Earnings Release • Aug 4, 2016
Earnings Release
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1 4 August 2016
This document has been prepared by CTT – Correios de Portugal, S.A. (the "Company" or "CTT") exclusively for use during the presentation of the 1 st semester 2016 results. 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 document are invited and advised to consult the public information disclosed by CTT on its website (www.ctt.pt) as well as on the Portuguese Securities Exchange 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 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 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.
Other financials
Business units performance
Outlook
Opening of Banco CTT to the public in 51 CTT post offices and a flagship branch 18 March
Signature of a Revision Agreement to the 2015 CTT Company Agreement with 10 trade unions 23 March
The AGM approves all proposed resolutions, including the dividend payment of €0.47 per share 28 April
Decision to launch the process to select the fund manager for the postemployment healthcare responsibilities 11 May
€ million, except when indicated otherwise
| Including Banco CTT | Excluding Banco CTT 4 | |||||
|---|---|---|---|---|---|---|
| Financial indicators: | 1H15 | 1H16 | Δ% | 1H15 | 1H16 | Δ% |
| Recurring revenues 1 | 367.1 | 349.4 | -4.8% | 367.1 | 349.2 | -4.9% |
| Recurring operating costs 2 | 291.5 | 286.9 | -1.6% | 290.4 | 278.7 | -4.0% |
| Recurring EBITDA 1, 2 | 75.5 | 62.5 | -17.3% | 76.7 | 70.5 | -8.1% |
| Recurring net profit 3 | 44.6 | 34.1 | -23.6% | 45.5 | 40.2 | -11.7% |
| Reported net profit | 39.2 | 31.7 | -19.1% | 41.7 5 | 41.8 5 | +0.2% |
| Addressed mail (million items) |
Unaddressed mail (million items) |
Parcels 6 (million items) |
FS savings flows 7 (€ billion) |
Banco CTT current accounts (thousand) |
|
|---|---|---|---|---|---|
| 1H16 volumes | 411.2 | 234.7 | 13.0 | 2.5 | 20.2 |
| 1H16 vs. 1H15 | -2.3% | +4.3% | -5.2% | -31.1% | N/A |
1 Excluding non-recurring revenues of €1.7m recognised in 1H16 as a result of an early termination of a vacant building lease contract.
2 Excluding amortisation, depreciation, provisions, impairment losses and non-recurring costs affecting EBITDA of €5.1m in 1H15 (€2.3m related to Banco CTT) and €7.2m in 1H16 (€4.2m related to Banco CTT – €3.3m booked in Banco CTT business unit and €0.9m booked in Mail business unit).
3 Considers the theoretical (nominal) tax rate of CTT.
4 Excluding Banco CTT revenues and costs booked in Banco CTT, FS and Mail business units.
5 Considers the effective tax rate of the period of CTT S.A. and Banco CTT.
6Including Portugal (6.9 million items; -1.8%) and Spain (6.1 million items; -8.9%).
7 Including savings & insurance products placements and redemptions. €2.2bn placed in Jan.15, the current rate being >€300m of monthly placements so far in 2016.
INCORPORATE BANCO CTT AND STILL ACHIEVE 1.6% DECLINE IN RECURRING OPERATING COSTS
Outsourcing savings from networks integration (-€1.9m) & other efficiency measures partly absorb the increase of Banco CTT recurring ES&S costs (€4.4m)
4 Booked in Banco CTT business unit (€8.3m, of which €3.9m Staff costs and €4.4m ES&S and other costs) and in Mail business unit (-€0.1m of which -€0.1m Staff costs and €0.1m ES&S and other costs).
Recurring EBITDA 3 breakdown
Recurring EBITDA declines by 8.1% (-€6.2m) on a like-for-like basis, excluding Banco CTT. The increase in Mail EBITDA (+€2.5m) and E&P EBITDA (+€0.9m) partially offsets the €9.6m decline in FS EBITDA (due to high placements of certificates in Jan.15)
1Including -€0.1m Banco CTT recurring operating costs booked in Mail business unit.
2 Excluding -€8.1m Banco CTT business unit recurring EBITDA.
3 Excluding total non-recurring revenues of €1.7m in 1H16 and non-recurring operating costs affecting EBITDA of €5.1m in 1H15 (€2.3m related to Banco CTT) and €7.2m in 1H16 (€4.2m related to Banco CTT). 4 Excluding Banco CTT recurring revenues: €0.2m in 1H16.
5 Excluding Banco CTT recurring op. costs: €1.1m in 1H15 (booked in FS business unit) and €8.2m in 1H16 (€8.3m booked in Banco CTT business unit and -€0.1m in Mail business unit).
6 Booked in Banco CTT business unit (-€8.1m) and in Mail business unit (€0.1m).
OTHER FINANCIALS: THE CASH POSITION REMAINS STRONG, DESPITE THE IMPACTS OF BALANCE SHEET OPTIMISATION, DIVIDEND PAYMENT AND BANCO CTT LAUNCH
1Cash flow from operating activities excluding changes in net Financial Services payables of +€58.0m (1H15) and +€124.9m (1H16), respectively. Cash at the end of the period excluding net Financial Services payables of €443.7m (Jun-15) and €449.6m (Jun-16). Banco CTT not excluded and financial assets & investments of €61.1m not considered as cash.
2 Cash flow from operating activities includes net change in Banco CTT liabilities (+€56.4m). Cash flow from investing activities includes net change in Banco CTT financial assets (-€62.2m). Cash at the end of the period includes -€5.8m Banco CTT net liabilities (Jun-16). Change in methodology.
3 Capex payments presented in the table; capex was €12.5m in 1H16 (€10.9m in 1H15).
1 Including Financial Services receivables of €6.4m and €3.0m as at Dec-15 and Jun-16, respectively. 2 Including Banco CTT net liabilities of -€5.8m as at Jun-16. Change in methodology.
1Including +€1.5M from the MoU with Altice terminating in Dec-16, improvements made in the VAT deduction methodology procedures (+€1.3m), and decline in revenues from international mail exchange rate differences (-€1.4m).
2 Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs. Including Banco CTT recurring operating costs booked in Mail business unit of -€0.1m in 1H16.
3 Million items.
4 USO, excluding international inbound mail.
1 Including internal and other revenues, and internal transactions with Spain and Mozambique. Including +€1.5m from the MoU with Altice terminating in Dec-16.
2 Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs.
3 Million items.
1 Including +€1.5m from the MoU with Altice terminating in Dec-16 and +€0.7m from the improvements made in the VAT deduction methodology procedures.
2 Excluding amortisation, depreciation, provisions, impairment losses & non-recurring costs. Including Banco CTT recurring operating costs booked in FS business unit of €1.1m in 1H15.
3Amount of savings & insurance products placements (€ billion).
4 Million operations.
5 € million, new credit production, including consumer credit & credit cards.
Banco CTT indicators as at 30 June 2016.
1 Excluding depreciation / amortisation, impairments and provisions (€0.7m).
2Including cash and deposits at Central Banks (€5.3m) and loans and advances to credit institutions (€17.6m).
3 Including investments held to maturity (€28.4m), financial assets available for sale (€3.0m) and deposits in credit Institutions (€29.7m).
Key highlights
Other financials
Business units performance
| = | |
|---|---|
• NEW E&P AND ADVERTISING MAIL OFFERS LAUNCH DELAYED due to IT developments
• NEGATIVE MIX EFFECT IN MAIL (decline in registered mail)
• RIGOROUS SELECTION OF CLIENTS IN SPAIN, impacting revenues
o A positive impact on the 2H16 revenues comparison expected
o Registered mail volumes recovery could have an impact on results
o If monthly savings volumes continue to perform as in 1H16 (>€300m/month), FS might surpass last year's performance
o Under development, a positive impact on cash flow and on the Balance Sheet expected still in 2016, continuing in the next years
RECURRING EBITDA (EXCLUDING BANCO CTT) TO GROW BY MID-SINGLE DIGITS, positively impacted by optimisation measures
RECURRING EBITDA GROWTH (EXCL. BANCO CTT), supported by revenue initiatives in 2H16 & Balance Sheet optimisation measures in 4Q16
STABLE GROWTH OF DIVIDEND supported by strong cash flow generation, linked to Balance Sheet optimisation measures DIVIDEND
Dividend guidance unchanged – STABLE GROWTH OF DIVIDEND
| Including Banco CTT | Excluding Banco CTT 1 | |||||||
|---|---|---|---|---|---|---|---|---|
| Reported | Recurring 2 | Reported | Recurring 2 | |||||
| 1H15 | 1H16 | 1H15 | 1H16 | 1H15 | 1H16 | 1H15 | 1H16 | |
| Revenues | 367.1 | 351.1 | 367.1 | 349.4 | 367.1 | 350.9 | 367.1 | 349.2 |
| Operating costs | 296.7 | 294.1 | 291.5 | 286.9 | 293.2 | 281.7 | 290.4 | 278.7 |
| EBITDA | 70.4 | 57.0 | 75.5 | 62.5 | 73.8 | 69.2 | 76.7 | 70.5 |
| EBITDA margin | 19.2% | 16.2% | 20.6% | 17.9% | 20.1% | 19.7% | 20.9% | 20.2% |
| Depreciation, amortisation, provisions and impairments |
10.5 | 9.6 | 10.9 | 13.0 | 10.5 | 8.9 | 10.9 | 12.5 |
| EBIT | 59.9 | 47.4 | 64.6 | 49.5 | 63.3 | 60.3 | 65.8 | 58.0 |
| Financial income, net | -2.6 | -2.7 | -2.6 | -2.7 | -2.6 | -2.7 | -2.6 | -2.7 |
| Gains / (losses) in associated companies | 0.03 | 0.2 | 0.03 | 0.2 | 0.03 | 0.2 | 0.03 | 0.2 |
| Earnings before taxes (EBT) | 57.3 | 44.9 | 62.1 | 47.0 | 60.8 | 57.8 | 63.2 | 55.5 |
| Income tax for the period | 18.1 | 13.4 | 17.4 | 13.0 | 19.0 | 16.1 | 17.8 | 15.5 |
| Losses / (gains) attributable to non controlling interests |
0.01 | -0.13 | 0.01 | -0.13 | 0.01 | -0.13 | 0.01 | -0.13 |
| Net profit attributable to equity holders | 39.2 | 31.7 | 44.6 | 34.1 | 41.7 3 | 41.8 3 | 45.5 | 40.2 |
1 Excluding revenues/costs of Banco CTT BU and Banco CTT project reported in CTT S.A..
2 Recurring net profit excludes non-recurring revenues and costs and considers the theoretical (nominal) tax rate of CTT.
3 Considers the effective tax rate of the period of CTT S.A. and Banco CTT.
Note: Next page reconciles the reported and recurring EBITDA and EBIT.
€ million
| 1H15 | 1H16 | ∆ | |
|---|---|---|---|
| Reported EBITDA | 70.4 | 57.0 | -13.4 |
| Non-recurring items affecting EBITDA | 5.1 | 5.4 | +0.3 |
| Revenues | 0.0 | -1.7 | -1.7 |
| Staff costs | 1.3 | 2.3 | +0.9 |
| ES&S & other op. costs | 3.8 | 4.9 | +1.1 |
| Recurring EBITDA | 75.5 | 62.5 | -13.0 |
| Reported EBIT | 59.9 | 47.4 | -12.4 |
| Non-recurring costs affecting only EBIT | -0.3 | -3.4 | -3.1 |
| Provisions (reinforcements / reductions) |
-0.2 | -3.8 | -3.6 |
| Impairments (losses / reductions) | -0.1 | 0.4 | +0.5 |
| Non-recurring items affecting EBITDA & EBIT | 4.8 | 2.0 | -2.7 |
| Recurring EBIT |
64.6 | 49.5 | -15.2 |
Early termination of a vacant building lease contract
Continuation of the compensations resulting from the 2015 Company Agreement Studies and strategic projects, mainly related to the launch of Banco CTT
Early termination of a vacant building lease contract (€2.9m)
11 Aug. – New York – Jefferies 2016 Industrials Conference 9 Sep. – Porto – XIII BPI Iberian Conference 12 Sep. – London – UBS Global Transport, Travel & Leisure Conference 13 Sep. – London – JP Morgan Small / Mid Cap Conference 14 Sep. – Edinburgh – Roadshow with Barclays 15 Sep. – Paris – Kepler Cheuvreux Autumn Conference
Contacts: Phone: +351 210 471 857 E-mail: [email protected]
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