Investor Presentation • Mar 16, 2023
Investor Presentation
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16 March 2023
This document has been prepared by CTT - Correios de Portugal, S.A. (the "Company" or "CTT") exclusively for use during the presentation of the full year 2022 results (FY22). As a consequence thereof, this document may not be disclosed or published, nor used by any other person or entity, for any other reason or purpose without the express and prior written consent of CTT. This document (i) may contain summarised information and be subject to amendments and supplements, and (ii) the information contained herein has not been verified, reviewed nor audited by any of the Company's advisors or auditors.
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. Consequently, the Company does not assume liability for this document if it is used for a purpose other than the above. No express or implied representation, warranty or undertaking is made as to, and no reliance shall be placed on, the accuracy, completeness or correctness of the information or the opinions or statements expressed herein. Neither the Company nor its subsidiaries, affiliates, directors, employees or advisors assume liability of any kind, whether for negligence or any other reason, for any damage or loss arising from any use of this document or its contents. Neither this document nor any part of it constitutes a contract, nor may it be used for incorporation into or construction of any contract or agreement.
This document has an informative nature and 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 a solicitation of any kind 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. Moreover, the recipients of this documentare invited and advised to consult the public information disclosed by CTT on its website (www.ctt.pt) as well as on the Portuguese Securities Market Commission's website (www.cmvm.pt). In particular, the contents of this presentation shall be read and understood in light of the financial information disclosed by CTT, through such means, which prevail in regard to any data presented in this document. By attending the meeting where this presentation is made and reading this document, you agree to be bound by the foregoing restrictions.
This presentation 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 concerning 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 bevond 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 presentation. 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.
Operational review
CU Committed to deliver
Positive contribution from business solutions
Record level demand of public debt certificates leverages significant revenue growth in Financial Services & Retail, against a favourable interest rate environment
Bancassurance as a new growth avenue
Revenues up by 6.9% y.o.y in the FY22
| Group CTT - Financials $\epsilon$ million |
Recurring EBIT evolution € million; % change vs. prior year |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| 4Q22 | FY22 | $+7.4%$ | 64.5 | ||||||
| Revenues 1 | €243.8m $(+3.8\%)$ |
€906.6m $(+6.9\%)$ |
60.1 | $-8.4$ $\overline{-1.7}$ . |
$+9.1$ | $+5.4$ | |||
| Recurring EBIT | €25.8m $(+26.3%)$ |
€64.5m $(+7.4\%)$ |
FY21 Recurring EBIT |
$\triangle$ 1Q22 $\triangle$ 2Q22 |
$\triangle$ 3Q22 | $\triangle$ 4Q22 | FY22 Recurring EBIT |
||
| Express & Parcels | Mail & Other 2 | Financial Services & Retail | Banco CTT | ||||||
| Revenues | Recurring EBIT | Revenues | Recurring EBIT | Revenues | Recurring EBIT | Revenues | Recurring EBIT | ||
| 4Q22 | €71.2m $(+2.8\%)$ |
€3.8m $(-29.8\%)$ |
€115.4m $(-8.0\%)$ |
€5.9m $(-25.8\%)$ |
E21.2m $(+59.0\%)$ |
£11.2m $(+139.2\%)$ |
€36.0m $(+34.3%)$ |
€4.9m $(+101.9\%)$ |
|
| 2022 | €259.0m $(+1.3%)$ |
€8.5m $(-31.4\%)$ |
€460.9m $(+3.7\%)$ |
£10.7m $(-39.6%)$ |
€60.7m $(+24.2%)$ |
€30.8m $(+41.4%)$ |
€126.0m $(+27.4%)$ |
E14.4m $(+76.9\%)$ |
1 Excluding Specific items; 2 Including Central Structure.
1Individual accounts.
EXPRESS & PARCELS
E&P Spain: Market context placing volumes under pressure, while growing average revenue per item and cost efficiency driving profitability
% change vs. prior year $6.3%$ $3.2%$ $1.7%$ $1.2%$ $1.0%$ $-1.3%$ $-1.7%$ $-2.1%$ 4Q21 1Q22 2Q22 3Q22 4Q22
1 Includes bulk and advertising mail;2 - 39.8% y.o.y;3Adjusted for elections impact
1Tranquilidade/GeneraliSeguros
11
1 Excludes other revenues that account for €0.03m in 4Q21 and €-0.10m in 4Q22
Banco CTT – Key ratios
1 Net of impairments;2 Consolidated contribution;3 Excluding Specific items. 4 Average cost of customer deposits.
| Terms of the Partnership Agreement - Termination | 2022 Key Performance Indicators | |||
|---|---|---|---|---|
| ·德 universo. | • Partnership to be closed by 31 December 2023 • Sonae / Universo will progressively assume responsibility for financing and credit risk activities • Net exposure of Banco CTT to Universo credit cards will gradually decrease during 2023 • Upon termination, Universo will ensure the purchase of outstanding exposures |
• PBTI 1 partnership: $8.0M\epsilon$ • Revenues: $23.6M\epsilon^2$ • Administrative Expenses: -2.3M€ • Impairment & Provisions: -13.4M€ • Net Yield: $2.5\%$ 3 • Net Loans, EoP: $E354m$ (average $E322m$ ) • RWA, EoP: $E371m$ |
Banco CTT will gain strategic options in the management of its portfolio by |
|
| Partnership key terms | Partnership benefits | releasing liquidity and capital that |
||
| TRAN QUILL DADE EVERALI |
• Long-term agreements, with 5-year renewable exclusivity periods, for the distribution by CTT and Banco CTT of life and non-life insurance products of Generali 4 • Subscription by Generali of a €25m reserved share capital increase in Banco CTT in exchange for a stake of approximately 8.71% • Generali to have minority protection rights consistent with the size of the stake |
• Combination of Generali expertise in developing and managing insurance products with CTT and Banco CTT's extensive distribution capacity through their nationwide networks and digital channels • Reinforcement of Banco CTT's capital position by an estimated 210 bps on the proforma fully loaded CET1 ratio • Closing expected before the end of $2023^5$ |
will strengthen its balance sheet and profitable growth |
1Direct contribution before funding costs; 2Banco CTT's revenues includes a €1.9M severance payment for termination of contract in December 2022;3 PBTI/Average net loans; 4Tranquilidade/Generali Seguros, and 5Ongoi precedent, including banking and insurance regulatory authorities' approvals.
Financial review
| Key financial indicators | Quarter | ||
|---|---|---|---|
| € million; % change vs. prior year | 4Q21 | 4Q22 | y.o.y |
| Revenues 1 | 235.0 | 243.8 | 3.8% |
| Operating costs - EBITDA 2 | 199.8 | 201.4 | 0.8% |
| EBITDA2 | 35.2 | 42.5 | 20.7% |
| Depreciation & amortization | 14.8 | 16.7 | 12.9% |
| Recurring EBIT 1 | 20.4 | 25.8 | 26.3% |
| Specific items | 4.0 | 12.6 | 215.7% |
| EBIT | 16.4 | 13.1 | $-20.0%$ |
| Financial result | $-3.0$ | $-2.3$ | 23.8% |
| Tax | 1.2 | 2.8 | 126.1% |
| Net profit attributable to equity holders | 12.1 | 8.1 | $-33.0%$ |
| Free cash flow | 5.9 | 35.5 | 502.5% |
| Full year | ||
|---|---|---|
| 2021 | 2022 | y.o.y |
| 847.9 | 906.6 | 6.9% |
| 729.8 | 777.3 | 6.5% |
| 118.1 | 129.3 | 9.5% |
| 58.0 | 64.8 | 11.7% |
| 60.1 | 64.5 | 7.4% |
| $-1.8$ | 8.4 | 571.2% |
| 61.9 | 56.1 | $-9.3%$ |
| $-11.1$ | $-9.4$ | 14.9% |
| 12.2 | 10.4 | $-15.1%$ |
| 38.4 | 36.4 | $-5.2%$ |
| 45.3 | 67.4 | 48.7% |
1 Excluding Specific items; 2 Excluding Specific items, depreciation & amortization
Revenues1 $\epsilon$ million; % change vs. prior year
€ million; % change vs. prior year; % of total
E&P costs grew by $\epsilon$ 3.5m mainly due to activity, fuel inflation and investment in capacity expansion and automation
Mail & Other costs decreased $\epsilon$ 8.1m primarily due to the impact of the elections in 4Q21 ( $\epsilon$ 4.1m) and impacted by facilities optimisation, as previously highlighted
Banco CTT costs increased €6.7m mainly as a result of impairment & provisions growth (+€3.1m) as a result of volume growth and due to the CoR volatility in the consumer credit book
In 4Q22:
1 Excluding Specific items; 2 Including Central Structure
$\epsilon$ million; % change vs. prior year
1 Excluding Specific items; 2 The recurring EBIT also benefited from the cost savings associated with the change of CTT's headquarters already envisaged in the quick wins shared with the market, namely those related with there will be an equivalent annual impact in 2023 and going forward;3 Including Central Structure
$\epsilon$ million; impact on cash flow vs. prior year
| Consolidated | |
|---|---|
| $(+)$ Cash & cash equivalents | 456.5 |
| $(-)$ Net Financial Services & Other payables $3$ | 361.7 |
| $(-)$ Banco CTT liabilities, net $3$ | $-117.1$ |
| $(-)$ Other 4 | 45.7 |
| (=) Adjusted cash | 166.2 |
| $(-)$ Financial debt | 70.1 |
| (=) Net cash position | 96.1 |
| (-) Lease liabilities (IFRS 16) | 125.9 |
| Net financial debt 2 | 29.8 |
1 Impairments, provisions and IFRS 16 affecting EBITDA;2 Only financial debt presented in the table; it does not include net employee benefits of €162.1m as at 31 December 2022;3 The change in net liabilities of Financ with third parties, depositors or other banking financial liabilities, net of the amounts invested in credit or investments in securities/banking financial assets, of entities of the CTT Group providing financial services, change in other cash items reflects the evolution of Banco CTT's sight deposits at Bank of Portugal, outstanding cheques/clearing of Banco CTT cheques, and impairment of sight and term deposits and bank applications
Committed to deliver
1For detailed information on CTT's Financial Policy, including its shareholder's remuneration principles, please refer to CTT's investor relations website and to the announcement disclosed on 23 June 2022;2 Based on in shares of the share buyback of 2021, share count excluding own shares equals 148.5m; 4Share count excluding own shares equals 142, 4m, and 5Yield calculated taking as a reference the year end share price of each year
$+47%$
Grabbing the full potential of e-commerce convergence in Portugal and Spain to resume growth, while focusing on prices and costs to improve profitability
Improving structural mail profitability furthering operational efficiency measures
Transforming the retail network into a service platform, with special focus on savings and insurance distribution
Benefiting from a favourable interest rate outlook, Banco CTT will focus on (i) delivering on growth; (ii) strengthening its bancassurance offering and (iii) taking advantage of its strong capital position
Continue to implement transformation initiatives to drive revenue sustainability by reducing dependence on traditional mail services
Focusing on cost cutting to cope with inflation pressure and high fuel prices
Exploit inorganic expansion opportunities in last mile and fulfilment segments in Iberia
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Contacts: Phone: +351 210 471 087 E-mail: [email protected]
ctt.pt
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