
Associated companies
As at 31 December 2022 and 31 March 2023, the Group held the following interests in associated companies accounted for by the equity method:
| Company name | Place of business |
Head office | 31.12.2022 | 31.03.2023 | ||||
|---|---|---|---|---|---|---|---|---|
| Percentage of ownership | Percentage of ownership | |||||||
| Direct | Indirect | Total | Direct | Indirect | Total | |||
| Mafelosa, SL (a) | Espanha | Castellon - Espanha | — | 25 | 25 | — | 25 | 25 |
| Urpacksur, SL (a) | Espanha | Málaga - Espanha | — | 30 | 30 | — | 30 | 30 |
(a) Company held by CTT Expresso - Serviços Postais e Logística, S.A., branch in Spain (until 2018 was held by Tourline Mensajeria, SLU), which currently has no activity.
Structured entities
Additionally, considering the requirements of IFRS 10, the Group's consolidation perimeter includes the following structured entities:
| Name | Constitution Year | Place of issue | Consolidation Method |
|---|---|---|---|
| Ulisses Finance No.1 (*) | 2017 | Portugal | Full |
| Ulisses Finance No.2 (*) | 2021 | Portugal | Full |
| Ulisses Finance No.3 (*) | 2022 | Portugal | Full |
| Chaves Funding No.8 (*) | 2019 | Portugal | Full |
| Next Funding No.1 (*) | 2021 | Portugal | Full |
(*) Entities incorporated within the scope of securitisation operations, recorded in the consolidated financial statements in accordance with the Group's continued involvement, determined based on the holding of residual interests (equity piece or excess spread) of the respective vehicles and to the extent that the Group holds substantially the risks and rewards associated with the underlying assets and has the ability to affect these same risks and rewards..
On 1 June 2022, the Group issued a new securitisation operation named Ulisses Finance nº 3, through its subsidiary 321 Crédito. This operation aimed to finance the growth of Banco CTT's activity, optimising its capital and diversifying its sources of liquidity, through the securitisation of 200 million euros of car loans. Considering the provisions of IFRS10, this operation became part of the Group's consolidation perimeter.
The main impacts of the consolidation of these structured entities on the Group's accounts are the following:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Cash and cash equivalents | 22,640,074 | 23,032,455 |
| Financial assets at fair value through profit and loss (Derivatives) |
26,219,905 | 24,191,223 |
| Financial assets at amortised cost - Credit to banking clients - Credit Cards (Note 10) |
353,815,583 | 321,815,857 |
| Financial assets at amortised cost (Credit to banking clients - Other receivables) |
(40,672,436) | (37,619,908) |
| Financial assets at amortised cost (Debt securities) | (319,776,400) | (292,797,469) |
Changes in the consolidation perimeter
On 16 June 2021, CTT, through its subsidiary CTT Soluções Empresariais, S.A., entered into a purchase agreement for the entire share capital of NewSpring Services, S.A. and its holding company HCCM – Outsourcing Investment, which operate in the Business Process Outsourcing (BPO) and Contact Center market. The Purchase Price Allocation (PPA), which was in progress on 31 December 2021, was concluded during the financial year of 2022, as provided for in IFRS 3 – Business combinations.
The Goodwill recognition on the acquisition date of HCCM - Outsourcing Investment and NewSpring Services was as follows:
| Amount | |
|---|---|
| Assets acquired (HCCM) | 5,887,230 |
| Liabilities acquired (HCCM) | 50,992 |
| Net assets acquired (HCCM) | 5,836,238 |
| Assets acquired (NSS) | 9,875,561 |
| Assets acquired (NSS) | 6,995,252 |
| Net assets acquired (NSS) | 2,880,309 |
| Net assets acquired (NSS) - CTT-SE Participation (*) | 139,292 |
| Fair Value Adjustments: | |
| Intangible Assets | 1,864,330 |
| Deferred Taxes Liabilities | (522,013) |
| Fair Value of the acquired assets (HCCM e NSS) | 7,317,847 |
| Contingent components | 4,500,000 |
| Acquisition Price | 10,701,086 |
| Goodwill | 7,883,238 |
(*) Acquistion by CTT-SE of 4,84% of the share capital of NSS, with the remaining 95,16% belonging to HCCM.
The contingent components related to the contractually established earnouts, and with reference to 31 December 2022, were already materialised, with no discrepancies from the initial estimate having been found.
The goodwill is mainly attributable to the skills of NewSpring Services' human capital and the synergies expected to be achieved with the integration of the company into the Group's existing businesses.
The fair value measurement methods applied by the Group was detailed as follows:
- Intangible Assets: The intangible assets are related to the portfolio of customer contracts acquired as part of the NewSpring Services share acquisition transaction. These contracts were measured at fair value on the acquisition date in accordance with the requirements of IFRS 3 and IFRS 13. The fair value was estimated as the discounted value of expected future cash-flows of the acquired contracts, considering the term and their time value.
- Deferred tax liabilities: The estimated value for PPA purposes is related to the amount of deferred taxes resulting from differences between the fair value and the net book value of intangible assets related to customer contracts.
In the period ended 31 December 2022, the entities MedSpring, S.A., CTT IMO Yield, S.A. e CTT Services, S.A. were established and the structured entity Ulisses Finance no.3 was created, having both integrated the consolidation perimeter. The company HCCM - Outsourcing Investment, S.A. was merged by incorporation into the company CTT Soluções Empresariais, S.A., through the global transfer of the assets of the acquired company to the acquiring company, and subsequent extinction of the incorporated company, with reference to 1 January 2022.
During three-months period ended 31 March 2023, here were no changes in the consolidation perimeter.
8. Debt securities
As at 31 December 2022 and 31 March 2023, the caption Debt securities, showed the following composition:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Non-current | ||
| Financial assets at amortised cost | ||
| Government bonds | 409,510,672 389,783,050 | |
| Impairment | (121,927) | (115,951) |
| 409,388,745 389,667,099 | ||
| Current | ||
| Financial assets at amortised cost | ||
| Government bonds | 128,401,573 153,104,683 | |
| Impairment | (9,674) | (10,677) |
| 128,391,899 153,094,006 | ||
| 537,780,644 542,761,105 | ||
| 537,780,644 542,761,105 |
The financial assets at amortised cost are managed based on a business model whose objective is to receive its contractual cash flows.
The analysis of the Financial assets at amortised cost, by remaining maturity, as at 31 December 2022 and 31 March 2023 is detailed as follows:
| 31.12.2022 | |||||||
|---|---|---|---|---|---|---|---|
| Current | Non-current | ||||||
| Due within 3 months |
Over 3 months and less than 1 year |
Total | Over 1 year and less than 3 years |
Over 3 years | Total | Total | |
| Financial assets at amortised cost |
|||||||
| Government bonds | |||||||
| National | 3,011,149 | 17,990,243 | 21,001,392 | 38,028,368 | 162,664,338 | 200,692,705 | 221,694,097 |
| Foreign | 1,461,711 | 105,938,471 | 107,400,181 | 10,027,009 | 198,790,957 | 208,817,967 | 316,218,148 |
| 4,472,860 | 123,928,714 | 128,401,573 | 48,055,377 | 361,455,295 | 409,510,672 | 537,912,245 |
| 31.03.2023 | |||||||
|---|---|---|---|---|---|---|---|
| Current | Non-current | ||||||
| Due within 3 months |
Over 3 months and less than 1 year |
Total | Over 1 year and less than 3 years |
Over 3 years | Total | Total | |
| Financial assets at amortised cost |
|||||||
| Government bonds | |||||||
| National | 3,378,061 | 41,891,286 | 45,269,347 | 18,718,283 | 162,564,012 | 181,282,295 | 226,551,642 |
| Foreign | 101,805,086 | 6,030,250 | 107,835,336 | 10,024,568 | 198,476,188 | 208,500,756 | 316,336,091 |
| 105,183,147 | 47,921,536 | 153,104,683 | 28,742,851 | 361,040,200 | 389,783,050 | 542,887,733 |
The impairment losses, for the year ended 31 December 2022 and three-months period ended 31 March 2023, are detailed as follows:
| 31.12.2022 | ||||||
|---|---|---|---|---|---|---|
| Opening balance |
Increases | Reversals | Utilisations | Transfers | Closing balance |
|
| Non-current assets | ||||||
| Financial assets at fair value through other comprehensive income |
2,572 | — | (2,572) | — | — | — |
| Financial assets at amortised cost | 111,953 | 39,065 | (28,784) | — | (307) | 121,927 |
| 114,525 | 39,065 | (31,356) | — | (307) | 121,927 | |
| Current assets | ||||||
| Financial assets at fair value through other comprehensive income |
623 | — | (623) | — | — | — |
| Financial assets at amortised cost | 8,551 | 3,100 | (2,284) | — | 307 | 9,674 |
| 9,174 | 3,100 | (2,907) | — | 307 | 9,674 | |
| Financial assets at fair value through other comprehensive income |
3,194 | — | (3,194) | — | — | — |
| Financial assets at amortised cost | 120,504 | 42,165 | (31,068) | — | — | 131,602 |
| 123,698 | 42,165 | (34,262) | — | — | 131,602 |
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| Opening balance |
Increases | Reversals | Utilisations | Transfers | Closing balance |
|
| Non-current assets | ||||||
| Financial assets at amortised cost | 121,927 | 347 | (4,901) | — | (1,422) | 115,951 |
| 121,927 | 347 | (4,901) | — | (1,422) | 115,951 | |
| Current assets | ||||||
| Financial assets at amortised cost | 9,674 | 32 | (451) | — | 1,422 | 10,677 |
| 9,674 | 32 | (451) | — | 1,422 | 10,677 | |
| Financial assets at amortised cost | 131,602 | 379 | (5,353) | — | — | 126,629 |
| 131,602 | 379 | (5,353) | — | — | 126,629 |
Regarding the movements in impairment losses of Financial assets at fair value through other comprehensive income by stages, for the year ended 31 December 2022 and three-months period ended 31 March 2023, they are detailed as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Stage 1 | Stage 1 | |
| Opening balance | 3,194 | — |
| Change in period: | ||
| Increases due to origination and acquisition | — | — |
| Changes due to change in credit risk | — | — |
| Decrease due to derecognition repayments and disposals | (3,194) | — |
| Impairment - Financial assets at fair value through other comprehensive income |
— | — |
The reconciliation of accounting movements related to impairment losses is presented below:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Stage 1 | Stage 1 | |
| Opening balance | 3,194 | 3,194 |
| Change in period: | ||
| ECL income statement change for the period | (3,194) | — |
| Impairment - Financial assets at fair value through other comprehensive income |
— | — |
For the impairment losses of Financial assets at amortised cost, the movements by stages, in the year ended 31 December 2022 and three-months period ended 31 March 2023, they are detailed as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Stage 1 | Stage 1 | |
| Opening balance | 120,505 | 131,602 |
| Change in period: | ||
| Increases due to origination and acquisition | 26,972 | — |
| Changes due to change in credit risk | (7,324) | (4,973) |
| Decrease due to derecognition repayments and disposals | (8,552) | — |
| Impairment - Financial assets at amortised cost | 131,602 | 126,629 |
The reconciliation of accounting movements related to impairment losses is presented below:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Stage 1 | Stage 1 | |
| Opening balance | 120,505 | 131,602 |
| Change in period: | ||
| ECL income statement change for the period | 11,097 | (4,973) |
| Impairment - Financial assets at amortised cost | 131,602 | 126,629 |
According to the accounting policy in force, the Group regularly assesses whether there is objective evidence of impairment in its financial asset portfolios at amortised cost.
9. Other banking financial assets and liabilities
As at 31 December 2022 and 31 March 2023, the caption "Other banking financial assets" and "Other banking financial liabilities" showed the following composition:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Non-current assets | ||
| Loans to credit institutions | 961,720 | 350,603 |
| Impairment | (274) | (100) |
| 961,446 | 350,503 | |
| Current assets | ||
| Investments in central banks | 450,250,022 | 402,033,500 |
| Investments in credit institutions | 4,700,523 | 4,703,167 |
| Loans to credit institutions | 4,277,698 | 3,766,859 |
| Impairment | (1,394) | (878) |
| Other | 3,805,177 | 4,797,086 |
| Impairment | (1,805,945) | (1,807,411) |
| 461,226,081 | 413,492,323 | |
| 462,187,527 | 413,842,826 | |
| Current liabilities | ||
| Other | 46,210,667 | 32,025,643 |
| 46,210,667 | 32,025,643 | |
| 46,210,667 | 32,025,643 |
Investments in credit institutions and Loans to credit institutions
Regarding the above-mentioned captions, the scheduling by maturity is as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Up to 3 months | 455,572,501 | 407,418,780 |
| From 3 to 12 months | 3,655,742 | 3,084,746 |
| From 1 to 3 years | 961,721 | 350,603 |
| 460,189,963 | 410,854,129 |
The caption "Investments at credit institutions" showed an annual average return of 1.252% (31 December 2022: 1.361%).
The amount of 402,033,500 Euros recorded in investments in central banks corresponds to overnight deposits with the Bank of Portugal remunerated at a rate of 3.00%.
Impairment
The impairment losses, in the year ended 31 December 2022 and three-months period ended 31 March 2023, are detailed as follows:
| 31.12.2021 | ||||||
|---|---|---|---|---|---|---|
| Opening balance |
Increases | Reversals | Utilisations | Transfers | Closing balance |
|
| Non-current assets | ||||||
| Investments and loans in credit institutions | 1,709 | 140 | (508) | — | (1,067) | 274 |
| 1,709 | 140 | (508) | — | (1,067) | 274 | |
| Current assets | ||||||
| Investments and loans in credit institutions | 2,197 | 712 | (2,581) | — | 1,067 | 1,394 |
| Other | 1,800,306 | 52,283 | (4,548) | (42,097) | — | 1,805,945 |
| 1,802,504 | 52,995 | (7,129) | (42,097) | 1,067 | 1,807,339 | |
| 1,804,213 | 53,135 | (7,637) | (42,097) | — | 1,807,613 |
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| Opening balance |
Increases | Reversals | Utilisations | Transfers | Closing balance |
|
| Non-current assets | ||||||
| Investments and loans in credit institutions | 274 | 27 | (97) | — | (104) | 100 |
| 274 | 27 | (97) | — | (104) | 100 | |
| Current assets | ||||||
| Investments and loans in credit institutions | 1,394 | 232 | (853) | — | 104 | 878 |
| Other | 1,805,945 | 1,531 | (64) | — | — | 1,807,411 |
| 1,807,339 | 1,763 | (917) | — | 104 | 1,808,289 | |
| 1,807,614 | 1,790 | (1,014) | — | — | 1,808,389 |
Regarding the movements in impairment losses on investments and loans to credit institutions by stages, in the periods ended on 31 December 2022 and three-months period ended 31 March 2023, they are detailed as follows:
| 31.12.2022 | 31.03.2023 | ||
|---|---|---|---|
| Stage 1 | Stage 1 | ||
| Opening balance | 3,906 | 1,669 | |
| Change in period: | |||
| Increases due to origination and acquisition | 852 | 259 | |
| Changes due to change in credit risk | (892) | (380) | |
| Decrease due to derecognition repayments and disposals | (2,197) | (570) | |
| Impairment | 1,668 | 978 |
The reconciliation of accounting movements related to impairment losses is presented below:
| 31.12.2022 | 31.03.2023 | ||
|---|---|---|---|
| Stage 1 | Stage 1 | ||
| Opening balance | 3,906 | 1,668 | |
| Change in period: | |||
| ECL income statement change for the period | (2,237) | (691) | |
| Impairment | 1,668 | 978 |
The caption "Other current liabilities" essentially books the balance of banking operations pending of financial settlement.
10. Credit to banking clients
As at 31 December 2022 and 31 March 2023, the caption Credit to banking clients was detailed as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Performing loans | 1,808,576,514 | 1,815,615,073 |
| Mortgage Loans | 659,528,828 | 672,833,380 |
| Auto Loans | 780,322,145 | 803,459,150 |
| Credit Cards | 364,276,261 | 334,679,586 |
| Leasings | 3,098,317 | 2,751,254 |
| Overdrafts | 1,350,964 | 1,891,703 |
| Overdue loans | 23,724,664 | 28,086,950 |
| Overdue loans - less than 90 days | 1,407,206 | 1,712,544 |
| Overdue loans - more than 90 days | 22,317,458 | 26,374,406 |
| 1,832,301,179 | 1,843,702,024 | |
| Credit risk impairment | (54,736,167) | (61,063,142) |
| 1,777,565,012 | 1,782,638,882 |
The maturity analysis of the Credit to banking clients as at 31 December 2022 and 31 March 2023 is detailed as follows:
| 31.12.2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Current | Non-current | ||||||||
| At sight | Due within 3 months |
>3 months - < 1 year |
Overdue Loans |
Total | > 1 year - > 3 years |
Over 3 years |
Total | Total | |
| Mortgage loans |
— | 4,636,444 | 12,111,511 | 12,322 | 16,760,276 | 33,650,594 609,130,280 642,780,874 | 659,541,150 | ||
| Auto Loans | — | 31,350,940 | 83,953,302 | 12,548,440 127,852,682 | 218,528,051 446,489,852 665,017,903 | 792,870,584 | |||
| Credit Cards | — 364,276,261 | — | 9,536,389 373,812,649 | — | — | — | 373,812,649 | ||
| Leasings | — | 343,726 | 802,179 | 156,492 | 1,302,398 | 1,277,212 | 675,199 | 1,952,411 | 3,254,809 |
| Overdraft | 1,350,964 | — | — | 1,471,022 | 2,821,986 | — | — | — | 2,821,986 |
| 1,350,964 400,607,371 | 96,866,992 | 23,724,664 522,549,991 | 253,455,856 1,056,295,331 1,309,751,188 1,832,301,179 |
| 31.03.2023 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Current | Non-current | ||||||||
| At sight | Due within 3 months |
>3 months - < 1 year |
Overdue Loans |
Total | > 1 year - > 3 years |
Over 3 years |
Total | Total | |
| Mortgage loans |
— | 4,466,768 | 10,803,082 | 13,315 | 15,283,165 | 30,402,380 627,161,150 657,563,530 | 672,846,695 | ||
| Auto Loans | — | 32,280,513 | 86,442,567 | 16,361,554 135,084,634 | 225,007,535 459,728,537 684,736,071 | 819,820,705 | |||
| Credit Cards | — 334,679,586 | — | 10,079,097 344,758,684 | — | — | — | 344,758,684 | ||
| Leasings | — | 305,222 | 712,322 | 122,547 | 1,140,091 | 1,134,143 | 599,566 | 1,733,708 | 2,873,799 |
| Overdraft | 1,891,703 | — | — | 1,510,436 | 3,402,140 | — | — | — | 3,402,140 |
| 1,891,703 371,732,090 | 97,957,970 | 28,086,950 499,668,713 | 256,544,057 1,087,489,253 1,344,033,310 1,843,702,023 |
The Credit Cards caption essentially books a portfolio of credit cards acquired within the scope of the Universo Partnership with Universo, IME, S.A.. This portfolio was recognised in the Group's financial statements to the extent that the Group is a sole investor in the Next Funding No.1 securitisation operation and, therefore, in compliance with the conditions set out in IFRS 10 - Consolidated Financial Statements, the securitisation operation is consolidated.
On 31 December 2022, the Group, through its subsidiary Banco CTT, and Universo, IME, reviewed the terms of the Partnership Agreement in the area of financial services, communicated to the market on 1 April 2021. In this context, Banco CTT and Universo agreed on the terms for the termination of the Agreement with a view to ending the partnership by December 2023. Notwithstanding this agreement, the conditions provided for in IFRS 10 for recognition of the credit card portfolio credit in the Group's financial statements continue to be verified on 31 December 2022. Under this agreement, Banco CTT will be entitled to compensation of 2,000 thousand euros.
The breakdown of this heading by type of rate is as follows:
| 1,777,565,012 | 1,782,638,882 | |
|---|---|---|
| Credit risk impairment | (54,736,167) | (61,063,142) |
| 1,832,301,179 | 1,843,702,023 | |
| Floating rate | 684,802,038 | 681,884,620 |
| Fixed rate | 1,147,499,141 | 1,161,817,404 |
| 31.12.2022 | 31.03.2023 |
As at 31 December 2022 and 31 March 2023, the analysis of this caption by type of collateral, is presented as follows:
| 31.12.2022 | |||||||
|---|---|---|---|---|---|---|---|
| Performing Loans |
Overdue Loans | Gross amount | Impairment | Net amount | |||
| Asset-backed Loans | 662,647,627 | 146,757 | 662,794,383 | (1,036,479) | 661,757,905 | ||
| Other guaranteed Loans |
761,033,646 | 5,465,861 | 766,499,507 | (25,917,657) | 740,581,850 | ||
| Unsecured Loans | 384,895,241 | 18,112,047 | 403,007,288 | (27,782,031) | 375,225,257 | ||
| 1,808,576,514 | 23,724,664 | 1,832,301,179 | (54,736,167) | 1,777,565,012 |
| 31.03.2023 | |||||||
|---|---|---|---|---|---|---|---|
| Performing Loans |
Overdue Loans | Gross amount | Impairment | Net amount | |||
| Asset-backed Loans | 675,607,806 | 97,202 | 675,705,008 | (1,140,223) | 674,564,785 | ||
| Other guaranteed Loans |
784,212,401 | 5,435,422 | 789,647,823 | (26,759,016) | 762,888,807 | ||
| Unsecured Loans | 355,794,865 | 22,554,327 | 378,349,192 | (33,163,904) | 345,185,288 | ||
| 1,815,615,073 | 28,086,950 | 1,843,702,023 | (61,063,142) | 1,782,638,882 |
The credit type analysis of the caption, as at 31 December 2022 and 31 March 2023 is detailed as follows:
| 31.12.2022 | |||||||
|---|---|---|---|---|---|---|---|
| Performing Loans |
Overdue Loans | Gross amount | Impairment | Net amount | |||
| Mortgage Loans | 659,528,828 | 12,322 | 659,541,150 | (913,526) | 658,627,625 | ||
| Auto Loans | 780,322,145 | 12,548,440 | 792,870,585 | (32,596,578) | 760,274,007 | ||
| Credit Cards | 364,276,261 | 9,536,389 | 373,812,649 | (19,997,066) | 353,815,583 | ||
| Leasings | 3,098,317 | 156,492 | 3,254,809 | (58,560) | 3,196,249 | ||
| Overdrafts | 1,350,964 | 1,471,022 | 2,821,986 | (1,170,437) | 1,651,548 | ||
| 1,808,576,514 | 23,724,664 | 1,832,301,179 | (54,736,167) | 1,777,565,012 |
| 31.03.2023 | |||||
|---|---|---|---|---|---|
| Performing Loans |
Overdue Loans | Gross amount | Impairment | Net amount | |
| Mortgage Loans | 672,833,380 | 13,315 | 672,846,695 | (1,027,246) | 671,819,449 |
| Auto Loans | 803,459,150 | 16,361,554 | 819,820,704 | (35,838,788) | 783,981,916 |
| Credit Cards | 334,679,586 | 10,079,097 | 344,758,684 | (22,942,827) | 321,815,857 |
| Leasings | 2,751,254 | 122,547 | 2,873,801 | (52,461) | 2,821,340 |
| Overdrafts | 1,891,703 | 1,510,436 | 3,402,140 | (1,201,820) | 2,200,320 |
| 1,815,615,073 | 28,086,950 | 1,843,702,023 | (61,063,142) | 1,782,638,882 |
The analysis of credit to bank clients as at 31 December 2022 and 31 March 2023, by sector of activity, is as follows:
| 31.12.2022 | |||||
|---|---|---|---|---|---|
| Performing | Overdue | ||||
| Loans | Loans | Gross amount | Impairment | Net amount | |
| Companies | 73,517,445 | 1,432,171 | 74,949,616 | (2,636,453) | 72,313,163 |
| Agriculture, forestry and fishing | 8,953,383 | 111,188 | 9,064,571 | (284,460) | 8,780,112 |
| Mining and quarrying | 1,275,893 | 2,431 | 1,278,324 | (17,045) | 1,261,279 |
| Manufacturing | 6,335,183 | 149,505 | 6,484,688 | (209,049) | 6,275,639 |
| Water supply | 76,074 | — | 76,074 | (877) | 75,198 |
| Construction | 12,763,802 | 393,388 | 13,157,190 | (607,158) | 12,550,031 |
| Wholesale and retail trade | 10,508,686 | 160,442 | 10,669,128 | (312,582) | 10,356,546 |
| Transport and storage | 7,191,249 | 189,058 | 7,380,307 | (249,279) | 7,131,028 |
| Accommodation and food service activities |
5,522,098 | 97,047 | 5,619,145 | (234,925) | 5,384,220 |
| Information and communication | 825,977 | 165 | 826,142 | (4,572) | 821,570 |
| Financial and insurance activities | 281,488 | 6,662 | 288,150 | (16,097) | 272,052 |
| Real estate activities | 1,882,180 | 3,234 | 1,885,414 | (38,052) | 1,847,362 |
| Professional, scientific and technical activities |
2,199,136 | 19,674 | 2,218,810 | (71,056) | 2,147,754 |
| Administrative and support service activities |
3,876,731 | 90,129 | 3,966,861 | (186,372) | 3,780,489 |
| Public Administration, Defense and Social Security |
95,618 | — | 95,618 | (488) | 95,130 |
| Education | 790,979 | 1,941 | 792,920 | (13,857) | 779,063 |
| Human health services and social work activities |
1,356,996 | 46,801 | 1,403,797 | (33,217) | 1,370,580 |
| Arts, entertainment and recreation | 1,196,427 | 93,056 | 1,289,483 | (98,709) | 1,190,774 |
| Other services | 8,385,545 | 67,450 | 8,452,994 | (258,658) | 8,194,336 |
| Individuals | 1,735,059,070 | 22,292,494 | 1,757,351,563 | (52,099,713) | 1,705,251,851 |
| Mortgage Loans | 659,618,068 | 12,322 | 659,630,390 | (915,248) | 658,715,142 |
| Consumer Loans | 1,075,441,002 | 22,280,172 | 1,097,721,173 | (51,184,465) | 1,046,536,709 |
| 1,808,576,515 | 23,724,665 | 1,832,301,179 | (54,736,166) | 1,777,565,012 |
| 31.03.2023 | |||||
|---|---|---|---|---|---|
| Performing Loans |
Overdue Loans |
Gross amount | Impairment | Net amount | |
| Companies | 80,367,584 | 1,762,113 | 82,129,696 | (3,126,935) | 79,002,764 |
| Agriculture, forestry and fishing | 10,743,742 | 138,548 | 10,882,290 | (390,996) | 10,491,294 |
| Mining and quarrying | 1,400,247 | 3,410 | 1,403,657 | (26,224) | 1,377,434 |
| Manufacturing | 6,464,666 | 173,585 | 6,638,251 | (234,977) | 6,403,274 |
| Water supply | 60,990 | — | 60,990 | (640) | 60,350 |
| Construction | 14,041,124 | 489,613 | 14,530,737 | (718,018) | 13,812,720 |
| Wholesale and retail trade | 11,110,132 | 190,600 | 11,300,732 | (337,347) | 10,963,385 |
| Transport and storage | 8,442,173 | 253,742 | 8,695,915 | (326,917) | 8,368,998 |
| Accommodation and food service activities |
5,893,347 | 99,604 | 5,992,951 | (270,530) | 5,722,421 |
| Information and communication | 849,838 | 978 | 850,816 | (7,318) | 843,499 |
| Financial and insurance activities | 270,882 | 33,010 | 303,891 | (16,192) | 287,699 |
| Real estate activities | 1,821,450 | 7,629 | 1,829,080 | (42,005) | 1,787,074 |
| Professional, scientific and technical activities |
2,349,712 | 22,083 | 2,371,795 | (85,183) | 2,286,612 |
| Administrative and support service activities |
4,293,651 | 126,352 | 4,420,003 | (216,671) | 4,203,332 |
| Public administration and defence, compulsory social security |
92,949 | — | 92,949 | (474) | 92,475 |
| Education | 761,691 | 13,269 | 774,960 | (15,766) | 759,194 |
| Human health services and social work activities |
1,631,595 | 20,121 | 1,651,715 | (32,705) | 1,619,011 |
| Arts, entertainment and recreation | 1,383,864 | 112,792 | 1,496,656 | (107,342) | 1,389,314 |
| Other services | 8,755,531 | 76,777 | 8,832,308 | (297,630) | 8,534,678 |
| Individuals | 1,735,247,489 | 26,324,836 | 1,761,572,325 | (57,936,208) | 1,703,636,116 |
| Mortgage Loans | 672,920,969 | 13,315 | 672,934,284 | (1,028,950) | 671,905,333 |
| Consumer Loans | 1,062,326,520 | 26,311,521 | 1,088,638,041 | (56,907,258) | 1,031,730,783 |
| 1,815,615,073 | 28,086,950 | 1,843,702,023 | (61,063,142) | 1,782,638,882 |
The total credit portfolio, split by stage according to IFRS 9, is analysed as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Stage 1 | 1,660,385,770 | 1,647,546,540 |
| Gross amount | 1,667,898,411 | 1,654,054,627 |
| Impairment | (7,512,642) | (6,508,087) |
| Stage 2 | 82,154,887 | 99,565,126 |
| Gross amount | 89,109,896 | 107,785,644 |
| Impairment | (6,955,009) | (8,220,518) |
| Stage 3 | 35,024,355 | 35,527,215 |
| Gross amount | 75,292,871 | 81,861,752 |
| Impairment | (40,268,516) | (46,334,538) |
| 1,777,565,012 | 1,782,638,882 |
The caption credit to banking clients includes the effect of traditional securitisation transactions, carried out through securitisation vehicles, consolidated pursuant to IFRS 10.
The caption credit to banking clients includes the following amounts related to finance leases contracts:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Amount of future minimum payments | 3,548,810 | 3,222,371 |
| Interest not yet due | (450,493) | (471,117) |
| Present value | 3,098,317 | 2,751,254 |
The amount of future minimum payments of lease contracts, by maturity terms, is analyzed as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Due within 1 year | 1,580,023 | 1,464,887 |
| Due between 1 to 5 years | 1,632,323 | 1,438,244 |
| Over 5 years | 336,463 | 319,240 |
| Amount of future minimum payments | 3,548,810 | 3,222,371 |
The analysis of financial leases contracts, by type of client, is presented as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Individuals | 403,140 | 365,325 |
| Home | 83,393 | 81,226 |
| Others | 319,747 | 284,099 |
| Companies | 2,695,176 | 2,385,929 |
| Equipment | 178,712 | 174,485 |
| Real Estate | 2,516,465 | 2,211,444 |
| 3,098,317 | 2,751,254 |
Impairment losses
During year ended on 31 December 2022 and three-months period ended 31 March 2023, the movement under the Accumulated impairment losses caption (Note 13) was as follows:
| 31.12.2022 | |||||||
|---|---|---|---|---|---|---|---|
| Opening balance |
Increases | Reversals | Utilisations | Transfers | Other adjustments |
Closing balance |
|
| Non-current assets | |||||||
| Credit to banking clients |
15,601,705 | 17,177,617 | (7,208,624) | (569,135) | (3,063,025) | 136,426 | 22,074,965 |
| 15,601,705 | 17,177,617 | (7,208,624) | (569,135) | (3,063,025) | 136,426 | 22,074,965 | |
| Current assets | |||||||
| Credit to banking clients |
15,488,685 | 25,415,289 | (10,665,581) | (842,068) | 3,063,025 | 201,852 | 32,661,202 |
| 15,488,685 | 25,415,289 | (10,665,581) | (842,068) | 3,063,025 | 201,852 | 32,661,202 | |
| 31,090,390 | 42,592,906 | (17,874,205) | (1,411,203) | — | 338,278 | 54,736,167 |
| 31.03.2023 | |||||||
|---|---|---|---|---|---|---|---|
| Opening balance |
Increases | Reversals | Utilisations | Transfers | Other adjustments |
Closing balance |
|
| Non-current assets | |||||||
| Credit to banking clients |
22,074,965 | 4,996,504 | (2,651,432) | (12,639) | (1,661,337) | 27,185 | 22,773,246 |
| 22,074,965 | 4,996,504 | (2,651,432) | (12,639) | (1,661,337) | 27,185 | 22,773,246 | |
| Current assets | |||||||
| Credit to banking clients |
32,661,202 | 8,400,894 | (4,457,996) | (21,251) | 1,661,337 | 45,710 | 38,289,896 |
| 32,661,202 | 8,400,894 | (4,457,996) | (21,251) | 1,661,337 | 45,710 | 38,289,896 | |
| 54,736,167 | 13,397,398 | (7,109,428) | (33,889) | — | 72,895 | 61,063,142 |
The impairment losses of Credit to banking clients (net of reversals) for the period ended 31 March 2023 amounted to 6,287,970 Euros (3,748,749 Euros as at 31 March 2022) was booked in the caption "Impairment of other financial banking assets."
The movements in impairment losses by stages, in the year ended on 31 December 2022 and threemonths period ended 31 March 2023, they are detailed as follows:
| 31.12.2022 | |||||
|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | ||
| Opening balance | 6,473,619 | 4,602,577 | 20,014,195 | 31,090,391 | |
| Change in period: | |||||
| Increases due to origination and acquisition |
2,038,514 | 1,487,610 | 2,647,941 | 6,174,065 | |
| Changes due to change in credit risk Decrease due to derecognition repayments and disposals |
(2,048,547) | 2,295,799 | 19,878,455 | 20,125,706 | |
| (642,399) | (236,262) | (702,409) | (1,581,070) | ||
| Write-offs | (291) | — | (1,410,913) | (1,411,203) | |
| Transfers to: | |||||
| Stage 1 | 2,334,939 | (1,211,886) | (1,123,053) | — | |
| Stage 2 | (457,083) | 1,877,211 | (1,420,128) | — | |
| Stage 3 | (197,724) | (1,808,474) | 2,006,199 | — | |
| Foreign exchange and other | 11,616 | (51,566) | 378,228 | 338,278 | |
| Impairment | 7,512,642 | 6,955,009 | 40,268,516 | 54,736,167 | |
| Of which: POCI | — | — | 926,910 | 926,910 |
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | |||
| Opening balance | 7,512,642 | 6,955,009 | 40,268,516 | 54,736,167 | ||
| Change in period: | ||||||
| Increases due to origination and acquisition |
385,677 | 77,242 | 40,468 | 503,387 | ||
| Changes due to change in credit risk | (1,995,098) | 2,320,341 | 6,090,922 | 6,416,165 | ||
| Changes due to modifications without derecognition |
— | — | — | — | ||
| Decrease due to derecognition repayments and disposals |
(204,634) | (74,488) | (352,460) | (631,582) | ||
| Write-offs | — | — | (33,890) | (33,890) | ||
| Changes due to update in the institution's methodology for estimation |
— | — | — | — | ||
| Transfers to: | ||||||
| Stage 1 | 1,332,428 | (1,002,729) | (329,699) | — | ||
| Stage 2 | (505,724) | 1,590,722 | (1,084,998) | — | ||
| Stage 3 | (19,560) | (1,646,876) | 1,666,436 | — | ||
| Foreign exchange and other | 2,356 | 1,298 | 69,242 | 72,895 | ||
| Impairment | 6,508,087 | 8,220,518 | 46,334,538 | 61,063,142 | ||
| Of which: POCI | — | — | 1,006,063 | 1,006,063 |
The reconciliation of accounting movements related to impairment losses is presented below:
| 31.12.2022 | |||||
|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | ||
| Opening balance | 6,473,619 | 4,602,577 | 20,014,195 | 31,090,391 | |
| Change in period: | |||||
| ECL income statement change for the period |
(652,433) | 3,547,147 | 21,823,987 | 24,718,701 | |
| Stage transfers (net) | 1,680,131 | (1,143,149) | (536,982) | — | |
| Utilisations during the period | — | — | — | — | |
| Write-offs | (291) | — | (1,410,913) | (1,411,203) | |
| Foreign exchange and other | 11,616 | (51,566) | 378,228 | 338,278 | |
| Impairment | 7,512,642 | 6,955,009 | 40,268,516 | 54,736,167 |
| 31.03.2023 | |||||
|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | ||
| Opening balance | 7,512,642 | 6,955,009 | 40,268,516 | 54,736,167 | |
| Change in period: | |||||
| ECL income statement change for the period |
(1,814,054) | 2,323,094 | 5,778,930 | 6,287,970 | |
| Stage transfers (net) | 807,144 | (1,058,883) | 251,740 | — | |
| Write-offs | — | — | (33,889) | (33,889) | |
| Foreign exchange and other | 2,356 | 1,298 | 69,242 | 72,895 | |
| Impairment | 6,508,087 | 8,220,518 | 46,334,538 | 61,063,142 |
Sensitivity Analysis
Given the high uncertainty of macroeconomic projections and considering that deviations from the presented scenarios may have an impact on the value of estimated expected losses, sensitivity analyzes were carried out on the distribution of the portfolio by stage and the respective impact on impairment.
The Group considers that the parameters assumed to be more sensitive or susceptible to changes in the economic cycle are the Probability of Default (PD – Probability of Default) for most portfolios and the Loss Given Default (LGD – Loss Given Default) for the case of the credit card.
In this context, a sensitivity analysis was carried out to determine what would be the impairment of the global portfolio if those parameters suffered a relative deterioration of 10%, conclude that the increase in impairment would be 2,695 thousand euros, corresponding to about 4%.
11. Prepayments
As at 31 December 2022 and 31 March 2023, the Prepayments included in current assets and current and non-current liabilities showed the following composition:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Prepaid Assets | ||
| Current | ||
| Rents payable | 861,806 | 650,158 |
| Meal allowances | 1,360,349 | 1,349,950 |
| Other | 6,789,720 | 10,325,704 |
| 9,011,875 | 12,325,811 | |
| Prepaid Liabilities | ||
| Non-current | ||
| Investment subsidy | 260,886 | 258,086 |
| 260,886 | 258,086 | |
| Current | ||
| Investment subsidy | 11,201 | 11,201 |
| Contratual liabilities | 1,165,324 | 1,400,111 |
| Other | 2,501,615 | 9,401,269 |
| 3,678,140 | 10,812,581 | |
| 3,939,027 | 11,070,667 |
The change in the caption Other assets prepayments essentially results from the renewal of software license contracts and insurance contracts.
The variation in the caption "Other current prepaid liabilities" is mainly explained by the deferral of income for the subsequent period related to the commission earned on placing public debt.
The caption "Contractual liabilities" results from the application of IFRS 15 - Revenue from Contracts with Customers and stands for the amount already invoiced, but not yet recognised as revenue because the performance obligations have not yet been met as recommended by the standard.
The "Contractual liabilities" essentially refer to amounts related to stamps and prepaid postage of priority mail in the amount of 571,207 Euros (877,484 Euros on 31 December 2022), whose revenue is expected to be recognised in April 2023 (estimate of 80% of the item's value) and the remaining during 2023, and to objects invoiced and not delivered on 31 March 2023 in the express segment, in the amount of 828,904 Euros (287,840 Euros as at 31 December 2022), whose revenue is recognised upon delivery in the following month.
The revenue recognised in the period, included in the balance of Contractual liabilities at the beginning of the period amounted to 895,533 Euros.
No "Assets resulting from contracts" associated with the application of IFRS 15 - Revenue from contracts with customers were recognised.
12. Cash and cash equivalents
As at 31 December 2022 and 31 March 2023, cash and cash equivalents correspond to the amount of cash, sight deposits, term deposits and cash investments on the monetary market, net of bank overdrafts and equivalent short-term bank financing, and is detailed as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Cash | 71,794,674 | 91,530,490 |
| Sight deposits | 160,127,945 | 167,001,419 |
| Demand deposits at Central Banks | 38,636,396 | 15,821,204 |
| Deposits in other credit institutions | 59,140,984 | 53,842,078 |
| Term deposits | 126,769,299 | 260,813,591 |
| Cash and cash equivalents (Statement of | ||
| Financial position) | 456,469,298 | 589,008,781 |
| Sight deposits at Bank of Portugal | (23,185,900) | — |
| Outstanding checks / Checks clearing | (22,492,340) | (22,185,121) |
| Impairment of slight and term deposits | 7,917 | 26,151 |
| Cash and cash equivalents (Cash flow statement) | 410,798,975 | 566,849,811 |
The caption "Sight deposits at Bank of Portugal" includes mandatory deposits in order to meet the legal requirements to maintain a minimum cash reserve in accordance with the provisions of Regulation (EU) No. 1358/2011 of European Central Bank of 14 December 2011, which states that the minimum cash requirements kept as demand deposits at Bank of Portugal amounts to 1% of the average amount of deposits and other liabilities, over each reserve maintenance period. As at 31 March 2023, the daily average of the minimum mandatory availability for the period in force was 22 468 800 Euros.
Therefore, the item Demand deposits at Bank of Portugal includes, as at 31 March 2023, a total amount of demand deposits of 15,821,204 Euros (31 December 2022: 38,636,396 Euros). The change in this caption is justified by a lower cash availability explained by a reduction in customer deposits.
As of the reserve counting period that began on 30 October 2019, the ECB introduced the tiering regime, which exempted part of the excess reserves deposited by credit institutions with the central bank from the negative remuneration then associated with the deposit facility rate. The tiering ceased to apply on 27 July 2022, following the European Central Bank Governing Council's decision to increase the deposit facility rate to a non-negative amount.
Within the scope of the tiering system, all credit institutions subject to the minimum reserve system have an excess reserve limit which is effectively remunerated at a rate of 0%. This limit is based on a multiple applied to the amount of the minimum reserves to be met, adopted by decision of the ECB Governing Council, and subject to change by it.
The tiering system came into effect with a multiple of six. At its meeting on 8 September 2022, the Governing Council decided to suspend this system, setting the multiplier to zero.
The caption "Outstanding checks/ Checks clearing" represents checks drawn by third parties on other credit institutions, which are in collection.
Impairment
In the year ended on 31 December 2022 and three-months period ended 31 March 2023, the movement recorded under the caption "Impairment of sight and term deposits" (Note 13) related to the Group is detail as follows:
| 31.12.2022 | ||||||
|---|---|---|---|---|---|---|
| Group | Opening balance |
Increases | Reversals | Utilisations | Closing balance |
|
| Sight and term deposits | 24,913 | 1,715 | (18,711) | — | 7,917 | |
| 24,913 | 1,715 | (18,711) | — | 7,917 |
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| Group | Opening balance |
Increases | Utilisations | Closing balance |
||
| Sight and term deposits | 7,917 | 20,997 | (2,764) | — | 26,151 | |
| 7,917 | 20,997 | (2,764) | — | 26,151 |
The Impairment losses (increases net of reversals) for the period ended 31 March 2023 in the amount of 18,233 Euros (18 551 Euros as at 31 March 2022) were recorded under the caption "Impairment of accounts receivable (losses/reversals)" ".
13. Accumulated impairment losses
During the year ended on 31 December 2022 and three-months period ended 31 March 2023, the following movements occurred in the impairment losses:
| 31.12.2022 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Opening balance |
Increases | Reversals | Utilisations | Transfers | Other movements |
Closing balance |
| Non-current assets | |||||||
| Tangible fixed assets | 19,460 | 3,636,002 | (3,335) | — | — | — | 3,652,127 |
| Investment properties | 392,936 | — | (139,754) | — | — | — | 253,182 |
| Intangible assets | 60,617 | — | — | (60,617) | — | — | — |
| 473,013 | 3,636,002 | (143,089) | (60,617) | — | — | 3,905,309 | |
| Debt securities at fair value through other comprehensive income |
2,572 | — | (2,572) | — | — | — | — |
| Debt securities at amortised cost | 111,953 | 39,065 | (28,784) | — | (307) | — | 121,927 |
| Other non-current assets | 2,749,010 | — | — | — | 157,837 | — | 2,906,847 |
| Credit to banking clients | 15,601,705 | 17,177,617 | (7,208,624) | (569,135) | (3,063,025) | 136,426 | 22,074,965 |
| Other banking financial assets | 1,709 | 140 | (508) | — | (1,067) | — | 274 |
| 18,466,949 | 17,216,822 | (7,240,487) | (569,135) | (2,906,562) | 136,426 | 25,104,013 | |
| 18,939,963 | 20,852,823 | (7,383,576) | (629,752) | (2,906,562) | 136,426 | 29,009,322 | |
| Current assets Accounts receivable |
39,883,599 | 3,835,005 | (1,641,407) | (669,845) | — | 1,695 | 41,409,047 |
| Credit to banking clients | 15,488,685 | 25,415,289 (10,665,581) | (842,068) | 3,063,025 | 201,852 | 32,661,202 | |
| Debt securities at fair value through other comprehensive income |
623 | — | (623) | — | — | — | — |
| Debt securities at amortised cost | 8,551 | 3,100 | (2,284) | — | 307 | — | 9,674 |
| Other current assets | 10,325,865 | 1,796,674 | (303,789) | (113,117) | (157,837) | — | 11,547,796 |
| Other banking financial assets | 1,802,503 | 52,995 | (7,129) | (42,097) | 1,067 | — | 1,807,339 |
| Slight and term deposits | 24,913 | 1,715 | (18,711) | — | — | — | 7,917 |
| 67,534,741 | 31,104,778 (12,639,523) | (1,667,127) | 2,906,562 | 203,547 | 87,442,978 | ||
| Non-current assets held for sale | 164,441 | 8,236 | (172,038) | — | — | — | 638 |
| 164,441 | 8,236 | (172,038) | — | — | — | 638 | |
| Merchandise | 3,131,405 | — | (211,906) | (172,098) | — | — | 2,747,401 |
| Raw, subsidiary and consumable | 867,668 | 68,233 | (13,587) | — | — | — | 922,313 |
| 3,999,073 | 68,233 | (225,494) | (172,098) | — | — | 3,669,714 | |
| 71,698,254 | 31,181,246 (13,037,055) | (1,839,225) | 2,906,562 | 203,547 | 91,113,329 | ||
| 90,638,215 | 52,034,070 (20,420,631) | (2,468,977) | — | 339,973 120,122,649 |
| 31.03.2023 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Opening balance |
Increases | Reversals | Utilisations | Transfers | Other movements |
Closing balance |
| Non-current assets | |||||||
| Tangible fixed assets | 3,652,127 | — | (1,558,287) | — | — | — | 2,093,841 |
| Investment properties | 253,182 | — | — | — | — | — | 253,182 |
| 3,905,309 | — | — | (1,558,287) | — | — | 2,347,022 | |
| Debt securities at amortised cost | 121,927 | 347 | (4,901) | — | (1,422) | — | 115,951 |
| Other non-current assets | 2,906,847 | — | — | — | 18,061 | — | 2,924,908 |
| Credit to banking clients | 22,074,965 | 4,996,504 | (2,651,432) | (12,639) | (1,661,337) | 27,185 | 22,773,246 |
| Other banking financial assets | 274 | 27 | (97) | — | (104) | — | 100 |
| 25,104,013 | 4,996,878 | (2,656,430) | (12,639) | (1,644,802) | — | 25,814,205 | |
| 29,009,322 | 4,996,878 | (2,656,430) | (1,570,925) | (1,644,802) | — | 28,161,227 | |
| Current assets | |||||||
| Accounts receivable | 41,409,047 | 1,183,961 | (180,734) | (107,653) | — | (806) 42,303,816 | |
| Credit to banking clients | 32,661,202 | 8,400,894 | (4,457,996) | (21,251) | 1,661,337 | 45,710 | 38,289,896 |
| Debt securities at amortised cost | 9,674 | 32 | (451) | — | 1,422 | — | 10,677 |
| Other current assets | 11,547,796 | 590,873 | (68,294) | (12,177) | (18,061) | — | 12,040,138 |
| Other banking financial assets | 1,807,339 | 1,763 | (917) | — | 104 | — | 1,808,289 |
| Slight and term deposits | 7,917 | 20,997 | (2,764) | — | — | — | 26,151 |
| 87,442,978 | 10,198,520 | (4,711,156) | (141,081) | 1,644,802 | 44,905 | 94,478,968 | |
| Non-current assets held for sale | 638 | — | — | — | — | — | 638 |
| 638 | — | — | — | — | — | 638 | |
| Merchandise | 2,747,401 | — | (241,164) | (11,047) | — | — | 2,495,190 |
| Raw, subsidiary and consumable | 922,313 | 24,715 | — | — | — | — | 947,029 |
| 3,669,714 | 24,715 | (241,164) | (11,047) | — | — | 3,442,219 | |
| 91,113,329 | 10,223,236 | (4,952,319) | (152,128) | 1,644,802 | 44,905 | 97,921,824 | |
| 120,122,649 | 15,220,114 | (7,608,750) | (1,723,053) | — | 44,905 126,083,049 |
As at 31 December 2022, the increase in impairment on "Credit to banking clients" essentially concerns the increase in credit exposure by 259 million euros.
The amounts classified as "Other movements", with reference to 31 December 2022 and 31 March 2023, refer to the movements resulting from adjustments to POCI credits (Purchase or Originated Credit Impaired) regarding the acquisition of 321 Crédito on 1 May 2019, according to IFRS 3 - Business Combinations.
14. Equity
On 16 March 2022, the implementation of a share buyback programme was approved, with the sole purpose of reducing the Company's share capital, through the extinction of the acquired shares. The implementation of this programme is explained in detail in note 15.
Subsequently, on 7 November 2022, the Company's share capital reduction in the amount of 2,325,000 euros, through the cancellation of 4,650,000 shares representing 3.1% of the share capital, was registered in the Commercial Register Office. Thus, on 31 December 2022 and 31 March 2023, the Company's share capital was composed of 145,350,000 shares with the nominal value of 0.50 Euros each. The share capital is fully underwritten and paid-up.
As at 31 December 2022 and 31 March 2023 the Company's shareholders with greater than or equal to 2% shareholdings, according to the information reported, are as follows:
| Shareholders | Number of Shares |
% Share Capital |
Nominal Value | |
|---|---|---|---|---|
| Global Portfolio Investments, S.L. (1) | 21,787,696 | 14.990 % | 10,893,848 | |
| Indumenta Pueri, S.L. (1) | Total | 21,787,696 | 14.990 % | 10,893,848 |
| Manuel Champalimaud, SGPS, S.A. (2) | 19,261,815 | 13.252 % | 9,630,908 | |
| Manuel Carlos de Melo Champalimaud | 500,185 | 0.344 % | 250,093 | |
| Manuel Carlos de Melo Champalimaud (2) | Total | 19,762,000 | 13.596 % | 9,881,000 |
| GreenWood Builders Fund I, LP (3) | 10,025,000 | 6.897 % | 5,012,500 | |
| GreenWood Investors LLC (3) | Total | 10,025,000 | 6.897 % | 5,012,500 |
| Green Frog Investments Inc | Total | 7,730,000 | 5.318 % | 3,865,000 |
| Norges Bank | Total | 3,105,287 | 2.136 % | 1,552,644 |
| Bestinver Gestión S.A. SGIIC (4) | Total | 3,024,366 | 2.081 % | 1,512,183 |
| CTT, S.A. (own shares) (5) | Total | 2,935,000 | 2.019 % | 1,467,500 |
| Other shareholders | Total | 76,980,651 | 52.962 % | 38,490,326 |
| TOTAL | 145,350,000 | 100.000 % | 72,675,000 |
31.12.2022
(1) Global Portfolio Investments, S.L. is controlled by Indumenta Pueri, S.L..
(2) Includes 19,246,815 shares directly held by Manuel Champalimaud, SGPS, S.A. and 15,000 shares held by Duarte Palma Leal Champalimaud, Vice-Chair of its Board of Directors and Non-executive Director of CTT. Qualified shareholding directly and indirectly attributable to Manuel Carlos de Melo Champalimaud.
- (3) GreenWood Investors, LLC, of which Steven Wood, Non-Executive member of the Board of Directors of CTT, is a Managing Member, exercises the voting rights not in its own name but on behalf of the fund GreenWood Builders Fund I, LP as its management company. The full chain of controlled undertakings through which the voting rights are held includes GreenWood Investors, LLC and GreenWood Performance Investors, LLC.
- (4) Bestinver Gestión S.A. SGIIC is a Spanish fund management company. As such, it exercises the voting rights attached to the shares property of the investment institutions it manages and represents. Additionally, Bestinver Gestión, S.A. SGIIC has been granted a power of attorney to exercise the voting rights attached to the shares under the property of the pension funds managed by Bestinver Pensiones EGFP, S.A..
- (5) Shares held by CTT following the share capital reduction in the amount of 2,325,000 Euros through the cancellation of 4,650,000 shares held by the Company, representing 3.1% of its share capital. The share capital reduction was registered before the Commercial Registry Office on 7 November 2022 and announced to the market on 8 November 2022 (see press releases available on CTT website, at https://www.ctt.pt/grupo-ctt/investidores/comunicados/index?language_id=1).
| 31.03.2023 | ||||
|---|---|---|---|---|
| Shareholders | Number of Shares |
% Share Capital |
Nominal Value | |
| Global Portfolio Investments, S.L. (1) | 21,787,696 | 14.990 % | 10,893,848 | |
| Indumenta Pueri, S.L. (1) | Total | 21,787,696 | 14.990 % | 10,893,848 |
| Manuel Champalimaud, SGPS, S.A. (2) | 19,261,815 | 13.252 % | 9,630,908 | |
| Manuel Carlos de Melo Champalimaud | 500,185 | 0.344 % | 250,093 | |
| Manuel Carlos de Melo Champalimaud (2) | Total | 19,762,000 | 13.596 % | 9,881,000 |
| GreenWood Builders Fund I, LP (3) | 10,025,000 | 6.897 % | 5,012,500 | |
| GreenWood Investors LLC (3) | Total | 10,025,000 | 6.897 % | 5,012,500 |
| Green Frog Investments Inc | Total | 7,730,000 | 5.318 % | 3,865,000 |
| Norges Bank | Total | 3,105,287 | 2.136 % | 1,552,644 |
| Bestinver Gestión S.A. SGIIC (4) | Total | 3,024,366 | 2.081 % | 1,512,183 |
| CTT, S.A. (own shares) (5) | Total | 2,935,000 | 2.019 % | 1,467,500 |
| Other shareholders | Total | 76,980,651 | 52.962 % | 38,490,326 |
| TOTAL | 145,350,000 | 100.000 % | 72,675,000 |
(1) Global Portfolio Investments, S.L. is controlled by Indumenta Pueri, S.L..
(2) Includes 19,246,815 shares directly held by Manuel Champalimaud, SGPS, S.A. and 15,000 shares held by Duarte Palma Leal Champalimaud, Vice-Chair of its Board of Directors and Non-executive Director of CTT. Qualified shareholding directly and indirectly attributable to Manuel Carlos de Melo Champalimaud.
(3) GreenWood Investors, LLC, of which Steven Wood, Non-Executive member of the Board of Directors of CTT, is a Managing Member, exercises the voting rights not in its own name but on behalf of the fund GreenWood Builders Fund I, LP as its management company. The full chain of controlled undertakings through which the voting rights are held includes GreenWood Investors, LLC and GreenWood Performance Investors, LLC..
- (4) Bestinver Gestión S.A. SGIIC is a Spanish fund management company. As such, it exercises the voting rights attached to the shares property of the investment institutions it manages and represents. Additionally, Bestinver Gestión, S.A. SGIIC has been granted a power of attorney to exercise the voting rights attached to the shares under the property of the pension funds managed by Bestinver Pensiones EGFP, S.A..
- (5) Shares held by CTT following the share capital reduction in the amount of 2,325,000 Euros through the cancellation of 4,650,000 shares held by the Company, representing 3.1% of its share capital. The share capital reduction was registered before the Commercial Registry Office on 7 November 2022 and announced to the market on 8 November 2022 (see press releases available on CTT website, at https://www.ctt.pt/grupo-ctt/investidores/comunicados/index?language_id=1).
15. Own shares, Reserves, Other changes in equity and Retained earnings
Own shares
As at 31 December 2022, the following movements were made in the caption "Own Shares":
| Quantity | Amount | Average Price | |
|---|---|---|---|
| Balance 31 December 2021 |
1,500,001 | 6,404,963 | 4.27 |
| Acquisitions | 6,084,999 | 21,573,976 | 3.55 |
| Cancellation (due to share capital reduction) |
(4,650,000) | (17,152,548) | 3.69 |
| Balance 31 December 2022 |
2,935,000 | 10,826,390 | 3.69 |
During the three-months period ended 31 March 2023, the following movements were made in the caption "Own Shares":
| Quantity | Amount | Average Price | |||
|---|---|---|---|---|---|
| Balance 2022 |
31 December |
2,935,000 | 10,826,390 | 3.69 | |
| Balance 31 March 2023 | 2,935,000 | 10,826,390 | 3.69 |
At the meeting of the Company's Board of Directors held on 16 March 2022, and as communicated to the market on the same date, it was unanimously decided to approve the implementation of a Buy-back programme for the Company's own shares, including the related terms and conditions, with the sole purpose of reducing the related share capital through the cancellation of shares acquired under the aforementioned programme, subject to prior approval by the General Meeting.
Thus, at the General Meeting held on 21 April 2022, the share capital reduction of up to 2,325,000 Euros was approved, with the purpose of releasing the excess of share capital, through the extinction of up to 4,650,000 shares representing up to 3.1% of the share capital already acquired or that were to be acquired within the scope of a share buyback programme. The maximum monetary amount of the approved Buyback Programme was 18,000,000 Euros.
Subsequently, on 27 July 2022, and still within the scope of the authorisation granted at the Annual General Meeting of Shareholders held on 21 April 2022, the Company's Board of Directors deliberated to increase the maximum pecuniary amount and number of shares that could be acquired under the share buyback programme of the Company, as follows:
- Maximum pecuniary amount of the Buy-back Programme: it is increased by 3,600,000 Euros, now being up to 21,600,000 Euros;
- Maximum number of shares to be acquired under the Buy-back Programme: it is increased by 1,900,000 shares, being now up to 6,550,000 CTT's shares, representing up to 4.37% of the respective share capital.
The other terms and conditions of the Buy-back Programme approved by the Board of Directors and the Annual General Meeting held in 2022 and communicated on 16 March 2022 remained unchanged.
The Buyback Programme started on 17 March 2022 and would last until 18 December 2022 unless, however, the maximum number of shares to be acquired or the maximum pecuniary amount of the Buyback Programme were reached, which happened to 8 September 2022, thus ending before the end of its maximum duration period.
Considering the resolution of the General Meeting of 21 April 2022 which authorised the reduction of the share capital, and the acquisition of own shares having been fulfilled for this purpose, the commercial register was registered, on 7 November 2022, reduction of the Company's share capital in the amount of 2,325,000 euros, through the extinction of 4,650,000 own shares, as explained in note 14.
As at 31 December 2022 and 31 March 2023, the Company held, as a result of the acquisition and cancellation operations indicated herein, an accumulated amount of 2,935,000 own shares, representing 2.02% of the share capital, including 1,500,001 of own shares previously acquired, with par value of 0.50 Euros, with all inherent rights related to suspended shares, with the exception of those relating to the receipt of new shares in the case of capital increase by incorporation of reserves, as provided for in article 324(1)(a)) of the Commercial Companies Code.
Considering that the Company's Annual General Meeting held in 2022 only approved the extinction of up to 4,650,000 own shares corresponding to 3.1% of the share capital, the General Meeting held on 20 April 2023 approved the capital reduction for cancellation of the remaining 1 434 999 shares acquired under the buy-back programme referred to above.
Own shares held by CTT are within the limits established by the Articles of Association of the Company and by the Portuguese Companies Code. These shares are recorded at acquisition cost.
Reserves
As at 31 December 2022 and 31 March 2023, the caption "Reserves" showed the following composition
| 31.12.2022 | |||||
|---|---|---|---|---|---|
| Legal reserves | Own shares reserves | Fair Value reserves |
Other reserves | Total | |
| Opening balance | 15,000,000 | 6,404,963 | 26,746 | 45,646,642 | 67,078,351 |
| Share Capital decrease |
— | (17,152,548) | — | 2,325,000 | (14,827,548) |
| Own shares acquisition | — | 21,573,976 | — | (21,573,976) | — |
| Assets fair value | — | — | (26,746) | — | (26,746) |
| Share Plan | — | — | — | 1,620,000 | 1,620,000 |
| Closing balance | 15,000,000 | 10,826,390 | — | 28,017,666 | 53,844,057 |
| 31.03.2023 | |||||
|---|---|---|---|---|---|
| Legal reserves | Own shares reserves | Fair Value reserves |
Other reserves | Total | |
| Opening balance | 15,000,000 | 10,826,390 | — | 28,017,666 | 53,844,057 |
| Closing balance | 15,000,000 | 10,826,390 | — | 28,017,666 | 53,844,057 |
Legal reserves
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 absorb losses after all the other reserves have been depleted or incorporated in the share capital.
Own shares reserve (CTT, S.A.)
The commercial legislation Code obliges, within the scope of the own shares regime provided in article 324, the existence of a reserve equal to the amount for which the shares are accounted for, which becomes unavailable as long as these shares remain in the company's possession. Additionally, applicable accounting standards determine that gains or losses on the sale of own shares are booked in reserves.
As at 31 March 2023, this caption includes the amount of 10,826,390 Euros related to the creation of an unavailable reserve for the same amount of the acquisition price of the own shares held.
Other reserves
This caption records the profits transferred to reserves that are not imposed by the law or articles of association, nor constituted pursuant to contracts signed by the Company.
Retained earnings
During the year ended on 31 December 2022 and three-months period ended 31 March 2023, the following movements were made in caption "Retained earnings":
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Opening balance | 43,904,074 | 64,647,067 |
| Application of the net profit of the prior year | 38,404,113 | 36,406,519 |
| Distribution of dividends (note 16) | (17,656,441) | — |
| Adjustments from the application of the equity method | (4,678) | (7,128) |
| Closing balance | 64,647,067 | 101,046,457 |
Other changes in equity
The actuarial gains/losses associated to post-employment benefits, as well as the corresponding deferred taxes, are recognised in this caption.
During the year ended on 31 December 2022 and three-months period ended 31 March 2023, the movements occurred in this caption were as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Opening balance | (43,998,612) | 6,857,207 |
| Actuarial gains/losses | 70,558,124 | — |
| Tax effect (Note 26) | (19,702,304) | — |
| Closing balance | 6,857,207 | 6,857,207 |
16. Dividends
According to the dividend distribution proposal included in the 2021 Annual Report, at the General Meeting of Shareholders, which was held on 21 April 2022, a dividend distribution of 17,820,000 Euros, corresponding to a dividend per share of 0.12 Euros (amount that excludes the dividend attributable to own shares in the portfolio at that date), regarding the financial year ended 31 December 2021 was proposed and approved. The dividend amount assigned to own shares was transferred to Retained earnings, amounting to 343,559 Euros.
According to the dividend distribution proposal included in the 2022 Annual Report, at the General Meeting of Shareholders, which was held on 20 April 2023, a dividend distribution of 17,801,875 Euros, corresponding to a dividend per share of 0.125 Euros, regarding the financial year ended 31 December 2022 was proposed and approved. The dividend amount assigned to own shares was transferred to Retained earnings.
17. Earnings per share
During the three-months periods ended 31 March 2022 and 31 March 2023, the earnings per share were calculated as follows:
| Group | 31.03.2022 | 31.03.2023 |
|---|---|---|
| Net income for the period | 5,388,750 | 16,135,054 |
| Average number of ordinary shares | 149,001,324 | 142,415,000 |
| Earnings per share | ||
| Basic | 0.04 | 0.11 |
| Diluted | 0.04 | 0.11 |
The average number of shares is detailed as follows:
| 31.03.2022 | 31.03.2023 | |
|---|---|---|
| Shares issued at begining of the period | 150,000,000 | 145,350,000 |
| Average number of shares realised | 150,000,000 | 145,350,000 |
| Own shares effect | 998,676 | 2,935,000 |
| Average number of shares during the period | 149,001,324 | 142,415,000 |
The basic earnings per share are calculated dividing the net profit attributable to equity holders of the parent company by the average ordinary shares, excluding the average number of own shares held by the Group.
As at 31 March 2023, the number of own shares held is 2,935,000 and its average number for the period ended 31 March 2023 is 2,935,000, justified by the fact that there were no movements in the period.
There are no dilutive factors of earnings per share.
18. Debt
As at 31 December 2022 and 31 March 2023, the Debt caption showed the following composition:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Non-current liabilities | ||
| Bank loans | 40,706,101 | 47,717,982 |
| Commercial Paper | — | 34,923,258 |
| Lease liabilities | 95,491,822 | 89,189,257 |
| 136,197,923 | 171,830,497 | |
| Current liabilities | ||
| Bank loans | 29,372,066 | 22,601,716 |
| Commercial Paper | — | (114,824) |
| Lease liabilities | 30,384,677 | 28,986,676 |
| 59,756,744 | 51,473,567 | |
| 195,954,667 | 223,304,064 |
As at 31 March 2023, the interest rates applied to bank loans were between 4.341% and 5.216% (31 December 2022: 3.693% and 4.568%).
Bank loans and Commercial Paper
As at 31 December 2022 and 31 March 2023, the details of the bank loans were as follows:
| 31.12.2022 | 31.03.2023 | |||||
|---|---|---|---|---|---|---|
| Amount used | Amount used | |||||
| Limit | Current | Non-current | Limit | Current | Non-current | |
| Bank loans | ||||||
| Millennium BCP | 12,350,926 | 8,106,120 | 778,704 | 12,270,370 | 8,119,080 | 698,148 |
| BBVA / Bankinter | 33,250,000 | 14,136,880 | 18,944,129 | 33,250,000 | 7,063,992 | 26,037,491 |
| Novo Banco | 28,000,000 | 7,129,066 | 20,983,268 | 28,000,000 | 7,418,644 | 20,982,343 |
| Commercial paper | ||||||
| BBVA / Bankinter | — | — | — | 15,000,000 | (76,732) | 14,964,687 |
| Novo Banco | — | — | — | 20,000,000 | (38,092) | 19,958,571 |
| 73,600,926 | 29,372,066 | 40,706,101 | 108,520,370 | 22,486,892 | 82,641,240 |
On 27 September 2017, a financing contract between CTT and BBVA and Bankinter was signed, for an initial period of 5 years and for a total amount of 90 million Euros, with the possibility of using the funds until September 2018. As no amount was used until the mentioned date, the contract was renegotiated on 27 September 2018, having the total amount been altered to 75 million Euros, while maintaining the one-year term for the use of the funds. Subsequently, due to the non-use of all the funds, the limit was reduced again to 33.250 million euros. As at 31 March 2023, the referred used amount, net of commissions and added by the amount of interests to be paid in the following period corresponded to 33,101,483 Euros. By the Group decision, the remaining available amount will not be used.
On 22 April 2019, a simple credit agreement was signed between CTT and Novo Banco for a period of 60 months, with a grace period of two years, and may be extended for a period of 24 months, for a total amount of 35 million Euros. On 31 December 2022, the limit was reduced to 28 million euros, due to non-use of all funds. As at 31 March 2023, the 28 million Euros were used and are presented in the statement of financial position net of commissions and added by the amount of interests to be paid in the following period, in the total amount of 28,400,987 Euros.
As disclosed to the market on 7 March 2023, CTT contracted 35 million euros in bank loans in the form of commercial paper, indexed to sustainability goals, maturing in 2026, with two financial institutions - Novo Banco, S.A. and Banco Bilbao Vizcaya Argentaria S.A. - Portuguese Branch.
These bank loans are set within CTT's Sustainability Related Financing Reference Framework that was the subject of a Second Party Opinion disclosed by S&P Global Ratings. Therefore, the referred financing lines are indexed to the goal of reducing carbon emissions of CTT's activity (scopes 1, 2 and 3 emissions) by at least 30% by 2025 in relation to 2013, which is validated by the Science Based Targets initiative and aligned with the best practices of the sector.
With these operations, CTT consolidates the link between its financing cost and its performance in terms of sustainability, reinforcing and demonstrating its strategic relevance and the commitment to achieve ambitious leadership goals regarding ESG (Environment, Social and Governance) indicators.
As at 31 March 2023, the amount used presented in the statement of financial position, net of commissions and plus the amount of interest to be paid in the following period, amounts to 14,887,955 Euros in the case of BBVA/Bankinter and 19,920,479 Euros in Novo Banco. These commercial paper programmes are shown in non-current liabilities, since the Group's practice/expectation will be to use the contracts during their period of validity and having the right to roll-over these loans.
Bank loans obtained are subject to compliance with financial covenants, namely clauses of Cross default, Negative Pledge and Assets Disposal's limits. Additionally, the loans obtained also require compliance with rations of Net Debt over EBITDA and financial autonomy. Compliance with financial covenants is regularly monitored by the Group and is measured by counterparties on an annual basis based on the Financial Statements as at 31 December. As at 31 December 2022, the Group is in compliance with financial covenants.
Lease Liabilities
The Group presents lease liabilities which future payments, undiscounted and discounted amounts presented in the financial position, are detailed as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Due within 1 year | 33,738,178 | 31,742,576 |
| Due between 1 to 5 years | 64,061,159 | 59,436,053 |
| Over 5 years | 41,692,362 | 39,655,699 |
| Total undiscounted lease liabilities |
139,491,699 | 130,834,328 |
| Current | 30,384,677 | 28,986,676 |
| Non-current | 95,491,822 | 89,189,257 |
| Lease liabilities included in the statement of financial position |
125,876,499 | 118,175,933 |
The amounts recognised in the income statement are detailed as follows:
| 31.03.2022 | 31.03.2023 | |
|---|---|---|
| Lease Liabilities interests (note 25) | 733,266 | 805,700 |
| Variable payments not included in the measurament of the lease liability | 502,139 | 435,245 |
The amounts recognised in the Cash flow statement are as follows:
| 31.03.2022 | 31.03.2023 | |
|---|---|---|
| Total of lease payments | (7,990,527) | (8,868,615) |
The movement in the rights of use underlying these lease liabilities can be analyzed in note 4.
Reconciliation of Changes in the responsibilities of Financing activities
The reconciliation of changes in the responsibilities of financing activities as at 31 December 2022 and 31 March 2023, is detailed as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Opening Balance | 201,119,450 | 195,954,666 |
| Movements without cash | 44,304,863 | 1,708,851 |
| Contract changes | 40,529,793 | 412,401 |
| IFRS 16 Interests | 3,124,941 | 771,520 |
| Others | 650,130 | 524,929 |
| Loans: | ||
| Inflow | 104,856,928 | 73,388,066 |
| Outflow | (120,618,233) | (38,878,904) |
| Lease liabilities: | ||
| Inflow | — | — |
| Outflow | (33,708,341) | (8,868,615) |
| Closing balance | 195,954,667 | 223,304,065 |
19. Provisions, Guarantees provided, Contingent liabilities and commitments
Provisions
For the year ended on 31 December 2022 and three-months period ended 31 March 2023 in order to face legal proceedings and other liabilities arising from past events the Group recognised provisions, which showed the following movement:
| 31.12.2022 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Opening balance |
Increases | Reversals | Utilisations | Transfers | Regularisations | Closing balance |
| Non-current provisions |
|||||||
| Litigations | 2,834,799 | 1,516,656 | (1,304,899) | (114,458) | 213,598 | — | 3,145,696 |
| Restructuring | — | 453,598 | — | (293,450) | — | — | 160,148 |
| Other provisions | 7,314,082 | 3,894,875 | (4,819,453) | (155,924) | (213,598) | — | 6,019,982 |
| Commitment provisions |
314,163 | 39,865 | (229,571) | — | — | — | 124,457 |
| Sub-total - caption "Provisions (increases)/ reversals" |
10,463,043 | 5,904,994 | (6,353,923) | (563,832) | — | — | 9,450,283 |
| Investments in subsidiaries and associated companies |
— | 168,972 | — | — | — | — | 168,972 |
| Restructuring | 1,455,737 | 145,993 | (50,000) | — | (1,250,000) | (102,344) | 199,386 |
| Other provisions | 2,760,741 | 158,488 | — | (105,603) | — | — | 2,813,626 |
| 14,679,520 | 6,378,447 | (6,403,923) | (669,435) | (1,250,000) | (102,344) | 12,632,267 |
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| Group | Opening balance |
Increases | Reversals | Utilisations | Transfers | Closing balance |
| Non-current provisions | ||||||
| Litigations | 3,145,696 | 117,569 | (246,011) | (47,243) | — | 2,970,011 |
| Onerous contracts | — | — | — | (74,011) | — | 86,137 |
| Other provisions | 6,019,982 | 201,132 | (40,459) | (269,217) | — | 5,911,438 |
| Commitment provisions | 124,457 | 19,207 | (29,235) | — | — | 114,429 |
| Sub-total - caption "Provisions (increases)/reversals" |
9,450,283 | 337,908 | (315,705) | (390,471) | — | 9,082,015 |
| Investments in subsidiaries and associated companies |
168,972 | 6,480 | — | — | — | 175,452 |
| Restructuring | 199,386 | — | — | — | — | 199,386 |
| Other provisions | 2,813,626 | — | — | — | — | 2,813,626 |
| 12,632,267 | 344,388 | (315,705) | (390,471) | — | 12,270,479 |
The net amount between increases and reversals of provisions was recorded in the consolidated income statement under the caption Provisions, net and amounted to 658,302 Euros as at 31 March 2022 and 22,203 Euros as at 31 March 2023.
A provision should only be used for expenditures for which the provision was originally recognised, so the Group reverse the provision when it is no longer probable that an outflow of resources that incorporate future economic benefits will be necessary to settle the obligation.
Litigations
The provisions for litigations were set up to face the liabilities resulting from lawsuits brought against the Group and are estimated based on information from their lawyers as well as on the termination of the mentioned lawsuits. The final amount and the timing of the outflows regarding the provision for litigations depend on the outcome of the respective proceedings.
The reversal of the provision for litigations, in the amount of (1,304,899) Euros as at 31 December 2022 and (246,011) Euros as at 31 March 2023, essentially results from lawsuits whose decision, which was made known in the course of 2022 or 2023, respectively, proved to be favourable to the Group, or, not being favourable, resulted in the condemnation to pay amounts that proved to be lower than the estimated amounts (and reflected in this provision caption).
Onerous contracts
The provision for onerous contracts is intended to cover contracts in which the unavoidable costs of meeting the obligations of the contracts exceed the economic benefits that are expected to be received under them, amounting at 31 March 2023 the amount of 86,137 euros.
Other provisions
As at 31 December 2022, the amount of 3,780,356 Euros provisioned in previous years to cover possible contingencies related to labour litigation actions not included in the current court proceedings, related to remuneration differences that could be claimed by workers, was fully reversed, as it is understood that the probability of outflows associated with these contingencies is currently remote.
As at 31 March 2023, a provision is recognised in CTT Expresso branch in Spain to face the notification issued by the Spanish National Commission on Markets and Competition. This process was originated during the year 2016, based on the alleged contrary action to article 1 of the Law 15/2017 ("Law on Competition Defense") and article 101º of the Treaty on the Functioning of the European Union ("TFUE"). This notification amounted to 3,148,845 Euros and, in previous years, has already been subject of an appeal to the Spanish Audiencia Nacional (National High Court). Regarding this matter,
Tourline (currently designated as CTT Expresso branch in Spain) submitted a formal request to the coercive measure suspension, and the request was accepted under the condition of a guarantee presentation – a procedure that was duly and timely adopted by Tourline. During 2022, the Spanish Audiencia Nacional dismissed the appeal and ratified the fine of 3,148,845 Euros plus final and unappealable costs. Regarding this subject, the provision booked in previous years, which amounted to 1,400,000 Euros, was increased by 1,800,000 Euros, amounting at 31 December 2022, the amount of 3,200,000 Euros and results from the evaluation carried out by the Group's legal advisors. As at 31 March 2023, no relevant developments had occurred, with the provision remaining in the amount of 3,200,000 Euros.
The amount provisioned in 321 Crédito, S.A. amounting to 918 285 Euros as at 31 March 2023 (741,641 Euros at 31 December 2022) mainly results from the management assessment regarding the possibility of materialising tax contingencies and other processes.
As at 31 March 2023, in addition to the previously mentioned situations, this caption also includes:
- the amount of 269,827 Euros to cover costs of dismantlement of tangible fixed assets and/or removal of facilities and restoration of the site;
- the amount of 664,872 Euros, which results from the assessment carried out by management regarding the possibility of materialising contingent amounts to be paid to third parties under the scope of contracts entered into;
- the amount of 309,007 Euros regarding the liability, recognised in the company CTT Expresso, with a labour legal proceeding;
- the amount of 2,025,666 Euros to cover costs of operational vehicles restoration;
- the amount of commitments for guarantees provided to third parties to cover promotional contests in the amount of 590,060 Euros.
Commitments provisions
Commitments provisions refer to provisions for indirect credit, amounting to 114,429 Euros in the period ended 31 March 2023 (31 December 2022: 124,457 Euros).
Restructuring
In June 2021, CTT approved an HR optimisation programme that included the launch of a Voluntary Leave Programme based on the conclusion of Suspension or Pre-Retirement Agreements. As at 31 December 2022, regarding the new agreements performed during 2022, an amount of 1,250,000 Euros was transferred to the caption employee benefits in the statement of financial position. As at 31 March 2023, there were no changes to the mentioned caption.
Guarantees provided
As at 31 December 2022 and 31 March 2023, the Group has provided bank guarantees to third parties as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Autoridade Tributária e Aduaneira (Portuguese Tax and Customs Authority) |
4,389,246 | 4,364,246 |
| Contencioso Administrativo da Audiência Nacional (National Audience Administrative Litigation) and CNMC - Comission Nacional de los Mercados y la Competencia - Espanha (National Commission on Markets and Competition - Spain) |
3,148,845 | 3,148,845 |
| PLANINOVA - Soc. Imobiliária, S.A. (Real estate company) | 2,033,582 | 2,033,582 |
| LandSearch, Compra e Venda de Imóveis (Real estate company) | 1,792,886 | 1,792,886 |
| Fidelidade, Multicare, Cares - (Glintt BPO) | 1,022,834 | 1,500,000 |
| MARATHON (Closed investment fund) | 810,435 | 810,435 |
| AMBIMOBILIÁRIA- INVESTIMENTOS E NEGÓCIOS, S.A. (Real estate company) |
480,000 | 480,000 |
| Courts | 339,230 | 339,230 |
| EUROGOLD (Real estate company) | 318,299 | 318,299 |
| CIVILRIA (Real estate company) | 224,305 | 224,305 |
| TRANSPORTES BERNARDO MARQUES , S.A. | 220,320 | 220,320 |
| TIP - Transportes Intermodais do Porto, ACE (Oporto intermodal transport) |
150,000 | 150,000 |
| Via Direta | 150,000 | 150,000 |
| Municipalities | 118,658 | 118,658 |
| EPAL - Empresa Portuguesa de Águas Livres (Multi-municipal System of Water Supply and Sanitation of the Lisbon Area) |
68,895 | 68,895 |
| INCM - Imprensa Nacional da Casa da Moeda (Portuguese Mint and Official Printing Office) |
68,386 | 68,386 |
| ANA - Aeroportos de Portugal (Airports of Portugal) | 34,000 | 34,000 |
| GNB Companhia de seguros vida SA (Insurance company) | 25,000 | 25,000 |
| Águas do Norte (Water Supply of the Northern Region) | 23,804 | 23,804 |
| Instituto de Gestão Financeira Segurança Social (Social Security Financial Management Institute) |
21,557 | 21,557 |
| EMEL, S.A. (Municipal company managing parking in Lisbon) | 19,384 | 19,384 |
| Serviços Intermunicipalizados Loures e Odivelas (Inter-municipal Services of Water Supply and Sanitation of the Loures and Odivelas Areas) |
17,000 | 17,000 |
| Direção Geral do Tesouro e Finanças (Directorate General of Treasury and Finance) |
16,867 | 16,867 |
| Alegro Alfragide | — | 16,837 |
| Portugal Telecom, S.A. (Telecommunication Company) | 16,658 | 16,658 |
| Refer (Public service for the management of the national railway network infrastructure) |
16,460 | 16,460 |
| Other entities | 16,144 | 16,144 |
| SMAS de Sintra (Services of Water Supply and Sanitation of the city of Sintra) |
15,889 | 15,889 |
| Repsol (Oil and Gas Company) | 15,000 | 15,000 |
| DOLCE VITA TEJO (Real State Company) | 13,832 | 13,832 |
| Águas do Porto, E.M (Services of Water Supply and Sanitation of the city of Porto) |
10,720 | 10,720 |
| ADRA - Águas da Região de Aveiro (Services of Water Supply and Sanitation of the city of Aveiro) |
10,475 | 10,475 |
| SMAS Torres Vedras (Services of Water Supply and Sanitation of the city of Torres Vedras) |
9,910 | 9,910 |
| ACT Autoridade Condições Trabalho (Authority for Working Conditions) |
9,160 | 9,160 |
| Consejeria Salud ( Local Health Service/Spain) | 4,116 | 4,116 |
| Instituto do Emprego e Formação Profissional (Employment and Professional Training Institute) |
3,719 | — |
| 15,635,616 | 16,100,900 |
Bank guarantees
As at 31 March 2023, the bank guarantees provided in favour of "Autoridade Tributária e Aduaneira" (Portuguese Tax and Customs Authority), in a global amount of 4,364,246 Euros, were essentially provided for the suspension of tax enforcement proceedings.
Guarantees for lease Contracts
According to the terms of some lease contracts of the buildings occupied by the Company's services, the Portuguese State ceased to hold the majority of the share capital of CTT, bank guarantees on first demand had to be provided. These guarantees amount to 3,826,468 Euros as at 31 December 2022 and 31 March 2023.
CTT provided a bank guaranty, on behalf of CTT Expresso branch in Spain, to the Sixth Section of the National Audience Administrative Litigation and to the Spanish National Commission on Markets and Competition ("Comisión Nacional de los Mercados y la Competencia") in the amount of 3,148,845 Euros, regarding the legal proceedings of CTT Expresso branch in Spain with the National Audience in Spain.
Commitments
As at 31 December 2022 and 31 March 2023., the Group subscribed promissory notes amounting to approximately 44.4 thousand Euros and 43.6 thousand Euros, respectively, for various credit institutions intended to secure complete and timely compliance with the corresponding financing contracts.
The Group engaged guarantee insurances in the total amount of 5,658,910 Euros(31 December 2022: 5,444,387 Euros), with the purpose of guaranteeing the fulfilment of contractual obligations assumed by third parties. In addition, the Group also assumed commitments relating to real estate rents under lease contracts and rents for other leases.
The Group contractual commitments related to Tangible fixed assets and Intangible assets are detailed respectively in Notes 4 and 5.
20. Accounts payable
As at 31 December 2022 and 31 March 2023, the caption "Accounts payable" showed the following composition:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Current | ||
| Advances from customers | 2,175,341 | 2,161,477 |
| CNP money orders | — | 93,800,595 |
| Suppliers | 97,417,126 | 100,851,674 |
| Invoices pending confirmation | 12,194,096 | 10,413,604 |
| Fixed assets suppliers | 4,900,077 | 5,285,271 |
| Invoices pending confirmation (fixed assets) |
6,495,524 | 3,091,161 |
| Values collected on behalf of third parties |
10,069,404 | 16,193,367 |
| Postal financial services | 360,890,497 | 357,776,013 |
| Deposits | 676,504 | 714,831 |
| Charges | 14,844,784 | 14,390,597 |
| Compensations | 1,105,808 | 1,187,036 |
| Postal operators - amounts to be settled |
680,423 | 569,426 |
| Amounts to be settled to third parties |
1,659,136 | 1,374,351 |
| Amounts to be settled in stores | 3,012,730 | 4,433,307 |
| Other accounts payable | 9,090,299 | 6,031,572 |
| 525,211,751 | 618,274,282 |
CNP money orders
The value of CNP money orders refers to the money orders received from the National Pensions Center (CNP), whose payment date to the corresponding pensioners will occur in the month after the closing of the financial year. The absence of a balance verified on 31 December 2022 is related to the fact that the IGFSS advance for the settlement of CNP money orders only occurred in the first days of January 2023.
Postal financial services
This heading records mainly the amounts collected related to taxes, insurance, savings certificates and other money orders, whose settlement date should occur in the month following the end of the period.
21. Debt Securities issued at amortised cost
This caption showed the following composition:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Non current liabilities | ||
| Debt securities issued | 445,226,206 | 425,859,137 |
| 445,226,206 | 425,859,137 | |
| Current liabilities | ||
| Debt securities issued | 351,654 | 433,097 |
| 351,654 | 433,097 | |
| 445,577,860 | 426,292,234 |
As at 31 December 2022 and 31 March 2023, the Debt securities issued are analyzed as follows:
| 31.12.2022 | |||||
|---|---|---|---|---|---|
| Issue | Issue date | Maturity date | Remuneration | Nominal value | Book value |
| Ulisses Finance No.1 – Class B | July 2017 | March 2033 | Euribor 1M + 160 b.p. | 4,233,007 | 4,237,732 |
| Ulisses Finance No.1 – Class C | July 2017 | March 2033 | Euribor 1M + 375 b.p. | 7,100,000 | 7,113,012 |
| Ulisses Finance No.2 – Class A | September 2021 | September 2038 | Euribor 1M + 70 b.p. | 189,826,075 | 191,350,779 |
| Ulisses Finance No.2 – Class B | September 2021 | September 2038 | Euribor 1M + 80 b.p. | 9,318,904 | 9,315,433 |
| Ulisses Finance No.2 – Class C | September 2021 | September 2038 | Euribor 1M + 135 b.p. | 18,637,808 | 18,633,429 |
| Ulisses Finance No.2 – Class D | September 2021 | September 2038 | Euribor 1M + 285 b.p. | 10,530,362 | 10,531,837 |
| Ulisses Finance No.2 – Class E | September 2021 | September 2038 | Euribor 1M + 368 b.p. | 3,447,995 | 3,449,193 |
| Ulisses Finance No.2 – Class F | September 2021 | September 2038 | Euribor 1M + 549 b.p. | 1,211,458 | 1,212,427 |
| Ulisses Finance No.2 – Class G | September 2021 | September 2038 | Euribor 1M + 500 b.p. | 375,000 | 375,254 |
| Ulisses Finance No.3 - Class A | June 2022 | June 2039 | Euribor 1M + 90 bps | 168,000,000 | 167,808,294 |
| Ulisses Finance No.3 - Class B | June 2022 | June 2039 | Euribor 1M + 200 bps | 8,000,000 | 7,828,704 |
| Ulisses Finance No.3 - Class C | June 2022 | June 2039 | Euribor 1M + 370 bps | 12,000,000 | 11,741,334 |
| Ulisses Finance No.3 - Class D | June 2022 | June 2039 | Euribor 1M + 525 bps | 6,000,000 | 5,665,908 |
| Ulisses Finance No.3 - Class E | June 2022 | June 2039 | Euribor 1M + 650 bps | 5,000,000 | 4,758,885 |
| Ulisses Finance No.3 - Class F | June 2022 | June 2039 | Euribor 1M + 850 bps | 1,000,000 | 965,514 |
| Ulisses Finance No.3 - Class G | June 2022 | June 2039 | Euribor 1M + 785 bps | 600,000 | 590,125 |
| 445,280,609 | 445,577,860 |
31.03.2023
| Issue | Issue date | Maturity date | Remuneration | Nominal value | Book value |
|---|---|---|---|---|---|
| Ulisses Finance No.1 – Class B | July 2017 | July 2033 | Euribor 1M + 160 b.p. | 1,795,060 | 1,797,548 |
| Ulisses Finance No.1 – Class C | July 2017 | July 2033 | Euribor 1M + 375 b.p. | 7,100,000 | 7,114,929 |
| Ulisses Finance No.2 – Class A | September 2021 September 2038 | Euribor 1M + 70 b.p. | 176,584,910 | 178,004,364 | |
| Ulisses Finance No.2 – Class B | September 2021 September 2038 | Euribor 1M + 80 b.p. | 8,668,871 | 8,667,906 | |
| Ulisses Finance No.2 – Class C | September 2021 September 2038 | Euribor 1M + 135 b.p. | 17,337,743 | 17,338,195 | |
| Ulisses Finance No.2 – Class D | September 2021 September 2038 | Euribor 1M + 285 b.p. | 9,795,825 | 9,799,754 | |
| Ulisses Finance No.2 – Class E | September 2021 September 2038 | Euribor 1M + 368 b.p. | 3,207,482 | 3,209,435 | |
| Ulisses Finance No.2 – Class F | September 2021 September 2038 | Euribor 1M + 549 b.p. | 1,126,953 | 1,128,149 | |
| Ulisses Finance No.2 – Class G | September 2021 September 2038 | Euribor 1M + 500 b.p. | 150,000 | 150,141 | |
| Ulisses Finance No.3 - Class A | June 2022 | June 2039 | Euribor 1M + 90 bps | 168,000,000 | 167,870,668 |
| Ulisses Finance No.3 - Class B | June 2022 | June 2039 | Euribor 1M + 200 bps | 8,000,000 | 7,847,331 |
| Ulisses Finance No.3 - Class C | June 2022 | June 2039 | Euribor 1M + 370 bps | 12,000,000 | 11,769,924 |
| Ulisses Finance No.3 - Class D | June 2022 | June 2039 | Euribor 1M + 525 bps | 6,000,000 | 5,699,929 |
| Ulisses Finance No.3 - Class E | June 2022 | June 2039 | Euribor 1M + 650 bps | 5,000,000 | 4,783,832 |
| Ulisses Finance No.3 - Class F | June 2022 | June 2039 | Euribor 1M + 850 bps | 1,000,000 | 969,243 |
| Ulisses Finance No.3 - Class G | June 2022 | June 2039 | Euribor 1M + 785 bps | 150,000 | 140,887 |
| 425,916,844 | 426,292,234 |
During the year ended on 31 December 2022 and three-months period ended 31 March 2023, the movement of this item is as follows:
| 31.12.2022 | ||||||
|---|---|---|---|---|---|---|
| Opening balance |
Issues | Repayments | Other movements |
Closing balance |
||
| Ulisses Finance No.1 | 24,532,237 | — | (13,188,001) | 6,508 | 11,350,744 | |
| Ulisses Finance No.2 | 253,263,517 | — | (17,927,399) | (467,765) 234,868,353 | ||
| Ulisses Finance No.3 | — | 201,500,000 | (2,699,000) | 557,764 199,358,764 | ||
| 277,795,753 | 201,500,000 | (33,814,400) | 96,507 445,577,860 |
| 31.03.2023 | |||||
|---|---|---|---|---|---|
| Opening balance |
Issues | Repayments | Other movements |
Closing balance |
|
| Ulisses Finance No.1 | 11,350,743 | — | (2,437,947) | (319) | 8,912,477 |
| Ulisses Finance No.2 | 234,868,352 | — | (16,475,817) | (94,592) 218,297,944 | |
| Ulisses Finance No.3 | 199,358,764 | — | (450,000) | 173,049 199,081,813 | |
| 445,577,860 | — | (19,363,764) | 78,138 426,292,234 |
In 31 December 2022, the movements booked in "Issues" is related to the issuance of a new credit securitisation operation called Ulisses Finance nº 3, carried out through 321 Crédito.
The scheduling by maturity regarding this caption is as follows:
| 31.12.2022 | |||||||
|---|---|---|---|---|---|---|---|
| Current | |||||||
| Due within 3 months |
Over 3 months and less than 1 year |
Total | Over 1 year and less than 3 years |
Over 3 years |
Total | Total | |
| Securitisations 351,654 | — | 351,654 | — 445,226,206 | 445,226,206 | 445,577,860 | ||
| 351,654 | — | 351,654 | — 445,226,206 | 445,226,206 | 445,577,860 |
| 31.03.2023 | |||||||
|---|---|---|---|---|---|---|---|
| Current | |||||||
| Due within 3 months |
Over 3 months and less than 1 year |
Total | Over 1 year and less than 3 years |
Over 3 years |
Total | Total | |
| Securitisations 433,097 | — | 433,097 | — 425,859,137 | 425,859,137 | 426,292,234 | ||
| 433,097 | — | 433,097 | — 425,859,137 | 425,859,137 | 426,292,234 |
Asset securitisation
Ulisses Finance Nr.1
This securitisation operation was originated in July 2017 and issued by Sagres - Sociedade de Titularização de Créditos, S.A. and corresponds to a public credit securitisation programme (Ulisses) with the Ulisses Finance No.1 operation being placed on the market. The operation was set up with the collaboration of the banks Citibank and Deutsche Bank, and included a Consumer Credit portfolio created by 321 Crédito. The structure of the Transaction includes five Tranches from A to E. Tranches A to C are dispersed in the market and Tranches D and E have been retained. This operation obtained ratings from DBRS and Moody's for the tranches placed on the market, Tranches A, B and C.
This transaction includes an optional early repayment clause that allows the Issuer to redeem the notes of all Classes issued, when the residual value of the credits represents 10% or less of the value of the Credit Portfolio on the date of setting up the securitisation transaction.
The operation has incorporated an interest rate cap, an interest rate risk mitigation mechanism for the operation and its investors, including the Group, but which was not contracted directly by the Group, but by the issuer of the securitisation operation (Sagres – STC, S.A.).
The Group guarantees the debt service (servicer) of traditional securitisation operations, taking over the collection of assigned credits and channelling the amounts received, through the respective deposit to the credit securitisation company.
The underlying assets of Ulisses Finance No.1 operations were not derecognised from the Consolidated Statement of Financial Position as the Group substantially maintained the risks and rewards associated with their holding.
Chaves Funding Nr.8
This private securitisation operation was issued in November 2019 by Tagus, Sociedade de Titularização de Créditos, S.A., it included a Consumer Credit portfolio originated by 321 Crédito. The operation was set up with the collaboration of Sociedade de Advogados PLMJ. The operation's structure includes a Tranche A and a Tranche B in the notes issued, both of which are fully owned by the Group.
This operation includes an optional early amortisation clause that allows the Issuer to redeem the Notes of all Classes issued, when the residual value of the credits represents 10% or less of the value of the Credit Portfolio on the date of setting up the securitisation operation.
The underlying assets of Chaves Funding No.8 operation were not derecognised from the Statement of Financial Position, as the Group substantially maintained the risks and benefits associated with their holding.
Ulisses Finance No.2
This securitisation operation was created in September 2021 and issued by Tagus - Sociedade de Titularização de Créditos, S.A. and corresponds to a public credit securitisation programme (Ulisses) with the Ulisses Finance No.2 operation being placed on the market. The operation was set up with the collaboration of Sociedade de Advogados PLMJ and Banco Deutsche Bank, and included a consumer credit portfolio originated by 321 Crédito, whose initial total amount was 250,000 thousand euros, to be maintained over the 12 months of revolving period.
The structure of the transaction includes six collateralised Tranches from A to F and additionally tranches G and Z. All tranches are dispersed in the capital market, with the exception of class Z, whose initial value was 1.5 million euros.
This operation obtained ratings from DBRS and Moody's for the tranches placed on the market, that is, Tranches A to G.
The Ulisses Finance No.2 operation has the characteristics of STS (simple, transparent and standardised) and SRT (significant risk transfer).
For the purposes of calculating the capital ratio, as the Ulisses Finance No.2 operation complies with article 244.1 (b) of European Regulation 575/2013 (full capital deduct approached), the company reduced its "Risk Weight Assets" with regard to the contracts securitised within the scope of this operation.
The operation has incorporated an interest rate cap, an interest rate risk mitigation mechanism for the operation and its investors, including the Group, but which was not contracted directly by the Group, but by the issuer. of the securitisation operation (Tagus – STC, S.A.).
The underlying assets of the Ulisses Finance No.2 operation were not derecognised from the Consolidated Statement of Financial Position, as the Group substantially maintained the risks and benefits associated with their holding.
Next Funding Nr.1
The Next Funding No.1 operation, issued by Tagus – STC, SA in April 2021 and in which Banco CTT is a single investor, has as its underlying asset the credit card balances originated by the Universo credit card issued by Sonae Financial Services. Additionally, Banco CTT grants the operation an overdraft facility (Liquidity Facility) with the sole purpose of acquiring receivables (credit card balances) between the interest payment dates. On each interest payment date (IPD) the balance of the Liquidity Facility will be settled by converting it into the note amount.
In the consolidated accounts, taking into account the conditions set out in IFRS 10 (Consolidated Financial Statements), the securitisation operation is consolidated, insofar as the Group substantially holds the risks and benefits associated with the underlying assets and is able to affect these same risks and benefits.
Ulisses Finance Nr. 3
This securitisation operation was created in June 2022 and issued by Tagus - Sociedade de Titularização de Créditos, S.A. and corresponds to a public credit securitisation programme (Ulisses) with the Ulisses Finance No.3 operation being placed on the market. The operation was set up with the collaboration of "Sociedade de Advogados PLMJ" and "Banco Deutsche Bank", and included a consumer credit portfolio originated by 321 Crédito, whose initial total amount was 200,000 thousand euros, to be maintained over the 12 months of revolving period.
The structure of the Transaction includes six collateralised Tranches from A to F and additionally tranches G and Z. All tranches are dispersed in the capital market, with the exception of class Z, whose initial value was 1.8 million euros.
This operation obtained ratings from DBRS and Moody's for the tranches placed on the market, that is, Tranches A to G.
The Ulisses Finance No.3 operation has the characteristics of STS (simple, transparent and standardised) and SRT (significant risk transfer).
For the purposes of calculating the capital ratio, as the Ulisses Finance No.3 operation complies with article 244.1 (b) of European Regulation 575/2013 (full capital deduct approached), the company reduced its "Risk Weight Assets" regarding to the contracts securitised within the scope of this operation.
The operation incorporates an interest rate swap, an interest rate risk mitigation mechanism for the operation and its investors, including the Group, but which was not contracted directly by the Group, but by the issuer. of the securitisation operation (Tagus – STC, S.A.).
The underlying assets of the Ulisses Finance No.3 operation were not derecognised from the Consolidated Statement of Financial Position, as the Group substantially maintained the risks and rewards associated with their holding.
Additionally, the Group, through 321 Crédito, maintained, as at 31 March 2023, the Fénix operation as the only live unrecognised securitisation operation. The Group's involvement in this operation is limited to providing servicing services.
22. Banking clients' deposits and other loans
As at 31 December 2022 and 31 March 2023, the composition of the caption Banking clients' deposits and other loans in the Group is as follows:
| 31.12.2022 | 31.03.2023 | |
|---|---|---|
| Sight deposits | 1,608,322,164 | 1,413,255,128 |
| Term deposits | 184,027,482 | 398,254,587 |
| Savings deposits | 452,980,272 | 398,769,392 |
| 2,245,329,918 | 2,210,279,108 |
The above-mentioned amounts relate to Banco CTT clients' deposits. Savings deposits are deposits associated with current accounts and which allow the client to obtain a remuneration above the slight deposits, which can be mobilised at any time, with no subscription limit, and it is possible to schedule transfers from and for this account. These deposits are different from term deposits as they have a definite date of constitution and maturity, and the savings accounts are fully mobilisable without penalty on remuneration.
For the three-months period ended 31 March 2023 the average rate of return on customer funds was 0.17% (31 December 2022: 0.02%).
As at 31 December 2022 and 31 March 2023, the residual maturity of banking client deposits and other loans, is detailed as follows:
| 31.12.2022 | ||||||
|---|---|---|---|---|---|---|
| No defined maturity |
Due within 3 months |
Over 3 months and less than 1 year |
Over 1 year and less than 3 years |
Over 3 years |
Total | |
| Sight deposits and saving accounts |
2,061,302,436 | — | — | — | — 2,061,302,436 | |
| Term deposits | — | 83,544,873 100,482,609 | — | — | 184,027,482 | |
| 2,061,302,436 83,544,873 100,482,609 | — | — 2,245,329,918 |
| 31.03.2023 | ||||||
|---|---|---|---|---|---|---|
| No defined maturity |
Due within 3 months |
Over 3 months and less than 1 year |
Over 1 year and less than 3 years |
Over 3 years |
Total | |
| Sight deposits and saving accounts |
1,812,024,521 | — | — | — | — 1,812,024,521 | |
| Term deposits | — 100,252,811 298,001,775 | — | — | 398,254,587 | ||
| 1,812,024,521 100,252,811 298,001,775 | — | — 2,210,279,108 |
23. Income taxes receivable /payable
As at 31 March 2023, the caption reflects the estimated income tax regarding 2022, which has not yet been paid, as well as the estimated income tax regarding the three-months period ended 31 March 2023.
24. Staff costs
During three-months periods ended 31 March 2022 and 31 March 2023, the composition of the caption Staff Costs was as follows:
| 31.03.2022 | 31.03.2023 | |
|---|---|---|
| Remuneration | 71,652,208 | 77,597,755 |
| Employee benefits | 1,652,877 | 748,089 |
| Indemnities | 238,251 | 272,416 |
| Social Security charges | 15,212,086 | 16,308,547 |
| Occupational accident and health insurance |
995,564 | 944,140 |
| Social welfare costs | 2,238,380 | 2,148,843 |
| Other staff costs | 29,439 | 39,204 |
| 92,018,805 | 98,058,994 |
Remuneration of the statutory bodies of CTT, S.A.
During the three-months periods ended 31 March 2022 and 31 March 2023, the fixed and variable remunerations attributed to the members of the statutory bodies of CTT, SA, were:
| 31.03.2022 | |||||
|---|---|---|---|---|---|
| Board of Directors |
Audit Comittee | Remuneration Board |
General Meeting of Shareholders |
Total | |
| Short-term remuneration | |||||
| Fixed remuneration | 694,908 | 39,643 | 4,950 | — | 739,501 |
| Annual variable remuneration |
— | — | — | — | — |
| 694,908 | 39,643 | 4,950 | — | 739,501 | |
| Long-term remuneration | |||||
| Defined contribution plan RSP |
49,425 | — | — | — | 49,425 |
| Long-term variable remuneration |
362,143 | — | — | — | 362,143 |
| 411,568 | — | — | — | 411,568 | |
| 1,106,476 | 39,643 | 4,950 | — | 1,151,069 |
| 31.03.2023 | |||||
|---|---|---|---|---|---|
| Board of Directors |
Audit Comittee | Remuneration Board |
General Meeting of Shareholders |
Total | |
| Short-term remuneration | |||||
| Fixed remuneration | 719,597 | 39,643 | 4,950 | — | 764,190 |
| Annual variable remuneration |
— | — | — | — | — |
| 719,597 | 39,643 | 4,950 | — | 764,190 | |
| Long-term remuneration | |||||
| Defined contribution plan RSP |
49,425 | — | — | — | 49,425 |
| Long-term variable remuneration |
— | — | — | — | — |
| 49,425 | — | — | — | 49,425 | |
| 769,022 | 39,643 | 4,950 | — | 813,615 |
Long-term variable remuneration ("LTVR")
The Long-term variable remuneration model for the 2020/2022 term of office is based on the participation of the executive Directors in the Options Plan, which is set out in the remuneration policy proposal approved by the Annual General Meeting of 21 April 2021 and based on the proposal of the Remuneration Committee.
Similarly, the Board of Directors put in place a Options Plan programme addressed to CTT's top management, using the same terms of the programme approved for the governing bodies members.
The Options Plan mentioned provides for the following main rules applicable to the allocation and exercise of the options and the financial settlement, and delivery and retention of the shares within the LTVR:
- a. The Options Plan regulates the allocation to its participants of options which confer the right to allocate shares representing CTT's share capital, subject to certain conditions applicable to the exercise and settlement of the options;
- b. The Options Plan sets out the number of options allocated that may be exercised by the Plan's participants (the CEO, the CFO, the remaining executive Directors and the Top Manager), according to the table forward, the date of attribution corresponding to the date of the referred plan's approval at the General Meeting;
| c. | The Options Plan sets five tranches of options that differ only by their different exercise price |
|---|---|
| or strike price, as shown in the table below: |
| Number of options - per participant | ||||
|---|---|---|---|---|
| Tranche | CEO | CFO | Other executive administrators |
Exercise Price or Strike Price |
| 1 | 700,000 | 400,000 | 300,000 € | 3.00 |
| 2 | 700,000 | 400,000 | 300,000 € | 5.00 |
| 3 | 700,000 | 400,000 | 300,000 € | 7.50 |
| 4 | 700,000 | 400,000 | 300,000 € | 10.00 |
| 5 | 700,000 | 400,000 | 300,000 € | 12.50 |
In the case of the Top Management, the Board of Directors approved the attribution of a global number of 1,200,000 options, subject to the conditions defined for the governing bodies.
- d. The exercise date of all the options is 1 January 2023, given the end of the 3-year term of office 2020/2022;
- e. The number of CTT shares eventually to be awarded to the participants (via physical or financial settlement pursuant to the terms of the Options Plan), following the automatic exercise of the options on the exercise date as foreseen on the Options Plan, depends on the difference between the exercise price (strike price) and the Share Price (i.e., the average price, weighted by the trading volume, of the Company's shares traded on the Euronext Lisbon regulated market in the sessions carried out in the 45 days prior to the exercise date, i.e., on 1 January 2023) and results from the application of the following formula:
No. of Shares = No. of Options Exercised x [(Share Price - Exercise Price (Strike Price)) / Share Price)]
Thus, subject to the eligibility conditions and the retention mechanism referred below, each participant is entitled to receive the total number of CTT shares resulting from the sum of the number of shares due for each tranche, calculated according to the referred formula.
- f. The Executive Committee Options Plan provides for the financial settlement of 25% of the options (cash settlement) and the physical settlement of 75% of the options (equity settlement), without prejudice to, exceptionally and in a scenario where the number of own shares held by CTT is not sufficient, determining that the Remuneration Committee establishes a compensation mechanism through the allocation of a cash amount and financial settlement of the options whose physical settlement is not possible. The plan for CTT's Top Management provides for the physical settlement of 100% of the options;
- g. In the event that shares are granted depending on stock market performance and the Company's positive performance as defined in the plan, the options will be subject to settlement over the deferral/retention period;
- h. 50% of the LTVR is settled on the fifth trading day immediately following the date of the annual general meeting of the Company approving the accounts for the 2022 financial year to be held in 2023, subject to verification of positive performance with respect to each of the 2021 and 2022 financial years, half by way of financial settlement in cash, in the case of the Executive Committee, (i.e. 25% of the options on a pro rata basis with respect to each of its 5 tranches) and the other half (i.e. 25% of the options also on a pro rata basis with respect to each of its 5 tranches) by way of physical settlement through the delivery of CTT shares. In the case of Top Management, the 50% of the LTVR settled on this date will be settled through the physical delivery of CTT shares;
- i. The remaining 50% of the LTVR (i.e. 50% of the options equally on a pro rata basis with respect to each of its 5 tranches) are settled through the delivery of CTT shares (physical settlement), in 2 tranches of 1/2 of the shares retained, respectively: (i) on the fifth trading day immediately following the end of the month after the date of approval of the accounts relating to financial year 2023 at an annual general meeting of the Company to be held in 2024, or on 31 May 2024 (whichever date occurs later) and subject to the positive performance of the Company in each of the financial years 2021 to 2023; and (ii) on the fifth trading day immediately following the end of the month after the date of approval of the accounts for the financial year 2024 at an annual general meeting of the Company to be held in 2025, or on 31 May 2025 (whichever date occurs later) and subject to the positive performance of the Company in each of the financial years 2021 to 2024, respectively for each tranche.
- j. The exercise of the options and their settlement are also subject to the eligibility conditions, namely, remaining in office during the term of office by rule, absence of situations of material non-compliance with the Options Plan, and no situations giving rise to the application of the adjustment mechanisms);
On the grant date, the fair value of the options granted was determined through a study carried out by an independent entity on the grant date. The model used for the valuation of the stock plan was the Monte Carlo simulation model.
For the cash-settlement component, the the liability amount is updated at the end of each reporting period, depending on the number of shares or share options awarded and their fair value at the reporting date, based on a study carried out by an independent entity. The liability amount determined in the study on 31 December 2022 amounted to 179,583 Euros, which led to the reversal of an amount of 231,847 Euros in the staff costs caption in the period of 2022.
In the period ended 31 December 2022, the amount recognised in staff costs amounted to 1,388,153 Euros, of which (231,847) Euros corresponds to the cash settlement component and 1,620,000 Euros corresponds to the equity instrument settlement component (Note 15).
Taking into account the end of the three-year term of office 2020/2022, the Remuneration Committee, in accordance with the Options Plan, has determined, on 1 January 2023, the number of shares to be attributed to each participant as LTVR (which attribution and settlement being subject to the rules set out in the Options Plan, described above). This determination was made through a study carried out by an independent entity.
For this purpose, the Share Price was calculated, based on the criteria described above, with the value of 3.168647 Euros was set as the value of the share for the purposes of the final calculation of the shares to be attributed.
In accordance with point 5.4.1 of the Options Plan, the Remuneration Committee determined that the Strike Prices shown in the table above should be adjusted to the distribution of dividends during 2021 and 2022, in accordance with the following formula:
Adjusted Strike Price = Previous Strike Price - shareholder remuneration per Company share x (1 - % of treasury shares of the Company)
According to the formula above, the adjusted Strike Prices corresponding to each tranche were updated in accordance with the table below:
| Number of options - per participant | |||||
|---|---|---|---|---|---|
| Tranche | CEO | CFO | Other executive administrators |
Exercise Price or Strike Price |
|
| 1 | 700,000 | 400,000 | 300,000 € | 2.799139 | |
| 2 | 700,000 | 400,000 | 300,000 € | 4.799139 | |
| 3 | 700,000 | 400,000 | 300,000 € | 7.799139 | |
| 4 | 700,000 | 400,000 | 300,000 € | 9.799139 | |
| 5 | 700,000 | 400,000 | 300,000 € | 12.299139 |
In accordance with the conditions of the Options Plan, and taking the Share Price of 3,168647 Euros mentioned above as a reference, only the Exercise Price (Strike Price) of the first tranche was taken into account, since the Share Price did not reach the Exercise Price (Strike Price) of the second tranche. Thus, the following formula was applied to determine the number of shares:
(Share Price – Strike Price) / Share Price = (3,168647 - 2,799139) / 3,168647 = 0.116614
Considering the above, each option was entitled to the attribution of 0.116614 shares which, multiplied by the number of options attributed to each participant, gave rise to the attribution of the following number of shares to each participant by way of LTVR:
| Participant | CEO | CFO | Other executive directors (three members) |
Total |
|---|---|---|---|---|
| Shares | 81,629 | 46,645 | 104,949 | 233,226 |
In the case of Top Management, a total of 127 103 shares to be awarded were calculated.
As mentioned above, providing for the Option Plan, in the case of the Board of Directors, the financial settlement of 25% of the shares attributed (cash settlement) and the physical settlement of 75% of the same (equity settlement), 50% of the shares attributed as LTVR were settled on the fifth trading day
immediately after the annual general meeting of the Company that approved the accounts for the 2022 financial year, held on 10 April 2023, half through financial settlement in cash and the other half through of physical settlement through the delivery of CTT shares to participants. In the case of top management, 50% of the shares awarded were paid through physical settlement on the same date. The remaining 50% of the allocated shares are subject to the deferral and retention mechanisms explained above.
As at 31 March 2023, and considering that the plan options were exercised on 1 January 2023, there was no change in the fair value of the cash settlement component. Likewise, in the case of the physical settlement component, and considering the exercise date of the options, this was fully recognised in 2021 and 2022, with no impacts recorded with reference to 31 March 2023..
Annual variable remuneration ("AVR"):
In the period ended 31 December 2021, the amount of 1,447,419 Euros was recognised as an estimated annual variable remuneration for members of the Governing Bodies. In 2022, the determination of the final amount to be settled was carried out, with 50% of the amount having already been settled, as stipulated in the Remuneration Regulation.
In the period ended 31 December 2022, the amount of 1,492,467 Euros was recognised as an estimated annual variable remuneration for members of the Governing Bodies.
For the three-months periods ended 31 March 2022 and 31 March 2023, the caption Staff costs includes the amounts of 72,083 Euros and 210,172 Euros related to expenses with workers' representative bodies.
For three-months period ended 31 March 2023, the average number of staff of the Group was 12,800 (12,560 employees for the period ended 31 March 2022 ).
25. Interest expenses and Interest income
For the three-months periods ended 31 March 2022 and 31 March 2023, the caption Interest Expenses had the following detail:
| 31.03.2022 | 31.03.2023 | |
|---|---|---|
| Interest expenses | ||
| Bank loans | 406,063 | 709,002 |
| Lease liabilities | 733,266 | 805,700 |
| Interest costs from employee benefits | 970,726 | 1,790,858 |
| Other interest costs | 89,277 | 180,749 |
| 2,199,332 | 3,486,309 |
During the three-months periods ended 31 March 2022 and 31 March 2023, the caption Interest income was detailed as follows:
| 31.03.2022 | 31.03.2023 | |
|---|---|---|
| Interest income | ||
| Deposits in credit institutions | 4,676 | 326,422 |
| Other supplementary income | 106,438 | 48,899 |
| 111,114 | 375,321 |
26. Income tax for the period
Companies with head office in Portugal are subject to tax on their profit through Corporate Income Tax ("IRC") at the normal tax rate of 21%, whilst the municipal tax is established at a maximum rate of 1.5% of taxable profit, and State surcharge is 3% of taxable profit between 1,500,000 Euros and 7,500,00 Euros, 5% of taxable profit between 7,500,000 and to 35,000,000 Euros and 9% of the taxable profit above 35,000,000 Euros. CTT – Expresso, S.A., Spain branch is subject to income taxes in Spain, through income tax (Impuesto sobre Sociedades - "IS") at a rate of 25%, and the subsidiary CORRE is subject to corporate income tax in Mozambique ("IRPC") at a rate of 32%.
Corporate income tax is levied on CTT and its subsidiaries CTT – Expresso, S.A., Payshop Portugal, S.A, CTT Contacto, S.A. and Banco CTT, S.A., 321 Crédito – Instituição Financeira de Crédito, S.A., CTT Soluções Empresariais, S.A., CTT IMO – Sociedade Imobiliária, S.A., NewSpring Services, S.A., MedSpring, S.A., CTT IMO Yield, S.A. and CTT Services, S.A. as a result of the option for the Special Regime for the Taxation of Groups of Companies ("RETGS") application. The remaining companies are taxed individually. The entity CTT IMO – Sociedade Imobiliária, S.A. joined the RETGS in the previous year and the entities NewSpring Services, S.A., MedSpring, S.A., CTT IMO Yield, S.A. and CTT Services, S.A. integrated the RETGS in this financial year.
Reconciliation of the income tax rate
For the three-months periods ended 31 March 2022 and 31 March 2023, the reconciliation between the nominal rate and the effective income tax rate was as follows:
| 31.03.2022 | 31.03.2023 | |
|---|---|---|
| Earnings before taxes (a) | 7,238,916 | 21,841,937 |
| Nominal tax rate | 21.0% | 21.0% |
| 1,520,173 | 4,586,807 | |
| Tax Benefits | (73,476) | (53,073) |
| Accounting gains/(losses) | (1,964) | (3,194) |
| Tax gains/(losses) | 980 | 1,597 |
| Equity method | (112,806) | — |
| Provisions not considered in the calculation of deferred taxes | 12,287 | 8,454 |
| Impairment losses and reversals | 64,538 | 109,201 |
| Compensation for insurable events | 64,208 | 23,051 |
| Depreciation and car rental charges | 6,832 | 6,391 |
| Credits uncollectible | 29,676 | 25,444 |
| Difference between current and deferred tax rates | — | (58,716) |
| Fines, interest, compensatory interest and other charges | 1,802 | 6,083 |
| Other situations, net | 29,245 | (19,236) |
| Adjustments related with - autonomous taxation | 140,903 | 173,571 |
| Insuficiency / (Excess) estimated income tax | (95,617) | (73,651) |
| Subtotal (b) | 1,586,782 | 4,732,730 |
| (b)/(a) | 21.92% | 21.67% |
| Adjustments related with - Municipal Surcharge | 112,747 | 312,253 |
| Adjustments related with - State Surcharge | 126,788 | 671,184 |
| Income taxes for the period | 1,826,317 | 5,716,167 |
| Effective tax rate | 25.23% | 26.17% |
| Income taxes for the period | ||
| Current tax | 1,082,200 | 5,746,840 |
| Deferred tax | 839,734 | 42,978 |
| Insuficiency / (Excess) estimated income tax | (95,617) | (73,651) |
| 1,826,317 | 5,716,167 |
Deferred taxes
As at 31 December 2022 and 31 March 2023, the balance related to deferred tax assets and liabilities was composed as follows:
| 31.12.2022 | 31.03.2022 | |
|---|---|---|
| Deferred tax assets | ||
| Employee benefits - healthcare | 53,302,302 53,033,157 | |
| Employee benefits - pension plan | 51,604 | 50,521 |
| Employee benefits - other long-term benefits | 5,090,460 | 4,933,476 |
| Impairment losses and provisions | 2,400,419 | 2,390,684 |
| Tax losses carried forward | 2,765,595 | 3,014,327 |
| Impairment losses in tangible fixed assets | 1,594,826 | 1,182,057 |
| Long-term variable remuneration (Board of diretors) | 1,049,729 | 1,049,729 |
| Land and buildings | 332,610 | 332,610 |
| Tangible assets' tax revaluation regime | 962,147 | 881,968 |
| Other | 273,917 | 333,902 |
| 67,823,608 67,202,432 | ||
| Deferred tax liabilities | ||
| Revaluation of tangible fixed assets before IFRS | 1,519,019 | 1,477,719 |
| Suspended gains | 631,893 | 625,356 |
| PPA Movements - NewSpring Services | 387,300 | 362,041 |
| Fair Value Adjustments | 7,108,430 | 6,598,641 |
| Other | 200,835 | 185,485 |
| 9,847,476 | 9,249,242 |
The deferred tax asset related to Tangible assets tax revaluation regime was recognised following the Companies' accession to the regime established in Decree-Law no. 66/2016, of 3 November. In the year ended 31 March 2023 the deferred tax asset amounts to 881,968 Euros.
The deferred tax liability relating to "fair value adjustments" essentially refers to the deferred tax associated with the caption "Financial assets and liabilities at fair value through profit or loss".
As at 31 March 2023, the expected amount of deferred tax assets and liabilities to be settled within 12 months is 3.2 million Euros and 0.4 million Euros, respectively.
During the years ended 31 December 2022 and 31 March 2023, the movements which occurred under the deferred tax captions were as follows:
| 31.12.2022 | 31.03.2022 | |
|---|---|---|
| Deferred tax assets | 87,255,087 | 67,823,608 |
| Opening balances | ||
| Effect on net profit | ||
| Employee benefits - healthcare | (414,767) | (269,144) |
| Employee benefits - pension plan | (11,597) | (1,082) |
| Employee benefits - other long-term benefits | 359,712 | (156,984) |
| Impairment losses and provisions | (1,738,614) | (9,735) |
| Tax losses carried forward | 686,684 | 248,732 |
| Impairment losses in tangible fixed assets | 1,113,639 | (412,769) |
| Share Plan | 594,329 | — |
| Land and buildings | (11,042) | — |
| Tangible assets' tax revaluation regime | (320,715) | (80,179) |
| Other | (89,819) | 59,985 |
| Effect on equity | ||
| Employee benefits - healthcare | (19,593,906) | — |
| Employee benefits - pension plan | (5,383) | — |
| Other | — | — |
| Closing balance | 67,823,608 | 67,202,432 |
31.12.2022 31.03.2022
| Saldo final | 9,847,476 | 9,249,242 |
|---|---|---|
| PPA movements - NewSpring Services | 522,013 | — |
| Others | ||
| Other | 142,477 | (20,036) |
| Effect on equity | ||
| Other | 15,818 | 33,624 |
| Fair Value Adjustments | 7,108,430 | (538,726) |
| PPA Movements - NewSpring Services | (134,713) | (25,259) |
| Non-current assets held for sale | (42,718) | — |
| Suspended capital gains | (26,149) | (6,537) |
| Revaluation of tangible fixed assets before IFRS adoption | (165,194) | (41,300) |
| Effect on net profit | ||
| Opening balances | 2,427,513 | 9,847,476 |
| Deferred tax liabilities |
During the year ended 31 December 2022 and the three-months period ended 31 March 2023, the tax losses carried forward are detailed as follows:
| 31.12.2022 | 31.03.2022 | |||
|---|---|---|---|---|
| Group | Tax losses | Deferred tax assets |
Tax losses | Deferred tax assets |
| CTT – Expresso, S.A., branch in Spain | 77,006,639 | — | 79,092,200 | — |
| CTT Expresso/Transporta | 13,133,872 | 2,758,113 | 13,133,872 | 2,758,113 |
| CTT Soluções Empresariais/HCCM | — | — | 1,184,437 | 248,952 |
| CTT IMO | — | — | 34,572 | 7,262 |
| Total | 92,226,071 | 2,758,113 | 93,445,080 | 3,014,327 |
Regarding CTT – Expresso, S.A., branch in Spain (prior Tourline), the tax losses of the years 2008, 2009 and 2011 may be reported in the next 15 years, the tax losses related to 2012, 2013 and 2014 may be carried forward in the next 18 years and the tax losses of the years 2015, 2016, 2017, 2018, 2019, 2020, 2021 and 2022 have no time limit for deduction. No deferred tax assets associated with CTT Expresso branch in Spain's tax losses were recognised, given its losses history.
Regarding to CTT Expresso/ Transporta, the tax losses presented refer to the losses of Transporta for the years 2014 and 2015 and 2017 and 2018, since in 2019 this company was incorporated into CTT Expresso, which can be reported in the next 14 years (previously 12 years, but extended to 14 years under exceptional measures approved to deal with adverse consequences caused by the COVID Pandemic), for the years 2014 and 2015 and 7 years (previously 5 years, but extended to 7 years within the scope of exceptional measures approved to deal with adverse consequences caused by the COVID Pandemic) for the years 2017 and 2018. The recognition of deferred tax assets related to Transporta's tax losses is supported by the estimate of future taxable profits of CTT Expresso, based on the company's 8-year business plan (ie, until 2030).
It should be noted that, following the acquisition of Transporta, a request was made to maintain the tax losses that had been determined with reference to the periods of 2014 and 2015 (in the amounts of 4,536,810 Euros and 3,068,088 Euros, available for reporting until 2028 and 2029, respectively), for which a favourable response was obtained from the Tax Authority during 2021.
It should be noted that, following the acquisition of HCCM – Outsourcing Investment, S.A, a request was made to maintain the tax losses that had been determined with reference to the periods from 2015 to 2020 (in the total amount of 1,300,311 Euros), in relation to which awaits a favourable response from the Tax and Customs Authority during the three-months period ended 31 March 2023. Therefore, in the three-month period ended 31 March 2023, the related deferred tax asset was recorded. It should be noted that, as previously mentioned, HCCM – Outsourcing Investment, S.A. was merged by incorporation into the entity CTT Soluções Empresariais, S.A., with reference to 1 January 2022.
Law No. 24-D/2022, of December 30 – "OE 2023" – includes a rule, identified as promoting the principle of solidarity between financial years (logic of continuity of business cycles), which determines the end of time limit for reporting tax losses calculated in previous years.
Despite being a rule for application to financial years beginning on or after 1 January 2023, the calculation of deferred tax on 31 December 2022 in respect of tax losses was considered rational.
In another sense, the percentage of the amount of deductible tax losses in each financial year is reduced from 70% to 65%, therefore it is expected that Companies will take longer to take advantage of the deduction of tax losses.
The sensitivity analysis performed allows us to conclude that a 1% reduction in the underlying rate of deferred tax would imply an increase in the income tax for the period of about 2.73 million Euros.
SIFIDE
The Group recognises an estimate of the tax credit that was submitted for certification by the competent authority (ANI – Agência Nacional de Inovação) in the period to which the investments relate.
Regarding to R&D expenses incurred by the Group in the 2020 financial year, with the submission of the application, these amounted to approximately 5,304,741 Euros, with the Group having the possibility of benefiting from a income tax deduction estimated at 3,850,195 Euros. As at 31 March 2023, the tax credit for the year 2020 is already fully deferred by the Certifying Commission (ANI).
Regarding R&D expenses incurred by the Group in the financial year of 2021, with the submission of the application, these amounted to the amount of 6,474,190 Euros, with the Group having the possibility of benefiting from a income tax deduction estimated at 3,816,703 euros. During the first three months of this year, the Certifying Commission granted, in relation to the 2021 financial year, two tax credits in the
global amount of 577,893 Euros, and the Group is currently awaiting receipt of the declarations relating to the remaining amount.
As for the financial year 2022, the Group is still identifying and quantifying the expenses incurred with R&D that will integrate the applications that will be submitted during the year 2023.
Other information
Pursuant to the legislation in force in Portugal, income tax returns are subject to review and correction by the tax authorities for a period of four years (five years 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 years are extended or suspended. Therefore, CTT's income tax returns from 2019 and onwards may still be reviewed and corrected.
The Board of Directors 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 31 March 2023.
27. Related parties
The Regulation on Assessment and Control of transactions with CTT related parties defines related party as: qualified shareholder, manager, subsidiaries companies' managers or third party with any of these related through relevant commercial or personal interest (under the terms of IAS 24) and also subsidiaries, associates and joint ventures of CTT. It is considered that there is a "relevant commercial or personal interest" in relation to (i) close family members of the managers, subsidiaries companies' managers and qualified shareholders who, at each moment, have significant influence on CTT, as well as (ii) controlled entities (individually or jointly), either by management, subsidiaries companies' managers qualified shareholders or by the persons referred to in (i). For this purpose, "control" is considered to exist when an investor is exposed or holds rights in relation to variable results through its relationship with it and has the capacity to affect those results through the power it exercises over the investee. Additionally, "close family members" are: (i) the spouse or domestic partner and (ii) the children and dependents of the person and persons referred to in (i).
According to the Regulation, the significant transactions with related parties, as well as transactions that members of the Board of Directors of CTT and/or its subsidiaries conduct with CTT and/or its subsidiaries, must be previously approved by resolution of Board of Directors, preceded by a prior favourable opinion of Audit Committee, except when included in the normal company´s business and no special advantage is granted to the director directly or by an intermediary. Significant transaction is any transaction with a related party whose amount exceeds one million Euros, and / or carried out outside current activity scope of CTT and / or subsidiaries and / or outside market conditions.
The other related parties' transactions are approved by Executive Committee, to the extent of the related delegation of powers, and subject to subsequent examination by the Audit Committee.
For the three-months periods ended 31 March 2022 and 31 March 2023, the following transactions took place and the following balances existed with related parties:
| 31.03.2022 | ||||||
|---|---|---|---|---|---|---|
| Group | Accounts receivable |
Accounts payable |
Revenues | Costs | Dividends | Financial investments / Increase in share capital |
| Shareholders | — | — | — | — | — | — |
| Group companies | ||||||
| Associated companies | — | — | — | — | — | — |
| Jointly controlled | 198,694 | — | 180,830 | 160,498 | — | — |
| Members of the (Note 24) | ||||||
| Board of Directors | — | — | — | 694,908 | — | — |
| Audit Committee | — | — | — | 39,643 | — | — |
| Remuneration Committee |
— | — | — | 4,950 | — | — |
| General Meeting | — | — | — | — | — | — |
| 198,694 | — | 180,830 | 899,999 | — | — |
| 31.03.2022 | ||||||
|---|---|---|---|---|---|---|
| Group | Accounts receivable |
Accounts payable |
Revenues | Costs | Dividends | Financial investments / Increase in share capital |
| Shareholders | — | — | — | — | — | — |
| Group companies | ||||||
| Associated companies | — | — | — | — | — | — |
| Jointly controlled | 258,723 | 56 | 134,340 | 83 | — | — |
| Members of the (Note 24) | ||||||
| Board of Directors | — | — | — | 719,597 | — | — |
| Audit Committee | — | — | — | 39,643 | — | — |
| Remuneration Committee |
— | — | — | 4,950 | — | — |
| General Meeting | — | — | — | — | — | — |
| 258,723 | 56 | 134,340 | 764,273 | — | — |
In the context of transactions with related parties, no commitments were made, nor were any guarantees given or received.
No provision was recognised for doubtful debts or expenses recognised during the period in respect of bad or doubtful debts owed by related parties.
The remunerations attributed to the members of the statutory bodies of CTT, S.A. are disclosed in note 24 – Staff Costs.
28. Other information
As announced to the market on 26 January 2023, an update of the price of the basket of letter mail, editorial mail and parcels services covered by the Universal Postal Service Price Convention, corresponding to an average annual price variation of 6.58%, took effect as from 1 March 2023. This update corresponded to an average annual price variation of 6.58%. The overall average annual price variation, also reflecting the effect of the update of special prices for bulk mail, is 6.24%.
With regard to the legal proceedings relating to ANACOM's Decision regarding the quality of service parameters and performance targets applicable to the universal postal service provision, of July 2018, the Government's appeal against the decision of the Arbitration Court continues. This decision acknowledges that ANACOM's decision constituted an abnormal and impressionable change in
circumstances, causing damages amounting to 1,869,482 euros. The administrative actions against ANACOM, the first concerning the same decision and the second concerning the deliberation of December 2018 regarding the new measurement procedures to be applied to the indicators, had no developments.
As CTT appealed the decision to apply a fine of 153,750 euros for twenty-six administrative offences related to the non-compliance with postal network density targets and minimum service offers, and the publication of quality of service indicators and information on prices charged at various postal establishments in 2014 and 2015, the Lisbon Court of Appeal reduced the fine to 57 thousand euros. As CTT disagreed with the grounds of the decision that upheld some of the administrative offences, it appealed to the Constitutional Court on 23 February 2023. This process is still at the appeal stage. The administrative offence proceeding of which CTT was charged by ANACOM for alleged violation of the measurement procedure of the quality of service indicators (IQS) in 2016 and 2017 is ongoing.
Following the proposal to apply contractual fines in the amount of 753 thousand euros, on 4 August 2022, CTT requested the constitution of an arbitration court, under the terms of the concession agreement. The arbitration court has been constituted and the process is underway. For the same facts, CTT had already been notified of the filing of an administrative offence proceeding on 30 August 2021, which is running its course, with no developments, following the presentation of the respective defences. On 23 February, CTT was notified to comment on a new proposal for the application of contractual fines submitted by ANACOM to the Government, in relation to the alleged contractual breach of the quality of service obligation in the years 2016, 2017, 2018 and 2019. CTT submitted its comments on 6 April, in which it defends there is no basis in fact or in law for the ascertainment of any contractual liability and requests additional evidence. The application of contractual fines and the respective amount depends on the further steps of the administrative procedure.
A decision is awaited in the arbitration proceedings for the protection of CTT's rights filed by CTT against the Portuguese State on 11 June 2021. Specifically: (a) the impacts and contractual effects, namely compensatory (which CTT estimates to be approximately 23 million euros), of the COVID-19 pandemic, as well as of the public measures adopted in that context; and (b) the legal compatibility, impacts and contractual effects, namely compensatory (which CTT estimates to be approximately 44 million euros), of the decision to extend the concession agreement. The above mentioned figures correspond to the amounts to which CTT, with the data available at the time, considers to be entitled and are subject to update, assessment and decision in the process, which is ongoing.
There are no relevant developments in the lawsuits filed on 18 January 2022 by the companies Vasp Premium – Entrega Personalizada de Publicações, LDA. (Vasp) and Iberomail – Correio Internacional, S.A., (Iberomail) against CTT before the Competition, Regulation & Supervision Court, seeking the conviction of CTT for abuse of dominant position. CTT follows the best market practices and considers the request to be totally unfounded, as these lawsuits concern facts assessed by the Competition Authority (AdC) in the scope of a proceeding that was closed with the imposition of commitments, which CTT has implemented and reports annually to the AdC.
Strategic Partnership - Generali Seguros
On 6 November 2022, CTT - Correios de Portugal, S.A. and its subsidiary Banco CTT, S.A. entered into a strategic partnership agreement with Generali Seguros, S.A. (Tranquilidade/Generali Seguros).
The transaction concluded between the parties includes:
• Long-term distribution agreements, with 5-years exclusivity renewable periods, for the distribution by CTT and Banco CTT of life and non-life insurance products of Tranquilidade/ Generali Seguros;
• Subscription by Tranquilidade/Generali Seguros of a 25 million euros reserved share capital increase in Banco CTT, in exchange for a shareholding of approximately 8.71%. A Shareholders' Agreement will provide Tranquilidade/Generali Seguros with minority interests with the size of the shareholding.
The agreement aims to combine the experience of Tranquilidade/Generali Seguros in the development and management of insurance products with the distribution capacity of CTT and Banco CTT through their nationwide networks coverage and digital channels. The insurance distribution agreements contemplate a fixed price by Tranquilidade/Generali Seguros of 1 million euros and 9 million euros to CTT and Banco CTT, respectively, to be settled in the initial six years, and additional contingent payments depending on the performance achieved over the term of the agreements.
The CTT Group expects that the transaction, which is subject to suspensive conditions, including approval by the banking and insurance regulatory authorities, will be completed by the end of 2023.
29. Subsequent events
Following the resolution of the Annual General Meeting of Shareholders of CTT - Correios de Portugal, S.A. held on 20 April 2023, which approved the share capital reduction in the amount of 717,500 Euros for the purpose of releasing excess capital, on 21 April 2023, the CTT share capital reduction in the amount mentioned above through the cancellation of 1,435,000 shares held by the Company, representing 0.997% of its share capital and acquired under the share buyback programme carried out from 17 March to 8 September 2022, was registered before the Commercial Registry Office.
As such, CTT's share capital is now 71,957,500 Euros, represented by 143,915,000 shares with the nominal value of fifty cents per share.
With the exception of what is mentioned above, after 31 March 2023 and up to the date that the financial statements were approved for issue, no relevant or material facts have occurred in the Group's activity that have not been disclosed in the notes to the financial statements.