Annual Report • Mar 9, 2017
Annual Report
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2016
| CHAIRMAN & CHIEF EXECUTIVE OFFICER'S STATEMENT 5 | ||
|---|---|---|
| CORPORATE BODIES AND MANAGEMENT 11 | ||
| KEY FIGURES 15 | ||
| HIGHLIGHTS OF THE YEAR 18 | ||
| AWARDS AND RECOGNITIONS 19 | ||
| PART I - MANAGEMENT REPORT 21 | ||
| 1. | STRATEGIC LINES 21 | |
| 2. | BUSINESSES 25 | |
| 2.1. | Economic, sectoral and regulatory environment 25 | |
| 2.2. | Mail 39 | |
| 2.3. | Express & Parcels 48 | |
| 2.4. | Financial Services 51 | |
| 2.5. | Banco CTT 53 | |
| 3. | ECONOMIC AND FINANCIAL REVIEW AND CTT SHARE PERFORMANCE 55 | |
| 4. | HUMAN RESOURCES 73 | |
| 5. | QUALITY, INNOVATION AND SUSTAINABILITY IN CTT'S ACTIVITIES 76 | |
| 5.1. | Quality of Service 76 | |
| 5.2. | Innovation and development 78 | |
| 5.3. | Sustainability 79 | |
| 6. | SUBSEQUENT EVENTS AND FUTURE PERSPECTIVES 83 | |
| 7. | PROPOSAL FOR THE APPROPRIATION OF RESULTS 87 | |
| 8. | DECLARATION OF CONFORMITY 89 | |
| PART II - FINANCIAL STATEMENTS 91 | ||
| Consolidated and individual financial statements 91 | ||
| PART III – AUDIT REPORT AND REPORT AND OPINION OF THE AUDIT COMMITTEE 205 | ||
| CONTACTS 229 |
2016 was a particularly challenging year for CTT. The acceleration of some of the industry trends (digital substitution and liberalisation) – with impact on volumes and also with pressure on prices and the growth below expectations of some business segments, have tested the resilience of the CTT business model in a year that is marked by the implementation of several concrete initiatives, in line with our strategy, which we are convinced will bring results and sustainability of the business model for the future. The successful launch of Banco CTT, new offers in the Express & Parcels segment and advertising mail, the launch of a commercial excellence programme and the beginning of the transformation of our technological capacities are good examples of the dynamics we are putting in place.
Mail volumes are and will continue to decrease, urging the development of CTT based on its core networks and strong brand, keeping a focus on growth and profitability. Through innovation and constant search for efficiency, we have sought to achieve what we have set out as goals and to respond to the needs of our stakeholders. I believe we are increasingly better prepared to face a naturally different future.
The postal sector is undergoing a deep transformation with technological disruptions that significantly change our activity and way of operating. Although traditional mail usage has been declining over the last few years, postal operators have been able to explore new sources of value around its core competencies.
The dynamics of the postal business market have gone through major changes as the industry has been shifting from public monopolies to liberalised markets, with increasing presence of competitors. This combination of occurrences has accelerated the dynamism of the market by creating a more competitive environment.
On the demand side, companies and end consumers have been showing an increasing preference for digital communications, which impacts the physical business due to the substitution effect. On the other hand, the democratisation of internet access has made it possible to purchase online, not only at national level but also to access international markets. The evolution of e-commerce has been intensifying and as a result the parcels business is the one that has contributed the most to the growth of the industry. However, in many cases it means starting from a smaller base (i.e. the B2C delivery market), and it becomes more difficult in the short term to provide direct compensation to postal operators for the substitution effect that will tend to soften over time.
Postal operators have been ambitious and innovative, striving to expand their presence in the distribution value chain and develop businesses with potential synergies with their traditional activities. There is a phenomenon of diversification, which is naturally framed in the strong structures and assets typically present in companies in this environment, its networks and presence in the market. These companies have leveraged in their strong brand awareness and physical networks, capillarity and proximity to develop adjacent businesses in a sustainable and efficient manner, namely financial services, logistics and retail.
Representing a large part of CTT's revenues, Mail continues and will continue to be one of the main focuses of our Company. The preservation of our core business continues to be a central strategic pillar for CTT.
This year, one of the most important initiatives in this space was the implementation of the new Advertising Mail strategy, which we believe has a high potential for growth in the coming years. It was marked by the re-branding of these solutions, presented today under the CTT Ads umbrella. This way the Company strengthens its position in the market, aiming to reinforce digital advertising with the proven effectiveness of the physical advertising means. Earlier in 2017, the new online platform aimed at SMEs was launched, which, in a one-stop-shop approach, will allow for the development of hybrid campaigns that combine various digital and physical solutions.
Keeping up with the digitalisation trend, CTT now offers a number of solutions that streamline the processes associated with sending and receiving mail (e.g. Via CTT, Printing & Finishing solutions, automated address processing and dematerialisation solutions). Strengthening of CTT's technological capacities in this context is currently underway, as it will allow the Company to ensure a more robust offer to our business customers and an expansion to processes that are less adjacent to mail, but equally dependent on communications in the companies (between them and their customers or internally). We have also initiated a review of our portfolio of proximity and geographic information solutions by carrying out several pilot testing of data collection and information provisioning (e.g. meter reading, georeferencing, signal measurements, etc.). We believe that there is a relevant and monetisable path for CTT in these areas.
The Express and Parcels business is clearly one of the areas that presents the greatest growth potential for CTT, highly driven by globalisation and the corresponding dynamism and growth of e-commerce. For CTT, this trend presents opportunities in a broad value chain, within which we believe we will have the capacity to expand. On the other hand, as a result of an increasingly technological and on-the-move culture, this business presents an increasing demand for flexibility and quality of service, typically associated with the criteria of convenience, simplicity and interactivity that both the e-seller and e-buyer seek.
In 2016 we have taken a major step towards meeting the needs of the stakeholders of the e-commerce ecosystem. In November e-segue was launched, a new modular offer especially adapted to the dynamic needs of the final consumer allowing him/her to change the day, time and place of delivery as he/she wishes.
In addition, especially focused on convenience and leveraged in the potential of the internet a totally online experience was developed, the Click and Ship service, which allows our clients to send a parcel with no need to go to a CTT post office. In 2016, we also invested in the search for self-service solutions in the receipt of parcels, resulting in a first project planned for the beginning of 2017 that will consist of the use of lockers to receive parcels. It is our goal to continue working in this direction, together with the continuous development of our PuDo network, always with a creative and innovative spirit.
It is our conviction that CTT can play a relevant role in the domestic marketplace as a catalyst for the coming digitalisation process of the economy, not only as a supplier of distribution and logistics, but also by helping Portuguese companies to sell more online and encouraging consumers to buy more online. As such, we are studying a set of specific initiatives to that effect.
At international level, we want to position CTT as the partner of the Portuguese e-sellers and e-buyers, giving them access to world trade. The Express2ME service appeared in this context and allows the purchase of products in US online shops that do not allow for international sales, and ensures the delivery of products at home in Portugal to the final consumer (through a virtual address).
In Spain, where our presence is ensured through Tourline, we secured some relevant contracts at the end of the year, including a very strong global e-commerce player, which gives us the conviction that the route of operational improvement is getting clearer. In order to achieve this path, it has also been very important to reinforce the analytical skills (people and processes) that now give us more visibility on the value drivers of this business in Spain.
2016 was also marked by the signing of the contract for the purchase of Transporta - Transportes Porta a Porta, S.A., a company that essentially operates in the cargo distribution and transport market of goods of over 30 kg. This acquisition fits into the strategy of capturing growth opportunities in adjacent markets with synergies with our business. This platform will allow CTT to expand and reinforce its presence in the logistics and last-mile cargo value chain, extending the range of services provided and offering even more integrated solutions to our customers. As at this date, the Competition Authority has already communicated its non-opposition decision regarding such acquisition, hence we have already started to prepare its integration, ensuring that we have a robust plan to capture the synergies and the operational growth once the transaction is completed.
Following the soft opening of Banco CTT only to CTT employees at the end of 2015, the effort of all teams involved in the project culminated in the opening to the general public on 18 March 2016. On that Friday, 52 branches gave the Portuguese population access to the no-frills offer characterised by simplicity and low cost that we strive to ensure. At the end of the year, 9 months after the opening to the public, we can say that we have met our goal for the 2nd wave of expansion of the network, given that branch number 200 was opened in December.
2016 was the year to launch and expand the network, but simultaneously the entire Banco CTT team has been focused on the development of the bank's offer. During this year, our offer was extended, from the simple current account to the credit card with no annual fee, to the salary-account that allows access to an authorised overdraft and solutions of consumer credit and car loans. In 2017, the focus on further developing our offer will continue – in January, the mortgage loans offering was launched in line with the bank's strategy of guaranteeing its customers quality products at competitive prices.
We can confidently conclude that this was a successful year for Banco CTT, which ended with more than 100 thousand customers, 74 thousand current accounts opened and over 250 million Euros in deposits, which proves the acceptance of the bank's concept by the market. As planned, we now follow the path to profitability and growth of the operation.
At the same time a strategic review of the payment services product line of CTT took place in 2016, which resulted in several initiatives to be implemented during 2017, mostly with the aim of maximising the strong network of Payshop agents, the value of this brand and the simplicity and modernisation inherent in the payment processes.
A constant priority in our day-to-day business is to ensure results and for this reason efficiency is a key word in CTT. We have teams focused on the continuous improvement of processes and operations ensuring that, through process review, automation and aggregation, savings that are relevant to the group are achieved.
Due to its importance, operational efficiency has become one of the strategic pillars of the group, highlighting our willingness to continue to implement best practices similar to those that have allowed us to be a reference operator in Europe. In 2017 this will be an integral focus of all the initiatives to be implemented, in order to ensure that we adapt to the evolution and transformation of the market maintaining the same, or better, profitability levels as until today.
We operate in a market in transformation and therefore we try to be dynamic and to have the capacity to adapt to the new reality, always in a distinctive way. Over time and in line with industry practices, we have diversified our offer to products and services more or less adjacent to mail. This scenario has brought a number of challenges, including the specificity of certain products and services and the intensification of the competitive environment.
In this sense, this year we revisited our commercial strategy, always with the objective of better meeting the needs of our customers and providing them with better customer care and attention. As a result of the analysis, several initiatives were defined, partially implemented at the end of 2016 while others will be carried out throughout 2017. Of these, we want to highlight the new segmentation of our business customers and the strengthening and improvement of processes and critical support tools for first-class planning, management and commercial follow-up. The Commercial Excellence programme aims ultimately at (i) ensuring our focus on preserving mail, (ii) leveraging new growth levers and (iii) maximising cross-selling opportunities.
We believe that the agile and effective implementation of what we propose to do is possible due to five catalysts inherent to CTT: i) our financial strength; ii) the proximity (of the CTT brand and networks) to the Portuguese population; iii) the people and the culture in constant learning and transformation; iv) the evolution of our support tools (IT) and adaptation to the digital world; and v) innovation.
In 2016 the overall results were lower than expected and were significantly impacted by the structural decline in mail revenues, which was higher than expected and with a strong negative price
mix effect. Recurring revenues totalled €695.1m and recurring EBITDA was €119.5m, reflecting an EBITDA margin of 17.2%. Excluding Banco CTT, recurring EBITDA totalled €139.6m and the EBITDA margin was 20.1%, the latter remaining at similar levels as in the previous year.
A significant part of the revenues still comes from Mail (77%), and the results of this business had the greatest impact on the overall results of the Company. Although unaddressed mail volumes increased by 5.1%, the digitalisation trend led to a drop in addressed mail. The revenue decrease in 2016 is particularly driven by the decline in Registered Mail volumes, strongly impacted by its lower usage by the Tax Authority. Excluding the Tax Authority effect, Registered Mail volumes grew by 1.3% in the year.
On the other hand, the revenues of the Express & Parcels business were strongly impacted by the operation in Spain, where the strategy implemented in the first half, which aimed at improving the margin of the business, led to the departure of 2 clients representing more than 10% of the revenues. The focus on attracting strategically relevant customers led to the entry of a large e-commerce global player, which only took place at the end of the year and did not compensate for the aforementioned departures. In Portugal, revenues were negatively affected by the loss of a relevant customer and by the continued downturn in the business of transport of internal documents for banks. However, in the last quarter volumes grew by 8.6% driven partially by e-commerce. The competitive dynamics of the business in both markets should be noted, as it exerts increasing pressure on prices, even though there was an improvement in the EBITDA of the business in 2016.
Regarding the Financial Services business, it is worth noting that the savings product line reached 3.8 billion Euro in savings captured from the population, mostly corresponding to placement of public debt products – the revenues of which registered 6.3% growth vis-à-vis 2015. However, the total revenues of this segment were affected by the performance of the payments and money orders and transfers product lines, the latter evolving in line with its main service, pension payments by postal money order, which is decreasing.
By focusing on the efficiency of business management, in 2016, there was a reduction of recurring operating expenses, which totalled €575.6m (-1.3%). Emphasis was given to savings in staff costs, mainly derived from new policies and efficiency measures with permanent impact, which, although with positive effect, were partially offset by the increase in the same heading in Banco CTT. With regard to non-recurring operating costs, it should be highlighted that part of those were directed to the implementation of a human resources optimisation plan, whose positive impacts will be felt in the costs of the coming years.
In 2016 the total investment was €42.2m and was directed mainly to the implementation of Banco CTT objectives and to the IT strategic plan. The increase in this component reflects the effort that CTT is making to ensure that it has the necessary tools to grow.
The full year 2016 results reflect the transition year for the Company; a year focused on strategic projects of structured and sustained planning for the future. This was a period of capacity building at all levels, whether technological, commercial, product or management, which we trust will strengthen the growth levers of the group and mitigate the effects of the decline of mail volumes on the overall results. I believe we are on the right track and that this year of work and reinvention will bring positive results.
CTT has been pursuing a transformation path since its privatisation, in order to prepare the Company for the future while adequately remunerating its shareholders. Since the IPO, there has been a stabilisation of the level of revenues and a significant increase in the EBITDA. In recent years, a total of €200m of dividends (referring to the years 2013 to 2015) has been distributed and for the 2016
financial year a distribution of €72m will be proposed, an amount higher than the previous year and in line with our policy of stable growth of dividend.
I would like to acknowledge the involvement and commitment of all those working at CTT, who are clearly our main asset and act daily as promotors and facilitators of the implementation of CTT's strategy. Together we will implement the business reinvention and adaptation to the New Postal World, as well as the generation of additional value. I also want to highlight the role of our shareholders, customers and other stakeholders, who, through their constant feedback and continued involvement, contribute proactively and positively to our evolution as a Company.
2016 is certainly a mark in the history of CTT for another big event: the opening to the public of Banco CTT.
Over time CTT has demonstrated a high capacity to innovate and diversify its businesses, and new initiatives are making us better prepared to face the future in a rapidly changing industry. I trust future results will show the outcome of the initiatives we are developing!
Francisco de Lacerda Chairman & CEO
| Chairman: | Francisco José Queiroz de Barros de Lacerda (CEO) |
|---|---|
| Vice-Chairmen: | António Sarmento Gomes Mota (Chairman of the Audit Committee) Manuel Cabral de Abreu Castelo-Branco |
| Members2: | André Manuel Pereira Gorjão de Andrade Costa (CFO) Dionizia Maria Ribeiro Farinha Ferreira Ana Maria de Carvalho Jordão Ribeiro Monteiro de Macedo Nuno de Carvalho Fernandes Thomaz (Member of the Audit Committee) Diogo José Paredes Leite de Campos (Member of the Audit Committee) Rui Miguel de Oliveira Horta e Costa3 José Manuel Baptista Fino Manuel Carlos de Melo Champalimaud4 Céline Abecassis-Moedas5 |
| Chairman: | Júlio de Lemos de Castro Caldas |
|---|---|
| Vice-Chairman: | Francisco Maria de Moraes Sarmento Ramalho |
| Chairman: | João Luís Ramalho de Carvalho Talone |
|---|---|
| Members6: | Rui Manuel Meireles dos Anjos Alpalhão Manuel Fernando Macedo Alves Monteiro7 |
1 As at the date of approval of this Annual Report.
2 António Manuel de Carvalho Vitorino tendered his resignation as Non-Executive Member of the Board of Directors on 30-05-2016.
3 Tendered his resignation asf Non-Executive Member of the Board of Directors on 08-02-2017.
4 Elected at the General Meeting of Shareholders of 28-04-2016 for the position of Non-Executive Member of the Board of Directors to complete the current 2014/2016 term of office.
5 Co-opted by a deliberation of the Board of Directors of 04-08-2016 to complete the current term of office (pending ratification at the next General Meeting) for the position of Non-Executive member of the Board of Directors to replace António Manuel de Carvalho Vitorino.
6 José Gonçalo Ferreira Maury tendered his resignation as Member of the Remuneration Committee on 04-01-2016.
7 Elected at the General Meeting of Shareholders of 28-04-2016 for the 2014/2016 term of office following José Gonçalo Ferreira Maury's resignation as Member of the Remuneration Committee on 04-01-2016.
| Executive Committee | ||||||
|---|---|---|---|---|---|---|
| Chairman: | Francisco José Queiroz de Barros de Lacerda | |||||
| Members: | Manuel Cabral de Abreu Castelo-Branco André Manuel Pereira Gorjão de Andrade Costa (CFO) Dionizia Maria Ribeiro Farinha Ferreira Ana Maria de Carvalho Jordão Ribeiro Monteiro de Macedo |
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| Audit Committee | ||||||
| Chairman: | António Sarmento Gomes Mota | |||||
| Members: | Nuno de Carvalho Fernandes Thomaz Diogo José Paredes Leite de Campos |
|||||
| Corporate Governance, Evaluation and Nominating Committee | ||||||
| Chairman: | António Sarmento Gomes Mota | |||||
| Members: | José Manuel Baptista Fino Céline Abecassis-Moedas8 |
|||||
| Statutory Auditor and External Auditor | ||||||
| Statutory Auditor (ROC): | KPMG & Associados, SROC, S.A., represented by Maria Cristina Santos Ferreira |
|||||
| Alternate Statutory Auditor: Vítor Manuel da Cunha Ribeirinho |
8 Appointed as Member of the Corporate Governance, Evaluation and Nominating Committee by a deliberation of the Board of Directors of 14-02-2017 to replace Rui Miguel de Oliveira Horta e Costa who tendered his resignation as Non-Executive Member of the Board of Directors and Member of the Corporate Governance, Evaluation and Nominating Committee on 08-02-2017.
Banco CTT adopts an Anglo-Saxon corporate governance model based on the existence of a Board of Directors, an Audit Committee, a Remuneration Committee and a Statutory Auditor.
The Board of Directors of Banco CTT in office since 31 December 2016 and as at this date is composed of the following 9 Directors, of whom 5 Non-Executive Directors (including the Chairman of The Board of Directors, who is also Chairman of the Remuneration Committee, and 3 independent Directors) and 4 Executive Directors (including the Chairman of the Executive Committee).
The Bank also has two Committees supporting the Board of Directors: the Selection Committee, which is chaired by António Gomes Mota (who is also Member of the Remuneration Committee) and composed of Francisco de Lacerda and José Manuel Fino as Members, and a Remuneration Committee chaired by Francisco de Lacerda and composed of José Morais Cabral and Clementina Barroso as Members.
With regard to the Selection Committee, António Vitorino and Rui Horta e Costa tendered their resignation to the position of Members of this Committee respectively on 30 May 2016 and 8 February 2017. Rui Horta e Costa also tendered his resignation to the position of Member of the Remuneration Committee of Banco CTT on 8 February 2017.
| € thousand or %, except where indicated | 2014 | 2015 | 2016 | Δ% 16/15 |
|---|---|---|---|---|
| Revenues (1) | 717,774 | 727,180 | 695,060 | -4.4 |
| Operating costs excluding depreciation, amortisation, | 582,674 | 583,205 | 575,561 | -1.3 |
| impairments, provisions and non recurring-costs | ||||
| Recurring EBITDA (2) | 135,100 | 143,975 | 119,499 | -17.0 |
| Recurring EBIT (2) | 111,522 | 119,762 | 94,687 | -20.9 |
| EBIT | 135,418 | 109,932 | 90,883 | -17.3 |
| EBT | 127,999 | 104,610 | 85,245 | -18.5 |
| Net profit for the period | 76,844 | 72,071 | 61,897 | -14.1 |
| Net profit attributable to equity holders | 77,171 | 72,065 | 62,160 | -13.7 |
| Earnings per share (euro)(3) | 0.51 | 0.48 | 0.42 | -13.5 |
| Recurring EBITDA margin | 18.8% | 19.8% | 17.2% | -2.6 p.p. |
| Recurring EBIT margin | 15.5% | 16.5% | 13.6% | -2.9 p.p. |
| Net profit margin | 10.8% | 9.9% | 8.9% | -1.0 p.p. |
| Return on Equity (ROE) | 29.4% | 28.8% | 25.6% | -3.1 p.p. |
| Return on Invested Capital (ROIC) | 26.2% | 21.3% | 13.0% | -8.3 p.p. |
| Return on Capital Employed (ROCE) | 24.0% | 20.2% | 18.1% | -2.1 p.p. |
| Capex | 16,596 | 32,331 | 42,160 | 30.4 |
| Operating free cash flow (4) | 106,434 | 68,322 | 83,761 | 22.6 |
| 31.12.2014 | 31.12.2015 | 31.12.2016 | Δ% 16/15 | |
| Cash and cash equivalents | 664,570 | 603,650 | 618,811 | 2.5 |
| Net cash | 278,891 | 278,999 | 295,306 | 5.8 |
| Assets | 1,180,997 | 1,119,472 | 1,316,697 | 17.6 |
| Liabilities | 931,787 | 867,637 | 1,083,370 | 24.9 |
| Equity | 249,210 | 251,835 | 233,327 | -7.3 |
| Share Capital | 75,000 | 75,000 | 75,000 | - |
| Number of shares | 150,000,000 150,000,000 150,000,000 | - | ||
| Current liquidity ratio | 134.5% | 133.0% | 106.2% | -26.8 p.p. |
| Solvency ratio | 26.7% | 29.0% | 21.5% | -7.5 p.p. |
| Adjusted Solvency ratio (5) | 45.6% | 46.4% | 30.7% | -15.7 p.p. |
| Net debt (6) | -74,876 | -82,590 | -90,275 | 9.3 |
| Net debt/recurring EBITDA (7) | -0.6 x | -0.6 x | -0.8 x | 0.2 x |
Tangible fixed asset coverage 239.0% 237.0% 230.4% -6.6 p.p. (1) Excluding non-recurring revenues.
(2) Before non-recurring revenues and costs.
(3) It is considered the number of shares outstanding excluding the 600 531 own shares (200 177 bought in 2015 and 400 354 bought in 2016).
(4) Cash flow from operating and investment activities excluding change in net Financial Services payables.
(5) Equity/(Total liabilities - Financial Services payables).
(6) Net debt includes the responsibility with employee benefits, net of deferred tax credit.
(7) If negative indicates a positive net cash position.
| 2014 | 2015 | 2016 | Δ% 16/15 | |
|---|---|---|---|---|
| Addressed mail volumes (million items) | 841.3 | 814.7 | 780.2 | -4.2 |
| Transactional mail | 718.0 | 688.3 | 662.8 | -3.7 |
| Editorial mail | 47.6 | 46.2 | 43.3 | -6.4 |
| Advertising mail | 75.7 | 80.2 | 74.2 | -7.5 |
| Unaddressed mail volumes (million items) | 507.7 | 473.4 | 497.8 | 5.1 |
| Express & Parcels | ||||
| Portugal (million items) | 13.8 | 14.4 | 14.6 | 1.1 |
| Spain (million items) | 13.7 | 14.0 | 12.3 | -12.3 |
| Financial Services | ||||
| Payments (number of transactions; millions) | 67.0 | 61.5 | 57.6 | -6.2 |
| Savings and insurance (subscriptions and redemptions; € millions) | 5,481.6 | 4,252.9 | 3,794.0 | -10.8 |
| Banco CTT | ||||
| Number of current accounts | - | - | 74,135 | - |
| Client deposits (€m) | - | - | 253,945 | - |
| Number of branches | - | - | 202 | - |
| Staff | ||||
| Staff (FTE) (1) | 12523 | 12,462 | 12,479 | 0.1 |
| Retail, Transport and Delivery Networks | ||||
| Post offices | 623 | 619 | 615 | -0.6 |
| Postal agencies (partnership branches) | 1694 | 1,711 | 1,724 | 0.8 |
| Payshop agents | 3876 | 3,939 | 4,202 | 6.7 |
| Postal delivery offices | 262 | 254 | 242 | -4.7 |
| Postal delivery routes | 4659 | 4,731 | 4,698 | -0.7 |
| Fleet (number of vehicles) | 3478 | 3,530 | 3,609 | 2.2 |
(1) FTE = Full-time equivalent.
| 2014 | 2015 | 2016 | Δ% 16/15 | |
|---|---|---|---|---|
| Customers | ||||
| Customer satisfaction (%) | 84.8 | 85.2 | 86.1 | 0.9 p.p. |
| Total number of operating units certified (ISO standard and retail and delivery networks certification) |
1,159 | 1,183 | 1,167 | -1.4 |
| Retail and delivery networks certification (% coverage) | 100 | 100 | 100 | - |
| Overall Quality of Service Indicator (points) (1) | 236.5 | 205.8 | 126.0 | -79.8 |
| Staff | ||||
| Number of accidents (2) | 955 | 949 | 979 | 3.2 |
| Training (hours) | 263,828 | 316,042 | 311,354 | -1.5 |
| Women in management positions (1st management level) (%) | 38.3 | 35.3 | 32.4 | -2.9 p.p. |
| Community/Environment | ||||
| Value chain - contracts with environmental criteria (%) | 99.5 | 99.2 | 99.4 | 0.2 p.p. |
| Total CO2 emissions, scope 1 and 2 (kton.) (3) (4) | 21.1 | 16.3 | 16.5 | 1.0 |
| Energy consumption (TJ) (3) (4) | 368.7 | 381.3 | 384.9 | 1.0 |
| Eco-friendly vehicles | 298 | 304 | 320 | 5.3 |
| Weight of Eco product range in Direct Mail line (%) (5) | 22.8 | 34.3 | 37.1 | 2.8 p.p. |
| Investment in the Community (€ thousand) | 1,039 | 908 | 1,236 | 36.1 |
(1) As of 1 january 2016 the constitution of the Overall quality of service indicator was changed with the introduction of new indicators and weights. The indicator of 2016 is not comparable with those of the previous years.
The 2015 OQSI figure published on the Annual Report (206.4) was recalculated considering the items sent (instead of delivered) in the year 2015.
(2) 2015 data were updated: accidents were considered which were communicated after the publication of the Annual Report 2015. 2016 data are provisional.
(3) 2015 data were updated: includes the acquisition of green energy (with zero carbon emmission) and year-end data of Banco CTT.
(4) Indicators do not include Corre.
(5)Volume.
CTT's Annual General Meeting where the 2015 financial reporting documents were approved, including the management report, the individual and consolidated accounts, the corporate governance report, the allocation of year-end results including the payment of a gross dividend of €0.47 per share, as proposed by the Board of Directors and votes of positive assessment and praise for the members of the Company's management and oversight bodies for carrying out their duties in 2015.
14 additional Banco CTT branches were opened in CTT's Retail Network, thereby widening Banco CTT's on-site network.
CTT and its senior officers received the following awards and acknowledgements in 2016:
CTT's Chairman and CEO, Francisco de Lacerda, was distinguished for the second consecutive year with the Best CEO Award and CTT's CFO, André Gorjão Costa, was distinguished as the best manager in the financial area, in the Investor Relations & Governance Awards 2016 (IRGA). These awards are promoted by Deloitte and distinguish the best company performances and best corporate governance practices.
CTT was distinguished by the magazine Human Resource Portugal with the Human Resources Portugal 2015 award in the categories of: "Person of the Year" granted to CTT's CEO, Francisco de Lacerda, "Company with the best health and well-being policy" and "Company that most promotes Gender Equality".
CTT won in the following categories:
Best photograph (2nd place) from FEIEA (Aposta+ magazine no. 142, pg. 26)
Best cartoon/illustration/graphic image (3rd place) from FEIEA (Cover of Aposta+ magazine no. 143)
Miguel Salema Garção, CTT's Brand and Communication Manager, was distinguished with the Big Fish award in the 8th edition of the Marketeer Awards.
Miguel Salema Garção won the 2016 Marketing and Communication Person Award attributed by Meios & Publicidade (Media & Advertising). Move-nos magazine and CTT TV were distinguished for internal communication in the "Internal/Institutional Publication" and "Corporate TV or Web TV" categories.
CTT was again distinguished in the 2016 edition of the World Post & Parcel Awards, the Oscars of the world mail industry, having been "Highly Commended" twice in the categories of "ecommerce" and "Human Resource Management", with the "Online Invoice" project and the "Human Resource Development Programme", respectively.
CTT received the 2016 "Brand of Excellence" award from among thousands of brands through a study carried out by Superbrands, belonging to Netquest. Netquest is an independent market research company with the only certified online panel.
CTT was again distinguished in the International Prize of Philatelic Art of Asiago, considered the Oscar of Philately. This time, the two commemorative stamps for the "International Year of the Soil" won in the "Ecology" category.
The issue of the stamps "International Year of Light and International Year of the Soil" was deemed the most original in the entire world by the monthly magazine L'Arte del Francobollo in February 2016.
Two stamps issued by CTT in 2015 were distinguished in the Nexofil grand prize gala in Madrid. The "International Year of the Soil" stamp won 1st prize for final artwork design in the "Best Design" category and the "Madeira Embroidery" self-adhesive stamp was considered the 2nd best stamp in the "Innovation" competition. The Nexofil awards are granted by El Eco magazine, the oldest and most renowned philately and numismatic Spanish magazine.
CTT's and CTT Expresso's customer service lines were awarded the bronze and silver medals, respectively, in APCC's 2016 Best Awards in the category of "Delivery and Logistics" by the Portuguese Association of Contact Centres (APCC).
CTT was awarded the "2016 bicycle-friendly company" merit badge by MUBi, the Association for Bicycle Urban Mobility (Associação para a Mobilidade Urbana em Bicicleta).
CTT was also distinguished, for the third consecutive time, as an Environmentally Trusted Brand in the "Public Service Company" category, an important acknowledgement of the environmental policy it has been implementing over the years.
CTT was distinguished for the "A Tree for the Forest" project, in partnership with Quercus, in the "Mobilization Initiative" category.
CTT received an honourable mention in the "Efficient resource management" category in the "Driver's Challenge" project, a sustainable driving assessment and acknowledgement system, as regards eco-efficiency, road accidents and customer service.
CTT was bestowed this award in the environment category with the project "A Tree for the Forest", which was described by the organisation as a "good Corporate Social Responsibility practice among European postals".
Companies operating in the postal sector face important global challenges that make in depth transformations necessary in order to permanently optimise efficiency and reinforce growth drivers. CTT's action plan and strategy are based on fast changing consumer needs and general sector trends:
In 2016, CTT reviewed its strategy and made certain adjustments in order to reflect the Company's corporate priorities and the market's vibrant evolution, both as regards trends and its competitive structure.
The strategic pillars are currently five, three of which are directly related to new businesses and the offer upgrade in its main business units (Mail, Express & Parcels and Financial Services). The other two, which cut across the entire organisation, are operational efficiency and commercial excellence. The latter two take on greater importance and relevance within the organisation.
Some of the main initiatives carried out or currently underway concerning these strategic pillars are:
To implement its strategy, CTT relies on 5 differentiating catalysts:
The IMF's latest forecasts (January 2017) for the world economy indicate slightly slower growth in 2016 (3.1%, as compared to 3.2% in 2015). This development is the result of different growth rates among regions, with decelerated growth in advanced economies (1.6% in 2016, as compared to 2.1% in 2015), along with stable growth in emerging and developing market economies (4.1% for both years).
U.S. economic activity rebounded throughout the year (1.6% in 2016) and is approaching full employment. In the Eurozone, GDP (1.7%) continued to fall short of its potential level. Some economies grew more than expected, such as Spain that had a 3.2% growth rate (equal to 2015) and the United Kingdom where domestic demand held up better than expected in the aftermath of the vote to leave the European Union, with growth in GDP at 2.0% in 2016. Japan's growth rate also surpassed initial forecasts (0.9%). Economic activity in emerging market economies remains diverse in its evolution, depending on the underlying economic models and government policies. China had a 6.9% growth rate in 2016, thanks to continued policy stimuli. Activity in Latin America was weaker than expected (-0.7%) due to the fact some countries are currently in recession, such as Argentina and Brazil. Turkey suffered a sharp contraction from the fall in service exports (tourism), due to the political turmoil that swept the country and the sentiment of insecurity. Despite contraction, activity in Russia was better than expected (-0.6%), in part reflecting firmer oil prices, as a result of an agreement between the Organization of the Petroleum Exporting Countries (OPEP) and other producing countries to trim global oil production.
Despite growth in the trade of goods and services in emerging economies (from 0.3% in 2015 to 1.9% in 2016), less growth in the trade of goods and services in advanced economies (from 4.0% in 2015 to 2.0% in 2016) led to a strong slowdown in the world trade of goods and services, which grew 1.9%, less than the 2.7% in 2015. This affected e-commerce in these economies. The inflation rate for most advanced economies rose to 0.7% in 2016 (0.3% in 2015), as opposed to the estimated slowdown to 4.5% for the whole of emerging and developing countries (4.7% in 2015). The average inflation rate in the Eurozone remained low throughout 2016, reaching 0.2% in December in terms of variation over the last 12 months (0.0% in 2015), although with varying behaviour in the various economies that comprise it.
In the context of contained inflationary pressure and the still low capacity utilisation rates in most advanced economies, monetary policy remained dovish throughout 2016, especially for the Eurozone, Japan and the United Kingdom. Long-term nominal and real interest rates have risen substantially since August, particularly in the United Kingdom, as a result of the Brexit vote and the announced post-Brexit economic stimulus policies, and in the U.S. since the November election. Short-term Euribor interest rates closed the year at negative levels for all maturities, which in part reflected the broad set of monetary policy measures adopted by the ECB.
According to the Preliminary 2016 Quarterly and Annual National Accounts of the INE (National Statistics Institute), GDP grew by 1.4% in 2016, 0.2 percentage points (p.p.) below that of the previous year. The domestic demand's positive contribution to the the annual rate of change of the GDP was lower, as it decreased from 2.6 p.p. in 2015 to 1.5 p.p., essentially due to a shortfall in investment of 0.9% (mainly as a result of the drop in Gross Fixed Capital Formation) but also, to a lesser degree, to the slight slowdown of private consumption (from 2.6% in 2015 to 2.3% in 2016). Net external demand contributed -0.1% to the change in GDP in 2016, which is less negative than in 2015 (-1.0 p.p.), as a consequence of a greater slowdown of the import of goods and services (from 8.2% in 2015 to 4.4% in 2016) than the export of goods and services (from 6.1% in 2015 to 4.4% in 2016). In nominal terms, the external balance of goods and services increased in 2016 and stands at 1.2% of GDP (0.7% of GDP in 2015), benefiting from the 2016 gains in terms of trade which are nevertheless below those of 2015.
Inflation, measured by the Harmonised Consumer Price Index (HCPI), increased slightly in 2016 to 0.6% (0.5% in the previous year), reflecting a more moderate fall in prices for energy products and a pick-up in service prices.
In 2016, the labour market continued to show signs of improvement, with a lower rate of unemployment at 11.1% (-1.3 p.p. than the previous year) and a rise in total employment of 1.6% (0.2 p.p above that of 2015).
For 2016, the general government deficit should be 2.4% of GDP, 0.2 p.p. of GDP above the target set by the 2016-2020 Stability Programme and the 2016 State Budget and 0.1 p.p. of GDP below the value recommended by the European Commission and adopted by the European Union. The deficit is worse than previously forecast essentially due to the downturn in economic activity, less dynamic development in domestic demand and in consumer prices, leading to lower tax revenues than estimated in the State Budget, where growth was based on a strong pick-up in domestic demand.
The postal sector continued its transformation process in 2016, due to sectoral trends wherein postal operators have implemented business diversification strategies in which Mail already represents less than 50% of revenue.
As regards mail, volumes are under pressure for most postal operators, which led to a fall in volumes in recent years and thereby a drop in mail-related revenue. CTT, together with certain other operators, is an exception in this regard for the period between 2013 and 2015. In 2016, the fall in revenue was similar to the fall in volume, due to a change in the volume profile with a sharp fall in mail of greater added-value (registered mail) and a price increase lower than the volume decrease. The following graph shows the relationship between volume growth and revenue growth for a group of European postal operators, in a sectoral trend analysis between 2013 and 2015 (2016 data is not yet available for all operators).
In the national market, the panorama is analogous to those of international markets with a historic trend toward a drop in volume in all mail segments in recent years. The evolution in transaction communication, and in government authorities in particular, is one of the reasons for this fall, due to the increasing weight of the use of digital options.
However, it is important to note that segments that have historically tended to show sharper downturns are those most permeable to the digital substitution effect, as is the case for advertising mail and editorial mail (2016 has shown signs of a turnaround in this trend as regards addressed advertising mail volumes in Portugal9 ). Letter mail represents the vast majority of postal volumes
9 Source: ANACOM – addressed advertising mail volume in the first 9 months of the year.
and has historically tended to fall less sharply than other segments, nearly 2.6% a year. The following table illustrates the evolution of mail volumes over the last 16 years (all of the market).
Evolution in Portuguese mail market volumes in the period of 2000-2015
Inversely, the global express & parcels market continues to show strong growth (largely driven by e-commerce), with generally growing volumes and revenue, as the following graph illustrates.
Evolution in express & parcels volume versus revenue by operator
E-commerce has grown quite significantly in recent years. The number of online shoppers has been growing as trust in shopping websites and platforms has increased. Even so, Portugal still has a way to go as it trails behind European countries with nearly 30% of online shoppers in 2016 (see graph below).
Evolution in % of online shoppers in Portugal, the EU and the world
Notwithstanding, growth forecasts are very positive, with the volume spent on e-commerce growing by double digits in Portugal per year. The outlook for the following years is that the growth trend will continue at a very accelerated pace.
As specifically concerns the domestic Express & Parcels market, the growth trend is in step with the global market and with the opportunity arising from e-commerce, with 8% volume growth per year over the last 16 years, as illustrated by the graph below.
Evolution in the Portuguese Express & Parcels market volume from 2000-2015
However, as shown by the graph above, the recent fall in parcel volume between companies (B2B) during the Portuguese economy's period of contraction, slowed the growth this market had been going through since 2011. There was a fall despite the growth in e-commerce affecting the segment of end consumer parcels (B2C), because the weight thereof in the national market was less than 20%. The B2C e-commerce segment continues, therefore, to have quite significant (double digit) growth prospects, as opposed to traditional B2C, which continues to fall.
Breakdown of segments in the Express & Parcels market in Portugal – 2015
Computer use and access to the internet in private homes in Portugal has grown at a consistent pace over the last 5 years, with nearly 71% and 70% in 2015 respectively. There is nonetheless still some resistance to using the internet in the home, the main reasons for which are, among homes without internet access where there is at least one person between the age of 17 and 74, not knowing how to access the internet (65.4%), not being interested (44.8%) and the high-cost of getting online (40.1%)10.
The evolution of the postal sector and the trends that affect it result in ever straighter ties between postal operators with other sectors of activity, such as logistics and transport, the financial sector or the advertising market.
The advertising sector in particular has quite a direct and significant impact on postal operators' activity, namely in the performance of the offer lines related to advertising mail. It is therefore relevant to note that the advertising sector in Portugal is undergoing significant growth, following a period of divestment by advertisers. It grew almost 16% in 2016, as indicated in the following graph.
10 Source: National Institute of Statistics.
Evolution of advertising investment in Portugal, by medium
TV and the internet are the media that have sustained the referenced growth, as opposed to the printed press which is in sharp decline due to its migration online. Notwithstanding the dominant weight of TV, advertisers diversify the media used for campaigns, namely Small and Medium Enterprises that claim the Press and Internet as the prevalent media in their communications budget planning. These small advertisers tend to rely more heavily than the rest on addressed and unaddressed advertising mail (spending 12% and 7% of their respective budget), while large advertisers essentially use television to promote their products and services.
In addition to the growth trend in the Portuguese advertising sector, it is also relevant to understand the importance consumers give advertising media, in particular those related to physical medium. When comparing the behaviour and time spent on receiving addressed physical mail with advertising emails, it is clear the consumer's behaviour differently with addressed advertising mail, on which he/she spends more time and attention. Nearly 44% reads addressed advertising mail closely (versus 25% in advertising email) and almost 40% spends more than 6 minutes reading it.
The year of 2016 was marked by strained world growth of around 3%11, which was close to the post-financial crisis rates of previous years. Growth forecasts were gradually adjusted downward and world growth rates continue to be low, affecting financial market forecasts differently.
The June referendum in the United Kingdom that determined its exit from the European Union (Brexit) and the U.S. presidential elections that elected Donald Trump as president were two political milestones in 2016 that influenced the behaviour of world financial markets.
After announcing Brexit, European shares, especially British shares, traded at historical lows as compared to North American shares. Lack of clarity as to the framework that will govern economic and commercial ties between the United Kingdom and Europe caused great volatility in the markets, in particular the foreign exchange market, where the Euro gained ground vis-à-vis the British Pound. This fact also sparked a greater concern with promoting the unity of the Euro economies by the European Union.
11 OECD Economic Outlook November 2016.
On the other hand, 2016 was marked by a climate of low interest rates, due to stability and low growth rates that led to continuity in the U.S. Federal Reserve's (Fed) monetary policy decisions, in addition to those of the ECB. The latter contributed thereto namely through the sovereign and corporate debt purchase programme that enabled Eurozone countries and companies to benefit from very low financing costs. This ECB quantitative easing programme has been fundamental in controlling yields on sovereign debt securities, namely Portuguese debt securities and those of other peripheral countries. As an example thereof, in the last quarter of 2016, there was rebound in yields for the main public debt securities, because of the possibility the ECB would decrease the amount of its monthly long-term asset purchases from 80 to 60 billion euros (see graph below).
Source: Thomson Reuters in "OECD Economic Outlook", November 2016.
In 2017, advances in Brexit negotiations, economic slowdown in China, the Fed's and ECB's monetary policy measures and Trump Presidency decisions will have an impact on financial markets. The outcome of elections in countries like France and Italy may also bring greater uncertainty and turmoil to markets, especially the European market.
In its projections for 2017, the Fed12 states that interest rates will tend to rise and predicts three 25 basis point increases throughout the year. As evidence thereof, the Fed raised the federal funds rate in December by 25 basis points, from 0.50% to 0.75%. Inflation is also expected to rise to 2% in the medium-term in this region.
In turn, the ECB13 decided to keep reference interest rates unchanged in the Eurozone and so the reference rate remains at 0%. For short-term rates, whose reference is 3-month EURIBOR, the ECB predicts an average rate of -0.3% in 2017. Nominal yields for 10-year public debt bonds in the Eurozone are forecast at 1.2% in 2017.
12 "Economic projections of Federal Reserve Board members and Federal Reserve bank presidents under their individual assessments of projected appropriate monetary policy" - December 2016.
13 "Macroeconomic projections for the Eurozone prepared by Eurosystem specialists"– December 2016.
| December 2016 | |||||
|---|---|---|---|---|---|
| 2016 | 2017 | 2018 | 2019 | ||
| 3-month EURIBOR (as a percentage per year) | -0.3 | -0.3 | -0.2 | 0.0 | |
| Yields for ten-year public debt bonds (as a percentage per year) | 0.8 | 1.2 | 1.5 | 1.7 | |
| Oil Price (USD/barrel) | 43.1 | 49.3 | 52.6 | 54.6 | |
| Prices of non-energy raw materials, in United States dollars (annual change, as a percentage) |
-4.0 | 6.6 | 3.8 | 4.5 | |
| USD/EUR Exchange rate | 1.11 | 1.09 | 1.09 | 1.09 | |
| Actual nominal exchange rate for the Euro (TCE 38) (annual change, as a percentage) |
3.8 | 0.1 | 0.0 | 0.0 |
Source: ECB, "Eurosystem staff macroeconomic projections for the Euro area" – December 2016.
As regards the prices of raw materials, the assumption is that the price of the barrel of Brent crude oil will rise to USD 49.3 in 2017. The prices of non-energy raw materials are expected to increase 6.6% in 2017, as compared to 2016. The average USD/EUR foreign exchange rate is expected to be 1.09 in 2017. As regards the growth of the real GDP and inflation in the Eurozone, rates of 1.7% and 1.3%, respectively, are expected.
In 2016, the Portuguese Banking System maintained the trend toward low interest rates and reduced banking business, as a result of that scenario. The system's banks made an effort to reduce operational costs, mainly by decreasing staff and branches. The year was further marked by uncertainties in Caixa Geral de Depósito's recapitalisation plan and new board of directors, as well as by the sale of Novo Banco, which was postponed yet again in light of its complexity. Of relevance is also the takeover bid launched by BPI's largest shareholder in order to seize control of the bank, thereby enabling greater integration with Caixabank and resolving its problem of over-exposure to Angola as a result of its majority stake in BFA.
The Banking system reinforced positive returns on equity in the 3rd quarter of 2016, although with a substantial year-on-year fall, due to solid revenues from financial operations (sale of public debt securities).This profitability continued to be positively influenced by the international activity of Portuguese banks, thereby offsetting the fragile returns on domestic activity.
On the other hand, asset reductions continued throughout the third quarter of 2016 (-3.4% as compared to the end of 2015)14, albeit at a slower rate, with a continued fall in customer credit (nearly -2% as compared to the end of 2015). The weight of client deposits on the financing of the banking sector continued to rise to the detriment of financing from the Eurosystem. As evidence of these movements, the transformation ratio fell from 103% in the 2nd quarter of 2016 to 101% in the 3rd quarter of 2016.
Volumes of new credit production were also positive, with 14% growth in Mortgage Loans and 8.5% in Consumer Credit, between the end of 2015 and November 2016, although these remain low as compared to the volumes generated before 2011. Spreads on new loans granted by banks to retail customers follow an inverse trajectory, with a 34 b.p. drop for Mortgage Loans to 1.82% and 31 b.p. drop for Consumer Credit to 7.39% between the end of 2015 and November 201615.
14 Bank of Portugal – Portuguese Banking System – Recent Developments – 3rd quarter 2016.
15 Bank of Portugal – Statistical Bulletin – January 2017.
The Banking sector faces various challenges in 2017. The first is related to the recapitalisation of Caixa Geral de Depósitos, with a share capital increase announced for 2017 and the sale of Novo Banco. Another important challenge will be the uncertainty surrounding sustained economic recovery and the contribution of international economic activity, which is expected to cause banks to focus on optimising costs and adequately controlling credit risk.
The provisions that govern the development of the internal market for E.U. postal services were set out in an initial Directive of the European Parliament and Council of 15 December 1997 (97/67/EC), which was supplemented by the Directives of 10 June 2002 (2002/39/EC) and 20 February 2008 (2008/6/EC), which are at the origin of the gradual liberalisation of the postal sector that was completed with the total opening of the market to competition on 1 January 2011. This liberalised market framework simultaneously safeguards a common level of obligations for the Universal Service for all users of the Member States of the European Union (EU) and defines the harmonised principles for the regulation of postal services in a free market environment.
In terms of funding the Universal Service, and since the provision of reserved postal services as a means of funding has been abolished, the new legal framework establishes a series of mechanisms that Member States can adopt to safeguard and fund the Universal Service. The new Directive also contains guidelines on how to calculate the net cost of the Universal Service. The provision of the Universal Service tends to operate at a loss in the EU, with various countries having implemented measures to mitigate this cost without requiring direct compensation. The regulators, aware of the challenges that the postal sector and primarily the provider of the Universal Service face, have permitted the diversification of activities and a more efficient allocation and use of resources, always safeguarding the obligations set out under European law.
With the creation of the Single Digital Market and measures carried out to improve consumer and corporate access to digital goods and services, namely those facilitating cross-border e-commerce, the European Commission (EC) presented a package of measures on 25 May 2016 to enhance ecommerce across the entire EU, including namely a regulation proposal on cross-border parcel delivery services. This legislative proposal, which is still under discussion, aims to increase price transparency and the regulatory supervision of cross-border parcel delivery services.
In this context, European postal operators are together implementing the Interconnect project that essentially entails 5 commitments: flexible delivery options; return solutions; expansion of the track and trace system; better quality of service for the client; and harmonised labels. The goal of this project is to thereby remove obstacles that dissuade consumers from making online purchases outside their country by equipping vendors with more flexible efficient delivery solutions with a single standard for clients and, as such, maximise growth potential in cross-border electronic commerce for postal operators and contribute to the development of the Single Digital Market.
The Postal Law entered into force in April 2012 (Law 17/2012, of 26 April, as amended by Decree-Law 160/2013, of 19 November), transposing to the Portuguese legal system Directive
2008/6/EC. The postal market in Portugal was thereby fully opened to competition, eliminating the areas under the Universal Service that were still reserved to CTT. However, for reasons of public order and security or general public interest, some activities and services remain reserved up to 2020: placement of letter and mailboxes on public roads for the acceptance of mail, issuance and sale of postage stamps with the word "Portugal" and registered mail used in legal or administrative proceedings.
The Universal Service includes the following services, of national and international scope:
In terms of the funding Universal Postal Service obligations (USO), Universal Service providers are entitled to compensation of the net cost of the USO when it constitutes an unreasonable financial burden for them. This compensation is made through a fund supported by the postal service providers, which offer services that, from the point of view of the user, are considered services exchangeable with those covered by the Universal Service, the operation of which has yet to be defined. In February 2014, the regulatory entity (ANACOM) approved the methodology for the calculation of the net cost of the Universal Service provided by CTT as a provider of the Universal Service, as well as on the concept of unreasonable financial burden for effects of compensation of the net cost of the Universal Service as well as the terms for its calculation.
As the concessionaire of the Universal Postal Service, CTT shall remain the Universal Service provider until 2020, with the Government having reviewed the principles of the concession pursuant to the system established in the Postal Law, through the publication of Decree-Law 160/2013, of 19 November, with the execution thereunder of an amendment to the concession contract on 31 December 2013.
Pursuant to the Base XV of the Concession of the Universal Postal Service, in August 2014, ANACOM approved the final decision on the objectives of postal network density and minimum services offer with which CTT should comply until 2017. The objectives defined in terms of postal network density and minimum services offer, which do not significantly alter the current postal network, reinforce the assurance of the existence of availability and accessibility of the Universal Service provision entrusted to CTT.
Under the criteria for formation of prices for the 2015/2017 period as established by an ANACOM resolution of 21 November 2014, ANACOM approved the Universal Service price proposal presented by CTT on 17 November 2015, as later adjusted, by a resolution of 20 January 2016. The prices inherent to this proposal, which complied with the established price formation principles and criteria, became effective on 1 February 2016.
As further regards prices, special prices for postal services included in the Universal Service that apply to bulk mail senders were also updated on 1 February 2016 to keep prices consistent, following the proposal submitted to the Regulator on 18 January 2016.
As the Universal Postal Service provider and in order to provide a standardised and nondiscriminatory service to operators that wish to use the Universal Service network, as of February 2016, CTT made available to postal operators with an individual license an offer to access its
network that is deemed competitive and that safeguards the network's security and the Universal Service provision efficiency.
This offer consists of a basic service of collection, transport, sorting and delivery of non-priority letter mail with a maximum weight of 2kg that allows items to be sent nationally or internationally using the Business Mail counters of Lisbon, Taveiro (Coimbra) and Maia (Porto) as access points. Through this offer, the other postal operators access a specific price list in order to feed their clients' mail in the CTT postal network, thereby enabling them to only develop their own network in certain geographic areas wherein they may compete with CTT while using CTT for the rest of the national territory.
Further regarding access to elements of the postal infrastructure by other postal operators, access was granted as of March 2016 to (i) deliveries to P.O. Boxes through which postal operators can directly drop-off mail addressed to P.O. Boxes located in CTT post offices, and (ii) the return service of mail found in the CTT network with postage from other operators. CTT will continue to work toward improving and expanding the conditions of access to the network and infrastructures, while maintaining the present efficiency of operations in the universal postal service. It will also seek to not compromising future maximisation options of that efficiency in a sector that shows a drop in traditional mail and growth in parcels and non-standard mail.
In terms of the quality of the Universal Postal Service and in the aftermath of the new Postal Law, a new quality measurement and control system was implemented throughout 2016, which will be carried out by an independent external entity. Following the pre-qualified international tender, the selection fell on an international company that carried out the works necessary to implement the measurement system for quality of service indicators as of 1 October 2016.
In terms of the objectives and minimum quality of service levels, whose quantification is presented in the section on quality of service, the quality of service standards and the performance goals associated with the provision of the Universal Service in the 2015/2017 period, defined by an ANACOM resolution of 30 December 2014, maintain the high standards required for postal services in Portugal, which CTT has complied with.
As of the implementation of Basel III, Banking Institutions have faced increased demands from regulators as regards compliance with minimum capital and liquidity requirements, in order to increase their ability to absorb losses and comply with short-term undertakings, thereby avoiding scenarios such as in the subprime crisis and the recapitalisation and resolution of Portuguese Banks in the last decade.
Capital and liquidity requirements are increasingly heavier. Of note are the liquidity cover ratio (LCR) and the net stable funding ratio (NSFR). The LCR, to be implemented by banks at 100% by 201916 serves to increase their resilience in the event of a strong liquidity stress over a 30-day period. The NSFR, to be implemented by 2018, serves to stipulate a minimum amount of stable funding, with a maturity of at least a 1 year, to control changes in banks' balance structure during that period.
The CRD – Capital Requirements Directive IV / CRR – Capital Requirements Regulation reinforced standards to attribute Core Tier I status to banking capital and RWA calculation standards. This directive introduced the Leverage Ratio as a new prudential measure for the banking sector, which
16 PWC – Banking regulation:Understanding Basel III with the CRD IV navigator http://www.pwc.com/gx/en/industries/financial-services/regulation/basel-iii/basel-iii-crdiv-navigator.html
stipulates the minimum amount of own funds over total exposure. The Leverage Ratio has been currently set at a minimum of 3%17 of CET1 by the EBA and is expected to be fully calibrated and applied at the beginning of 2018.
The implementation of increasingly tighter and more uniform regulation at the level of the European Union, by creating Single Supervisory and Single Resolution Mechanisms, the Banking Recovery and Resolution Directive (BRRD), among other measures, strive to transfer responsibility initially borne by taxpayers to the banks' main stakeholders and is a game changer for the strategy of financial institutions. The deleveraging of banks and the need to maintain more robust capital and liquidity ratios limits the profitability of the former with consequences over their entire operation and results.
The stabilisation of the banking system in various European countries posed and poses regulatory challenges to the ECB, which has acted with the flexibility necessary to come to the best solution at any given time. Examples thereof are the recapitalisation of Caixa Geral de Depósitos in Portugal and of Banca Monte dei Paschi di Siena in Italy.
The recurring revenues18 of the Mail business unit reached €533.6m in 2016, corresponding to a 3.8% fall relative to 2015. The evolution in revenues is connected to the drop in addressed mail volumes (-4.2%), together with the evolution of the product mix influenced by the 8.8% volume fall for mail of greater added-value, i.e. registered mail.
This business unit includes the Mail upstream and downstream businesses of postal services and corporate solutions, namely printing & finishing, mailmanager, video encoding, hybrid mail and other solutions complementary to the Mail business. The Retail Network is also included in this business unit that in addition to postal, retail and convenience services renders services to the other business units as a sales channel. The above-mentioned services are provided by CTT S.A. (parent company), CTT Contacto and Mailtec Comunicação.
Addressed mail volumes fell by 4.2% in 2016, as itemised in the table below.
| million items | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 1Q16 | ∆ 1Q15 |
2Q16 | ∆ 2Q15 |
3Q16 | ∆ 3Q15 |
4Q16 | ∆ 4Q15 |
2015 | 2016 | ∆ | |
| Transactional mail | 180.5 | -4.4% | 169.4 | 0.2% | 155.0 | -6.1% | 157.9 | -4.6% | 688.3 | 662.8 | -3.7% |
| Editorial mail | 11.6 | 2.2% | 11.0 | -7.7% | 9.3 | -14.9% | 11.3 | -5.3% | 46.2 | 43.3 | -6.4% |
| Advertising mail | 19.4 | -7.1% | 19.2 | 0.6% | 16.0 | 11.5% | 19.6 | -24.4% | 80.2 | 74.2 | -7.5% |
| Total addressed mail | 211.5 | -4.3% | 199.6 | -0.2% | 180.3 | -5.3% | 188.8 | -7.2% | 814.7 | 780.2 | -4.2% |
| Unaddressed mail | 108.5 | -1.6% | 126.2 | 9.9% | 126.7 | 5.7% | 136.3 | 6.1% | 473.4 | 497.8 | 5.1% |
17 CFA Institute – Capital Requirements Directive (CRD) IV – Issue Brief https://www.cfainstitute.org/ethics/documents/crd_iv_issue_brief_final.pdf
18 Including internal services and intra-group transactions which are eliminated for consolidation purposes.
The decrease in addressed mail volumes was mainly impacted by less 4 business days in 2016 visà-vis 2015, due to the reintroduction of 4 national holidays and a lower consumption by large and mid-sized business customers, both by the normal digital substitution effect and by the change in the consumption pattern (campaigns or initiatives not carried out).
The average price change for the Universal Service in 2016 resulted in a year-on-year increase of 1.1%, thereby contributing, together with inbound international mail, to alleviate the effect of the volume fall on addressed mail revenues. This change was mainly the result of the price update for the basket of letter mail, editorial mail and parcel services that took place as of 1 February 2016 (as better detailed above in the section on the Regulatory Framework), changes to the discount policy and the volume structure itself in terms of the various product categories and weight steps.
Transactional mail volumes decreased by 3.7% in 2016. This evolution is the result of changes in the volumes of ordinary mail (-3.4%), registered mail (-8.8%), priority mail (-8.8%), green mail (-2.7%) and outbound international mail (-2.4%). In contrast, inbound international mail saw an increase in volume (+5.2%).
The decrease in registered mail (-8.8%) was due to a fall in demand by the State and Public Administration, especially the Tax Authorities, which have, since the third quarter of 2015, reduced their demand for this type of mail. Without the fall in volume for this type of mail caused by the Tax Authorities, which was -35% in 2016, registered mail volumes would have shown a year-on-year growth of 1.3%, thereby showing its resilience as a form of communication that has an added-value for users. The evolution of this type of volume actually showed signs of recovery throughout the year (year-on-year change of -12.5% in the 1st quarter and -0.9% in the 4th quarter).
The fall in priority mail volumes was very much influenced by a sharp drop in demand by one of the large customers in the contractual segment and the impact of aforementioned reduced business days on the non-contractual segment.
Ordinary mail volumes fell fundamentally due to a sharper fall in the demand of the main customers in the sectors of Telecommunications (-9.1%) and other utilities (-7.9%). Those drops were mainly due to the replacement of physical communications by digital ones, and also the as of yet unsubstantial use of other operators that have arrived in the marketplace.
Domestic editorial mail volumes continued to fall (-5.3% in the 4th quarter and -6.4% for the year) throughout the year, mainly due to a drop in demand by contractual clients, which is also affected by the growing recourse to online editions. The price policy offset the drop in volume so that it did not affect this product's revenues, which grew by 6.3% in the 4th quarter and 1.4% in the year.
Addressed advertising mail volumes, which until the end of the first nine months of the year showed a small growth of 0.5%, fell sharply in the 4th quarter (-24.4%), thereby influencing the annual evolution (-7.5%). Behaviour in the 4th quarter was mainly due to the reduction in the number of campaigns carried out by two large customers in the retail sector.
The turnaround in advertising mail continues, however, to be an important focus for the future. The vision for advertising mail is to position CTT as the benchmark for direct marketing and relational marketing in Portugal, based on two strategic objectives: 1) growing the size of the market for advertising mail, increasing its weight in advertising investment in Portugal, and 2) gaining part of the digital marketing market with an integrated physical-digital offer that enhances increased sales for companies.
CTT launched a new integrated service of advertising solutions in January 2017 that allows micro-, small- and medium-sized companies to design, produce and procure advertising campaigns
through the online solution- www.cttads.pt. This turnkey solution allows companies to manage their advertising campaigns with autonomy, simplicity and effectiveness. For that, the user needs only define the communication targets and create his/her campaign. CTT undertakes all the rest of the process, from printing (Mailtec) to distribution of the advertisements by mail, email or SMS.
CTT continues to focus on hybrid communication solutions, developing offers that combine physical with digital communication, such as: document production (through Mailtec Comunicação, the market leader in printing and enveloping), mail and document digitalisation, as well as information technologies for the postal sector, geographic and geo-referencing solutions, as well as ViaCTT, a secure e-mail with controlled access.
There is growing market demand from a wide variety of business sectors for CTT's integrated solutions, which include features tailored to the needs and goals of each client organisation, based on the portfolio and capabilities inherent to CTT's two capillary networks – delivery and retail (post offices) network. Among the integrated solutions offered, special note is made to growth in the proximity and de-materialised services, where document dematerialisation services showed significant growth rates.
New geographic information services are in the final stages of development. In 2017, these will endow CTT with new features based on its knowledge of the territory and population and will allow clients to access services based on quality information, which allow them to be more operationally efficient and effective in their communications with clients from the domestic market.
In 2016, Recibos Online (online invoices) – a retail electronic invoice solution – doubled the number of processed invoices and tripled its user base. During the fourth quarter of 2016, Online Invoices established various partnerships for the distribution of this solution, namely with two companies whose clients operate in the retail invoice software market and will integrate the Online Invoice solution in their software in 2017 and later market it to their clients. This partnership strategy will be carried out together with other players in 2017, thereby fostering the national scale that Online Invoices intend to reach. Paper receipts delivered by retailers are generally not used by clients and do not enable the retailer to collect information on their clients' consumer profile.
In the last quarter of 2016, a project began for the integration of the Online Invoice solution in CTT post offices and is expected to be available in CTT post offices and postal agencies in the 2nd half of 2017.
The Philately business achieved €7.5m in revenue in 2016, resulting in a year-on-year drop of 6.8%. The reduced price of products in 2016 as compared to 2015 contributed to this evolution. In books, that fall was 4.5% in order to moderate prices and increase overall demand, and in stamps the fall was 2.5%, in order to comply with the good standards of not speculating on the face values of issues by Designated Postal Operators.
We highlight the following philatelic issues and themed books produced in 2016:
the sale of Sport Lisboa e Benfica (SLB) and "Historical Figures" philatelic products 1st issue.
the new issues of self-adhesive stamps: Madeira, the Southern Mainland and the meuselo (mystamp) "30-Year Anniversary of the Collector's Magazine".
In 2016, CTT received four international awards for quality of design. CTT was distinguished for the eighth time in the International Prize of Philatelic Art in the Asiago municipality in the province of Vicenza, Italy. The winning philatelic issue in the "Ecology" category is the one honouring 2015 as the "International Year of Light and International Year of the Soil". The stamp issue was deemed the most original in the entire world by the monthly magazine L'Arte del Francobollo in February 2016, because it addressed the United Nations decision to proclaim 2015 simultaneously the International Year of Light and the International Year of the Soil. Two stamps issued by CTT in 2015 were distinguished in the Nexofil grand prize gala. The "International Year of the Soil" stamp won 1st prize for final artwork design in the "Best Design" category and the "Madeira Embroidery" self-adhesive stamp was considered the 2nd best stamp in the "Innovation" competition. The Nexofil awards are granted by "El Eco" magazine, the oldest and most renowned philately and numismatic Spanish magazine.
The themes covered for the commemorative issues encompass various areas of human knowledge, as shown by the list below:
| Issues | ||
|---|---|---|
| |
Historical and Cultural Figures Centenary Museums - Abade de Baçal Centenary Museums - Grão Vasco 50 Years of Lubrapex Joint Portugal-Vietnam Issue Joint Portugal-France Issue Joint Portugal-Phillipines Issue Centenary of the 1st Portuguese Military Flight 500 Years of Postal Services in Portugal 450 Years of the Publication of the Petri Nonni Salaciensis Opera Marian Shrines |
Historical and Cultural Figures |
| |
Launch of Banco CTT Jesuits - Builders of Globalisation Madeira - Christmas and New Year Festivities Portuguese Army Heraldry Historical Cafés (1st Group) Portuguese Canning Industry Treasures of Portuguese Museums (1st Group) Our Cities (1st Group) Radio Voices Congratulations Portugal! European Champions 2016 Southern Mainland (Self-Adhesive) Madeira (Self-Adhesive) |
Themes |
| | 2016 - International Year of Global Understanding (automatic postage labels) |
International Projection |
| Issues | |
|---|---|
| Cante Alentejano - Song of Alentejo |
|
| Europe - Think Green |
|
| Azores - Ecotourism |
|
| Mammalian Predators |
|
| Fish of the Mediterranean |
Environment |
| Old Vineyards of Portugal |
and |
| Sidewalks of Portugal |
Sustainability |
| Extreme Sports (3rd Group) - Base Issue |
|
| Extreme Sports (3rd Group) - Self-Adhesive |
|
| Portuguese Anti-Cancer League – 75th Anniversary (automatic postage labels) |
The following themed books have been launched with a high-level of success:
The Retail Network is an increasingly important product and service sales channel in CTT's revenue growth for all business units, in an increasingly digital economy where convenience and proximity serve an important role in the physical component of this new paradigm and where the consumer wants an array of interactive channels – the omnichannel concept – for the purchase and research process.
Although it is the capillary network for access to postal services throughout the country for both people and companies, its activity is much more far-reaching. It manages over-the-counter services and direct sales to final customers (private individuals and small enterprises) and is the largest commercial network at a national level with an offer marked by its amplitude, diversity and high proximity. The Company has increased the value of this asset, transforming it into a convenient multi-service platform (especially financial services and services of general interest to citizens), thereby boosting its sales volume, while fully and strictly complying with the universal service obligations in addition to other services the Portuguese State determined would be provided by CTT (postal money orders and public debt for the retail market). In 2016, the service and value of this convenient network was boosted for parcel pick-up and drop-off ("PuDo"), thereby providing a wider offer to the e-commerce segment with multiple options for place of delivery.
Management of business in the Retail Network is based on the following fundamental vectors:
channel of proximity for the marketing of financial services as a pillar for creating and developing Banco CTT in particular and for the ongoing placement of public debt with the retail market through its network;
businesses and services of convenience to the population, services of general interest, by taking on the role of local multi-service assistance, services to citizens, pension payments and other welfare services by postal order and parcel pick-up and drop-off in the solutions offered for e-commerce.
At the end of 2016, the Retail Network was made up of 4,297 contact points, with 615 post offices, 1,724 partnership branches (postal agencies) and 1,958 stamp sale points. The offer of services, under self-service and in some cases available 24 hours a day, is complemented by 217 automatic stamp vending machines and 15 automatic postal product vending machines.
During 2016, with the cost optimising and streamlining measures carried out under the Transformation Programme19, satellite post offices continued to be integrated into core post offices (a project that entails placing smaller post offices under the management of core post offices), thereby enabling their joint management and greater integration of the local offer with the public.
Further under the Retail Network optimisation measures, a Customer Support Line was implemented in December 2015, thereby freeing post offices from daily telephone calls from customers (as contacts were funnelled to the call centre). Providing this service through a specialised line allows a more uniform and consistent message to be disseminated. With this initiative, post offices became free to spend more time on serving their customers and on commercial activities.
Following a historical analysis of post office funding needs, a more efficient model for the flow of funds was implemented in September 2016 that allows a better supply of funds to satisfy varying monthly, weekly and daily needs, while reducing costs with transport of valuables.
Also in September 2016, CTT launched the Future Opens competition, an initiative whose goal is to identify and select innovative products/services/businesses that are suitable for sale in the CTT Retail Network. Candidates will be selected based on originality and innovation and will be integrated in the stimulation strategy of CTT's Retail Network. The opening of CTT's delivery channels to the candidates will allow them to test their products and services in a national multibrand retail network. 73 companies from various market segments participated in this initiative. The next step will be to make a pre-selection and final assessment to find the winners of this competition in 2017.
With this initiative, CTT, as a Portuguese company, is seeking to promote innovation by supporting Portuguese entrepreneurs and showcasing distinctive and innovative products/services in the market. Also under this outreach to Portuguese companies, arrangements have been made with 4 national start-ups to market their innovative products in CTT post offices.
Retail turnover was negatively affected in the last quarter of 2016 by difficulties faced by CTT's partner in supplying post offices with lotteries.
The Retail network implemented an offer segmentation in 2016 by post office type to market thirdparty products and services. Thereunder, it reviewed their respective portfolio in order to free-up post office capacity to introduce Banco CTT, thereby optimising the potential of added-value products and services and making the post office's image better suited to a banking institution.
This segmentation allowed initiatives to be carried out in 2016 to stimulate other retail businesses, by (i) leasing out space, (ii) establishing partnerships with well-known reference brands in the national market (iii) providing the CTT ticket sales service, (iv) sales via catalogue and (v) providing
19 Transformation Programme: a set of projects selected annually as fundamental to implementing CTT's strategy.
services to citizens, such as the payment of the Mobility Social Subsidy in the Autonomous Regions of Madeira and the Azores, which in 2016 entailed 250 thousand operations in a total amount paid to beneficiaries greater than 47 million Euros. Of further note is the partnership with EDP Comercial that entails attracting customers for new contracts in all mainland post offices. Hereunder, nearly 1,000 contracts were registered in 2016. The intention is to expand this type of partnership to the telecommunications sector.
In 2016, the Transformation Programme20 was heavily focused on improving operational efficiency not only by continually reorganising the production cycle through a wider set of initiatives aimed at streamlining the operational cycle (sorting, transport and delivery), but also by deepening integration and synergies between CTT delivery networks (Mail distribution network and the outsourced Express & Parcels network). In this regard, a plan to reinforce and later replace equipment and transport is under analysis for later implementation. Its goal is to increment the level of automated sorting of standard mail with non-standard mail and small parcels to face the efficiency challenges that the fall in mail and changes to the volume profile have brought with them.
The sorting network is composed of 3 production and logistics centres, 7 logistics and delivery centres and 1 business mail centre. The activities of the production and logistics centres are carried out by 44 automated mail sorting machines (of which 24 are mail sequencing machines and one Rest Mail machine) and 78 video encoding posts.
The new Rest Mail automated sorting equipment was put into operation in 2016, which maximised sorting automation capacity, with a special focus on medium-sized postal items (non-standard mail), in large extent from e-commerce, which did not benefit from automated sorting before. This initiative, concluded by the end of the 1st quarter, represented a very significant milestone among the transformation measures carried out in the operations area. The Rest Mail machine, the only one in Europe that sorts 6,000 non-standard items between 10g and 12kg per hour. In 2016, it sorted 14 million items. The sorting capacity of this new piece of equipment may double in the future to a maximum of 12,000 items per hour.
In 2016, 2.1 million items (flat ordinary mail) a day were automatically sorted by postal delivery route. Nearly 1.9 million (79% of total volume) were automatically sequenced (door-to-door) for 4,698 postal delivery routes of 242 postal delivery offices (PDO), which is 88% of automated volumes of mail delivered daily on those routes.
Automation of the postal service continues to produce excellent results in address recognition, with flat letter mail achieving correct assignment rates of 95% for 7-digit postcodes and 68% for 10-digit postcodes.
It is worth noting that, this year, a study has begun on the evolution of automation associated with the strategy of concentrating all pre-delivery activities in the production and logistics centres. This study, to be implemented in coming years, forecasts automatic sequencing by mail delivery route for standard and non-standard items with recourse to new mail sorting equipment (mixed mail solutions and OCR driven solutions).
20 Transformation Programme: a set of projects selected annually as fundamental to implementing CTT's strategy.
Under the Mailmanager service, 11.5 million images and 6.4 million complete documents were digitalised in 2016, which resulted in a 97% year-on-year increase in documents produced for new internal and external clients. It is worth noting that the Mailmanager's digitalisation capacity increased by 40% as compared to 2015 with the purchase of new equipment to support the verified growth in this business unit.
Under the Transformation Programme21, we highlight:
International mail processing underwent structural changes during this period. The entire operational activity of inbound international volume control was concentrated at the Airmail Unit (located at the Lisbon Airport). Here, the opening, control and monitoring of inbound dispatches are carried out, with the corresponding statistical control. This change enables the entire volume to enter the Southern PLC and be directly forwarded to its respective production lines.
As regards Customs, we highlight the following set of changes:
The volume growth rate in customs had a year-on-year growth of 23% in 2016 due to the growth of the inbound international mail volume mentioned before. This increase is very much related to growth in e-commerce in markets such as China for small-sized and low-cost items.
The transport network operates with 255 vehicles, which travel approximately 48 thousand km/day. In 2016, the national transport network covered a total of nearly 12 million km, thanks to ever more efficient vehicles acquired under the fleet renovation that has been carried out over the last years.
The continuous reorganisation of the national transport network (made up of the "primary" and "secondary" networks) due to internal reorganisations, synergies with the express network and the insourcing of outsourced connections are among the initiatives carried out.
It is worth noting that, in line with the trend of recent years of change in volume type (fewer flat items and more bulk items), the fleet was adapted in order to increase volume capacity of the various axes by 318m3 .
21 Transformation Programme: a set of projects selected annually as fundamental to implementing CTT's strategy.
During 2016, a study was carried out that supports a New Architecture for the Production and Logistics Network (a project known as NARPEL). This project took into account:
The pursuit of a more efficient solution is due to the well-known evolution in road infrastructures in Portugal. These allow for more efficient routes, which may translate into less operational costs for the transport activity.
This optimisation also entails an adjustment to the operational processes associated with different network nodes, thereby enhancing an improvement in productivity and greater synergies per centralisation and activity.
This project is one of the main operation transformation initiatives in CTT for 2017 and is expected to be concluded by the end of the 1st quarter.
The delivery network is made-up of 242 PDOs, including 69 delivery support offices (DSO) and 2 delivery support services (one in Lisbon and another in Coimbra), and 7 logistics and distribution centres organised into 4,698 delivery routes, which cover around 240 thousand km/day.
The fleet provided for delivery is primarily comprised of light vehicles, motorcycles and bicycles (mostly electric). It has been reinforced with more vehicles, mainly electric vehicles, in order to make routes faster with greater load capacity. This is in response to lower object density per home which leads to greater distance of delivery routes and in response to the mail distribution network's delivery of new types of items.
Under the Transformation Programme22, the continued reorganisation and optimisation of PDOs with the intervention and implementation of new more efficient organisations are worthy of note. In 2016, 114 PDO interventions took place entailing 41% of total volume. 11 operational units (DSO/PDO) were centralised, thereby contributing to the greater streamlining of producing infrastructures. This continuous demand for efficiency will continue for years to come, due to developments in the postal business and as a result of the permanent rise in automated sorting of upstream postal items in production and logistics centres. This allows PLCs to increasingly become operational units with no internal activity and places where post men and women receive mail and other postal items ready for the mail delivery routes straight away.
The MOGU project (Motorisation of Urban On Foot Delivery Routes) was implemented in September 2016 in the 1500 Lisbon PDO. This project intends to motorise urban on-foot postal delivery routes in order to reduce down time during delivery, where there are increasingly fewer items per point and also to better address the rise in volumes in the mail distribution network. The expansion of this project to other PDOs has been planned for 2017.
22 Transformation Programme: a set of projects selected annually as fundamental to implementing CTT's strategy.
Of note is the implementation, in April 2016, of water meter readings in the Municipality of Bombarral by the PDO of Bombarral, with a total of 7,200 bi-monthly readings. With this new service, the delivery network fosters and reinforces the service proximity with clients. This business shows the capacity and versatility of our network to make solutions and services available on a national and regional level where capillarity is a relevant factor.
The recurring revenues of this business unit reached €120.8m in 2016 (-8% than in 2015). This business unit encompasses the activities of CTT Expresso in Portugal, Tourline Express in Spain and CORRE in Mozambique.
In Portugal in 2016, CTT Expresso launched a solution for retail chains (especially for those present in shopping malls) – the "Shopping Network" service – that includes the logistics and transport associated to the daily restocking of clients' retail networks (their own shops, franchises or partner shops), as well as exchanges between stores and returns from stores to central warehouses. This solution is particularly relevant in the fashion sector, where CTT Expresso intends to reinforce its competitive position, namely in the B2B segment. In the B2C segment, CTT Expresso already has a relevant position in this sector.
In 2016, the marketing of an reverse logistics solution began, especially for the telecommunications sector. This is one of the sectors that shows the most growth potential, namely in the collection of client equipment for refurbishment and reinjection in the market (set-top-box and routers). This is a critical operation for telecommunication operators and a new opportunity for CTT, since it can increase its involvement with clients in this sector.
A partnership was set up with the retail specialist Phonehouse, in order to reinforce CTT's network, already offering more than 1,000 parcel pick-up and drop-off points. This partner will enable access to nearly 100 highly convenient points, due both to their location (mainly in shopping malls) and their extended opening hours, during the evenings and weekends. The bet on online services and on quality of service are two critical axes for the two companies, whereby points of access to CTT's network continue to provide the most adequate offer for varying market needs – location, convenience and service. This network will also be expanded with the model's extension to a number of selected Payshop agents in order to further reinforce its convenience and proximity.
The main project implemented in 2016 was the launch of a new offer called CTT e-segue (meaning, e-follow). This required profound technological adjustments to the information systems that support the business and is based on an essential vector: transfer of control of the delivery process to the final client, i.e. the recipient. It was designed with the B2C / e-commerce segment in mind. It seeks to give the market convenience, flexibility and predictability based on fast information suitable to the participants therein (mainly the recipient) and the possibility of interacting by changing delivery conditions (address, date and time slot). Because returns are a critical concern for online shoppers and retailers, returns are also addressed with CTT e-segue. The launch was initially planned for the end of the 1st semester, but was only launched on 11 November 2016. For this reason, the impact on revenues was minimal despite the positive intake by B2C clients.
With the offer of e-segue, CTT believes it has addressed the main needs of the B2C segment, especially those of the final consumer (recipient). This makes CTT the reference player in this segment, which will continue to have a critical role in the growth of the CEP market.
In the 4th quarter of 2016, following the launch of the new offer, a new price and commercial autonomy policy was put in place, with three main goals: to reduce potential revenue leakage, streamline processes and simultaneously endow commercial teams (throughout the various levels of hierarchy) with ability to apply commercial discounts to the reference price of each volume segment.
Despite these and other commercial and marketing initiatives, revenues in Portugal fell -4.5% albeit with signs of recovery in the last 3 months of the year, with a growth in the activity, measured in terms of +8.6% volume particularly based on the performance of the e-commerce, retail, cosmetic and telecommunications sectors. This behaviour includes both the entry of new clients gained in 2016 and the rise in share of wallet for certain clients, as well as the growth in the activity of important clients, namely in e-commerce and cosmetics. The annual growth in volume as compared to the previous year was +1.1%.
The fall in revenue was particularly affected (i) by the continued erosion of the Banking business (38% of the drop), by the fall in activity associated with fewer branches and the rise in competition in this segment, (ii) by the behaviour in the inbound and outbound international volume (32% of the drop) due to more aggressive competition from integrators in this international segment and (iii) in domestic express, by the exit of an important client. Without this effect, revenues in the domestic segment would be growing at a rate of about 2%.
On an operational level and in order to improve profitability of operations in Portugal, we highlight the progress made with the integration of the Mail and Express & Parcels delivery networks (previously outsourced) that began in 2014. In 2015, a profound integration of the networks was carried out, with the goal of increasing the use of the network of postmen and women for last-mile delivery of date-specific parcels and packages, using the installed capacity and high capillarity of the network. This process allowed existing company resources to replace outsourced delivery.
In 2016, a new phase in the network optimisation project began, with the gradual insourcing of the delivery of EMS19 Múltiplo in CTT's mail distribution network in a total of 30 PDOs, thereby drawing the insourcing potential of EMS delivery in mail distribution network to a close. Arising therefrom, during 2016 nearly 73% of the entire EMS volume was delivered by the mail distribution network (compared to 52.2% in 2015), increasing to 77% in the 4th quarter of the year.
(CTT Expresso volume % distributed through the mail distribution network)
In 2016, postal parcel sorting of the Universal Service was transferred from the Lisbon production and logistics centre (in Cabo Ruivo) to CTT Expresso's Lisbon operational centre, thereby reducing sorting costs in the former and enhancing the installed automated capacity in the latter. In this regard, it also enhanced automated sorting for parcels.
Given e-commerce's growing importance, which is a fundamental driver for the growth of the parcels business (with a year-on-year growth in delivered volume in Portugal - last mile – of 14% in 2016), CTT highlights the following initiatives undertaken to develop this business:
In Spain, the year of 2016, was of strong transformation in Tourline Express. In addition to the 2015 reduction of staff costs and reductions of certain large customers with loss-inducing conditions at the end of 1st quarter of 2016, commercial capacity was reinforced, which reignited strong growth in volume and revenues in the last quarter. This outcome is the first symptom of a new focus on growth, the reinforcement of the number of franchised areas (with the goal of boosting sales and lowering delivery costs) and the creation of an Iberian operator carrying out the necessary changes to processes and systems therefor.
In commercial terms, we highlight:
In Mozambique, CTT is active in the Express & Parcels business since October 2010 through the company CORRE – Correio Expresso de Moçambique, whose share capital is 50% held by CTT and 50% by Empresa Nacional de Correios de Moçambique.
The company covers most provinces and owns an operations centre, two own branches and an Airport Mail Unit in Maputo. CORRE products and services are also available at all post offices of Correios de Moçambique, thus achieving national coverage, which has contributed to the rapid expansion of the business.
Mozambique is currently going through turbulent times. The IMF and main donors closely oversaw the external audit begun at the end of 2016 of the so called "Hidden Debts", which resulted in the suspended delivery of funds to Mozambique, and which is expected to draw to a conclusion at the end of the 1st quarter of 2017. The Central Bank of Mozambique implemented a number of measures in the last quarter that led to a slight recovery of the Metical as compared to the Dollar/Euro, after which it stabilised.
Although peace talks were suspended by international mediators, the truce agreed at the end of the year and that was extended for 2 more months at the beginning of the year, is cause for some optimism as regards the odds of finding a solution to the political/military conflict. The impact on Corre's activity is immediate, given that road circulation ceases to be affected by military blockades, thereby reducing costs and strains on circulation throughout the country.
Despite these adversities, CORRE continues to consolidate its position as the biggest service provider in the banking sector in Mozambique. Its numbers in Euros were significantly affected by the sharp depreciation of the Metical.
This business unit includes all CTT, S.A.'s financial services that are focused on retail, as well as payment activities, directed at the business segment. They are provided through the Retail Network and the Payshop business with its vast network of agents, in order to reach the largest possible number of users. The recurring revenues23 of this business unit reached €70.8m in 2016, -6% than in 2015.
Savings placements reached 3.8 billion euros, the vast majority of which in the form of subscribed Public Debt Certificates, which made up nearly 97% of that amount, with the strong placement of Treasury Certificates Poupança Mais in particular, which continue to stand out as the main savings product in the domestic market, given their unique conditions of profitability and perceived risk. Throughout the period, CTT continued to sell capitalization insurance and retirement savings plans, in line with the diversification strategy that has been consistently pursued over the last years. The available offer of these products by our business partners was, however, very limited as a result of capital markets and interest rate conditions that hindered the creation of products appealing to consumers and profitable from the insurer's point of view.
Therefore, in 2016, revenues for the savings segment essentially originated from the placement of Public Debt Certificates.
23 Including internal services and intra-group transactions which are eliminated for consolidation purposes.
Public Debt Placement – 2016 (million euros)
In the payment business, the year of 2016 was marked by the repositioning of the Payshop brand as CTT's unique payment brand, in order to streamline the message and service for the user. Payshop is the largest assisted on-site payment network in the country, with more than 6,500 points of payment including those found in CTT post offices, postal agencies and the 4,202 Payshop agents. Throughout 2016 and for the first time, Payshop surpassed the threshold of 4,000 agents.
Repositioning of the Payshop brand and expanding the network will form the basis for this business' transformation plan designed in 2016 and pending implementation in the 2017-2019 period. It will bring new services to clients, agents and users. The bet is on diversification, innovation and excellence of service leveraged on the potential of new technologies in the payment segment and maximising the value of the network of agents, for the latter and for users.
Despite the dip in revenues that was still felt in 2016, the payment business as a whole generated revenues greater than 23 million euros. On a positive note, we highlight:
A project was developed to create a network of parcel pick-up and drop-off ("PuDo") for the Express business area, in order to add value to Payshop agents and improve capillarity and convenience to users of this business. A partnership was also established with Western Union to make the transfer service available in a number of agents, thereby boosting this offer within CTT.
The money orders and transfers business evolved in line with its main service, pension payments, which fell in 2016, due to a loss of clients by this service as a result of the aging pensioner population. The international transfers business, showed a lower transaction volume than in 2015 (-4.1%) with a fall in revenues due to a drop in prices in the Western Union network, in order to make the offer more competitive vis-à-vis the competition. Worthy of note is the gradual expansion of the international transfer service as of the end of 2016, in partnership with Western Union, to some postal agencies under a strategy aligned with the referenced Payshop strategy.
Banco CTT is born from the natural evolution of the financial services already rendered by CTT and brings with it a history and experience in excess of 500 years. It was launched to the market on 18 March 2016 with a proposal based on values such as trust, solidity, proximity, simplicity and innovation.
The recurring revenues24 of this business unit reached €961.7 thousand in 2016, in which the focus was on attracting clients by opening accounts. The results obtained until now prove Banco CTT was a project the market was anxious for and is already a brand widely recognised by the Portuguese, associated to trust and solidity, in addition to proximity.
The year of 2016 marked the launch of Banco CTT's operations, with enormous challenges, namely the opening of branches at an unprecedented pace, attracting clients, developing and optimising processes, gradually reinforcing the offer of products and solutions to clients and focusing on quality dissemination of the Banco CTT brand and identity to the Portuguese public. These hurdles have been overcome, as shown by the revenues generated by the end of the year as compared to the main stipulated goals for the launch year.
After only 9 months, Banco CTT is present in the entire country with more than 200 branches open to the public and has earned the trust of 105 thousand clients, through the opening of 74 thousand current accounts. Those clients established a relationship of trust and proximity with the Bank, values that are the root of its activity, and that have driven its growth, of which we highlight the more than 250 million euros worth of deposits. This accelerated growth was only possible because Banco CTT was created based on CTT's strategic assets, in this case its Retail Network (post offices) and strong brand and also allowing it to be created with tight cost control.
Banco CTT provides its clients with excellent service and makes many account-related advantages available to them, as well as simple unique products and solutions that fit their profile and needs. The competitive offer made available by Banco CTT has caught the public's attention and contributed to the high level of recognition the Banco CTT brand has already gained.
24 Including internal services and intra-group transactions which are eliminated for consolidation purposes.
The fourth quarter of 2016 marked the opening of more 96 Banco CTT branches, thereby reinforcing its presence to a total of 202 branches. It has, therefore, remained true to its roll-out plan and the year-end goal it had set for itself.
The last quarter of the year was also marked by the Bank's increased offer of credit solutions. Media coverage was given to "New Zero" (Novo Zero), "Fourth Zero" (Quarto Zero) and Banco CTT's annuity-free Credit Card, alongside other advantages, and more than 10 thousand of those cards have been placed. This product, in partnership with BNP Paribas Personal Finance, in addition to Consumer Credit and Car Loan products, reinforced the Bank's offer, which is in line with its ambition of increasingly addressing clients' needs with the best products and solutions.
In 2017, the Bank intends to continue to grow in terms of activity, clients, credit, branches and resources, while expanding its offer. It will do so by launching and preparing new products, namely by competitively positioning itself in the mortgage loans segment, which will allow the Bank to increase and diversify its current client portfolio and increment cross-selling.
Digitalisation via user-friendly solutions that are both convenient and secure will be a priority, together with a strong physical presence in CTT's network of post offices, as the Bank continues to grow and gain client loyalty. A robust presence in the various channels (omnichannel) will allow client relationships to be carried out on various platforms according to the client's convenience or product specifications.
This section summarises the consolidated results achieved by CTT and the consolidated assets, liabilities and financial position of the company as at 31 December 2016. This section should be read in conjunction with the consolidated financial statements and the accompanying notes, which have more detailed information. The present analysis includes the consolidation of the activities of the parent company and its subsidiaries as included in note 8 of the consolidated financial statements, and an analysis excluding the consolidation of Banco CTT by CTT, where Banco was treated as a financial investment (merely to facilitate the analysis of the impact of Banco CTT on CTT accounts).
During 2016, it is important to highlight the following aspects for a better understanding of the company accounts:
− €4.9m in CTT, S.A., as a result of the calculation method review, concerning the retributive differences that could be claimed by workers, incorporating more historical data, namely information regarding the outcome of legal proceedings;
− €2.1m in CTTExpresso concerning the lawsuits following the extinction of the assiduity premium, having the probability of its occurrence been reviewed due to the favourable outcome for CTT in court. Accordingly, the entire provision has been cancelled.
In the full year 2016, CTT achieved a consolidated net profit of €62.2m, -13.7% (-€9.9m) than that of the previous year, corresponding to a consolidated net profit per share of €0.42, compared to €0.48 in 2015.
For this fall it is important to consider that Banco CTT project impacted the 2016 result by -€23.3m, when it had only had an impact of -€8.8m in the same period of the previous year. Therefore, excluding the Banco CTT project, the consolidated net profit of CTT would have been €85.5m, corresponding to a growth of €4.5m (+5.6%) in relation to the full year 2015.
The operating activity generated earnings before non-recurring items, interest, taxes, impairments, depreciation and amortisation (recurring EBITDA) of €119.5m, -17.0% (-€24.5m) than those obtained in the same period of the previous year, with an EBITDA margin of 17.2% compared to 19.8% in 2015.
These results reflect a decrease of 4.4% (-€32.1m) in the recurring revenues, resulting mainly from the fall in revenues registered on the Mail and Express & Parcels segments, amount that was not offset by the decrease of 1.3% (-€7.6m) in recurring operating costs (excluding impairments, provisions, depreciation/amortisation and non-recurring costs). The cost reduction was less due to the costs already incurred with Banco CTT.
The recurring EBITDA of 2016, excluding the recurring expenses incurred with Banco CTT and the expenses at CTT, S.A. associated with Banco CTT, amounted to €139.6m, -€9.6m (-6.3%) regarding the same period of the previous year also excluding Banco CTT costs.
In 2016 the non-recurring results affecting CTT results were -€3.8m. This amount results mainly from costs associated with studies and strategic projects, especially those related to the launch of Banco CTT, the early termination of the long-term lease contract of Conde Redondo building, the onerous contracts provision reversal and the review of the labour contingencies provision, as well as the continuation of the initiatives on structural matters, namely the human resource optimisation programme and the compensations resulting from the 2015 Company Agreement.
The reported earnings before interest and taxes reached €90.9m, €19,0m (-17.3%) below those recorded in 2015. Excluding the effect of Banco CTT this result would have reached €120.5m, i.e. a decrease of €1.1m (-0.9%) regarding the same period of the previous year, also excluding Banco CTT.
The financial results amounted to -€5.6m, 5.9% (-€0.3m) below those of the same period of the previous year. Financial costs incurred reached €6.5m, resulting mainly from financial costs with employee benefits, which represented 96.7% of the total. Interest income decreased by 54.7% (-€0.8m) vs 2015, as it was affected by the decline in the rates of return on term deposits, by the reduction of liquidity levels resulting from the investment in Banco CTT and by CTT maintaining a very conservative liquidity management policy.
Earnings before taxes and non-controlling interests (EBT) reached €85.2m, 18.5% lower (-€19.4m) than in 2015. Excluding the effect of Banco CTT, this result would have been €114.8m, representing a decrease of 1.2% (-€1.4m) compared to the same period of the previous year, also excluding Banco CTT.
In the full year 2016 the effective income tax rate was 27.39%, vs 31.11% in 2015, mainly from the reduction of €8.3m in the current tax, as a result of different balance sheet optimisation initiatives carried out throughout 2016.
| Consolidated income statement | ||||||
|---|---|---|---|---|---|---|
| Thousand Euros | 2016 | 2015 | % 16/15 |
2016 Excluding Banco CTT project* |
2015 Excluding Banco CTT project* |
% 16/15 |
| Revenues | 695,060 | 727,180 | -4.4 | 693,805 | 727,178 | -4.6 |
| Sales and services rendered | 669,669 | 705,169 | -5.0 | 669,646 | 705,169 | -5.0 |
| Sales | 20,082 | 23,807 | -15.6 | 20,082 | 23,807 | -15.6 |
| Services rendered | 649,586 | 681,361 | -4.7 | 649,564 | 681,361 | -4.7 |
| Financial margin | 26 | 0 | n.a. | |||
| Other operating income | 25,365 | 22,011 | 15.2 | 24,159 | 22,009 | 9.8 |
| Operating costs excluding impairments, provisions, depreciation/amortisation and non-recurring costs |
575,561 | 583,205 | -1.3 | 554,239 | 578,157 | -4.1 |
| Cost of sales | 13,904 | 16,316 | -14.8 | 13,904 | 16,316 | -14.8 |
| External supplies and services | 223,258 | 224,687 | -0.6 | 211,372 | 221,973 | -4.8 |
| Staff costs | 328,394 | 331,738 | -1.0 | 319,296 | 329,485 | -3.1 |
| Other operating costs | 10,005 | 10,463 | -4.4 | 9,667 | 10,381 | -6.9 |
| Earnings before depreciation/amortisation, impairments and provisions, non-recurring results, interest and taxes (recurring EBITDA) |
119,499 | 143,975 | -17.0 | 139,566 | 149,021 | -6.3 |
| Impairment of accounts receivable, net | 549 | (233) | -335.6 | 549 | (233) | -335.6 |
| Provisions, net | 1,251 | (240) | -621.3 | 1,272 | (240) | -630.0 |
| Impairment of other financial banking assets | - | - | n.a. | - | - | n.a. |
| Impairment of non-depreciable assets | - | 0 | n.a. | - | 0 | n.a. |
| Depreciation/amortisation and impairment of investments, net |
(26,611) | (23,740) | 12.1 | (24,862) | (23,570) | 5.5 |
| Earnings before non-recurring results, financial income and taxes (recurring EBIT) |
94,687 | 119,762 | -20.9 | 116,525 | 124,979 | -6.8 |
| Company restructuring | (10,588) | (1,562) | 577.8 | (10,588) | (1,562) | 577.8 |
| Costs associated to studies and advice services for strategic projects |
(9,676) | (8,397) | 15.2 | (1,934) | (1,987) | -2.7 |
| Other non-recurring income and costs | 16,459 | 130 | 12,560.8 | 16,459 | 130 | 12,560.8 |
| Earnings before interest and taxes | 90,883 | 109,932 | -17.3 | 120,463 | 121,559 | -0.9 |
| Financial results, net | (5,869) | (5,376) | -9.2 | (5,869) | (5,394) | -8.8 |
| Gains/losses in associated companies | 230 | 54 | 325.9 | 230 | 54 | 325.9 |
| Earnings before taxes (EBT) | 85,245 | 104,610 | -18.5 | 114,825 | 116,219 | -1.2 |
| Income tax for the period | (23,348) | (32,539) | -28.2 | (29,625) | (35,301) | -16.1 |
| Net profit before non-controlling interests | 61,897 | 72,071 | -14.1 | 85,199 | 80,919 | 5.3 |
| Non-controlling interests | (263) | 5 | 5,360.0 | (263) | 5 | 5,360.0 |
| Net profit for the period attributable to equity holders | 62,160 | 72,065 | -13.7 | 85,463 | 80,913 | 5.6 |
Note: Revenues exclude non-recurring values.
* Excluding Banco CTT business unit revenues/costs and Banco CTT project revenues/costs booked in CTT, S.A..
| Thousand Euros | 2016 | 2015 | % 16/15 |
2016 Excluding Banco CTT project* |
2015 Excluding Banco CTT project* |
% 16/15 |
|---|---|---|---|---|---|---|
| Sales and services rendered | 669,669 | 705,169 | -5.0 | 669,646 | 705,169 | -5.0 |
| Sales | 20,082 | 23,807 | -15.6 | 20,082 | 23,807 | -15.6 |
| Services rendered | 649,586 | 681,361 | -4.7 | 649,564 | 681,361 | -4.7 |
| Financial margin | 26 | 0 | n.a. | 0 | 0 | n.a. |
| Other operating income | 25,365 | 22,011 | 15.2 | 24,159 | 22,009 | 9.8 |
| Revenues | 695,060 | 727,180 | -4.4 | 693,805 | 727,178 | -4.6 |
Note: Revenues exclude non-recurring items.
* Excluding Banco CTT business unit revenues/costs and Banco CTT project revenues/costs booked in CTT, S.A..
The business of CTT is organised in the following segments:
| 2016 - Revenues by segment | |||||||
|---|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services |
Banco CTT | CTT Central Structure |
Intragroup eliminations |
Revenues | |
| Sales and services rendered | 490,838 | 115,956 | 65,944 | - | 11 | (3,081) | 669,669 |
| Sales | 19,248 | 838 | - | - | - | (3) | 20,082 |
| Services rendered | 471,590 | 115,119 | 65,944 | - | 11 | (3,078) | 649,586 |
| Financial Margin | - | - | - | 26 | - | - | 26 |
| Other operating revenues | 42,713 | 4,854 | 4,817 | 936 | 55,986 | (83,940) | 25,365 |
| Allocation to CTT central structure | - | - | - | - | 44,104 | (44,104) | - |
| Revenues | 533,551 | 120,810 | 70,761 | 962 | 100,101 | (131,125) | 695,060 |
2015 - Revenues by segment Thousand Euros Mail Express & Parcels Financial Services Banco CTT CTT Central Structure Intragroup eliminations Revenues Sales and services rendered 511,167 127,014 70,854 - - (3,867) 705,169 Sales 22,893 916 - - - (1) 23,807 Services rendered 488,274 126,098 70,854 - - (3,865) 681,361 Other operating revenues 43,470 4,242 4,460 2 72,595 (102,759) 22,011 Allocation to CTT central structure - - - - 36,000 (36,000) -
Note: Revenues exclude non-recurring items.
The Mail segment, which includes the postal service revenues of CTT, including USO (Universal Service Obligation), represents the greatest weight in terms of revenues, amounting to €533.6m, with a decrease of 3.8% (-€21.1m) in comparison to the previous year.
Revenues 554,637 131,256 75,315 2 108,595 (142,625) 727,180
Services rendered decreased by €16.7m (-3.4%) as a result of the decrease of €14,7m (-3.2%) in addressed mail affected by the 4.2% fall in volumes, despite the 1.1% average increase in the prices
of the USO services in 2016.This evolution was also penalized by the fall in the mail with higher added value, i.e. registered mail (-8.8%).
Sales decreased by €3.6m (-15.9%), mainly due to the decrease in retail products - merchandising by -€1.2m (-21.6%) and lottery by -€1.9m (-24.2%) – but also in philatelic products by -€0.6m (-7.2%).
Conversely, foreign operators increased by €2.8m (+15.2%). This growth is concentrated in the terminal dues (remuneration for the distribution in Portugal of mail originating abroad), mainly due to the growth in volumes originating in Asian countries, with particular emphasis on China, which grew by 38% (+189 tonnes of incoming mail), severely influenced by e-commerce. It should be noted that small items coming mainly from e-commerce are treated as inbound mail, under international agreements between postal operators, and do not belong to the express and parcel business.
The other operating revenues of the Mail segment decreased by €0.8m (-1.7%), mainly caused by the reduction of €0.7m (-5.6%) in internal services provided by the Retail Network to other segments. There are also some favourable and unfavourable changes in 2016 vs 2015:
The Express & Parcels segment, with €120.8m of revenues, posted a decrease of 8.0% (-€10.4m) in comparison to the same period of the previous year.
The revenues in Spain decreased by €6.1m (-12.5%) with a volume reduction of 12.3% as a result of the strategy implemented in the first quarter of the year and in Portugal the decrease was €4.3m (-5.7%) despite the 1.1% growth in volume.
Mozambique recorded a decrease of €0.6m (-29.6%) in revenues, due to the evolution of the exchange rate, which in MZN translates into an increase in revenues of 11.6%, +11.4 MZN million, mainly due to the banking business growth and the price increase.
Additionally, it is important to mention the €1.4m positive impact on revenues of the memorandum of understanding with Altice in comparison to the same period of the previous year.
The Financial Services segment, with €70.8m of revenues, registered a 6.0% (-€4.6m) decrease in contrast to 2015. Services rendered decreased by €4.9m (-6.9%) influenced by the decreases in insurance products (-€2.3m; -48.6%), in invoice and tax collection (-€2.9m; -22.0%) and in mobile phone top-ups (-€1.0m;-21.8%).
Conversely, there was a growth of €1.7m (+6.3%) in public debt treasury certificates commission income and the integrated payment solutions business grew by €1.2m (+ 123.3%).
Other operating income increased by €0.4m (+8.0%), justified by the recognised earnings resulting from the memorandum of understanding with Altice of +€1.4m compared to the same period of last
25 The memorandum of understanding with Altice affected three segments (Mail, Express & Parcels and Financial Services).
year, which was partially offset by the decrease of €0.7m from the improvements made in the direct allocation method of VAT deduction.
Banco CTT reached revenues of €1.0m, of which €0.5m concern transactions processing and services provided through different means of payment which are available for customers and €0.2m are related to commissions received from the collection of personal credit agreements and credit cards in Banco branches.
In CTT Central Structure there was a decline of €16.6m (-22.9%) in other operating revenues, due to the decrease of €12.5m in internal services provided by human resources services and of €2.4m in IT systems, due to the optimisation carried out during recent years.
| Thousand Euros | 2016 | 2015 | % 16/15 |
2016 Excluding Banco CTT project* |
2015 Excluding Banco CTT project* |
% 16/15 |
|---|---|---|---|---|---|---|
| Cost of sales | 13,904 | 16,316 | -14.8 | 13,904 | 16,316 | -14.8 |
| External supplies and services | 223,258 | 224,687 | -0.6 | 211,372 | 221,973 | -4.8 |
| Staff costs | 328,394 | 331,738 | -1.0 | 319,296 | 329,485 | -3.1 |
| Other operating costs | 10,005 | 10,463 | -4.4 | 9,667 | 10,381 | -6.9 |
| Operating costs | 575,561 | 583,205 | -1.3 | 554,239 | 578,157 | -4.1 |
Note: Excluding non-recurring items.
* Excluding Banco CTT business unit revenues/costs and Banco CTT project revenues/costs booked in CTT, S.A..
The recurring operating costs amounted to €575.6m, -1.3% (-€7.6m) in comparison to the last year, despite the €21.3m recurring costs from Banco CTT and with the project to set up Banco CTT in the retail network recorded in CTT, S.A., especially:
26 Cost of sales + ES&S + Staff costs + other operating costs (excludes non-recurring items).
To be noticed is also the effect of the 2015 Company Agreement review, which began to have positive impacts in the second half of 2016, due to the cancellation of some supplements.
These favourable changes were partly absorbed by the increase of Banco CTT staff costs (+€7.4m), by the extension of the coverage of work accidents insurance of "Caixa Geral de Aposentações" workers (+€1.3m) and by an increase of €1.4m in sales incentives, particularly in financial services.
d) The other costs decreased €0.5m (-4.4%). The reduction of €1.3m (-65.5%) in the SDR exchange rate differences, has been absorbed by the +€1.0m of banking services expenses.
The operating costs by segment are as follows:
| 2016 - Operating costs by segment | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services |
Banco CTT | CTT Central Structure |
Intragroup eliminations |
Operating costs |
|||
| External supplies and services | 98,709 | 92,749 | 9,830 | 11,823 | 40,628 | (30,482) | 223,258 | ||
| Staff costs | 239,040 | 21,232 | 4,601 | 9,626 | 53,895 | - | 328,394 | ||
| Other costs | 54,177 | 2,190 | 18,164 | 338 | 5,579 | (56,539) | 23,909 | ||
| Allocation to CTT central structure | 43,800 | - | 304 | - | - | (44,104) | - | ||
| Operating costs | 435,726 | 116,171 | 32,900 | 21,788 | 100,101 | (131,125) | 575,561 | ||
Note: excludes non-recurring items.
| 2015 - Operating costs by segment | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial Services |
Banco CTT | CTT Central Structure |
Intragroup eliminations |
Operating costs |
||||
| External supplies and services | 103,439 | 99,995 | 11,087 | 2,359 | 41,262 | (33,454) | 224,687 | |||
| Staff costs | 239,164 | 24,666 | 3,497 | 2,252 | 62,159 | - | 331,738 | |||
| Other costs | 73,610 | 2,573 | 18,515 | 78 | 5,175 | (73,171) | 26,780 | |||
| Allocation to CTT central structure | 35,718 | - | 282 | - | - | (36,000) | - | |||
| Operating costs | 451,931 | 127,233 | 33,381 | 4,689 | 108,595 | (142,625) | 583,205 |
Note: Excluding non-recurring items.
The Mail segment recorded a significant amount of operating costs as it includes the functions of mail sorting, transport and delivery, and the retail network, areas of major significance, particularly in terms of the number of workers and assets. These operating activities are provided to the other segments - sorting/transport and especially delivery of parcels for the Express & Parcels business unit, as well as financial services and banking services rendered in the Retail Network – thus increasing synergies via the scalability of the unique assets, in both the distribution and retail networks.
In the full year 2016 the Mail segment booked €435.7m of recurring operating costs, a reduction of €16.2m (-3.6%) relative to the previous year, mainly from the decrease in internal services provided by human resources (-€12.2m) and night work (-€1.4m), information systems (-€2.4m), in exchange rate differences (-€1.4m) and maintenance and repair expenses with vehicles, buildings and IT (-€2.6m).
The Express & Parcels segment recorded a decrease of €11.1m (-8.7%) in recurring operating costs, of which it is worth mentioning the reduction in Spain of Tourline's staff, transport and delivery
costs as a result of the restructuring measures and, in Portugal, the decline in the EMS delivery subcontracting costs due to the ongoing process of the network integration and optimisation.
The Financial Services segment reported a decrease of €0.5m (-1.4%) in recurring operating costs, mainly due to the increase of €1.0m in sales incentives and the reduction of internal services by €1.1m, essentially those provided by the Retail Network, due to the significant fall in the segments of money orders and payments.
Banco CTT posted €21.8m of recurring costs in 2016, namely staff costs (€9.6m) and external supplies and services costs (€11.8m), the latter mainly in IT and transactionality costs (interbank commissions for transaction services rendered to clients).
The Central Structure shows a favourable variance of €8.5m (-7.8%), to which contributed the decrease in staff costs by €8.3m (-13.3%), resulting from the remuneration policy and from the adjustment to the "telephone subscription fee" employee benefit.
The recurring EBITDA27 amounted to €119.5m, 17.0% (-€24.5m) lower than the 2015 value, as a result of the revenue decline (-4.4%) that exceeded the decline in operating recurring costs (-1.3%), largely justified by the ramp-up period of Banco CTT which represented an increase over 2015.
The recurring EBITDA in 2016, excluding the recurring revenues and expenses with Banco CTT project (both in Banco CTT and CTT, S.A.) amounted to €139.6m, -€9.5m (-6.3%) in comparison to the same adjusted period of the previous year, excluding Banco CTT costs. Without considering the impact of Banco CTT, the company was able to almost achieve a reduction of expenses (-4.1%), comparable to the reduction in revenues (-4.6%).
| Thousand Euros | 2016 | 2015 | % 16/15 |
2016 Excluding Banco CTT project* |
2015 Excluding Banco CTT project* |
% 16/15 |
|---|---|---|---|---|---|---|
| Recurring revenues | 695,060 | 727,180 | -4.4 | 693,805 | 727,178 | -4.6 |
| Operating costs excluding impairments, provisions, depreciation and non recurring costs |
575,561 | 583,205 | -1.3 | 554,239 | 578,157 | -4.1 |
| Recurring EBITDA | 119,499 | 143,975 | -17.0 | 139,566 | 149,021 | -6.3 |
| Recurring EBITDA margin | 17.2% | 19.8% | -2.6 p.p. | 20.1% | 20.5% -0.4 p.p. |
* Excluding Banco CTT business unit revenues/costs and Banco CTT project revenues/costs booked in CTT, S.A..
27 Recurring EBITDA = Operating results + amortisation and depreciation + net change of provisions and impairment losses (does not include non-recurring revenues and expenses, such as company restructuring, impairment of investment properties, provisions for onerous contracts and labour contingencies).
| Thousand Euros | Express & Parcels |
Financial Services |
Banco CTT | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | 533,551 | 120,810 | 70,761 | 962 | ||||||
| Operating costs | 435,726 | 116,171 | 32,900 | 21,788 | ||||||
| Recurring EBITDA | 97,825 | 4,639 | 37,861 | (20,826) | ||||||
| Recurring EBITDA margin | 18.3% | 3.8% | 53.5% | n.a. |
| 2016 - Recurring EBITDA by segment |
|---|
| ------------------------------------ |
| 2015 - Recurring EBITDA by segment | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Express & | Financial | ||||||||
| Thousand Euros | Parcels | Services | Banco CTT | ||||||
| Revenues | 554,637 | 131,256 | 75,315 | 2 | |||||
| Operating costs | 451,931 | 127,233 | 33,381 | 4,689 | |||||
| Recurring EBITDA | 102,706 | 4,023 | 41,934 | (4,688) | |||||
| Recurring EBITDA margin | 18.5% | 3.1% | 55.7% | n.a. |
In the full year 2016, CTT recorded negative non-recurring results of €3.8m, which include:
-€0.9m in depreciations/amortisations regarding the Banco CTT project and impairment of investments.
-€0.6m of net impairments increase recorded in the scope of the Express & Parcels segment optimisation, due to the restructuring of the Tourline network.
| 2016 Non-recurring results | ||||||||
|---|---|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial | Services Banco CTT | CTT Central Structure |
Intragroup eliminations |
Others non allocated |
Total | |
| Other operating revenues | 36 | - | - | - | 1,726 | - | - | 1,762 |
| External supplies and services | 2,230 | - | - | 4,616 | 1,934 | - | - | 8,779 |
| Staff Costs | 3,336 | 131 | 0.1 | - | 6,526 | - | - | 9,993 |
| Other costs | 85 | - | - | - | 350 | - | - | 435 |
| Non-recurring results that affect EBITDA |
(5,615) | (131) | (0.1) | (4,616) | (7,084) | - | - | (17,446) |
| Depreciation/amortisation and impairment of investments, net |
848 | - | - | - | - | - | 9 | 857 |
| Impairment of accounts receivable, net |
- | 594 | - | - | - | - | - | 594 |
| Impairment of non-depreciable | ||||||||
| assets | - | - | - | - | - | - | - | - |
| Provisions net | (6) | (2,151) | - | - | (12,935) | - | - | (15,093) |
| Non-recurring results that affect EBIT |
(6,456) | 1,425 | (0.1) | (4,616) | 5,851 | - | (9) | (3,805) |
| 2015 Non-recurring results | ||||||||
|---|---|---|---|---|---|---|---|---|
| Thousand Euros | Express & Parcels |
Financial | Services Banco CTT | CTT Central Structure |
Intragroup eliminations |
Others non allocated |
Total | |
| Other operating revenues | - | - | - | - | - | - | - | - |
| External supplies and services | - | 140 | 3,703 | 2,707 | 1,847 | - | - | 8,397 |
| Staff Costs | 2,811 | 2,131 | 58 | - | (4,965) | - | - | 35 |
| Other costs | - | 973 | - | - | - | - | - | 973 |
| Non-recurring results that affect | ||||||||
| EBITDA | (2,811) | (3,244) | (3,761) | (2,707) | 3,118 | - | - | (9,405) |
| Depreciation/amortisation and impairment of investments, net |
- | - | - | - | - | - | (167) | (167) |
| Impairment of accounts receivable, net |
- | 1,237 | - | - | (59) | - | - | 1,177 |
| Impairment of non-depreciable | ||||||||
| assets | - | (623) | - | - | - | - | - | (623) |
| Provisions net | - | 223 | - | - | (185) | - | - | 38 |
| Non-recurring results that affect | ||||||||
| EBIT | (2,811) | (4,080) | (3,761) | (2,707) | 3,362 | - | 167 | (9,830) |
The consolidated financial results reached a negative amount of €5.6m, representing a decrease of 5.9% (-€0.3m) in relation to 2015.
The interest income and financial revenues decreased by 54.7 % (-€0.8m) when compared to the same period of the previous year, directly influenced by the decline in interest rates offered on term deposits, by the reduction of liquidity levels resulting from the investment in Banco CTT and by the maintenance of a very conservative policy regarding liquidity applications by CTT.
Interest expenses incurred reached €6.5m, which include mainly financial costs associated with employee benefits in the amount of €6.3m and also, but of less relevance, interest related to financial leases and bank loans (€0.2m).
| Financial results | ||||||||
|---|---|---|---|---|---|---|---|---|
| Thousand Euros | 2016 | 2015 | % 16/15 |
|||||
| Interest income | 672 | 1,485 | -54.7 | |||||
| Interest expenses | (6,540) | (6,861) | -4.7 | |||||
| Interest expenses (financial) | (217) | (137) | 58.4 | |||||
| Interest costs with employee benefits (accounting) |
(6,323) | (6,724) | -6.0 | |||||
| Gains/losses in associated companies | 230 | 54 | 325.9 | |||||
| Financial results | (5,638) | (5,322) | -5.9 |
In 2016 CTT achieved a consolidated net profit attributable to equity holders of €62.2m, 13.7% lower than the one obtained in the same period of last year, corresponding to consolidated earnings of €0.42 per share and a net margin of 8.9% (9.9% in 2015). If the non-recurring effects in both years were excluded, the net profit would have decreased by 21.6%.
The reported and recurring consolidated income statement for the full years 2016 and 2015 is summarised below:
| Reported | Recurring * | ||||||
|---|---|---|---|---|---|---|---|
| Thousand Euros | 2016 | 2015 | % 16/15 |
2016 | 2015 | % 16/15 |
|
| Revenues | 696,822 | 727,180 | -4.2 | 695,060 | 727,180 | -4.4 | |
| Operating costs | 594,769 | 592,610 | 0.4 | 575,561 | 583,205 | -1.3 | |
| EBITDA | 102,053 | 134,570 | -24.2 | 119,499 | 143,975 | -17.0 | |
| EBITDA margin | 14.6% | 18.5% | -4.0 p.p. | 17.2% | 19.8% | -2.6 p.p. | |
| EBIT | 90,883 | 109,932 | -17.3 | 94,687 | 119,762 | -20.9 | |
| EBIT margin | 13.0% | 15.1% | -2.1 p.p. | 13.6% | 16.5% | -2.8 p.p. | |
| Earnings Before taxes | 85,245 | 104,610 | -18.5 | 89,049 | 114,440 | -22.2 | |
| Income tax for the period | 23,348 | 32,539 | -28.2 | 25,375 | 32,865 | -22.8 | |
| Non-controlling interests | (263) | 5 | 5,360.0 | (263) | 5 | 5,360.0 | |
| Net profit for the period | 62,160 | 72,065 | -13.7 | 63,938 | 81,570 | -0.2 |
Note: operating costs = cost of sales + external supplies and services + staff costs + other operating costs. * Recurring net profit excludes non-recurring revenues and costs and considers a theoretical (nominal) tax rate.
Return on Equity (ROE) decreased by 3.1 p.p., from 28.8% in 2015 to 25.6% in 2016, as a result of the reduction in net profit of 13.7%.
The Return on Invested Capital (ROIC) of 13.0% and the Return on Capital Employed (ROCE) of 18.1% decreased by 8.3 p.p. and 2.1 p.p., respectively, in relation to 2015, primarily due to the 17.3% decrease in earnings before interest and taxes, severely influenced by the ramp-up of Banco CTT.
| Returns on Capital | |||||||
|---|---|---|---|---|---|---|---|
| 2016 | 2015 | % 16/15 |
|||||
| Return on Equity (ROE)(1) | 25.6% | 28.8% | -3.1 p.p. | ||||
| Return on Invested Capital (ROIC)(2) | 13.0% | 21.3% | -8.3 p.p. | ||||
| Return on Capital Employed (ROCE)(3) | 18.1% | 20.2% | -2.1 p.p. |
(1) Net profit/average Equity
Average Equity = (EQ year n + EQ year n-1)/2
(2) Earnings before financial income and taxes/(Net assets-Cash)
(3) Earnings before financial income and taxes (Net assets-ST Liabilities)
The gross added value amounted to €419.8m corresponding to a GAV/average number of employees of about of 33.9 thousand euros, 4.6% lower than that of the previous year, due to the reduction of the net profit and income tax for the period. This indicator highlights the effort to optimise operations and maximise the productivity of resources.
| Gross Added Value (GAV) | |||||||
|---|---|---|---|---|---|---|---|
| 2016 | 2015 | % 16/15 |
|||||
| GAV - € thousand | 419,771 | 441,719 | -5.0 | ||||
| Average Staff | 12,401 | 12,445 | -0.4 | ||||
| GAV/Average Staff (euros) | 33,850 | 35,494 | -4.6 |
Capex amounted to €42.2m, 30.4% (+€9.8m) above the one in the same period of last year, mainly due to the launch of Banco CTT (€19.0m) specifically in IT systems and, in CTT, the renovation work in order to adapt the post offices for implementation of Banco CTT, in 202 post offices.
| Consolidated statement of financial position | ||||
|---|---|---|---|---|
| Thousand Euros | 31.12.2016 | 31.12.2015 | % 16/15 |
|
| Non-current assets | 452,618 | 354,906 | 27.5 | |
| Current assets | 864,080 | 764,566 | 13.0 | |
| Total assets | 1,316,697 | 1,119,472 | 17.6 | |
| Equity | 233,327 | 251,835 | -7.3 | |
| Total liabilities | 1,083,370 | 867,637 | 24.9 | |
| Non-current liabilities | 269,533 | 292,668 | -7.9 | |
| Current liabilities | 813,837 | 574,970 | 41.5 | |
| Total equity and liabilities | 1,316,697 | 1,119,472 | 17.6 |
Total assets recorded an increase of €197.2m (+17.6%) vs 31.12.2015, including €167.7m of financial assets held by Banco CTT, as follows:
Total assets also include the increase in cash and cash equivalents by €15.2m and the increase in other current assets by €7.1m.
Equity decreased by €18.5m (-7.3%) in relation to 31 December 2015, as a result of a €9.9m decrease in net profit and €8.5m in other changes in equity, due to a negative net actuarial gains/losses associated with post-employment benefits (-€11.8M) and the corresponding deferred taxes (+€3.3m), essentially due to the reduction of the discount rate.
Additionally, the purchase of own shares (400,354 shares) for the amount of €3.2m took place in 2016, totalling €5.1m (600,531 shares).
The liabilities increased by €215.7m (+24.9%), with the following main changes:
The employee benefits liabilities in 2016 amounted to €272.3m, an increase of 3.6% when compared to December 2015, largely related to the reduction of the discount rate of these liabilities from 2.5% to 2.0%, which will have a positive impact on financial results in 2017.
| Liabilities with post-retirement employee benefits | |||
|---|---|---|---|
| Thousand Euros | 31.12.2016 31.12.2015 | % 16/15 |
|
| Liabilities | 272,317 | 262,832 | 3.6 |
| Healthcare | 249,110 | 236,806 | 5.2 |
| Staff (suspension agreements) | 5,495 | 8,234 | -33.3 |
| Other benefits | 13,231 | 14,805 | -10.6 |
| Share plan | 4,481 | 2,987 | 50.0 |
The net change in cash and cash equivalents amounted to +€15.2m, which is mainly the result of:
-€29.5m in payments concerning investments in tangible fixed assets and intangible assets;
-€164.8m in Banco CTT financial assets (includes available-for-sale financial assets, held-tomaturity investments and investments in credit institutions held by Banco CTT);
Excluding the changes in the financial services receivables/payables (-€1.1m), the CTT change in cash would be +€16.3m.
| Cash flow | ||||||
|---|---|---|---|---|---|---|
| Reported | Adjusted* | |||||
| Thousand Euros | 2016 | 2015 | % 16/15 |
2016 | 2015 | % 16/15 |
| Cash flow from operating activities | 268,217 | 32,832 | 716.9 | 269,363 | 93,860 | 187.0 |
| Cash flow CTT excluding FS and Banco Banco CTT cash flow |
43,598 225,764 |
97,054 (3,193) |
-55.1 7,170.6 |
|||
| Cash flow from investment activities | (185,602) | (25,539) | -626.7 (185,602) | (25,539) | -626.7 | |
| Capex | (29,514) | (28,362) | -4.1 | (29,514) | (28,362) | -4.1 |
| of which Banco CTT | (9,977) | (9,904) | -0.7 | |||
| Banco CTT financial assets** | (164,767) | - | n.a. | (164,767) | - | n.a. |
| Other | 8,679 | 2,823 | 207.4 | 8,679 | 2,823 | 207.4 |
| Operating free cash flow | 82,616 | 7,294 | 1,032.7 | 83,761 | 68,322 | 22.6 |
| Cash flow from financing activities | (72,420) | (68,230) | -6.1 | (72,420) | (68,230) | -6.1 |
| of which dividends | (70,265) | (69,750) | -0.7 | (70,265) | (69,750) | -0.7 |
| Change in consolidation perimeter | 4,966 | 17 | 29,111.8 | 4,966 | 17 | 29,111.8 |
| Net change in cash and cash equivalents | 15,161 | (60,920) | 124.9 | 16,306 | 108 | 14,998.1 |
* Cash flow from operating activities excluding changes in financial services receivables/payables.
** Including financial assets available for sale, investments held to maturity and investments in credit institutions held by Banco CTT.
Financing is mainly related to financial leasing operations concerning operating facilities and the acquisition of basic equipment, a non-current bank loan in Corre in order to fund operating activities and the cash pooling system used within CTT scope, particularly by Tourline in Spain.
Net debt amounted to €90.3m in 2016, after net financial debt and net liabilities with employee benefits.
| Net debt | |||
|---|---|---|---|
| Thousand Euros | 31.12.2016 | 31.12.2015 | % 16/15 |
| Financial debt | 9,807 | 8,114 | 20.9 |
| Bank loans and other loans | 8,813 | 6,123 | 43.9 |
| Financial leasings | 994 | 1,990 | -50.1 |
| Net cash | 295,306 | 278,999 | 5.8 |
| Net financial debt | (285,499) | (270,885) | 5.4 |
| Liabilities with employee benefits * | 272,317 | 262,832 | 3.6 |
| Deferred tax assets related to employee benefits |
(77,093) | (74,537) | 3.4 |
| Net debt (incl. Liabilities with employee benefits) |
(90,275) | (82,590) | 9.3 |
* Includes share plan recorded in equity.
| Net cash | |||
|---|---|---|---|
| Thousand Euros | 31.12.2016 | 31.12.2015 | % 16/15 |
| Net cash | |||
| (+) Cash and cash equivalents | 618,811 | 603,650 | 2.5 |
| (-) Net Financial Services payables | (323,506) | (324,651) | -0.4 |
| Net cash | 295,306 | 278,999 | 5.8 |
| Financial indicators | |||
|---|---|---|---|
| 2016 | 2015 | % 16/15 |
|
| Current liquidity ratio (1) | 106.2% | 133.0% | -26.8 p.p. |
| Solvency ratio (2) | 21.5% | 29.0% | -7.5 p.p. |
| Adjusted solvency ratio (3) | 30.7% | 46.4% | -15.7 p.p. |
| Net debt (€m) | (90,275) | (82,590) | 9.3 |
| Net debt/EBITDA(4) | -0.8 x | -0.6 x | 0.2 x |
| Tangible fixed asset coverage (5) | 230.4% | 237.0% | -6.6 p.p. |
| Dividend/Net profit (6) | 115.8% | 97.8% | 18.0 p.p. |
| Dividend/ Ajusted operating free cash flows (6) | 86.0% | 103.2% | -17.2 p.p. |
| (1) Current assets/Current liabilities |
(2) Equity/Total liabilities
(3) Equity/(Total liabilities - net Financial Services payables )
(4) If negative indicates positive net cash situation
(5) (Non-current liabilities+Equity)/Tangible fixed assets (includes investment properties)
(6) €72.0m dividends in 2016 and €70.5m dividends in 2015.
The economic and financial position of CTT Group excluding Banco CTT from the consolidation perimeter, being accounted as a financial participation (equity method), would be as follows:
| Consolidated income statement | ||||
|---|---|---|---|---|
| Thousand Euros | 2016 | 2015 | % 16/15 |
|
| Revenues | 696,470 | 727,366 | 0.0 | |
| Operating costs | (578,582) | (609,902) | -0.1 | |
| Earnings before financial income and taxes | 117,887 | 117,464 | 0.0 | |
| Financial results | -27,077 | -11,261 | 1.4 | |
| Gains/losses in associated companies | -21,208 | -5,866 | 2.6 | |
| Earnings before taxes | 90,811 | 106,203 | -0.1 | |
| Income tax for the period | -28,914 | -34,133 | -0.2 | |
| Net profit for the period | 61,897 | 72,071 | -0.1 | |
| Non-controlling interests | -263 | 5 | -50.2 | |
| Net profit for the period attributable to equity holders |
62,160 | 72,065 | -0.1 | |
| EBITDA | 127,495 | 141,965 | -0.1 |
| Thousand Euros | 31.12.2016 | 31.12.2015 | % 16/15 |
|---|---|---|---|
| Non-current assets | 393,226 | 373,202 | 5.4 |
| Current assets | 669,901 | 744,944 | -10.1 |
| Total assets | 1,063,127 | 1,118,147 | -4.9 |
| Equity | 233,327 | 251,835 | -7.3 |
| Total liabilities | 829,800 | 866,312 | -4.2 |
| Non-current liabilities | 269,512 | 292,668 | -7.9 |
| Current liabilities | 560,288 | 573,644 | -2.3 |
| Total equity and liabilities | 1,063,127 | 1,118,147 | -4.9 |
Impact of the exclusion of Banco CTT from the consolidation perimeter on the economic position (Profit & Losses) in 2016:
Impact of the exclusion of Banco CTT from the consolidation perimeter on the financial position (Balance Sheet) in 2016:
The impacts mentioned above would change the 2016 ratios, namely:
| Returns on Capital | |||
|---|---|---|---|
| 2016 | 2015 | % 16/15 |
|
| Return on Invested Capital (ROIC)(1) | 20.7% | 22.0% | -1.3 p.p. |
| Return on Capital Employed (ROCE)(2) | 23.4% | 21.6% | 1.9 p.p. |
(1) Earnings before financial income and taxes/(Net assets-Cash)
(2) Earnings before financial income and taxes (Net assets-ST Liabilities)
| Financial indicators | |||
|---|---|---|---|
| 31.12.2016 | 31.12.2015 | % | |
| 16/15 | |||
| Current liquidity ratio (1) | 119.6% | 129.9% | -10.3 p.p. |
| Solvency ratio (2) | 28.1% | 29.1% | -1.0 p.p. |
| Adjusted solvency ratio (3) | 46.1% | 46.5% | -0.4 p.p. |
(1) Current assets/Current liabilities
(2) Equity/Total liabilities
(3) Equity/(Total liabilities - net Financial Services payables )
In 2016, CTT paid a dividend of €0.47 per share and the CTT share price depreciated by 27.21%. Hence, the total shareholder return or TSR (capital gain + dividend, calculated on the basis of the share price as at 31 December 2015) was 22.86%. During the period, the PSI 20 also had a negative total shareholder return, of -9.04%.
From the date of CTT IPO until the end of 2016, the company shares gave a total shareholder return of 37.10%, the second best performing among EU postal sector peers, second only to bpost with 80.53% but above the PSI20 which was negative by 19.90%.
In terms of share price appreciation, the best performer of the EU postal sector in 2016 was Deutsche Post, whose shares appreciated by 20.34%. On the same basis, the PSI 20 index depreciated by 11.93% in the year 2016, which was influenced by the strong increase in yield of Portuguese 10-year sovereign debt (+49.6% from 2.50% to 3.75%) relative to 31 December 2015.
1 Royal Mail share price in euros.
Throughout the year 2016, circa 150 million CTT shares were traded, corresponding to a daily average of 582 thousand shares, which translates into an annualised turnover ratio of around 100% of the share capital, which is a strong measure the share liquidity. As at 31 December 2016 market close, the CTT share price was €6.445.
Human resources management continued to be driven by the following priorities: (i) definition and implementation of new, all-encompassing and consistent human resources development policies that reward performance and promote skills, (ii) promote the agility of the Company, (iii) maintaining a sound social climate, (iv) continued investment in training and qualification, and (v) optimisation and adequacy of staff to meet the evolving needs and challenges of the markets CTT operates in.
As at 31 December 2016, CTT has 12,149 employees, 92 (0.8%) more than at 31 December 2015. The increase of 97 employees in Banco CTT is also reflected in this number.
Permanent staff was reduced by 118 and employees on fixed-term contracts rose by 210. The reduction of employees in the Express & Parcels business unit had a particular effect on this evolution, as a result of the delivery network integration process, the optimisation of the integrated networks in Portugal and the downsizing of employees at CTT, S.A.'s central services as a result of the human resources optimisation programme. On the contrary, Banco CTT increased its number of employees inherent in the project life cycle.
The increased number of employees on fixed-term contracts was centred around the Mail business unit (i) in the operational area due to greater absenteeism during the period and the need to adapt processes and reinforce support for the integration of networks, with the opposite effect on the Express & Parcels business unit and (ii) in the Retail Network as a result of the necessary reorganisation in hosting banking operations in the post offices in response to the high affluence of clients to open bank accounts.
| 31.12.2016 | 31.12.2015 | Δ 2016/2015 | ||
|---|---|---|---|---|
| 9,774 | 9,651 | 123 | 1.3% | |
| Express & Parcels | 1,027 | 1,074 | -47 | -4.4% |
| Financial Services | 96 | 102 | -6 | -5.9% |
| Banco CTT | 162 | 65 | 97 | 149.2% |
| Other | 1,090 | 1,165 | -75 | -6.4% |
| Total, of which: | 12,149 | 12,057 | 92 | 0.8% |
| Permanent | 11,247 | 11,365 | -118 | -1.0% |
| Fixed-term contracts | 902 | 692 | 210 | 30.3% |
| Total in Portugal | 11,702 | 11,600 | 102 | 0.9% |
The number of employees includes 6,685 employees in the areas of operations and mail delivery, including 4,687 letter-carrier postmen, and 2,745 employees in the Retail Network. The majority of the latter also have the necessary skills to provide services to Banco CTT.
In 2016, 140 employees were hired (106 in Portugal, 59 of which in Banco CTT, and 34 abroad, namely in Tourline Express), while 2 employees returned from unpaid leave and 260 left the company. Of these, 58 employees retired, 186 terminated their contracts or were on unpaid leave or other similar situations, and 16 deceased.
On 23 March 2016, effective January 2016, a Revision Agreement for CTT's 2015 Company Agreement was signed with ten Trade Unions. Under it, the parties agreed to review fixed remuneration up to €2,753/month in 2016, extendable to subsidiary employees. This revision of fixed remuneration was an important adjustment for lower levels of remuneration. This Revision Agreement takes into account the importance of a climate of social stability and peace within the Company, which is a goal of both CTT and the signing Trade Unions. The agreement seeks to value work, substantially via the performance-indexed variable remuneration policy.
Under the reinforcement and development of the human capital needed for CTT's growth, as well as the consolidation of CTT's Employer Brand, measures have been implemented to promote the entry of staff with new skills and resources, thereby reinforcing the units undergoing growth.
In this regard, the selection process for the 2nd edition of the Trainee Programme was launched with a view to attract and retain young people of high-potential, promote their development within a structured overall programme, contribute to the rejuvenation of staff, foster a mobility culture and position CTT as an "employer of first choice". The "Summer Internship 2016" programme was also carried out, wherein 17 university students developed technical skills and relationships in a work environment over the course of two months.
Performance assessment regarding performance in 2015 was carried out for the first time based on a new performance management model that is aligned with the management cycle and based on the assessment of behaviour and goals, established for all employees and taking into account the various activities and functional groups. In this regard and as one of the pillars of the remuneration policy and for the second year since CTT's privatisation, annual variable remuneration was granted in the approximate amount of €7.5 million in light of the company's results and performance in the 2015 financial year. This extraordinary bonus was allocated on a differentiated individual basis, in light of that assessment process.
Under CTT's ongoing transformation efforts to adopt new practices that contribute to the organisational efficiency, motivation and alinement of its teams, CTT VOX, an organisational diagnostic questionnaire intended to collect the opinions of all employees, was carried out during the month of September. The questionnaire also seeks to identify strong spots and those needing improvement and, consequently, increase staff satisfaction and motivation.
In terms of training, 2016 saw a strong investment in training that sought to bolster and promote skills geared toward i) attaining the stipulated goals and addressing new challenges, ii) gaining or developing knowledge in the new areas of growth, as is the case in the banking business, iii) professional and personal development, and iv) motivation, involvement and strengthening the commitment of employees to the company, its culture and values.
311 thousand hours of training took place for 12 thousand employees. Training programmes to prepare teams working in the post offices where Banco CTT operates were of strategic importance, as well as programmes preparing post offices to launch the offer of healthcare insurance and the ongoing preparation of staff in post offices, postal agencies, operations and service providers for the commercial and operational changes to the Express & Parcels offer.
Special note to the significant efficiency gains obtained through the sharp growth in e-learning as compared to the previous year, which already represented more than 20% of the total hours of training carried out and encompassed 4,909 employees (+36% than in 2015).
In 2016, a talent management programme was set-up. Activities for 2017 were stipulated for each of the five programme axes, as follows: (i) attract new employees; (ii) clarify their responsibilities, expectations, opportunities and modus operandi in CTT; (iii) engage employees with business, team and individual goals and results; (iv) empower employees for current challenges and prepare them for the future; and (v) make CTT grow by making employees grow.
The goals of the Talent Management Plan are to:
In 2016, the OQSI stood at 126 points compared to a target of 100. The year of 2016 was marked by the transition to an external entity (PricewaterhouseCoopers (PwC)), which initiated on 1 October 2016, measurement of the universal service quality of service indicators.
In 2016, all quality indicators for the Universal Postal Service performed above the stipulated minimum targets.
Quality Indicators Domestic Mail
Overall Quality of Service indicator
* The 2015 OQSI result reported in the 2015 Annual Report (206.4) was recalculated considering the items sent (instead of delivered) in the year 2015.
| Minimum | Target | Score |
|---|---|---|
| 93.50 | 94.50 | 93.80 |
| 84.00 | 87.00 | 89.40 |
| 99.75 | 99.85 | 99.87 (1) |
| 95.50 | 96.30 | 96.10 |
| 99.77 | 99.86 | 99.82 (1) |
| 95.50 | 96.30 | 98.30 |
| 85.00 | 88.00 | 86.00 (2) |
| 95.00 | 97.00 | 97.10 (2) |
| 90.50 | 92.00 | 90.70 |
| 75.00 | 85.00 | 86.40 |
| 89.00 | 91.00 | 92.00 |
Notes:
(1) Indicators calculated based on the sum of CTT samples (until the 3rd quarter) and PwC (in the 4th quarter).
(2) Indicators calculated by IPC - International Post Corporation based on the weighted average of the 4th quarter of 2015 and 9 months 2016 figures.
Other indicators were calculated based on the weighted average of CTT results (until the 3rd quarter) those from PwC (in the 4th quarter).
The variation in the OQSI for 2016 as compared to the previous year was due to certain operational disruptions in the months of February and March that had a negative effect on the overall indicator. Notwithstanding the recovery in service levels throughout the rest of the year, overall quality of service levels for Priority Mail in mainland Portugal (with next-day delivery) and Parcels (with 3-day delivery) recorded service levels higher than the minimum stipulated target, but slightly below the target (-0.7 p.p. and -1.3 p.p. respectively). In Parcels, further note should be made to the limits arising from air transport to the islands and inter-island operations (in the Azores Archipelago) as a result of irregular and sometimes insufficient flight cargo capacity, as well as certain seasonal weather.
The operational disruptions mentioned above were promptly resolved and led mainly to the installation of a new Rest Mail machine at the beginning of the year, which entailed important initial adjustments affecting the entire operational cycle. Despite the low levels of participation, a general strike on 28 March, extended the recovery period and delayed the return to stable normal activity.
CTT client perception of the overall quality of service provided remains relatively high, with 86.1% of clients considering the service provided to be good or very good (Source: Customer satisfaction surveys).
In 2016, there were continued efforts to keep management systems certified. In February 2016, a successful external audit was carried out to maintain the Control Systems Quality Certification for the stipulation of the Quality of Service Indicators, in relation to QSI 1 to 5 (Transit time for ordinary mail and priority mail), QSI 6 (Transit time for newspapers and periodicals), QSI 9 (Transit time for national parcels) and QSI 10 (Time waiting in queues).
The external audit to maintain CTT Expresso's and Mailtec's certification took place in April with positive results. In July, the audit to maintain certification for the production and logistics centre also took place with very positive results. The quality and environment certification of the subsidiary CTT Contacto was also maintained, through an external audit carried out in December.
For the first time in CTT, in December 2016, the adoption of the SMETA (4 Pillars) methodology obtained by CTT Expresso was acknowledged. The SMETA audit (Sedex Members Ethical Trade Audit) is a methodology that assesses good corporate, technical and ethical practices and takes four management pillars into account: human resources, occupational health and safety, respect for the environment and ethics in corporate relationships.
The Service Certification process was maintained in all post offices, postal delivery offices and expanded to 100 more postal agencies, making up a total of 200 certified postal agencies.
In terms of the quality of the Universal Postal Service and in the aftermath of the new Postal Law, a new quality measurement and control system was implemented throughout 2016, which will be carried out by an independent external entity. Following the pre-qualified international tender, the external entity entrusted with the measurement of quality levels was selected. This entity is an international company that carried out the works necessary to implement the measurement system for quality of service indicators as of 1 October 2016.
Telephone calls (58%) and emails (42%) to the Contact Centre were the communication methods most used by clients when contacting the company, with the latter growing to the detriment of the former.
In 2016, there were 1.3 million answered telephone calls, which represents a year-on-year increase of 12%. This evolution was mainly due to an increase in contacts related to customs clearance (in e-commerce) and with the toll payment service.
As for emails, 955 thousand contacts were received by the contact centre, which represents a yearon-year increase of 32%. Growth is associated with the client's need to obtain information on item location and customs clearance and to file complaints.
The CTT application (CTT App) for smartphones facilitates customer contact with CTT's offer of postal, payment and other services. It allows users to locate the closest point of access, search and pay tolls through the vehicle's license plate and monitor the delivery of parcels, all in a simple and intuitive format. In 2016, the CTT App was accessed 23.3 million times, a monthly average of 1.9 million, representing a year-on-year growth of 22%. A number of updates and improvements are planned for 2017, not only to its usability, but also in adding new services.
CTT's mission and values put the spotlight on innovation as both an assured way of fulfilling the mission – today and in the future – and as a bet on the ongoing pursuit of new ideas, processes and solutions that contribute to CTT's future. Innovation is a goal in itself for CTT.
In the context of innovation and development and as previously referenced in earlier sections concerning the business units, the highlights in 2016 are:
developing the self-service Cttads.pt platform to create advertising campaigns,
analysis of potential opportunities that the IOPT (Internet of Postal Things) may come to offer CTT,
The year was marked by the successful launch of Banco CTT, present in 202 branches, thereby expanding its offer and creating value.
CTT's sustainability strategy was reviewed, based on a stakeholder consultation that resulted in the update of the relevance analysis, mapping of interested parties and key topics. The Sustainability Committee was created under the governance structure review and is chaired by the CEO and made up of the remaining Executive Committee members, entrusted with defining, monitoring and developing the company's sustainability policy.
At the beginning of the year, a Revision Agreement for CTT's 2015 Company Agreement was signed, wherein the parties agreed to review fixed remuneration up to €2,753 per month, which was an important adjustment for lower levels of remuneration. The Agreement values the climate of social stability and peace within the Company, which is based on a variable remuneration policy indexed to performance.
Nearly 311 thousand hours (-1.5% than in 2015) of training were provided and absenteeism was 6.5%. The 2nd edition of the Driver's Challenge took place, a system that assesses and recognises eco-efficient performance, covering 4,700 company drivers. As regards work safety, there were 979 work-related accidents (none fatal), a year-on-year growth of 3.2%.
As regards diversity, the female presence within the Board of Directors rose to 25%. CTT renewed its membership to the Forum of Companies for Equality (IGEN – Fórum Empresas para a Igualdade), undertaking commitments regarding equality, non-discrimination, parenting rights and others. CTT received awards in the "Best health and well-being policy" and "Gender Equality" from the publication Human Resources.
Social and environmental initiatives received CTT's support in the amount of 1.2 million Euros. More than 160 volunteers and family members joined in on environmental and social volunteering initiatives, in a total of 2,184 hours. From among the charitable programmes, we highlight the Fight Against Poverty Project.
In fighting climate change, CTT launched the 3rd edition of the "A Tree for the Forest" project to plant trees in critical areas of the country. The communication impact of the project was outstanding, with an outreach of almost 2 million people. It received a "Green Projects Award" and a "CSR Coups de Coeur" of PostEurop.
The green portfolio (Green Mail and DM Eco) continued to gain importance, with an overall increase therein of 2.4% in volume and 3.9% in revenue. The weight of ecological purchases in overall procurement was 99.4%. For the third consecutive year, CTT was nominated as an "Environmentally Trusted Brand", by the Reader's Digest Selections.
The use of 100% green electricity as of 2015, caused scope 1 and 2 emissions to fall by approximately 15 ktons of CO2 a year. The insourcing of outsourced routes, and the launch of Banco CTT's operations caused fuel consumption to rise by 2.8%. Electricity consumption stabilised (-0.3%), the falls in gas and air conditioning contained the overall rise in energy to 1.0% (+1.0% emissions). The use of 43 electric vehicles and the delivery of another 28 expanded the electric fleet, the largest in the country, to 320 vehicles.
CTT recorded the largest drop in emissions in the worldwide postal sector: -70% in scopes 1 and 2 (2015, 2008 baseline) and again improved its position in the IPC's EMMS carbon proficiency rating, earning 3rd place from among the 20 main international operators. In the stock market rating of the CDP - Carbon Disclosure Project, CTT rose in the ranks to become co-world leader in its sector.
Quality attained 126 points, relative to the 100-point target set by the Regulator; 86.1% of customers claimed to be satisfied or very satisfied with the services rendered by CTT.
In 2016, 213,197 customer inquiries and claims (CTT, S.A. and CTT Expresso) were received regarding marketed services and products, a year-on-year increase of 17%. The breakdown of processed entries was 54% for domestic services, 40% for international services and 6% for financial services.
Two Mystery Client surveys were carried out in 2016 with the main goal of measuring the quality of service perceived by the customer. In the first survey, carried out in February and March, 619 post offices were assessed with an overall result of 99.6% favourable opinions; the second survey, held in July and August, covered 617 post offices with an overall result of 99.0% favourable opinions. Several variables were assessed, including the way the customer is served, the presentation of CTT employees, their product knowledge, the information available and the presentation of the space.
Additionally, in order to obtain in-depth knowledge and improve satisfaction with the services provided, CTT periodically carries out studies and questionnaires with its customers from both the Retail Segment (customers going to CTT post offices) and the Business Segment (Contractual Customers).
The last survey was carried out by Pitagórica (from June to July 2016) in 68 CTT post offices, on a national level. The sample was collected from 2,053 interviews. The overall satisfaction average for on-site post office customers is 4.40 (on a scale from 1 to 5, where 1 is "not at all satisfied" and 5 is "very satisfied").
The features that earned greater levels of satisfaction were:
| Cleanliness/presentation of the post office 4.70 |
Average | |
|---|---|---|
| Friendliness of service | 4.70 | |
| Effectiveness of service 4.70 |
||
| Ability to resolve problems/provided information 4.60 |
||
| Concern with resolving the customer's problems 4.60 |
||
| Post office location 4.60 |
||
| Opening hours 4.50 |
Basis: 2,053 individuals
The analysis of this market segment reflects the results of the Customer Satisfaction Surveys addressed to customers, broken down as Large Customers, CTT Business Customers and CTT Expresso Customers.
Large Customers (carried out by Equação Lógica, in January 2016) obtained an Overall Satisfaction Average of 8.42 (on a scale from 1 to 10, where 1 is "Not at All Satisfied" and 10 is "Very Satisfied").
Throughout the year, CTT spent 28 days in external meetings with investors (21.5 days in 2015), 16 of which in 15 conferences (organised by 12 different brokers in 6 different cities) and 12 days in 13 roadshows (organised by 9 different brokers in 9 different cities). In 2016, the Chairman and CEO of the Company spent 8 days abroad on investor-related activities and the CFO spent 21 days on similar activities. Banco CTT's CEO participated in one roadshow. Furthermore, the Investor Relations Department organised a corporate governance roadshow for the first time with the Vice-Chairman/Lead Independent Director, in which corporate governance issues were debated with roughly ten major Company shareholders.
CTT received visits from 10 investors in Lisbon. Over the course of the year, the Company met with 333 investors. Also, conference calls were held with 37 investors, 20 meetings and 12 scheduled conference calls with research analysts, as well as many unscheduled calls.
As at 31 December 2016, coverage of CTT's shares was provided by 16 research analysts (15 at the end of 2015) from 5 Portuguese brokers (Caixa BI, BPI, Haitong, Intermoney and Banco BIG), 5 from North America (JP Morgan, Morgan Stanley, Goldman Sachs, Jefferies and Royal Bank of Canada), 3 from Spain (BBVA, Santander and Fidentiis), 1 from Germany (MainFirst), 1 from the United Kingdom (Barclays) and 1 from South Africa (Investec).
Complying with the pricing criteria for the Universal Postal Service defined by ANACOM - Autoridade Nacional de Comunicações within the scope of article 14 (3) of the Law 17/2012 of 26 April, as published in the Decree-Law 160/2013 of 19 November, CTT has submitted to ANACOM the proposal for price update of the universal service for 2017, which is expected to enter into force only in the 2nd quarter of 2017.
On 15 December 2016, CTT and the Barraqueiro Group entered into an agreement for the purchase of the entire share capital of "Transporta - Transportes Porta a Porta S.A." ("Transporta"), for the price of €1.5m, due with the transaction closing and subject to adjustments, in particular, throughout the 3 years following that closing. There may be an increase in the price depending on the synergies created and operating revenues.
Following the announcement dated 15 December 2016, regarding the purchase and sale agreement for the total share capital of Transporta – Transportes Porta a Porta, S.A. ("Transporta"), on 2 March 2017, CTT was notified of the decision of non-opposition by the Competition Authority, without imposing any conditions to the referred acquisition. The acquisition is yet subject to the verification of other suspensive conditions agreed between the parties
CTT operates in a liberalised competitive market, which has seen a significant drop in physical mail due to the competition from new communication media, especially the email. CTT has therefore been developing a strategy of expansion and diversification, promoting and launching new services and businesses in adjacent markets with potential synergies, broadening its offer to clients ("one stop shop"). The acquisition of Transporta falls under this strategy, because, as a fractional cargo transport operator and integrated logistics service provider, it will allow CTT to add a new >30kg item delivery offer to its portfolio and create a new expansion platform for the Group in the logistics and last-mile cargo value chain, adding further value to its customers.
The cargo/logistics last mile trend is already followed by i) CTT Expresso competitors and ii) other international postal operators that have benefitted thereof in terms of growth and customer loyalty. In addition, it will allow CTT to offer 3PL logistic solutions, where Transporta already operates. This new business is supplementary to CEP and creating this new offer will allow CTT to offer its clients an integrated solution for their various logistic and delivery needs with the distribution of all types of items (<30 kg and >30 kg), as well as storage and added-value solutions.
Beyond the increased service offering, Transporta's integration in CTT will allow the Company to benefit from the group economies of scale and create operational synergies by reducing consolidated costs.
In execution of the Remuneration Committee's approved remuneration policy for the 2014/2016 term of office and the Company's Executive Director Share Award Plan approved by the General Meeting held on 5 May 2015, on 31 January 2017 CTT awarded a total of 600,530 registered, bookentry, own shares, with a value of €0.50 each, representing 0.400% of the share capital to the Company's Executive Directors, as long-term variable remuneration.
The attribution of those shares was performed outside a trading venue by way of the transfer of CTT own shares, which had been acquired in advance for that purpose, in accordance with the assessment of the compliance with the Total Shareholder Return objective set out in said remuneration policy, conducted by an independent entity and confirmed by the company's Auditor.
Following the attribution with reference to 31 January 2017 and as at this date, CTT is the holder of 1 own share, which represents 0.000% of its share capital, the voting right inherent to this share being suspended pursuant to article 324 of the Portuguese Companies Code.
On 9 March 2017 the Board of Directors decided to submit to the General Meeting's approval a proposal for the decrease of share capital, to free excess capital, from €75m to €25.5m, transferring the amount of €49.5m to free reserves and an increase of share capital, also in the amount of €49.5m, by way of incorporation of reserves available therefor and resulting mainly from retained earnings arising from revaluations of fixed tangible assets (which, until the adoption of the Accounting Standardisation System, fell under the "revaluation reserves" heading and as at 31 December 2016 amounted to approximately €44m).
Taking into account on this date the actual conditions for carrying out the referenced transactions and the various interests of the Company and its Stakeholders, said transactions will:
Following these mutually conditional transactions subject to the approval of the 2016 accounts and appropriation of results, the nominal value and number of the shares representing CTT's share capital shall remain unchanged and, as the due legal reserve is €15m, it is also proposed to the General Meeting the transfer of the amount of €3m to free reserves. The decrease and increase of share capital are subject to the General Meeting approval and to the commercial registry.
CTT's dividend policy is one of the relevant pillars of the shareholder remuneration strategy. It should be balanced with the development of the new CTT growth levers, such as Banco CTT. This operation allows for greater flexibility in the Company's management during investment periods such as the current one.
The Transformation Programme28 initiatives implemented between 2013 and 2016, allow CTT to face the year 2017 with the expectation of continuing to pursue the defined strategy, namely to achieve growth in the consolidated revenues based on the growth levers and the unique networks of CTT, as means to sustain the generation of value for the shareholders.
Expected GDP growth for Portugal will continue to be heavily influenced by growth in exports and investment, along with an accelerating domestic consumption, the main consumer driver for CTT's products and services, mainly in the Mail business. In this framework, the drop in demand for mail will continue to be affected not only by the structural trend toward electronic substitution, but also by macroeconomic factors. It should remain close to the natural long-term trend, although it may vary depending on the behaviour of internal consumption. CTT may also be affected by the increase in competition, both in terms of penetration and price pressure, specifically in some market segments.
Growth in electronic commerce will continue to be the main driver of growth in the parcels business for the B2C segment (business to consumer) while internal economic activity promotes the growth of the parcels market for the B2B segment (business to business), both in Portugal and Spain. Iberian retailers are expected to migrate or adopt online sales platforms in greater numbers, along with a change in consumer habits. E-commerce originated in local retailers will have more weight as is the case in northern European countries. For this purpose, CTT is undertaking various initiatives to increasingly become the leader in logistic solutions offered to this market and that include (i) the modular offer in the parcels business tailored for this segment with various levels of service, features and flexibility, (ii) the integration and now optimisation of the delivery networks in Portugal and also Spain, allowing greater competitiveness in the offer geared toward this market where capillarity and convenience are key factors and (iii) the development of a new technological platform to support this type of ever changing and increasingly soffisticated flexible modular offer.
CTT's Financial Services unit will focus on business customers while Banco CTT will focus on the individuals segment, covering the entire market with financial solutions leveraged on CTT's unique skills and assets.
For Banco CTT, 2017 will be a year for the consolidation of the customer base and to start monetising the activity with new products and services, focusing especially on the offer of mortgage loans and consumer credit. CTT will proceed its winning bet as one of the main players in the placement of savings solutions, particularly with public debt products for the retail in partnership with IGCP.
Banco CTT relies on an organic project supported by CTT's strategic assets (its Retail Network and Brand), while also considering acquisition opportunities (small-sized, inorganic and complementary) of entities and/or portfolios which are compatible with the strategy and the business plan of Banco CTT. The aim is to on one hand maintain the focus on a strong cost discipline and, on the other, to develop potential opportunities to cut time-to-market and alternative applications for customer resources, thus promoting an acceleration of the launch and growth of Banco CTT.
28 Transformation Programme: a set of projects selected annually as fundamental to implementing CTT's strategy.
As regards Payshop, initiatives will be carried out to maximise its competitive advantages in this market: (i) the vast portfolio of clients that covers almost all service providers, with a wider offer that also covers remote channels (digital) and (ii) the network of over 4,000 agents spread throughout the country, by presenting new services to their users.
The Balance sheet optimisation measures shall proceed, such as the optimisation of working capital and the optimisation of the use of vacant buildings. CTT shall continue to manage employee benefits, with a view to a good management of this responsibility and reducing its impact on the Balance Sheet and cash flow of the Company.
Following a difficult year in 2016, the company's goal is to achieve growing and sustainable revenues in the future. This goal is based on the expectation that the growing businesses (Financial Services and Express & Parcels) compensate the expected drop in revenue from Mail, as a result of the drop in volume that is not fully offset by price increases. For that purpose, the organic growth initiatives implemented in 2016 will be deepened and, depending on the Company's strategy and market opportunity, inorganic growth alternatives will be pursued, which are consistent with the strategy and markets where the Company operates.
"Under the terms of article 23 of the Articles of Association of CTT - Correios de Portugal, S.A. ("CTT" or "Company"), the annual net profit, duly approved, will be appropriated as follows:
Under the terms of article 295(1) of the Portuguese Companies Code ("PCC"), a minimum of 5% is intended for the constitution of the legal reserve and, if necessary, its reintegration until this reserve reaches 20% of the share capital. As the share capital is €75,000,000.00, 20% is calculated at € 15,000,000.00, whereby the legal reserve as at 31 December 2016 exceeds the minimum amount required by the Articles of Association and the PCC.
Pursuant to article 294(1) of the PCC, save for another bylaw provision or a resolution passed with a majority of ¾ of the votes corresponding to the share capital in a General Meeting called for that purpose, half of the financial year's distributable profits must be distributed to shareholders, as set out by law. CTT's Articles of Association contain no provision contrary to the referenced legal provision.
Distributable profits are the financial year's net profits after the constitution or increase of the legal reserve and after negative retained earnings have been covered, if applicable. As at 31 December 2016, the legal reserve is fully constituted and retained earnings are positive. For the financial year ended on 31 December 2016, net profits for the year, in the individual accounts, amounted to €62,160,395.00.
Given the accounting rules in force, the amount of €3,046,676.00 is already reflected in the stated net profits regarding profit sharing with CTT employees and Executive Directors, as proposed. Under the terms of said article 23 of the Articles of Association of the Company, a variable remuneration may be added to the Executive Directors' fixed remuneration which may consist of a percentage of the Company's consolidated profits. In such case, the overall percentage of profits allocated to the variable remuneration may not exceed, every year, an amount corresponding to 5% of the consolidated profit for the financial year.
Accordingly and in compliance with the provisions applicable under the law and the Articles of Association, the Board of Directors proposes that:
a) the net profit for the financial year of 2016, totalling €62,160,395.00, as per the individual financial statements, is allocated as follows:
Dividends*………………………………………………………… €60,805,324.00 Reserves ** …………………………………………………………. €1,355,071.00
* distribution of €72,000,000.00 in dividends, which corresponds to €0.48 per share.
** resulting from the fiscal re-assessment of tangible fixed assets as per Decree-Law 66/2016 of 3 November.
Lisbon, 9 March 2017
The Board of Directors,
For the purposes of article 245(1)(c) of the Portuguese Securities Code, the members of the Board of Directors and the members of the Audit Committee of CTT - Correios de Portugal, S.A. ("CTT") hereby declare that, to their best knowledge, the management report, the annual consolidated and individual accounts, the legal certification of accounts and other accounting documents i) were prepared in compliance with the applicable accounting standards, providing a true and fair view of the assets and liabilities, the financial position and the results of CTT and of the companies included in the consolidation perimeter, ii) faithfully describe the business evolution, the performance and position of CTT and of the companies included in the consolidation perimeter, and iii) contain a description of the major risks faced by CTT in its activity.
Lisbon, 9 March 2017
Francisco José Queiroz de Barros de Lacerda
António Sarmento Gomes Mota
Manuel Cabral de Abreu Castelo-Branco
André Manuel Pereira Gorjão de Andrade Costa
Ana Maria de Carvalho Jordão Ribeiro Monteiro de Macedo
Dionizia Maria Ribeiro Farinha Ferreira
The Member of the Board of Directors and of the Audit Committee
Nuno de Carvalho Fernandes Thomaz
The Member of the Board of Directors and of the Audit Committee
Diogo José Paredes Leite de Campos
The Member of the Board of Directors
Rui Manuel de Oliveira Horta e Costa
José Manuel Baptista Fino
The Member of the Board of Directors
Manuel Carlos de Melo Champalimaud
The Member of the Board of Directors
Céline Dora Judith Abecassis-Moedas
CTT-CORREIOS DE PORTUGAL, S.A.
CONSOLIDATED AND INDIVIDUAL STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 AND 31 DECEMBER 2015
Euros
| Group | Company | |||||
|---|---|---|---|---|---|---|
| Restated | Restated | |||||
| NOTES | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | 01.01.2015 | |
| ASSETS | ||||||
| Non-current assets | ||||||
| Tangible fixed assets | 5 | 208,921,781 | 209,940,886 | 192,866,766 | 193,843,668 | 196,761,737 |
| Investment properties | 7 | 9,291,983 | 19,783,095 | 9,291,983 | 19,783,095 | 23,329,763 |
| Intangible assets | 6 | 38,916,723 | 27,624,015 | 14,803,744 | 12,960,678 | 8,934,087 |
| Goodwill | 9 | 7,700,739 | 8,058,656 | - | - | - |
| Investments in subsidiary companies | 10 | - | - | 102,976,700 | 65,166,836 | 42,644,640 |
| Investments in associated companies | 11 | 296,260 | 255,695 | 295,779 | 255,214 | 937,732 |
| Other investments | 13 | 1,503,572 | 1,106,812 | 1,503,572 | 1,106,812 | 1,106,812 |
| Investments held to maturity | 14 | 93,986,115 | - | - | - | - |
| Shareholders | 51 | - | - | 5,125,000 | 6,750,000 | 9,103,098 |
| Other non-current assets | 24 | 1,306,148 | 601,103 | 1,110,991 | 586,741 | 790,601 |
| Financial assets available for sale | 15 | 4,473,614 | - | - | - | - |
| Deferred tax assets | 50 | 86,220,762 | 87,535,941 | 85,578,604 | 86,330,601 | 90,547,447 |
| Total non-current assets | 452,617,698 | 354,906,203 | 413,553,139 | 386,783,645 | 374,155,917 | |
| Current assets | ||||||
| Inventories | 18 | 5,407,685 | 5,455,115 | 4,721,728 | 4,671,709 | 5,002,908 |
| Accounts receivable | 19 | 122,113,270 | 124,355,641 | 94,323,683 | 97,684,021 | 96,513,372 |
| Credit to bank clients | 20 | 7,103,905 | - | - | - | - |
| Shareholders | 51 | - | - | 3,722,399 | 3,291,221 | 733,318 |
| Income taxes receivable | 37 | 3,587,614 | - | 3,569,641 | - | - |
| Deferrals | 21 | 6,128,931 | 8,168,589 | 4,937,995 | 7,002,270 | 4,670,967 |
| Investments held to maturity | 14 | 1,108,428 | - | - | - | - |
| Other current assets | 24 | 30,033,571 | 22,936,943 | 27,784,833 | 21,862,237 | 20,049,456 |
| Financial assets available for sale | 15 | 1,973,711 | - | - | - | - |
| Other banking financial assets | 16 | 59,054,303 | - | - | - | - |
| Cash and cash equivalents | 23 | 618,811,099 | 603,649,717 | 475,068,122 | 559,542,719 | 649,688,918 |
| 855,322,515 | 764,566,004 | 614,128,399 | 694,054,177 | 776,658,939 | ||
| Non-current assets held for sale | 22 | 8,756,999 | - | 8,756,999 | - | - |
| Total current assets | 864,079,515 | 764,566,004 | 622,885,398 | 694,054,177 | 776,658,939 | |
| 1,119,472,208 | 1,036,438,537 | 1,080,837,822 | 1,150,814,856 | |||
| Total assets | 1,316,697,213 | |||||
| EQUITY AND LIABILITIES | ||||||
| Equity | ||||||
| Share capital | 26 | 75,000,000 | 75,000,000 | 75,000,000 | 75,000,000 | 75,000,000 |
| Own shares | 27 | (5,097,536) | (1,873,125) | (5,097,536) | (1,873,125) | - |
| Reserves | 27 | 34,891,671 | 33,384,112 | 34,878,197 | 33,384,652 | 31,773,966 |
| Retained earnings | 27 | 93,589,211 | 91,727,994 | 93,602,685 | 91,727,994 | 84,374,563 |
| Other changes in equity | 27 | (27,137,824) | (18,644,832) | (27,137,824) | (18,644,832) | (18,786,310) |
| Net profit | 62,160,395 | 72,065,283 | 62,160,395 | 72,065,283 | 77,171,128 | |
| Equity attributable to equity holders | 233,405,918 | 251,659,432 | 233,405,918 | 251,659,972 | 249,533,347 | |
| Non-controlling interests | 30 | (79,135) | 175,322 | - | - | - |
| Total equity | 233,326,782 | 251,834,754 | 233,405,918 | 251,659,972 | 249,533,347 | |
| Liabilities | ||||||
| Non-current liabilities | ||||||
| Accounts payable | 34 | 375,379 | - | 375,379 | - | - |
| Medium and long term debt | 31 | 127,145 | 1,035,522 | - | 724,845 | 1,187,975 |
| Employee benefits | 32 | 250,445,608 | 241,306,773 | 250,445,608 | 241,306,773 | 255,527,808 |
| Provisions | 33 | 14,127,483 | 40,732,332 | 20,327,302 | 36,725,302 | 41,715,256 |
| Deferrals | 21 | 334,191 | 5,016,576 | 328,093 | 5,016,576 | 6,076,311 |
| Deferred tax liabilities | 50 | 4,123,146 | 4,576,598 | 4,086,530 | 4,534,199 | 4,788,768 |
| Total non-current liabilities | 269,532,952 | 292,667,801 | 275,562,913 | 288,307,695 | 309,296,118 | |
| Current liabilities | ||||||
| Accounts payable | 34 | 444,863,700 | 435,891,677 | 426,559,977 | 420,406,149 | 484,451,611 |
| Banking client deposits and other loans | 35 | 253,944,840 | - | - | - | - |
| Shareholders | 51 | - | - | 7,341,360 | 1,613,944 | 295,103 |
| Employee benefits | 32 | 17,390,573 | 18,538,572 | 17,390,573 | 18,499,767 | 21,594,809 |
| Income taxes payable | 37 | - | 7,922,942 | - | 7,923,944 | 6,171,287 |
| Short term debt | 31 | 9,679,829 | 7,078,155 | 724,749 | 462,968 | 460,098 |
| Deferrals | 21 | 4,177,609 | 13,745,430 | 4,169,848 | 10,550,227 | 5,853,426 |
| Other current liabilities | 36 | 82,562,725 | 91,792,877 | 71,283,201 | 81,413,156 | 73,159,057 |
| Other banking financial liabilities | 16 | 1,218,205 | - | - | - | - |
| Total current liabilities | 813,837,479 | 574,969,653 | 527,469,707 | 540,870,155 | 591,985,391 | |
| Total liabilities Total equity and liabilities |
1,083,370,431 1,316,697,213 |
867,637,454 1,119,472,208 |
803,032,619 1,036,438,537 |
829,177,850 1,080,837,822 |
901,281,509 1,150,814,856 |
| CTT-CORREIOS DE PORTUGAL, S.A. | |
|---|---|
| CONSOLIDATED AND INDIVIDUAL INCOME STATEMENT FOR THE TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 AND 31 DECEMBER 2015 | |
Euros
| Group | Company | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Twelve months ended | Three months ended | Twelve months ended | Three months ended | ||||||
| Restated | Restated | ||||||||
| NOTES | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | |
| Revenues | 696,821,564 | 727,179,760 | 177,995,598 | 189,104,907 | 581,972,346 | 600,888,329 | 145,777,234 | 156,826,015 | |
| Sales and services rendered | 4/40 | 669,668,571 | 705,168,863 | 172,407,094 | 178,208,284 | 531,057,316 | 550,979,418 | 134,466,373 | 138,165,711 |
| Financial margin | 41 | 26,051 | - | 57,443 | - | - | - | - | - |
| Other operating income | 42 | 27,126,942 | 22,010,897 | 5,531,061 | 10,896,623 | 50,915,030 | 49,908,911 | 11,310,861 | 18,660,303 |
| Operating costs | (605,938,692) | (617,247,815) | (157,474,393) | (158,923,053) | (479,459,501) | (490,922,262) | (123,541,799) | (127,202,343) | |
| Cost of sales | 18 | (13,906,199) | (16,316,346) | (3,644,134) | (4,501,124) | (10,974,792) | (13,874,596) | (2,778,799) | (3,802,546) |
| External supplies and services | 43 | (232,037,064) | (233,084,139) | (61,967,575) | (62,361,438) | (147,577,382) | (153,012,109) | (38,080,515) | (39,730,090) |
| Staff costs | 45 | (338,387,481) | (331,772,879) | (91,027,468) | (82,782,296) | (301,774,716) | (297,029,310) | (81,609,379) | (76,500,933) |
| Impairment of accounts receivable, net | 46 | (45,623) | (1,410,434) | 19,735 | (415,306) | 547,695 | 517,245 | 182,638 | 295,402 |
| Impairment of non-depreciable assets | 9 | - | 623,123 | - | 623,123 | (2,402,186) | - | - | - |
| Provisions, net | 33 | 16,343,680 | (277,313) | 8,877,961 | (285,526) | 13,805,988 | 246,722 | 6,738,555 | (60,022) |
| Depreciation/amortisation and impairment of investments, net | 47 | (27,468,094) | (23,573,001) | (7,562,231) | (6,887,234) | (22,479,167) | (19,441,277) | (6,148,896) | (5,831,377) |
| Other operating costs | 48 | (10,437,910) | (11,436,825) | (2,170,681) | (2,313,251) | (8,604,940) | (8,328,937) | (1,845,404) | (1,572,777) |
| Earnings before financial income and taxes | 90,882,873 | 109,931,945 | 20,521,205 | 30,181,854 | 102,512,845 | 109,966,067 | 22,235,435 | 29,623,672 | |
| Financial results | (5,638,167) | (5,321,964) | (1,658,727) | (1,408,300) | (16,612,738) | (9,152,413) | (3,691,998) | (1,838,776) | |
| Interest expenses | 49 | (6,540,106) | (6,861,401) | (1,737,672) | (1,710,418) | (6,466,598) | (6,774,705) | (1,718,438) | (1,693,146) |
| Interest income | 49 | 671,599 | 1,485,163 | 78,945 | 276,121 | 733,475 | 1,681,077 | 95,628 | 316,406 |
| Gains/losses in associated companies | 10/11/12 | 230,340 | 54,274 | - | 25,997 | (10,879,615) | (4,058,785) | (2,069,188) | (462,036) |
| Earnings before taxes | 85,244,706 | 104,609,981 | 18,862,478 | 28,773,554 | 85,900,107 | 100,813,654 | 18,543,437 | 27,784,896 | |
| Income tax for the period | 50 | (23,347,639) | (32,539,346) | (2,761,819) | (7,345,753) | (23,739,712) | (28,748,371) | (2,417,717) | (6,354,569) |
| Net profit for the period | 61,897,067 | 72,070,635 | 16,100,659 | 21,427,801 | 62,160,395 | 72,065,283 | 16,125,720 | 21,430,327 | |
| Net profit for the period attributable to: | |||||||||
| Equity holders | 62,160,395 | 72,065,283 | 16,125,720 | 21,430,326 | |||||
| Non-controlling interests | 30 | (263,328) | 5,352 | (25,061) | (2,525) | ||||
| Earnings per share: | 29 | 0.42 | 0.48 | 0.11 | 0.14 | 0.42 | 0.48 | 0.11 | 0.14 |
| CTT-CORREIOS DE PORTUGAL, S.A. | |
|---|---|
Euros CONSOLIDATED AND INDIVIDUAL STATEMENT OF COMPREHENSIVE INCOME FOR THE TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 AND 31 DECEMB ER 2015
Company
Group
| Twelve months ended | Three months ended | Twelve months ended | Three months ended | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Restated | Restated | ||||||||
| NOTES | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | |
| Net profit for the period | 61,897,067 | 72,070,635 | 16,100,659 | 21,427,801 | 62,160,395 | 72,065,283 | 16,125,720 | 21,430,327 | |
| Adjustments from application of the equity method (non re-classifiable adjustment to profit and loss) |
27 | 19,820 | 444,637 | 19,820 | 109,622 | 19,820 | - | 19,820 | - |
| Changes to fair value reserves | 27 | 14,014 | - | 3,820 | - | - | - | - | - |
| Employee benefits (non re-classifiable adjustment to profit and loss) | 32 | (11,827,990) | 114,181 | (11,827,990) | 3,290,351 | (11,827,990) | 114,181 | (11,827,990) | 3,290,351 |
| Deferred tax/Employee benefits (non re-classifiable adjustment to profit and loss) | 50 | 3,334,998 | 27,297 | 3,334,998 | (866,477) | 3,334,998 | 27,297 | 3,334,998 | (866,477) |
| Other changes in equity | 27/30 | 49,777 | (18,661) | (24,738) | (145,681) | 54,380 | (67,697) | (18,459) | (36,059) |
| Other comprehensive income for the period after taxes | (8,409,381) | 567,454 | (8,494,090) | 2,387,815 | (8,418,792) | 73,781 | (8,491,631) | 2,387,815 | |
| Comprehensive income for the period | 53,487,686 | 72,638,089 | 7,606,569 | 23,815,616 | 53,741,603 | 72,139,064 | 7,634,089 | 23,818,142 | |
| Attributable to non-controlling interests Attributable to shareholders of CTT |
53,742,143 (254,457) |
499,025 72,139,064 |
(27,519) 7,634,089 |
(2,525) 23,818,141 |
|||||
| NOTES | Share capital | Own Shares | Reserves | Other changes in equity |
Retained earnings | Net profit for the year | Non-controlling interests |
Total | |
|---|---|---|---|---|---|---|---|---|---|
| Balance on 1 January 2015 | 75,000,000 | - | 31,773,967 | (18,786,310) | 84,374,563 | 77,171,128 | (323,703) | 249,209,645 | |
| Appropriation of net profit for the year of 2014 Acquisition of own shares Share plan Dividends |
28/30 27/30 27 |
- - - - - |
(1,873,125) - - (1,873,125) - |
- - - 1,610,685 1,610,685 |
- - - - - |
77,171,128 (69,750,000) - - 7,421,128 |
(77,171,128) - - - (77,171,128) |
- - - - - |
- (70,012,440) (69,750,000) (1,873,125) 1,610,685 |
| Actuarial gains/losses - Health Care, net from deferred taxes Adjustments from the application of the equity method Comprehensive income for the period Balance on 31 December 2015 Changes to fair value reserves Net profit for the period Other movements |
27/30 27 27 27 |
- - 75,000,000 - - - - |
- (1,873,125) - - - - - |
(540) - - (540) - - 33,384,112 |
141,478 (18,644,832) - 141,478 - - - |
(177,319) - - 109,622 - (67,697) 91,727,994 |
- - - - 72,065,283 72,065,283 72,065,283 |
158,658 - - 335,015 499,025 175,322 5,352 |
141,478 444,637 72,637,549 251,834,754 (18,661) (540) 72,070,635 |
| Appropriation of net profit for the year of 2015 Balance on 1 January 2016 Acquisition of own shares Share plan Dividends |
28/30 27/30 27 |
75,000,000 - - - - - |
(1,873,125) (3,224,411) - - (3,224,411) - |
1,493,546 33,384,112 - - - 1,493,546 |
(18,644,832) - - - - - |
72,065,283 91,727,994 (70,264,792) - - 1,800,491 |
72,065,283 (72,065,283) - - - (72,065,283) |
175,322 - - - - - |
251,834,754 - 1,493,546 (71,995,658) (70,264,792) (3,224,411) |
| Actuarial gains/losses - Health Care, net from deferred taxes Adjustments from the application of the equity method Comprehensive income for the period Balance on 31 December 2016 Changes to fair value reserves Net profit for the period Other movements |
27/30 27 27 27 |
- - - 75,000,000 - - - |
- (5,097,536) - - - - - |
14,014 - - 14,014 - - 34,891,671 |
(8,492,992) (27,137,824) - (8,492,992) - - - |
40,906 - - 19,820 - 60,726 93,589,211 |
- - - - 62,160,395 62,160,395 62,160,395 |
8,871 - - - (263,328) (254,457) (79,135) |
14,014 19,820 53,487,686 233,326,782 49,777 (8,492,992) 61,897,067 |
CTT-CORREIOS DE PORTUGAL, S.A.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2016 AND 31 DECEMBER 2015
Euros
| tt | ||
|---|---|---|
| INDIVIDUAL STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2016 AND 31 DECEMBER 2015 CTT-CORREIOS DE PORTUGAL, S.A. Euros |
|---|
| ---------------------------------------------------------------------------------------------------------------------------------- |
| NOTES | Share capital | Own Shares | Reserves | Other changes in equity |
Retained earnings | Net profit for the year | Total | |
|---|---|---|---|---|---|---|---|---|
| Balance on 1 January 2015 | 75,000,000 | - | 31,773,967 | (18,786,310) | 84,374,563 | 77,171,128 | 249,533,347 | |
| Appropriation of net profit for the year of 2014 Acquisition of own shares Share plan Dividends |
28 27 27 |
- - - - - |
- - - (1,873,125) (1,873,125) |
- - - 1,610,685 1,610,685 |
- - - - - |
7,421,128 77,171,128 (69,750,000) - - |
- - - (77,171,128) (77,171,128) |
- (69,750,000) (1,873,125) 1,610,685 (70,012,440) |
| Actuarial gains/losses - Health Care, net from deferred taxes Comprehensive income for the period Balance on 31 December 2015 Net profit for the period Other movements |
27 27 |
- 75,000,000 - - - |
- - - - (1,873,125) |
- - - - 33,384,652 |
141,478 (18,644,832) - 141,478 - |
(67,697) 91,727,994 (67,697) - - |
- - 72,065,283 72,065,283 72,065,283 |
(67,697) 141,478 72,065,283 72,139,064 251,659,972 |
| Balance on 1 January 2016 | 75,000,000 | (1,873,125) | 33,384,652 | (18,644,832) | 91,727,994 | 72,065,283 | 251,659,972 | |
| Appropriation of net profit for the year of 2015 Acquisition of own shares Share plan Dividends |
28 27 27 |
- - - - - |
- - - (3,224,411) (3,224,411) |
- - - 1,493,545 1,493,545 |
- - - - - |
72,065,283 (70,264,792) - - 1,800,491 |
- - - (72,065,283) (72,065,283) |
- (70,264,792) (3,224,411) 1,493,545 (71,995,658) |
| Actuarial gains/losses - Health Care, net from deferred taxes Changes to fair value reserves Other movements |
27 27 27 |
- - - |
- - - |
- - - |
- (8,492,992) - |
54,380 - - |
- - - |
54,380 (8,492,992) - |
| Adjustments from the application of the equity method Comprehensive income for the period Balance on 31 December 2016 Net profit for the period |
27 | - 75,000,000 - - |
- - - (5,097,536) |
- - - 34,878,197 |
(8,492,992) (27,137,824) - - |
74,200 19,820 - 93,602,685 |
- 62,160,395 62,160,395 62,160,395 |
19,820 62,160,395 53,741,603 233,405,918 |
CTT-CORREIOS DE PORTUGAL, S.A.
CONSOLIDATED AND INDIVIDUAL CASH FLOW STATEMENT FOR THE TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 AND 31 DECEMBER 2015
| Euro | Group | Company | ||||
|---|---|---|---|---|---|---|
| NOTES | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | ||
| Operating activities | ||||||
| Collections from customers | 635,704,808 | 696,039,358 | 528,435,377 | 563,510,468 | ||
| Payments to suppliers | (248,660,942) | (230,578,621) | (162,807,260) | (158,179,087) | ||
| Payments to employees | (320,864,833) | (328,407,436) | (286,160,731) | (297,169,839) | ||
| Banking customer deposits and other loans | 253,545,420 | - | - | - | ||
| Credit to bank clients | (7,103,546) | - | - | - | ||
| Cash flow generated by operations | 312,620,906 | 137,053,302 | 79,467,386 | 108,161,542 | ||
| Payments/receivables of income taxes | (29,664,480) | (26,881,091) | (25,009,386) | (22,257,569) | ||
| Other receivables/payments | (14,738,983) | (77,340,046) | (13,506,804) | (67,832,724) | ||
| Cash flow from operating activities (1) | 268,217,444 | 32,832,164 | 40,951,196 | 18,071,249 | ||
| Investing activities | ||||||
| Receivables resulting from: | ||||||
| Tangible fixed assets | 1,739,510 | 515,316 | 1,739,510 | 515,316 | ||
| Investment properties | 5,944,750 | - | 5,944,750 | - | ||
| Financial investments | - | 24,870 | - | 24,870 | ||
| Financial assets available for sale | 28,916,956 | - | - | - | ||
| Investments held to maturity | 19,579,730 | - | - | - | ||
| Other banking financial assets | 136,480,000 | - | - | - | ||
| Interest income | 994,839 | 2,283,289 | 858,239 | 2,168,561 | ||
| Dividends | - | - | 7,930,641 | 7,500,373 | ||
| Loans granted | - | - | 9,649,364 | - | ||
| Payments resulting from: | ||||||
| Tangible fixed assets | (13,347,974) | (16,689,137) | (10,680,428) | (10,814,488) | ||
| Intangible assets | (16,165,688) | (11,254,311) | (5,428,345) | (1,574,138) | ||
| Financial investments Financial assets available for sale |
- (35,421,240) |
(418,622) - |
(52,726,000) - |
(34,418,622) - |
||
| Investments held to maturity | (115,350,055) | - | - | - | ||
| Demand deposits at Bank of Portugal | (3,792,333) | - | - | - | ||
| Other banking financial assets | (195,180,000) | - | - | - | ||
| Loans granted | - | - | (8,024,364) | - | ||
| Cash flow from investing activities (2) | (185,601,505) | (25,538,595) | (50,736,632) | (36,598,129) | ||
| Financing activities | ||||||
| Receivables resulting from: | ||||||
| Loans obtained | 8,343,271 | 9,031,873 | - | - | ||
| Payments resulting from: | ||||||
| Loans repaid | (5,480,000) | (3,800,884) | - | - | ||
| Interest expenses | (805,675) | (853,263) | (736,893) | (583,121) | ||
| Finance leases | (988,800) | (984,955) | (463,064) | (460,260) | ||
| Acquisition of own shares | 27 | (3,224,411) | (1,873,125) | (3,224,411) | (1,873,125) | |
| Dividends | 28 | (70,264,792) | (69,750,000) | (70,264,792) | (69,750,000) | |
| Cash flow from financing activities (3) | (72,420,408) | (68,230,355) | (74,689,161) | (72,666,506) | ||
| Net change in cash and cash equivalents (1+2+3) | 10,195,531 | (60,936,786) | (84,474,597) | (91,193,388) | ||
| Changes in the consolidation perimeter | - | 16,758 | - | - | ||
| - | - | - | 1,047,189 | |||
| Cash and equivalents at the beginning of the period | 603,649,717 | 664,569,744 | 559,542,719 | 649,688,918 | ||
| Cash and cash equivalents at the end of the period | 23 | 613,845,248 | 603,649,717 | 475,068,122 | 559,542,719 | |
| Cash and cash equivalents at the end of the period | 613,845,248 | 603,649,717 | ||||
| Sight deposits at Bank of Portugal | 3,792,334 | - | ||||
| Outstanding checks of Banco CTT / Checks clearing of Banco CTT | 1,173,518 | - | ||||
| Cash and cash equivalents (Balance sheet) | 618,811,099 | 603,649,717 |
| 1. | INTRODUCTION 100 | ||
|---|---|---|---|
| 1.1- | CTT – Correios de Portugal, S.A. (parent company) 100 | ||
| 1.2- | Business 101 | ||
| 2. | SIGNIFICANT ACCOUNTING POLICIES 102 | ||
| 2.1 | Basis of presentation 102 | ||
| 2.1.1 | New standards or amendments adopted by the Group 103 | ||
| 2.1.2 | New standards, amendments and interpretations issued, but without effective application to years starting on 1 January 2016 or not early adopted 105 |
||
| 2.1.2.1 The Group decided to opt for not having an early application of the following standards and/or interpretations endorsed by the EU: 105 |
|||
| 2.1.2.2 Standards, amendments and interpretations issued that are not yet effective for the Group 106 | |||
| 2.2 | Consolidation principles 107 | ||
| 2.3 | Segment reporting 108 | ||
| 2.4 | Transactions and balances in foreign currency 108 | ||
| 2.5 | Tangible fixed assets 108 | ||
| 2.6 | Intangible assets 109 | ||
| 2.7 | Investment properties 110 | ||
| 2.8 | Impairment of tangible fixed assets and intangible assets, except goodwill 111 | ||
| 2.9 | Goodwill 111 | ||
| 2.10 | Concentration of corporate activities 112 | ||
| 2.11 | Financial assets 113 | ||
| 2.11.1 Classification 113 | |||
| 2.11.2 Recognition and measurement 114 | |||
| 2.12 | Equity 114 | ||
| 2.13 | Financial liabilities 114 | ||
| 2.14 | Offsetting financial instruments 115 | ||
| 2.15 | Impairment of financial assets 115 | ||
| 2.16 | Inventories 116 | ||
| 2.17 | Non-current assets held for sale and discontinued operations 116 | ||
| 2.18 | Distribution of dividends 117 | ||
| 2.19 | Employee benefits 117 | ||
| 2.20 | Share-based payments 119 | ||
| 2.21 | Provisions and contingent liabilities 119 |
| 2.22 | Revenue 121 | |
|---|---|---|
| 2.23 | Subsidies obtained 122 | |
| 2.24 | Leases 122 | |
| 2.25 | Borrowing costs 122 | |
| 2.26 | Taxes 123 | |
| 2.27 | Accrual basis 123 | |
| 2.28 | Judgements and estimates 124 | |
| 2.29 | Cash Flow Statement 125 | |
| 2.30 | Subsequent events 125 | |
| CHANGES TO ACCOUNTING POLICIES, ERRORS AND ESTIMATES 125 SEGMENT REPORTING 129 TANGIBLE FIXED ASSETS 132 INTANGIBLE ASSETS 135 INVESTMENT PROPERTIES 138 COMPANIES INCLUDED IN THE CONSOLIDATION 139 GOODWILL 141 INVESTMENTS IN SUBSIDIARY COMPANIES 144 INVESTMENTS IN ASSOCIATED COMPANIES 145 INVESTMENTS IN JOINT VENTURES 146 OTHER INVESTMENTS 147 INVESTMENTS HELD TO MATURITY 147 FINANCIAL ASSETS AVAILABLE FOR SALE 148 OTHER BANKING FINANCIAL ASSETS 149 FINANCIAL RISK MANAGEMENT 149 INVENTORIES 155 ACCOUNTS RECEIVABLE 156 CREDIT TO BANKING CLIENTS 159 DEFERRALS 159 NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS 161 CASH AND CASH EQUIVALENTS 161 OTHER NON-CURRENT AND CURRENT ASSETS 161 ACCUMULATED IMPAIRMENT LOSSES 163 EQUITY 164 OWN SHARES, RESERVES, OTHER CHANGES IN EQUITY AND RETAINED EARNINGS 167 DIVIDENDS 169 EARNINGS PER SHARE 169 NON-CONTROLLING INTERESTS 169 DEBT 170 EMPLOYEE BENEFITS 172 |
| 34. | ACCOUNTS PAYABLE 181 | |
|---|---|---|
| 35. | BANKING CLIENT DEPOSITS AND OTHER LOANS 182 | |
| 36. | OTHER CURRENT LIABILITIES 183 | |
| 37. | INCOME TAXES RECEIVABLE /PAYABLE 183 | |
| 38. | FINANCIAL ASSETS AND LIABILITIES 184 | |
| 39. | SUBSIDIES OBTAINED 185 | |
| 40. | SALES AND SERVICES RENDERED 186 | |
| 41. | FINANCIAL MARGIN 186 | |
| 42. | OTHER OPERATING INCOME 187 | |
| 43. | EXTERNAL SUPPLIES AND SERVICES 188 | |
| 44. | OPERATING LEASES 188 | |
| 45. | STAFF COSTS 189 | |
| 46. | IMPAIRMENT OF ACCOUNTS RECEIVABLE 191 | |
| 47. | DEPRECIATION/ AMORTISATION (LOSSES/REVERSALS) 192 | |
| 48. | OTHER OPERATING COSTS 192 | |
| 49. | INTEREST EXPENSES AND INTEREST INCOME 193 | |
| 50. | INCOME TAX FOR THE PERIOD 193 | |
| 51. | RELATED PARTIES 196 | |
| 52. | FEES AND SERVICES OF THE EXTERNAL AUDITORS 199 | |
| 53. | INFORMATION ON ENVIRONMENTAL MATTERS 199 | |
| 54. | PROVISION OF INSURANCE MEDIATION SERVICE 199 | |
| 55. | OTHER INFORMATION 201 | |
CTT – Correios de Portugal, S.A. – Sociedade Aberta ("CTT" or "Company"), with head office at Avenida D. João II, no. 13, 1999-001 in Lisbon, had its origin in the "Administração Geral dos Correios Telégrafos e Telefones" government department and its legal form is the result of successive reorganizations 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 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 – Participaões 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 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 October 10, the RCM no. 62-B/2013, of 1 0 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, 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 detention 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.
The shares of CTT are listed on Euronext Lisbon.
The financial statements attached herewith are expressed in Euros, as this is the functional currency of the Group and the Company.
These financial statements were approved by the Board of Directors and authorised for issue on 9 March 2017.
The main activity of CTT and its subsidiaries ("CTT Group" or "Group"): CTT - Expresso – Serviços Postais e Logística, S.A., Payshop (Portugal), S.A., CTT Contacto, S.A., Mailtec Comunicação, S.A., Corre – Correio Expresso de Moçambique, S.A., Banco CTT, S.A., Escrita Inteligente, S.A. and Tourline Express Mensajería, SLU and its subsidiaries, is to ensure the provision of universal postal services, to render postal services and financial services. During 2015, within the scope of its financial services, CTT Group extended the scope of its activity with the establishment of Banco CTT, S.A., whose main activity is performing banking activities, including all the accessory, connected and similar operations compatible with the banking activity and allowed by law. The CTT Group also provides complementary services, such as the marketing of goods or provision of services on its own account or on behalf of third parties, provided that they are related with the normal operations of the public postal network, namely, the provision of information services, electronic communication networks and services, in which the Group acts as a Mobile Virtual Network Operator (" MVNO"), and the provision of public interest or general interest services.
The postal service is provided by CTT under the Concession contract of the Universal Postal Service signed on 1 September 2000 between the Portuguese State and CTT. In addition to the concessioned services, CTT can provide other postal services as well as develop other activities, particularly those which enable the use of the universal service network in a profitable manner, either directly or through incorporation or interests in companies or other forms of cooperation between companies. Within these activities it should be highlighted the provision of services of public interest or general interest subject to conditions to be agreed with the State.
Following the amendments introduced by Directive 2008/6/EC of 20 February 2008 of the European Parliament and of the Council to the regulatory framework that governs the provision of postal services, in 2012 the transposition into the national legal order took place through the adoption of Law no. 17/2012, of 26 April ( "new Postal Law" ), with the changes introduced in 2013 by Decree-Law no. 160/2013, of 19 November and by Law no. 16/2014, of 4 April, revoking the Law no. 102/99, of 26 July.
The new Postal Law establishes the legal regime for the provision of postal services in full competition in the national territory, as well as international services originating or terminating in the country.
Since the new Postal Law has become effective, the postal market in Portugal has been fully open to competition, eliminating areas within the universal service that were still reserved to the provider of the universal postal service, CTT – Correios de Portugal, S.A.. However, for reasons of general interest, the following activities and services remained reserved: placement of mailboxes on public roads for the acceptance of mail, issuance and sale of postage stamps with the word "Portugal" and registered mail used in legal or administrative proceedings.
According to the new Postal Law the universal postal service includes the following services, of national and international scope:
As a result of the new Postal Law, the Portuguese Government has revised the basis of the concession, through the publication of Decree-Law no. 160/2013, of 19 November, after which the
Fourth Amendment to the concession contract of the universal postal service came into effect on 31 December 2013.
The concession contract signed between the Portuguese State and CTT on 1 September 2000, subsequently amended on 1 October 2001, 9 September 2003, 26 July 2006 and 31 December 2013, covers:
As the Universal Postal Service incumbent operator, CTT remains the provider of universal postal services until 2020, ensuring the exclusivity of the reserved activities and services mentioned above.
Once the concession ends, in the event that it is not renewed to CTT, CTT may provide, together with any other operators, all the postal services, in a system of free competition, in accordance with a strategic and commercial policy, excluding the services granted by concession on an exclusive basis.
In summary, considering the legal and regulatory framework in force, CTT considers that there are no grounds for the introduction of any relevant change to the accounting policies of the Group and the Company.
The significant accounting policies adopted by the Group and the Company in the preparation of the consolidated and individual financial statements are those mentioned hereinafter.
The consolidated and individual financial statements were prepared under the assumption of going concern and are prepared under the historical cost convention, in accordance with the International Financial Reporting Standards, as adopted by the European Union as at 31 December 2016.
These standards include the IFRS issued by the International Accounting Standards Board ("IASB"), the IAS issued by the International Accounting Standards Committee ("IASC") and the respective interpretations – IFRIC and SIC, issued, respectively, by the International Financial Reporting Interpretation Committee ("IFRIC") and by the Standing Interpretation Committee ("SIC"). Hereinafter, these standards and interpretations are generally referred to as "IFRS".
In addition to the standards that became effective as of 1 January 2016, described in Note 2.1.1, and which are set out in the accounting policies adopted in the preparation of the consolidated and individual financial statements as at 31 December 2016 and described in Note 2.2 through Note 2.30, there are additional issued standards and interpretations, described in Note 2.1.2, which did not became mandatory in the year starting on 1 January 2016.
The standards and amendments recently issued, already effective and adopted by the Group and the Company in the preparation of these financial statements, are as follows:
accumulated depreciation (or amortization) does not depend on the selection of the valuation technique; and (ii) the accumulated depreciation (or amortization) is calculated as the difference between the gross and the net carrying amounts.
o IAS 34 Interim Financial Reporting: Disclosure of information 'elsewhere in the interim financial report' - The amendments clarify that the 'other disclosures' required by paragraph 16A of IAS 34 shall be presented either in the interim financial statements or incorporated by cross-reference from the interim financial statements to some other statement (such as management commentary or a risk report) that is available to users of the financial statements on the same terms as the interim financial statements and at the same time.The amendments to IAS 34 also clarify that if users of the financial statements do not have access to the information incorporated by cross-reference on the same terms and at the same time, the interim financial report is incomplete.
o The Group and the Company had no impact from the adoption of their amendments on its financial statements.
IFRS 9 Financial instruments (issued in 2009 and revised in 2010, 2013 and 2014) - IFRS 9 was endorsed by EU Commission Regulation no. 2067/2016 of 22 December 2016 (with an effective date of application for periods beginning on or after 1 January 2018). IFRS 9 (2009 and 2010) introduces new requirements for the classification and measurement of financial assets and financial liabilities. Under this new approach, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IASB published IFRS 9 (2013) addressing the new requirements for hedge accounting. It was also published IFRS 9 (2014) that introduced limited amendments to the classification and measurement requirements of IFRS 9 (including enlarge the instruments measured at fair value with the changes present in other comprehensive income, from some investments in equity instruments to other investments such as bonds) and added new requirements to address the impairment of financial assets, under the expected loss model. The mandatory effective date of IFRS 9 is 1 January 2018 (with option for early application). The Group and the Company have not carry out a full
analysis of the application of the impact of the standard yet. Considering the reformulation in the treatment of financial instruments, namely with Banco CTT's operation, a material impact could occur in future financial statements of the Group.
IFRS 15 – Revenue from Contracts with Customers - The IASB, issued on 28 May 2014, IFRS 15 - Revenue from Contracts with Customers, which was endorsed by EU Commission Regulation no. 1905/2016 of 22 September 2016, with an effective date of application for periods beginning on or after 1 January 2018. An early applications is allowed. This standard will revoke IAS 11 - Construction Contracts, IAS 18 – Revenue, IFRIC 13 – Customer Loyalty Programs, IFRIC 18 – Transfers of Assets from Customers and SIC 31 – Revenue - Barter Transactions Involving Advertising Services. IFRS 15 provides a model based on 5 steps of analysis in order to determine when revenue should be recognised and the amount. The model specifies that the revenue should be recognised when an entity transfers goods or services to the customer, measured by the amount that the entity expects to be entitled to receive. Depending on the fulfilment of certain criteria, revenue is recognised: (i) At a time when the control of the goods or services is transferred to the customer; or (ii) Over the period, to the extent that represents the performance of the entity. The Group and the Company are still evaluating the impact from the adoption of this standard.
o On 29 January 2016, and applicable for annual periods beginning on or after 1 January 2017, amendments to IAS 7 Disclosure initiative require companies to provide information about changes in their financing liabilities in order to provide information that helps the investors to better understand changes in a company's debt.
o On 29 January 2016, and applicable for annual periods beginning on or after 1 January 2018, amendments to IFRS 2 on Classification and Measurement of Sharebased Payment Transactions.
Investments in companies in which the Group holds the control, in other words, when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee, were consolidated in these financial statements by the full consolidation method. The companies consolidated by the full consolidation method are shown in Note 8.
Equity and net profit for the period corresponding to third-party participation in subsidiaries are reflected separately in the consolidated balance sheet and consolidated income statement in the caption Non-controlling interests. The gains and losses attributable to non-controlling interests are allocated to them.
The assets and liabilities of each Group company are recorded at fair value as of the date of acquisition, as established in IFRS 3. Any excess of cost over the fair value of the net assets and liabilities acquired is recognised as goodwill. If the difference between the cost and the fair value of the assets and liabilities acquired is negative, it is recorded as a profit and loss.
Transaction costs directly attributable to business combinations are immediately recognised in profit and loss.
Non-controlling interests include the third parties portion of the fair value of the identifiable assets and liabilities as of the date of acquisition of the subsidiaries.
The results of subsidiaries acquired or sold during the year are included in the consolidated income statement from the date of acquisition up to the date of disposal.
Whenever necessary, adjustments are made to the financial statements of the subsidiaries to be in accordance with the Group's accounting policies. Transactions (including unrealised gains and losses on sales between Group companies), balances and dividends distributed between Group companies are eliminated in the consolidation process.
The Group presents the operational segments based on internal management information.
In accordance with IFRS 8, an operating segment is a Group component:
Transactions in foreign currency (a currency different from the Group and Company functional currency) are recorded at the exchange rates in force on the transaction date. At each reporting date, the carrying values of the monetary items in foreign currency are updated at the exchange rates on that date. The carrying values of non-monetary items recorded at historical cost in foreign currency are not updated.
Favourable and unfavourable currency translation differences arising from the use of different exchange rates in force on the transaction dates and those in force on the recovery, payment or reporting dates are recognised in the profit or loss for the year.
The exchange rates used in the translation of the financial statements expressed in foreign currency are the closing exchange rates for assets and liabilities and the average exchange rate for the year for income and expenses.
The following exchange rates were used in the translation of the balances and financial statements in foreign currency:
| 2016 | 2015 | |||
|---|---|---|---|---|
| Close | Average | Close | Average | |
| Mozambican Metical (MZM) | 74.54000 | 69.82333 | 49.29000 | 43.53417 |
| United States Dollar (USD) | 1.05430 | 1.10661 | 1.08870 | 1.10963 |
| Special Drawing Right (SDR) | 1.27534 | 1.25621 | 1.27283 | 1.26147 |
Source: Bank of Portugal
Tangible fixed assets are recorded at their acquisition or production cost, minus accumulated depreciation and impairment losses, where applicable. The acquisition cost includes: (i) the purchase price of the asset, (ii) the expenses directly attributable to the purchase, and (iii) the estimated costs of dismantlement or removal of the asset and restoration of the location (Notes 2.20 and 33). Under the exception of IFRS 1 – First-time Adoption of the International Financial Reporting Standards, the revaluation of tangible assets made in accordance with the Portuguese legislation applying monetary indices, for the years up to 1 January 2009, was maintained, and the revalued amounts were referred to as "deemed cost" for IFRS purposes and were included under Retained earnings.
The depreciation of tangible assets, minus their residual estimated value, is calculated in accordance with the straight line method, from the month when the assets are available for use, over their useful lives, which are determined according to their expected economic utility. The depreciation rates that
are applied correspond, on average, to the following estimated useful lives for the different categories of assets:
| Years of useful life | |
|---|---|
| Buildings and other constructions | $10 - 50$ |
| Basic equipment | $4 - 10$ |
| Transport equipment | $4 - 7$ |
| Tools and utensils | 4 |
| Office equipment | $3 - 10$ |
| Other tangible fixed assets | $5 - 10$ |
Land is not depreciated.
Depreciation terminates when the assets are re-classified as held for sale.
On each reporting date, the Group and the Company assess whether there is any indication that an asset might be impaired. Whenever such indicators exist, the tangible fixed assets are subject to impairment tests, where any excess of the carrying value relative to the recoverable amount, should this exist, is recognised in the consolidated income statement. The recoverable amount corresponds to the highest amount between the fair value of an asset minus the costs of selling it and its value in use.
Tangible fixed assets in progress correspond to tangible assets that are still under construction/production, and are recorded at acquisition or production cost. These assets are depreciated from the month when they fulfil the necessary conditions to be used for their intended purpose.
Costs related to maintenance and repair of current nature are recorded as costs in the period these are incurred. Major repairs which lead to increased benefits or increased in expected useful lifes are recorded as tangible assets and depreciated at the rates corresponding to their expected useful life. Any replaced component is identified and written off.
The gain or loss arising from the disposal of tangible fixed assets is defined by the difference between the sale proceeds and the carrying amount of the assets and is recorded in the consolidated income statement under the heading Other revenues and operating gains or Other operating costs and losses.
Intangible assets are registered at acquisition cost, minus amortisation and impairment losses, when applicable. Intangible assets are only recognised when it is probable that they will result in future economic benefits for the Group and the Company, and they can be measured reliably.
Intangible assets are essentially composed of expenses related to patents, software (whenever this is separable from the hardware and associated to projects where the generation of future economic benefits is quantifiable), licenses and other user rights. Also included are expenses related to the development of R&D projects whenever the intention and technical capacity to complete this development is demonstrated, for the purpose of the projects being available for marketing or use. Research costs incurred in the search of new technical or scientific knowledge or aimed at the search of alternative solutions, are recognised through profit or loss when incurred.
Intangible assets are amortised through the straight line method, from the month when they are available for use, during their expected useful life, which varies between 3 and 20 years:
| Years of useful life | |
|---|---|
| Development projects | 3 |
| Industrial property | $3 - 20$ |
| Software | $3 - 10$ |
The exceptions to the above are assets related to industrial property, which are amortised over the period of time during which their exclusive use takes place and intangible assets with indefinite useful life, which are not amortised, but, rather, are subject to impairment tests on an annual basis and whenever there is indication that they might be impaired.
The Group and the Company perform impairment reviews whenever events or circumstances may indicate that the book value of the asset exceeds its recoverable amount, any impairment being recognised in the consolidated income statement. The recoverable amount is the higher of net selling price and value in use, the latter being calculated by the present value of the estimated future cash flows obtained from continued use of the asset and its sale at the end of its useful life.
Gains or losses arising from the divestment of tangible fixed assets, determined by the difference between the sales proceeds and the respective carrying value on the date of the divestment, are included in the consolidated income statement under the heading Other operating revenues or Other operating costs.
Investment properties are properties (land or buildings) held by the Group and Company to obtain rentals or for capital appreciation or both, rather than for:
a) use in the production or supply of goods or services or for administrative purposes, or
b) sale in the ordinary course of business.
Investment properties comprise mainly properties that the Group and Company did not affect to the rendering of services and holds to earn rentals or for capital appreciation.
An Investment property is initially measured at its acquisition or production cost, including any transaction costs which are directly attributable to it. After their initial recognition, investment properties are measured at cost less any accumulated depreciation and accumulated impairment losses, when applicable.
The depreciation rates are between 10 and 50 years.
The Group and Company ensure that an annual assessment of assets qualified as investment properties is carried out in order to determine any impairment and to disclose their fair value.
Costs incurred in relation to investment properties, namely with maintenance, repairs, insurance and property taxes are recognised as costs for the period in which they are incurred. Improvements which are expected to generate additional future economic benefits are capitalised.
The Group and the Company carry out impairment assessments of its tangible and intangible assets, whenever any event or situation occurs, which may indicate that the amount by which the asset is recorded might not be recovered. In case there is any indication of the existence of such evidence, the recoverable amount of the asset is estimated in order to measure the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, then the recoverable amount of the cash generating unit to which this asset belongs is estimated.
The recoverable amount of the asset or cash generating unit is the highest value between (i) its fair value minus the costs of selling it and (ii) its value in use. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The value in use arises from the future estimated discounted cash flows of the assets during their estimated useful life. The discount rate used in the discounted cash flows reflects the current market assessments of the time value of money and the specific risk of the asset.
Whenever the carrying amount of the asset or cash generating unit is higher than its recoverable amount, an impairment loss is recognised. The impairment loss is recorded in the Consolidated and individual income statement.
The reversal of impairment losses recognised in prior years is recorded whenever there is evidence that the recognised impairment losses no longer exist or have decreased, being recognised in the Consolidated and individual income statement. However, the reversal of the impairment loss is made up to the amount that would have been recognised (net of amortisation or depreciation) if the impairment loss had not been recorded in the previous years.
Goodwill represents the excess of the acquisition cost compared with the fair value of the identifiable assets, liabilities and contingent liabilities of each entity that is acquired and included by the full consolidation method, or subsidiary, on the respective acquisition date, in accordance with IFRS 3 (Revised) – Business Combinations. Under the exception provided by IFRS 1 – First-time Adoption of the International Financial Reporting Standards, the Group has applied the provisions of IFRS 3 only for the acquisitions made after 1 January 2009. The amounts of the goodwill corresponding to acquisitions before 1 January 2009 were kept at the net amounts presented on that date and, since this date, have been subject to impairment tests on an annual basis.
Goodwill is not amortised. In the assessment of the goodwill impairment, this value is allocated to the cash generating unit or units it refers to. The value in use is determined by discounting the estimated future cash flows of the cash generating unit. The recoverable amount of the cash generating units to which the goodwill refers is determined based on the assets' value in use and is calculated using valuation methodologies which are supported by discounted cash flow techniques, considering the market conditions, the time value and business risks. The discount rate used for discounting cash flows corresponds to the WACC before taxes ("Weighted Average Cost of Capital") estimated according to the rates and capital structures of the entities sector. The impairment tests are carried out on each reporting date, or earlier if impairment risk indicators were identified.
Impairment losses are not reversible.
In the sale of a cash generating unit, the corresponding goodwill is included in the determination of the capital gain or loss.
Investments in subsidiary and associated companies are recorded in the consolidated and individual balance sheet by the equity method (Note 10 and 11).
A subsidiary company is an entity over which the Group and/or the Company has significant influence, through participation in decisions concerning its financial and operating policies, having control or joint control, usually represented by more than half the voting rights.
On the other hand, an associated company is an entity over which the Group and/or the Company has significant influence, through participation in decisions concerning its financial and operating policies, but where the Group or the Company does not have control or joint control, which in general happens whenever the investment is between 20% and 50%.
In accordance with the equity method, the investments are initially recorded at their cost and subsequently adjusted by the value corresponding to the investment in the net profit or loss of the subsidiary and associated companies against Gain/losses in subsidiary and associated companies, and by other changes in equity in Other comprehensive income. Additionally, investments in subsidiary and associated companies may also be adjusted through the recognition of impairment losses. Whenever there are indications that the assets may be impaired, an assessment is carried out and the existing impairment losses are recorded in the income statement.
The excess of cost in relation to the fair value of the identifiable assets and liabilities of each subsidiary and/or associated company at the date of acquisition is recognised as goodwill and presented as part of the financial investment in the caption Investments in subsidiaries and/or associates. If the difference between cost and fair value of the assets and liabilities acquired is negative, it is recognised in the income statement under Gains/ losses in subsidiary and associated companies, after confirmation of the fair value.
Whenever the losses in subsidiary and/or associated companies exceed the investment made in these entities, the investment carrying value is reduced to zero and the recognition of future losses will be discontinued, except in what concerns the part in which the Group and/or the Company incurs in any legal or constructive obligation of assuming all these losses on behalf of the subsidiary and/or associated company, in which case a provision is recorded.
The dividends received from subsidiary and associated companies are recorded as a decrease in the carrying value of Investments in subsidiary companies and Investments in associated companies, respectively.
With the exception of goodwill impairment, if the impairment losses recorded in previous years are no longer applicable, these are reversed.
Unrealised gains and losses on transactions with subsidiary and associated companies are eliminated in proportion to the Group's interest in the subsidiary and/or associated companies, recorded against the investment in the same entity. Unrealised losses are also eliminated but only up to the point that the losses do not reflect that the transferred asset is impaired.
Investments in joint ventures are recorded in the balance sheet by the equity method. The classification of the investments in joint ventures is determined based on the existence of a contractual agreement, which demonstrates and rules the joint control. In accordance with the equity method, the investments are initially recorded at their cost and subsequently adjusted by the value corresponding to the investment in the net profit or loss of the joint ventures against Gains/ losses in joint ventures, and by other changes in equity in Other comprehensive income.
Additionally, investments in joint ventures may also be adjusted through the recognition of impairment losses. Whenever there are indications that the assets may be impaired, an assessment is carried out and the existing impairment losses are recorded as costs in the consolidated income statement.
Unrealised gains and losses on transactions with joint ventures are eliminated in proportion to the Group's interest in the entities, recorded against the investment in the same entity. Unrealised losses are also eliminated but only up to the point that the losses do not reflect that the transferred asset is impaired.
The Group and the Company classify their financial assets in the following categories: loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets on initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group and the Company loans and receivables comprise Accounts receivable, Cash and cash equivalents, Other non-current assets and Other current assets in the balance sheet.
This category includes: (i) financial assets recognised at fair value through profit and loss acquired mainly for the purpose of being traded in the short term and (ii) other financial assets designated upon initial recognition at fair value with changes recognised in profit and loss ("fair value option").
The financial assets available for sale are non-derivative financial assets which: (i) are designated as available for sale on initial recognition; or (ii) are not included in the remaining financial assets categories. These are recognised as non-current assets, except if there is the intention to sell within 12 months of the balance sheet date.
These financial assets are initially recognised at acquisition value. After initial recognition, the financial assets available for sale are subsequently carried at fair value, by reference to their market value at the balance sheet date, without any deduction of transaction costs which may be incurred until the sale. Whenever these investments are non-listed equity investments, and is not possible to estimate reliably the corresponding fair value, they are stated at cost net of any impairment losses.
Unrealised capital gains and losses are recognised directly in equity, until the financial asset is sold, received, or disposed of in any way, at which time the accumulated gain or loss previously recognised in equity is recognised in the net profit for the period.
The investments classified as held to maturity are non-derivative assets with defined or determinable payment dates and fixed maturity, which the Group and the Company both intend and have the capacity to hold until maturity and which are not designated, on initial recognition, as assets at fair value through profit or loss or as financial assets available for sale.
The investments held to maturity are measured at amortised cost, according to the effective interest rate method and are net from impairment losses.
The impairment loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (considering the recovery period) discounted at the financial asset's original effective interest rate. These investments are presented in the balance sheet net of impairment losses. If the asset is a floating interest rate's asset, the discount rate to use in the determination of the correspondent impairment losses should be the effective interest rate, determined in accordance with each contract rules. Regarding the investments held to maturity, if, in a subsequent period, the amount of the impairment loss decreases, and this decrease can be objectively associated to an event that occurred after the recognition of the impairment loss, the previously recognised impairment loss is reversed through the income of the period.
Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group and the Company commit to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and have transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value, with the variation's counterpart of the fair value being presented in comprehensive income. Loans and receivables are subsequently carried at amortised cost using the effective interest method.
Dividends on available-for-sale equity instruments are recognised in the income statement as part of other income when the right to receive payments is established.
Costs related to the issuance of new shares are recognised directly in the share capital as a deduction from the value of the cash inflow.
Costs related to an issue of equity which has not been completed are recognised as expenditure.
Debt
Loans are recorded as liabilities at the carrying value received, net of issuance expenses, corresponding to the respective fair value on that date. They are subsequently measured at
amortised cost, with the corresponding financial costs calculated based on the effective interest rate and stated through the income statement according to the accrual basis assumption, with the due and unpaid amounts as at the reporting date being classified under the item of Accounts payable (Note 34).
The effective interest rate is the rate that discounts future payments over the expected life of the financial instrument to the net carrying amount of the financial liability.
Accounts payable classified as current liabilities are registered at their nominal value, which is substantially equivalent to their fair value.
Accounts payable classified as non-current liabilities, for which there is no contractual obligation to pay interest, are initially measured at their net present value and subsequently measured at their respective amortised cost, determined in accordance with the effective interest rate method.
Accounts payable (balances of suppliers and other creditors) are liabilities related to the acquisition of goods or services, in the normal course of its business. If their payment falls due within one year or less, then they are classified as current liabilities. Otherwise, they are classified as non-current liabilities.
Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet, when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
The Group and Company assess at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indicators that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows.
For the Loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.
The Group and Company assess at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, minus any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses recognised in the income statement in equity instruments are not reversed through the income statement.
Goods and raw materials, subsidiary materials and consumables are valued at the lowest cost between the acquisition cost and net realisable value, using the weighted average cost as the method of assigning cost.
The acquisition cost includes the invoice price and transport and insurance costs.
Net realisable value corresponds to the normal selling price less costs to complete production and costs to sell.
Whenever cost exceeds net realizable value, the difference is recorded in the operating costs caption "Cost of sales".
Non-currents assets are classified as held for sale, if the respective carrying value is expected to be realized through their sale rather than through continued use. It is considered that this situation occurs only when: (i) the sale is highly probable and the asset is available for immediate sale in its present condition, (ii) there is a commitment to sell, and (iii) the sale is expected to be completed within a 12-month period.
Non-current assets, which are classified as held for sale, are measured at the lowest between the carrying value before this classification and fair value minus costs to sell. Whenever the fair value is less than the carrying value, the difference is recognised in the item Depreciation / amortisation and impairment of investments, net in the consolidated income statement.
Non-current assets held for sale are presented in a separate caption in the balance sheet.
Non-current assets held for sale are not depreciated or amortised.
Earnings from discontinued operations are presented on a specific line, in the income statement, after Income tax and before net profit for the year.
Whenever the Group and Company are committed to a plan to sell a subsidiary, which involves the loss of control over it, all the assets and liabilities of that subsidiary are classified as held for sale, provided they meet the above requirements, even if, after the sale, the Group and Company still keep a residual interest in the subsidiary.
The distribution of dividends, when approved by the shareholders at the Annual General Meeting of the Company, is recognised as a liability.
The Group and the Company adopt the accounting policy for the recognition of its responsibilities for the payment of post-retirement healthcare and other benefits, the criteria set out in IAS 19, namely using the Projected unit credit method (Note 32).
In order to obtain an estimate of the value of the liabilities (Present value of the defined benefit obligation) and the cost to be recognised in each period, an annual actuarial study is prepared by an independent entity under the assumptions considered appropriate and reasonable. The present value of the defined benefit obligation is recorded as a liability under Employee benefits.
Workers who are integrated in "Caixa Geral de Aposentações" ("CGA") and workers who are beneficiaries of the Portuguese state pension scheme (recruited as permanent staff of the Company after 19 May 1992 and up to 31 December 2009) are entitled to the healthcare benefits established in the CTT Social Works Regulation. These benefits are extended to all permanent workers of the company, whether they are still working, or are pensioners, or in a situation of preretirement or retirement.
Workers hired by the company after 31 December 2009, are only entitled to the benefits provided for in the state pension scheme while they remain bound to the Company by an individual employment contract, having no rights when they become pensioners, or in a situation of preretirement or retirement.
Healthcare benefits include contributions to the cost of medication, medical and surgical and nursing services, as well as auxiliary diagnostic means and hospital services, as defined in the CTT Social Works Regulation.
The financing of the post-retirement healthcare plan is ensured mostly by the Company and by the beneficiaries' co-payment upon the use of certain services, and the remaining costs are covered by the fees paid by the beneficiaries.
The maintenance of the post-employment healthcare plan benefits requires that the beneficiaries (retirees and pensioners) pay a fee corresponding to 2.25% of their respective pension. Resulting from the amendment to the Healthcare Plan, the fee was unified and the same fee is paid for each family member enrolled. In certain special situations, an exemption from the payment of the fee may be granted, either for the beneficiaries or for family members.
The management of the healthcare plan is ensured by the IOS – Instituto das Obras Sociais (Institute of Social Works) and regulated by the CTT's Regulation of the Social Works, which in turn, hired Médis – Companhia Portuguesa de Seguros de Saúde, S.A. (Médis - Portuguese healthcare insurance company) to provide healthcare services. The contract with Médis has been in force since 1 January 2015.
The Group and the Company also assumed, towards certain groups of workers, a series of constructive and contractual obligations, namely:
The liability for the payment of salaries to employees in the above mentioned situations or equivalent, is fully recognised in the income statement at the time they move into these conditions.
CTT has assumed the obligation of the life-long payment, to a closed group of retired workers and surviving spouses (4,724 beneficiaries as at 31 December 2016 and 7,326 beneficiaries as at 31 December 2015), of the telephone rental charges, to a monthly amount of 15.30 Euros. During the year ended 31 December 2013, the Board of Directors of CTT, decided to modify the economic benefit. Thus, from 1 January, 2014, the cash payment was replaced by a benefit in kind.
The liabilities related to the payment of pensions for work accidents is restricted to workers integrated in CGA.
According to the legislation in force concerning employees integrated in CGA, CTT is liable for the costs incurred with pensions that have been attributed for damages resulting from accidents at work, and which have resulted in permanent disability or death of the worker. The value of these pensions is updated pursuant to a legal diploma.
The liabilities incurred up to 31 December 2015 will continue to be borne by CTT. As of 1 January 2016, CTT contracted an insurance policy to cover these responsibilities, as is already the case for Social Security workers.
As at 31 December 2016 and 31 December 2015 there were 67 and 64 beneficiaries, respectively, receiving this type of pension.
This is an annuity provided for in the family benefits legal system set out in Decree-Law no. 133- B/97 of 30 May, as amended by the Declaration of Rectification no. 15-F/97, of 30 September, amended by Decree-Law no. 248/99, of 2 July, no. 341/99 of 25 August, no. 250/2001, of 21 September, and no. 176/2003, of 2 August.
Beneficiaries are workers, still working or retired, who have descendants over 24 years old, with physical, organic, sensorial, motor or mental disabilities, who are in a situation that prevents them from normally providing for their subsistence through the exercise of professional activity. In the case of beneficiaries integrated in the CGA, the cost of the monthly life annuity is the responsibility of CTT.
As at 31 December 2016 there were 44 beneficiaries under these conditions (44 beneficiaries as at 31 December 2015), receiving a monthly amount of 176.76 Euros, 12 months a year. This value is updated by Implementing Order of the Ministry of Finance and the Ministry of Labour and Social Security.
This benefit was granted to employees who retired with at least 5 years of seniority at the Company. Its amount depended on the seniority on the retirement date. As at 31 December 2012, the scheme in force determined a maximum amount of 1,847.16 Euros for 36 or more years of service. In 2012, the Board of Directors decided to discontinue the compensation awarded to the workers who have reached the end of their active life at the service of CTT. It has also ruled that, in situations of
disconnection and retirement that may occur as a result of the requests for retirement submitted until 31 March 2013, the benefit referred to above would be maintained.
The last amounts regarding this benefit were paid up until 31 December 2015 and thus there are no liabilities associated to this benefit.
Following the new remuneration model of the Statutory Bodies defined by the Remuneration Committee (elected by the General Meeting of 24 March 2014 and composed of independent members), it was determined that the allocation of a fixed monthly amount for an Open Pension Fund or Retirement Savings Plan to executive members of the Board of Directors.
This contribution falls into the definition of a defined contribution plan. Under a defined contribution plan, fixed contributions are paid into a fund but there is no legal or constructive obligation to further payments being made if the fund does not have sufficient assets to pay all of the employees' entitlements to post-employment benefits. The obligation is therefore effectively limited to the amount agreed to be contributed to the fund and the actuarial and investment risk is effectively placed on the employee. For defined contribution plans, the amount recognised in the period is the contribution payable in exchange for services rendered by employees during the period. Contributions to a defined contribution plan which are not expected to be wholly settled within 12 months after the end of the annual reporting period in which the employee renders the related service are discounted to their present value.
The benefits granted to the executive members of the Board of Directors under the long-term remuneration plans are recorded in accordance with the requirements of IFRS 2 – Share-based payments.
In accordance with IFRS 2, the benefits granted to be paid on the basis of own shares (equity instruments), are recognised at fair value at the date of allocation.
Since it is not possible to estimate reliably the fair value of the services received from employees, their value is measured by reference to the fair value of equity instruments.
The fair value determined at the date of allocation of the benefit is recognised as a linear cost over the period in which it is acquired by the beneficiaries as a result of their services, with the corresponding increase in equity.
Provisions (Note 33) are recognised when, cumulatively: (i) there is a present obligation (legal or constructive) arising from a past event, (ii) it is probable that its payment will be demanded, and (iii) there is a reliable estimate of the value of this obligation.
The amount of the provisions corresponds to the present value of the obligation, with the financial updating being recorded as a financial cost under the heading Interest expenses (Note 49). The provisions are reviewed on every reporting date and are adjusted in order to reflect the best estimate at that date.
Whenever losses in the subsidiaries or associated companies exceed the investment made in these entities, the carrying value is reduced to zero and the recognition of future losses is discontinued, except in what concerns the part in which the Company incurs in any legal or constructive obligation to assume all these losses on behalf of the associated or subsidiary company, in which case a Provision is recorded for investments in associated companies.
Restructuring provisions are made whenever a detailed formal restructuring plan has been approved by the Company and it has been launched or publicly disclosed, which identifies:
The restructuring provision includes direct expenditures arising from the restructuring, which are those entailed by the restructuring, or not associated with the ongoing activities of the entity.
The restructuring provision does not include the costs of retraining or relocating continuing staff, marketing and investments in new systems and distribution networks and are recognised on the same basis as if they appeared independently of a restructuring in the period that they occur.
The expected gains on assets disposals are not taken into account in a restructuring provision measurement, even if the assets sale is seen as part of the restructuring.
Provisions are made for dismantling costs, costs of removal of the asset and costs of restoration of the site of certain assets, when these assets are in use and it is possible to reliably estimate the respective obligation, or when there is a contractual commitment to restore the spaces rented by third parties. When the time value effect is material, the environmental liabilities that are not expected to be settled in the near future are measured at their present value.
A provision for litigation in progress is recorded when there is a reliable estimate of costs to be incurred due to legal actions brought by third parties, based on the evaluation of the probability of payment based on the opinion of the lawyers.
A provision for onerous contracts is measured at the present cost whenever the unavoidable costs to satisfy the contract's obligations exceeds the expected financial benefits that will be received under the same.
Whenever any of the conditions for the recognition of provisions is not met, the events are disclosed as contingent liabilities (Note 33). Contingent liabilities are: (i) possible obligations which arise from past events and whose existence will only be confirmed by the occurrence, or not, of one or more future events that are uncertain and not fully under the Company's control, or (ii) present obligations which arise from past events, but which are not recognised because it is not probable that an outflow of resources which incorporates economic benefits will be necessary to settle the obligation, or the
value of the obligation cannot be measured with sufficient reliability. Contingent liabilities are disclosed unless the possibility of an outflow of resources is remote.
Contingent assets and liabilities are evaluated continuously to assure that the developments are reflected properly in the financial statements.
If it becomes probable that an outflow of future economic benefits will be demanded for an item previously treated as a contingent liability, a provision is recognised in the financial statements of the period when that change in probability occurs.
If it becomes virtually certain that an economic benefits inflow will occur, the asset and related revenue are recognised in the financial statements of the period when the change will probably occur.
The Company does not recognise contingent assets and liabilities.
The revenue relative to sales, services rendered, royalties, interest and dividends (from investments not accounted for by the equity method), arising from the Company's normal business activity is measured at the fair value of the consideration that has been or will be received, which is defined as the sums established freely between the contractual parties on an independent basis, where, in relation to sales and services rendered, their fair value reflects any discounts granted and does not include Value Added Tax.
The recognition of revenue requires that (i) it is probable that the economic benefits associated to the transaction will flow to the Company, (ii) the amount of the revenue may be measured reliably, (iii) the costs that have been or will be incurred with the transaction may also be measured reliably, and (iv) the stage of completion of the services rendered/transaction can be measured reliably, in the case of the services rendered being recognised based on the percentage of completion.
Revenue from the sale of merchandising products and from postal business is recognised when the risks and benefits of ownership of the products are transferred to the buyer, which usually occurs at the time of the transaction.
Revenue from postal services is recognised at the moment the customer requests the service, since CTT has no information that would allow a reliable estimate of the amount concerning deliveries not made by the financial reporting date, although it is understood that this issue is not materially relevant, as the date of the service request does not significantly differ from the date of delivery.
The prices of the services rendered in the scope of the concession of the Universal Postal Service have been subject to regulation under a price agreement signed between CTT and ICP-ANACOM.
Fees from collections made and from the sale of financial products are recognised on the date that the client is charged. Only the fee from collections charged by CTT is recognised as revenue, as CTT acts as an agent.
Revenue from PO Boxes is recognised over the term of the contracts.
Revenue from the recharging of prepaid mobile phone services is deferred and recognised in earnings, according to the traffic of the specific client, during the period when the service is rendered.
Revenue and costs relative to international mail services, estimated based on surveys and indexes agreed with the corresponding postal operators, are recognised in provisional accounts in the month that the traffic occurs. Differences between the estimated and final amounts determined in agreement with those operators, which are not usually significant, are recognised in the consolidated income statement when the accounts become final.
Revenue from interest is recognised using the effective interest rate method, provided that it is probable that economic benefits will flow into the Group and the Company, and their amount can be measured reliably.
The Group and the Company register a portion of the interest received from deposits in other operating income, specifically interest from short-term deposits in the Financial Services segment. The Group and the Company consider the temporary investment of funds received and to be paid to third parties as one of the main operational objectives of its Financial Services segment. In the cash flow statement, this portion of interest is recognised as operational cash flow.
Subsidies are recognised when there is reasonable assurance that they will be received and that the Group and the Company will comply with the conditions required for their attribution.
Investment subsidies associated to the acquisition or production of tangible fixed assets are initially recognised in non-current liabilities and are subsequently allocated, on a systematic basis, as revenue for the period, consistent and proportional to the depreciation of the assets acquired through these subsidies.
Operating subsidies, namely those for employee training, are recognised in the consolidated income statement, within the periods necessary to match them with the expenses incurred, to the extent that these subsidies are not refundable.
The classification of leases is done according to the substance of the transaction and not the form of the contract. Leases are classified as financial whenever their terms imply the substantial transfer to the lessee of all the risks and rewards associated to the ownership of the asset. All other leases are classified as operating leases.
Tangible assets acquired through financial leasing contracts, as well as the corresponding liabilities payable to the lessor, are recorded in the balance sheet at the beginning of the lease at the lowest value between the fair value of the assets and the present value of the minimum lease payments. The discount rate used is the rate implicit in the lease. If this rate is not known, then the Group's financing rate for this type of investment is used. The policy for depreciation of these assets follows the rules applicable to tangible fixed assets owned by the Group and the Company. The interest included in the rents and in amortisation of fixed tangible assets is recognised in the consolidated income statement in the period to which they refer to.
For operating leases, the instalments that are owed are recognised as a cost in the income statement over the lease period (Note 44).
Financial charges related to loans are recognised in net profit, when incurred. However, interest expenses are capitalised when loans are directly attributable to the acquisition or construction of an asset that requires a substantial period of time (over one year) to reach its intended use.
Corporate income tax corresponds to the sum of current taxes and deferred taxes. Current taxes and deferred taxes are recorded under net income, unless they refer to items recorded directly in equity. In these cases, deferred taxes are also recorded under equity.
Current tax payable is based on the taxable income for the period of the Group companies included in the consolidation, calculated in accordance with the tax criteria prevailing at the financial reporting date. Taxable income differs from accounting income, since it excludes various costs and revenues which will only be deductible or taxable in other financial years. Taxable income also excludes costs and revenues which will never be deductible or taxable.
Deferred taxes refer to temporary differences between the amounts of assets and liabilities for accounting purposes and the corresponding amounts for tax purposes.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for deductible temporary differences. However, this recognition only takes place when there are reasonable expectations of sufficient future taxable profits to use these deferred tax assets, or when there are deferred tax liabilities whose reversal is expected in the same period that the deferred tax assets may be used. On each reporting date, a review is made of these deferred tax assets, which are adjusted according to expectations on their future use.
Deferred tax assets and liabilities are measured using the tax rates which are in force on the date of the reversal of the corresponding temporary differences, based on the taxation rates (and tax legislation) which are enacted, formally or substantially, on the reporting date.
CTT is covered by the special regime applicable to the taxation of groups of companies, which includes all companies in which CTT holds, directly or indirectly, at least 90% of the share capital and which are simultaneously resident in Portugal and taxed under IRC. The remaining companies are taxed individually according to their respective taxable income at the applicable tax rates.
For purposes of VAT, the Company follows the normal monthly regime, in accordance with the provisions of paragraph a) of no. 1 of article 41 of the Portuguese VAT Code, having various exempted operations in its activity that fall under the provisions of article 9 of the Portuguese VAT Code, as well as to other non-exempted operations which are subject to VAT, and for this reason, using the effective allocation method and the pro rata method. The other Group companies, with fiscal residence in Portugal, also follow the normal monthly regime, in accordance with the provisions of paragraph a) of no. 1 of article 41 of the Portuguese VAT Code, practicing mostly nonexempted operations, thus being subject to VAT.
Revenues and costs are recorded according to the accrual basis, and therefore, are recognised as they are generated, regardless of the time they are received or paid. Differences between the revenues and costs generated and the corresponding amounts invoiced are recorded in "Other
current assets" or in "Other current liabilities". Deferred revenues and costs paid in advance are recorded under the heading Deferrals, under liabilities and assets, respectively.
In the preparation of the financial statements, judgements and estimates were used which affect the reported amounts of assets and liabilities, as well as the reported amounts of revenues and costs during the reporting period. The estimates and assumptions are determined based on the best existing knowledge and on the experience of past and/or current events considering certain assumptions relative to future events. However, situations might occur in subsequent periods which, due to not having been predictable on the date of approval of the financial statements, were not considered in these estimates. Changes to estimates which occur after the date of the financial statements will be corrected prospectively. For this reason and in view of the associated degree of uncertainty, the real outcome of the situations in question might differ from their corresponding estimates.
The main judgements and estimates made in the preparation of the financial statements arise in the following areas:
Depreciation/amortisation is calculated on the acquisition cost using the straight line method, from the month when the asset is available for use. The depreciation/amortisation rates that are applied reflect the best knowledge on the estimated useful life of the assets. The residual values of the assets and their respective useful lives are reviewed and adjusted, when deemed necessary.
Goodwill is tested at least once a year, with the purpose of verifying if it is impaired, in accordance with the policy referred in Note 2.9. The calculation of the recoverable amounts of the cash generating units involves a judgment and substantially relies on the analysis of the Management related to the future developments of the respective subsidiary. The assessment underlying the calculations that have been made uses assumptions based on the available information, both concerning the business and macro-economic environment. The variations of these assumptions can influence the results and consequent recording of impairments.
Impairment losses relative to bad debts are based on the assessment of the probability of recovery of balances of accounts receivable. This assessment is made according to the period of time of default, the credit history of the customer and other debtors, and the deterioration of the credit situation of the main customers and other debtors. Should the customers' financial conditions deteriorate, the impairment losses might be higher than expected.
The recognition of deferred tax assets assumes the existence of future net profit and taxable income. The deferred tax assets and liabilities were determined based on the tax legislation currently in force, or on legislation that has already been published for future application. Amendments to tax legislation may influence the value of the deferred taxes.
The determination of the liabilities related to the payment of post-employment benefits, namely with healthcare plans, requires the use of assumptions and estimates, including the use of actuarial projections, discount rates and other factors that could have an impact on the costs and liabilities associated to these benefits. Any changes in the assumptions used, which are described in Note 32,
will have an impact in the carrying amount of the employees' benefits. CTT has a policy of periodically reviewing the major actuarial assumptions.
The Group and Company exercise considerable judgement in the measurement and recognition of provisions. Judgement is required in order to assess the probability of litigation having a successful outcome. Provisions are recorded when the current lawsuits are expected to lead to the outflow of funds, the loss is probable and may be estimated reasonably. Due to the uncertainties inherent to the process of assessment, actual losses might be different from those originally estimated in the provision. These estimates are subject to changes as new information becomes available. Reviews to the estimates of these losses might affect future results.
The Cash Flow Statement is prepared according to the direct method, through which cash receipts and payments relative to operating, investment and financing activities are disclosed.
The cash flow statement discloses the cash receipts and cash payments from operating, financing and investing activities.
Operating activities cover receipts from customers, payments to suppliers, payments to staff and other related to operating activity, namely income tax. Investment activities namely include acquisitions and divestments in participated companies, payments and receipts arising from the purchase and sale of assets, and receipts of interest and dividends. Financing activities include payments and receipts relative to loans received, financial lease contracts, interest paid and payments of dividends.
Events occurring after the closing date until the date of approval of the financial statements by the Board of Directors, and which provide additional information about conditions existing at the date of the financial reporting, are reflected in the financial statements. Events occurring after the closing date, which indicate conditions arising after the date of the financial reporting, are disclosed in the notes to the financial statements, if considered relevant.
In the year ended 31 December 2016 the Group adopted the International Financial Reporting Standards (IFRS) in the individual accounts for CTT and for the subsidiaries on national territory. Until 31 December 2015 the Company prepared, approved and disclosed, for the purpose of complying with the current commercial legislation, the individual financial statements in accordance with the generally accepted accounting principles in Portugal until that date as established in Sistema de Normalização Contabilística (SNC) and other complementary legislation.
Therefore, the statement of financial position as at 31 December of 2015, the income statement and the statement of changes in equity, as well as the related notes (to the individual financial statements) regarding the year ended 31 December 2015, presented for comparative purposes, were adjusted in accordance with IFRS. The adjustments/reclassifications made with effect as at 1
January 2015, the transition date, were made in accordance with the provisions of IFRS 1 – Firsttime adoption of International Financial Reporting Standards.
The main differences, following the adoption of the IFRS, with impact on the individual statement of financial position as of 1 January 2015 are the following:
| Statement of financial position - 01.01.2015 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Adjustments | Reclassifications | ||||||||||
| Caption | Reported amount | Investment subsidies (1) |
Investments in associated companies (2) |
Investments in subsidiary companies (3) |
Other current assets (4) |
Reserves (5) | Retained earnings (6) |
Accounts payable (7) |
Income taxes payable (8) |
Other current liabilities (9) |
Restated amount |
| Investment in subsidiaries and associated | 35,876,915 | - | (937,732) | (34,939,183) | - | - | - | - | - | - | - |
| companies | |||||||||||
| Goodwill | 7,705,457 | - | - | (7,705,457) | - | - | - | - | - | - | - |
| Investments in subsidiary companies | - | - | - | 42,644,640 | - | - | - | - | - | - | 42,644,640 |
| Investments in associated companies | - | - | 937,732 | - | - | - | - | - | - | - | 937,732 |
| Other accounts receivable | 20,049,456 | - | - | - | (20,049,456) | - | - | - | - | - | - |
| Other current assets | - | - | - | - | 20,049,456 | - | - | - | - | - | 20,049,456 |
| Other assets' captions | 1,087,183,028 | - | - | - | - | - | - | - | - | - | 1,087,183,028 |
| Total assets | 1,150,814,856 | - | - | - | - | - | - | - | - | - | 1,150,814,856 |
| Other equity instruments | (18,526,395) | (259,915) | - | - | - | - | - | - | - | - | (18,786,310) |
| Legal reserves | 18,072,559 | - | - | - | - | (18,072,559) | - | - | - | - | - |
| Other reserves | 13,701,407 | - | - | - | - | (13,701,407) | - | - | - | - | - |
| Reserves | - | - | - | - | - | 31,773,966 | - | - | - | - | 31,773,966 |
| Adjustments in investments | 21,622,320 | - | - | - | - | - | (21,622,320) | - | - | - | - |
| Retained earnings | 62,752,243 | - | - | - | - | - | 21,622,320 | - | - | - | 84,374,563 |
| Other equity's captions | 152,171,128 | - | - | - | - | - | - | - | - | - | 152,171,128 |
| Total equity | 249,793,262 | (259,915) | - | - | - | - | - | - | - | - | 249,533,347 |
| Deferrals | 11,568,040 | 361,697 | - | - | - | - | - | - | - | - | 11,929,737 |
| Deferred tax liabilities | 4,890,550 | (101,782) | - | - | - | - | - | - | - | - | 4,788,768 |
| Accounts payble | 66,845,568 | - | - | - | - | - | - | (66,845,568) | - | - | - |
| Portuguese State and other public entities | 18,247,579 | - | - | - | - | - | - | - | (6,171,287) | (12,076,292) | - |
| Other accounts payable | 478,688,808 | - | - | - | - | - | - | (417,606,043) | - | (61,082,765) | - |
| Accounts payable | - | - | - | - | - | - | - | 484,451,611 | - | - | 484,451,611 |
| Income taxes payable | - | - | - | - | - | - | - | - | 6,171,287 | - | 6,171,287 |
| Other current liabilities | - | - | - | - | - | - | - | - | - | 73,159,057 | 73,159,057 |
| Other liabilities' captions | 320,781,049 | - | - | - | - | - | - | - | - | - | 320,781,049 |
| Total liabilities | 901,021,594 | 259,915 | - | - | - | - | - | - | - | - | 901,281,509 |
The impacts on the individual statement of financial position and income statement as of 31 December 2015 are as follows:
| Statement of financial position - 31.12.2015 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Caption | Reported amount |
Adjustments Investment subsidies (1) |
Investments in associated companies (2) |
Investments in subsidiary companies (3) |
Other current assets (4) |
Reclassifications Reserves (5) |
Retained earnings (6) |
Accounts payable (7) |
Income taxes payable (8) |
Other current liabilities (9) |
Restated amount |
| Investment in subsidiaries and associated companies |
57,363,394 | - | (255,214) | (57,108,180) | - | - | - | - | - | - | - |
| Goodwill | 8,058,656 | - | - | (8,058,656) | - | - | - | - | - | - | - |
| Investments in subsidiary companies | - | - | - | 65,166,836 | - | - | - | - | - | - | 65,166,836 |
| Investments in associated companies | - | - | 255,214 | - | - | - | - | - | - | - | 255,214 |
| Portuguese State and other public entities | 2,502,186 | - | - | - | (2,502,186) | - | - | - | - | - | - |
| Other accounts receivable | 19,360,051 | - | - | - | (19,360,051) | - | - | - | - | - | - |
| Other current assets | - | - | - | - | 21,862,237 | - | - | - | - | - | 21,862,237 |
| Other assets' captions | 993,553,535 | - | - | - | - | - | - | - | - | - | 993,553,535 |
| Total assets | 1,080,837,822 | - | - | - | - | - | - | - | - | - | 1,080,837,822 |
| Other equity instruments | (18,393,737) | (251,095) | - | - | - | - | - | - | - | - | (18,644,832) |
| Legal reserves | 19,945,684 | - | - | - | - | (19,945,684) | - | - | - | - | - |
| Other reserves | 13,438,968 | - | - | - | - | (13,438,968) | - | - | - | - | - |
| Reserves | - | - | - | - | - | 33,384,652 | - | - | - | - | 33,384,652 |
| Adjustments in investments | 18,858,577 | - | - | - | - | - | (18,858,577) | - | - | - | - |
| Retained earnings | 72,869,417 | - | - | - | - | - | 18,858,577 | - | - | - | 91,727,994 |
| Other equity's captions | 145,192,158 | - | - | - | - | - | - | - | - | - | 145,192,158 |
| Total equity | 251,911,067 | (251,095) | - | - | - | - | - | - | - | - | 251,659,972 |
| Deferrals | 15,216,307 | 350,496 | - | - | - | - | - | - | - | - | 15,566,803 |
| Deferred tax liabilities | 4,633,600 | (99,401) | - | - | - | - | - | - | - | - | 4,534,199 |
| Accounts payble | 64,887,846 | - | - | - | - | - | - | (64,887,846) | - | - | - |
| Portuguese State and other public entities | 17,001,342 | - | - | - | - | - | - | - | (7,923,944) | (9,077,398) | - |
| Other accounts payable | 427,854,061 | - | - | - | - | - | - | (355,518,303) | - | (72,335,758) | - |
| Accounts payable | - | - | - | - | - | - | - | 420,406,149 | - | - | 420,406,149 |
| Income taxes payable | - | - | - | - | - | - | - | - | 7,923,944 | - | 7,923,944 |
| Other current liabilities | - | - | - | - | - | - | - | - | - | 81,413,156 | 81,413,156 |
| Other liabilities' captions | 299,333,599 | - | - | - | - | - | - | - | - | - | 299,333,599 |
| Total liabilities | 828,926,755 | 251,095 | - | - | - | - | - | - | - | - | 829,177,850 |
(1) Acording to IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance the investment subsidies are recorded as deferred income.
| Reclassifications | |||||||
|---|---|---|---|---|---|---|---|
| Caption | Reported amount |
Staff costs (10) | Impairment of inventories and accounts receivable, net (11) |
Depreciation/amortisat ion and impairment of investments, net (12) |
Other operating income (13) |
Interest income (14) |
Restated amount |
| Own work capitalised | 306,257 | (306,257) | - | - | - | - | - |
| Staff costs | (297,335,567) | 306,257 | - | - | - | - | (297,029,310) |
| Impairment of inventories, net | 268,616 | - | (268,616) | - | - | - | - |
| Impairment of accounts receivable, net | 248,629 | - | (248,629) | - | - | - | - |
| Impairment of inventories and accounts receivable, net |
- | - | 517,245 | - | - | - | 517,245 |
| Depreciation and amortisation, net | (19,732,394) | - | - | 19,732,394 | - | - | - |
| Impairment of depreciable/amortisable assets, net |
291,117 | - | - | (291,117) | - | - | - |
| Depreciation/amortisation and impairment of investments, net |
- | - | - | (19,441,277) | - | - | (19,441,277) |
| Grants - Operation subsidies | 8,119 | - | - | - | (8,119) | - | - |
| Other operating revenues | 51,298,403 | - | - | - | (49,900,792) | (1,397,611) | - |
| Other operating income | - | - | - | - | 49,908,911 | - | 49,908,911 |
| Interest and similar income received | 283,466 | - | - | - | - | (283,466) | - |
| Interest income | - | - | - | - | - | 1,681,077 | 1,681,077 |
| Other captions | 336,428,637 | - | - | - | - | - | 336,428,637 |
| Net profit for the period | 72,065,283 | - | - | - | - | - | 72,065,283 |
(10) Staff costs are presented net of own work capitalised.
(11) Impairment of inventories and impairment of accounts receivable are jointly presented.
| Reclassifications | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Caption | Reported amount |
Staff costs (1) | Impairment of inventories and accounts receivable, net (2) |
Depreciation/amortisat ion and impairment of investments, net (3) |
Other operating income (4) |
Interest income (5) |
Restated amount |
|||
| Own work capitalised | 115,303 | (115,303) | - | - | - | - | - | |||
| Staff costs | (76,616,236) | 115,303 | - | - | - | - | (76,500,933) | |||
| Impairment of inventories, net | 347,441 | - | (347,441) | - | - | - | - | |||
| Impairment of accounts receivable, net | (52,039) | - | 52,039 | - | - | - | - | |||
| Impairment of inventories and accounts receivable, net |
- | - | 295,402 | - | - | - | 295,402 | |||
| Depreciation and amortisation, net | (5,698,056) | - | - | 5,698,056 | - | - | - | |||
| Impairment of depreciable/amortisable assets, net |
(133,321) | - | - | 133,321 | - | - | - | |||
| Depreciation/amortisation and impairment of investments, net |
- | - | - | (5,831,377) | - | - | (5,831,377) | |||
| Grants - Operation subsidies | 18,906,806 | - | - | - | (18,660,303) | (246,503) | - | |||
| Other operating revenues | - | - | - | - | 18,660,303 | - | 18,660,303 | |||
| Other operating income | 69,904 | - | - | - | - | (69,904) | - | |||
| Interest and similar income received | - | - | - | - | - | 316,406 | 316,406 | |||
| Interest income | 84,490,525 | - | - | - | - | - | 84,490,525 | |||
| Other captions | 21,430,327 | - | - | - | - | - | 21,430,327 | |||
| Net profit for the period | 21,430,327 | - | - | - | - | - | 21,430,327 |
The adjustments made, with impact in individual Equity, reported as of 1 January and 31 December 2015, for the purposes of conversion into IFRS purposes, were as follows:
| Equity | ||
|---|---|---|
| 31.12.2015 | 01.01.2015 | |
| Individual equity - SNC | 251,911,067 | 249,793,262 |
| Reserves (Investment Subsidies) | (251,095) | (259,915) |
| Individual equity - IFRS | 251,659,972 | 249,533,347 |
Additionally, no material errors were identified relative to estimates made in preparing the financial statements of prior years.
The underlying estimates and assumptions were determined based on the best knowledge of the on-going events and transactions, at the time the financial statements were approved, as well as on the experience of past and/or current events. However, situations might occur in subsequent periods which, due to not having been predictable on the date of approval of the financial statements, were not considered in these estimates. Changes to estimates which occur after the date of the financial statements will be corrected prospectively. For this reason and in view of the associated degree of uncertainty, the real outcome of the transactions in question might differ from their corresponding estimates.
In accordance with IFRS 8, the Group discloses the segment financial reporting.
The Board of Directors regularly reviews segmental reports, using these 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:
The segments cover the three CTT business areas, as follows:
Besides the above mentioned segments, there are two sales channels, which are common to all businesses and products, the Retail Network and Large Customers. In this analysis, the Retail Network, which is connected to the obligations of the universal postal service concession, is incorporated in the Mail segment and integrates internal revenues related to the provision of services to other segments, as well as the sale in its network of third-party products and services.
The amounts reported in each business segment result from the aggregation of the subsidiaries and business units defined in each segment perimeter and the elimination of transactions between companies of the same segment.
The statement of financial position of each subsidiary and business unit 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 in the amounts booked directly in the companies' financial statements and related business units, adjusted by the elimination of transactions between companies of the same segment.
However, as CTT, S.A. has assets in more than one segment it was necessary to split its income and costs by the various operating segments. The Internal Services Rendered refers to services provided across the different CTT, S.A. business areas, and the income is calculated according to standard activities valued through internally set transfer prices.
Initially, CTT, S.A. operating costs are affected to the different segments by charging the internal transactions for the services mentioned above. After this initial allocation, cost relating to corporate and support areas (Central Structure CTT) previously unallocated, are allocated among the segments Mail and Financial Services according to the average number of CTT, S.A. employees affected to each of these segments.
With the allocation of all costs, the earnings before depreciation, provisions, impairments, financial results and taxes by segment in the year of 2016 and 2015 are analysed as follows:
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Euros | Express & Parcels | Financial Services |
Banco CTT | CTT Central Structure |
Intragroup eliminations |
Others non allocated |
Total | |
| Revenues | 533,586,673 | 120,809,947 | 70,760,726 | 961,734 108,910,984 | (138,208,500) | - | 696,821,564 | |
| Sales and services rendered | 490,837,845 | 115,956,403 | 65,944,099 | - | 11,030 | (3,080,807) | - | 669,668,571 |
| Sales | 19,247,627 | 837,524 | - | - | - | (2,893) | - | 20,082,259 |
| Services rendered | 471,590,218 | 115,118,878 | 65,944,099 | - | 11,030 | (3,077,914) | - | 649,586,312 |
| Financial Margin | - | - | - | 26,051 | - | - | - | 26,051 |
| Operating revenues external customers | 26,390,268 | 4,853,544 | 4,733,667 | 935,682 | 17,651,463 | (27,437,682) | - | 27,126,942 |
| Internal services rendered | 16,358,560 | - | 82,960 | - | 40,060,406 | (56,501,927) | - | - |
| Allocation to CTT central structure | - | - | - | - | 51,188,085 | (51,188,085) | - | - |
| Operating costs | 448,411,842 | 116,302,249 | 32,948,637 | 26,403,442 108,910,984 | (138,208,500) | - | 594,768,654 | |
| External supplies and services | 100,938,902 | 92,749,459 | 9,830,286 | 16,439,019 | 42,561,221 | (30,481,823) | - | 232,037,064 |
| Staff costs | 242,375,793 | 21,363,008 | 4,601,590 | 9,626,317 | 60,420,774 | - | - | 338,387,481 |
| Other costs | 15,673,374 | 2,189,782 | 1,365,657 | 338,106 | 4,813,856 | (36,666) | - | 24,344,109 |
| Internal services rendered | 38,588,353 | - | 16,798,440 | - | 1,115,133 | (56,501,927) | - | - |
| Allocation to CTT central structure | 50,835,421 | - | 352,664 | - | - | (51,188,085) | - | - |
| EBITDA(1) | 85,174,831 | 4,507,698 | 37,812,090 | (25,441,708) | - | - | - | 102,052,910 |
| Depreciation/amortisation and impairment of investments, net |
(15,698,721) | (2,736,099) | (354,204) | (1,541,550) | (6,683,109) | - | (454,412) | (27,468,094) |
| Impairment of accounts receivable, net | (45,623) | |||||||
| Provisions net | 16,343,680 | |||||||
| Interest expenses | (6,540,106) | |||||||
| Interest income | 671,599 | |||||||
| Gains/losses in associated companies | 230,340 | |||||||
| Earnings before taxes | 85,244,706 | |||||||
| Income tax for the period | (23,347,639) | |||||||
| Net profit for the period | 61,897,067 | |||||||
| Non-controlling interests | (263,328) | |||||||
| Equity holders of parent company | 62,160,395 |
(1) Operating results + depreciation/amortisation + provisions and impairment losses, net.
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Euros | Express & Parcels | Financial Services |
Banco CTT | CTT Central Structure |
Intragroup eliminations |
Others non allocated |
Total | |
| Revenues | 554,637,064 | 131,256,297 | 75,314,955 | 1,673 105,477,237 | (139,507,467) | - | 727,179,760 | |
| Sales and services rendered | 511,166,685 | 127,014,261 | 70,854,457 | - | - | (3,866,541) | - | 705,168,863 |
| Sales | 22,892,730 | 915,975 | - | - | - | (1,334) | - | 23,807,371 |
| Services rendered | 488,273,956 | 126,098,286 | 70,854,457 | - | - | (3,865,207) | - | 681,361,492 |
| Operating revenues external customers | 26,373,250 | 4,242,035 | 4,380,458 | 1,673 | 16,626,648 | (29,613,167) | - | 22,010,897 |
| Internal services rendered | 17,097,129 | - | 80,040 | - | 55,968,284 | (73,145,454) | - | - |
| Allocation to CTT central structure | - | - | - | - | 32,882,305 | (32,882,305) | - | - |
| Operating costs | 451,648,885 | 130,477,384 | 37,117,452 | 7,396,698 105,477,237 | (139,507,467) | - | 592,610,190 | |
| External supplies and services | 103,439,453 | 100,134,379 | 14,789,649 | 5,066,117 | 43,109,017 | (33,454,476) | - | 233,084,139 |
| Staff costs | 241,974,873 | 26,796,905 | 3,555,387 | 2,252,303 | 57,193,411 | - | - | 331,772,879 |
| Other costs | 19,503,763 | 3,546,100 | 598,685 | 78,279 | 4,051,577 | (25,233) | - | 27,753,171 |
| Internal services rendered | 54,105,814 | - | 17,916,408 | - | 1,123,231 | (73,145,454) | - | - |
| Allocation to CTT central structure | 32,624,981 | - | 257,323 | - | - | (32,882,305) | - | - |
| EBITDA(1) | 102,988,179 | 778,913 | 38,197,503 | (7,395,025) | - | - | - | 134,569,570 |
| Depreciation/amortisation and impairment of investments, net |
(14,775,094) | (3,213,473) | (552,154) | (137,081) | (4,433,952) | - | (461,248) | (23,573,001) |
| Impairment of accounts receivable, net | (1,410,434) | |||||||
| Impairment of non-depreciable assets | 623,123 | |||||||
| Provisions net | (277,313) | |||||||
| Interest expenses | (6,861,401) | |||||||
| Interest income | 1,485,163 | |||||||
| Gains/losses in associated companies | 54,274 | |||||||
| Earnings before taxes | 104,609,981 | |||||||
| Income tax for the period | (32,539,346) | |||||||
| Net profit for the period | 72,070,635 | |||||||
| Non-controlling interests | 5,352 | |||||||
| Equity holders of parent company | 72,065,283 |
(1) Operating results + depreciation/amortisation + provisions and impairment losses, net.
| Thousand Euros | 2016 | 2015 |
|---|---|---|
| 533,587 | 554,637 | |
| Transactional mail | 403,684 | 416,806 |
| Editorial mail | 15,952 | 15,738 |
| Parcels (USO) | 6,608 | 6,892 |
| A dvert ising mail | 29,596 | 31,712 |
| Retail | 17,758 | 19,505 |
| Philately | 7,480 | 8,155 |
| Business Solutions | 9,960 | 11,524 |
| Other | 42,549 | 44,305 |
| Express & Parcels | 1 20,810 | 131,256 |
| Financial Services | 70,761 | 75,315 |
| Banco CTT | 962 | |
| CTT Central Structure | 108,911 | 105,477 |
| Intragroup eliminations | (138,208) | (139,507) |
| 696,822 | 727,180 |
| 2016 | |||||||
|---|---|---|---|---|---|---|---|
| Assets (Euros) | Express & Parcels |
Financial Services |
Banco CTT | CTT Central Structure |
Non allocated assets |
Total | |
| Intagible assets | 2,688,799 | 3,989,255 | 383,266 | 18,455,823 | 7,853,454 | 5,546,126 | 38,916,723 |
| Tangible fixed assets | 172,040,917 | 13,822,493 | 711,568 | 59,727 14,920,468 | 7,366,608 | 208,921,781 | |
| Investment properties | 9,291,983 | 9,291,983 | |||||
| Goodwill | 7,294,638 | 406,101 | 7,700,739 | ||||
| Deferred tax assets | 86,220,762 | 86,220,762 | |||||
| Accounts receivable | 122,113,270 | 122,113,270 | |||||
| Credit to bank clients | 7,103,905 | 7,103,905 | |||||
| Investments held to maturity | 95,094,543 | 95,094,543 | |||||
| Financial assets available for sale | 6,447,325 | 6,447,325 | |||||
| Other banking financial assets | 59,054,303 | 59,054,303 | |||||
| Other assets | 48,263,780 | 48,263,780 | |||||
| Cash and cash equivalents | 618,811,099 | 618,811,099 | |||||
| Non-current assets held for sale | 8,756,999 | 8,756,999 | |||||
| 182,024,355 17,811,748 | 1,500,934 | 186,215,627 22,773,922 906,370,627 1,316,697,213 |
Assets (Euros) Mail Express & Parcels Financial Services Banco CTT CTT Central Structure Non allocated assets Total Intagible assets 2,884,879 3,663,322 245,408 9,716,701 9,104,348 2,009,357 27,624,015 Tangible fixed assets 174,902,447 13,727,659 549,351 60,642 17,579,075 3,121,711 209,940,886 Investment properties 19,783,095 19,783,095 Goodwill 7,652,555 406,101 8,058,656 Deferred tax assets 87,535,941 87,535,941 Accounts receivable 124,355,641 124,355,641 Other assets 38,524,257 38,524,257 Cash and cash equivalents 603,649,717 603,649,717 185,439,881 17,390,982 1,200,860 9,777,343 26,683,423 878,979,718 1,119,472,208 2015
| 2016 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Other information (Euros) | Express & Parcels | Financial Services |
Banco CTT | CTT Central Struture |
Total | |||||
| Medium and long-term debt | 127,145 | 127,145 | ||||||||
| Bank loans | 87,202 | 87,202 | ||||||||
| Leasings | 39,943 | 39,943 | ||||||||
| Short-term debt | 724,749 | 8,955,080 | 9,679,829 | |||||||
| Bank loans | 8,726,161 | 8,726,161 | ||||||||
| Leasings | 724,749 | 228,919 | 953,668 | |||||||
| 724,749 | 9,082,224 | 9,806,973 | ||||||||
| 2015 | ||||||||||
| Other information (Euros) | Express & Parcels | Financial Services |
Banco CTT | CTT Central Struture |
Total | |||||
| Medium and long-term debt Bank loans |
724,845 | 310,677 | 1,035,522 | |||||||
| Leasings | 95,241 | 95,241 | ||||||||
| 724,845 | 215,436 | 940,281 |
| Medium and long-term debt | 724,845 | 310,677 | 1,035,522 |
|---|---|---|---|
| Bank loans | 95,241 | 95,241 | |
| Leasings | 724,845 | 215,436 | 940,281 |
| Short-term debt | 462,968 | 6,615,187 | 7,078,155 |
| Bank loans | 6,028,197 | 6,028,197 | |
| Leasings | 462,968 | 586,990 | 1,049,958 |
| 1,187,813 | 6,925,864 | 8,113,677 | |
The Group CTT is domiciled in Portugal. The result of its Sales and services rendered by geographical segment is disclosed below:
| Thousand Euros | 2016 | 2015 |
|---|---|---|
| Revenue - Portugal | 594,380 | 624,709 |
| Revenue - other countries | 75,289 | 80,406 |
| 669,669 | 705,169 |
During the years ended 31 December 2016 and 31 December 2015, the movements occurred in Tangible fixed assets, as well as the respective accumulated depreciation, regarding the Group were as follows:
| 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Group | Land and natural resources |
Buildings and other constructions |
Basic equipment | Transport equipment | Office equipment | Other tangible fixed assets |
Tangible fixed assets in progress |
Advance payments to suppliers |
Total |
| Tangible fixed assets | |||||||||
| Opening balance | 37,306,577 | 337,982,013 | 138,002,341 | 3,273,327 | 54,961,400 | 23,252,352 | 1,971,616 | 1,398,408 | 598,148,034 |
| Acquisitions | - | 313,458 | 6,625,240 | 9,719 | 4,156,018 | 1,937,614 | 8,381,884 | 2,888,955 | 24,312,888 |
| Disposals | (526,637) | (3,885,980) | (1,503,859) | - | (52,919) | - | - | - | (5,969,395) |
| Transfers and write-offs | 123,778 | 675,516 | (2,289,200) | (8,174) | 51,751 | (115,897) | (5,337,034) | (812,692) | (7,711,951) |
| Adjustments | - | (175,240) | (399,323) | (5,800) | (94,314) | (36,644) | - | (123,265) | (834,586) |
| - | - | - | - | - | - | - | - | - | |
| - | - | - | - | - | - | - | - | - | |
| Closing balance | 36,903,717 | 334,909,766 | 140,435,200 | 3,269,073 | 59,021,936 | 25,037,425 | 5,016,467 | 3,351,405 | 607,944,989 |
| Accumulated depreciation | |||||||||
| Opening balance | 3,888,322 | 192,743,987 | 118,629,681 | 3,154,422 | 50,187,217 | 19,306,751 | - | - | 387,910,380 |
| Depreciation for the period | - | 9,180,124 | 7,410,835 | 66,457 | 2,621,487 | 1,111,546 | - | - | 20,390,450 |
| Disposals | (36,827) | (2,390,937) | (1,481,994) | - | (52,919) | - | - | - | (3,962,677) |
| Transfers and write-offs | - | (2,172,820) | (2,533,931) | (8,174) | (487,515) | (173,533) | - | - | (5,375,973) |
| Adjustments | - | (604) | (89,968) | (3,709) | (12,465) | (5,280) | - | - | (112,027) |
| - | - | - | - | - | - | - | - | - | |
| - | - | - | - | - | - | - | - | - | |
| Closing balance | 3,851,494 | 197,359,750 | 121,934,624 | 3,208,996 | 52,255,806 | 20,239,484 | - | - | 398,850,154 |
| Accumulated impairment | |||||||||
| Opening balance | - | - | - | - | - | 296,769 | - | - | 296,769 |
| Other variations | - | - | - | - | - | (123,714) | - | - | (123,714) |
| Closing balance | - | - | - | - | - | 173,055 | - | - | 173,055 |
| Net Tangible fixed assets | 33,052,223 | 137,550,016 | 18,500,576 | 60,077 | 6,766,130 | 4,624,886 | 5,016,467 | 3,351,405 | 208,921,781 |
| 2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Group | Land and natural resources |
Buildings and other constructions |
Basic equipment | Transport equipment | Office equipment | Other tangible fixed assets |
Tangible fixed assets in progress |
Advance payments to suppliers |
Total |
| Tangible fixed assets | |||||||||
| Opening balance | 36,831,709 | 330,651,512 | 143,631,822 | 2,620,085 | 53,946,268 | 22,491,331 | 1,737,799 | 431,404 | 592,341,930 |
| Acquisitions | - | 241,625 | 6,037,562 | 1,981 | 1,694,892 | 929,960 | 3,505,594 | 2,137,061 | 14,548,674 |
| Disposals | (2,881) | (206,610) | (3,453,459) | - | (10,823) | - | - | - | (3,673,773) |
| Transfers and write-offs | 477,748 | 7,295,485 | (8,159,431) | 647,245 | (634,229) | (139,395) | (3,271,776) | (1,168,066) | (4,952,418) |
| Adjustments | - | - | (57,723) | 4,016 | (34,707) | (29,544) | - | (1,991) | (119,949) |
| Changes in the consolidation perimeter | - | - | 3,569 | - | - | - | - | - | 3,569 |
| Closing balance | 37,306,577 | 337,982,013 | 138,002,341 | 3,273,327 | 54,961,400 | 23,252,352 | 1,971,616 | 1,398,408 | 598,148,034 |
| Accumulated depreciation | |||||||||
| Opening balance | 3,888,710 | 181,856,867 | 124,532,096 | 2,539,928 | 48,417,343 | 18,220,445 | - | - | 379,455,389 |
| Depreciation for the period | - | 8,999,999 | 6,576,631 | 65,894 | 2,392,151 | 1,244,129 | - | - | 19,278,804 |
| Disposals | (388) | (116,904) | (3,449,206) | - | (10,823) | - | - | - | (3,577,322) |
| Transfers and write-offs | - | 2,004,296 | (8,961,765) | 548,540 | (602,122) | (154,648) | - | - | (7,165,699) |
| Adjustments | - | (271) | (70,002) | 60 | (9,332) | (3,176) | - | - | (82,720) |
| Changes in the consolidation perimeter | - | - | 1,927 | - | - | - | - | - | 1,927 |
| Closing balance | 3,888,322 | 192,743,987 | 118,629,681 | 3,154,422 | 50,187,217 | 19,306,750 | - | - | 387,910,379 |
| Accumulated impairment | |||||||||
| Opening balance | - | - | - | - | - | 420,483 | - | - | 420,483 |
| Other variations | - | - | - | - | - | (123,714) | - | - | (123,714) |
| Closing balance | - | - | - | - | - | 296,769 | - | - | 296,769 |
| Net Tangible fixed assets | 33,418,255 | 145,238,026 | 19,372,659 | 118,905 | 4,774,183 | 3,648,833 | 1,971,616 | 1,398,408 | 209,940,886 |
The depreciation recorded in the Group amounting to 20,390,450 Euros (19,278,804 Euros on 31 December 2015), is booked under the heading Depreciation/amortisation and impairment of investments, net (Note 47).
During the years ended 31 December 2016 and 31 December 2015, the movements occurred in Tangible fixed assets, as well as the respective accumulated depreciation, regarding the Company were as follows:
| 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Company | Land and natural resources |
Buildings and other constructions |
Basic equipment | Transport equipment | Office equipment | Other tangible fixed assets |
Tangible fixed assets in progress |
Advance payments to suppliers |
Total |
| Tangible fixed assets | |||||||||
| Opening balance | 35,489,705 | 322,733,582 | 107,351,937 | 2,479,246 | 48,312,318 | 21,472,842 | 1,971,617 | 1,398,407 | 541,209,656 |
| Acquisitions | - | - | 5,552,134 | - | 3,444,701 | 1,918,240 | 8,376,038 | 2,032,080 | 21,323,193 |
| Disposals | (526,637) | (3,885,980) | (1,492,276) | - | - | - | - | - | (5,904,894) |
| Transfers and write-offs | 123,778 | 669,671 | (2,070,172) | - | 94,512 | 40,006 | (5,331,188) | (812,692) | (7,286,085) |
| Adjustments | - | (172,289) | (146,612) | - | (67,780) | (19,984) | - | (123,265) | (529,930) |
| Closing balance | 35,086,846 | 319,344,985 | 109,195,010 | 2,479,246 | 51,783,751 | 23,411,104 | 5,016,467 | 2,494,530 | 548,811,940 |
| Accumulated depreciation | |||||||||
| Opening balance | 3,888,321 | 184,477,527 | 94,533,371 | 2,369,138 | 44,176,849 | 17,624,015 | - | - | 347,069,221 |
| Depreciation for the period | - | 8,747,815 | 5,417,745 | 62,589 | 2,246,253 | 1,076,778 | - | - | 17,551,180 |
| Disposals | (36,827) | (2,390,937) | (1,470,411) | - | - | - | - | - | (3,898,175) |
| Transfers and write-offs | - | (2,172,819) | (2,314,904) | - | (445,217) | (17,167) | - | - | (4,950,106) |
| Adjustments | - | - | - | - | - | - | - | - | - |
| Closing balance | 3,851,494 | 188,661,587 | 96,165,800 | 2,431,726 | 45,977,885 | 18,683,626 | - | - | 355,772,119 |
| Accumulated impairment Opening balance |
- | - | - | - | - | 296,769 | - | - | 296,769 |
| Other variations Closing balance |
- - |
- - |
- - |
- - |
- - |
(123,714) 173,055 |
- - |
- - |
(123,714) 173,055 |
| Net Tangible fixed assets | 31,235,351 | 130,683,399 | 13,029,209 | 47,520 | 5,805,866 | 4,554,423 | 5,016,467 | 2,494,530 | 192,866,766 |
| Company | 2015 | ||||||||
| Land and natural | Buildings and other | Other tangible fixed | Tangible fixed assets | Advance payments to | |||||
| resources | constructions | Basic equipment | Transport equipment | Office equipment | assets | in progress | suppliers | Total | |
| Tangible fixed assets | |||||||||
| Opening balance | 35,014,836 | 315,616,144 | 113,261,739 | 1,645,511 | 46,543,817 | 20,574,950 | 1,737,799 | 264,291 | 534,659,087 |
| Acquisitions | - | - | 3,685,875 | 1,981 | 1,436,934 | 892,426 | 3,505,594 | 1,358,018 | 10,880,829 |
| Disposals | (2,881) | (206,610) | (2,133,753) | - | (10,823) | - | - | - | (2,354,067) |
| Transfers and write-offs | 477,748 | 7,288,834 | (8,237,710) | 831,755 | (52,712) | (7,862) | (3,271,776) | (222,750) | (3,194,473) |
| Adjustments | - | - | (57,723) | - | (34,205) | (30,046) | - | (1,151) | (123,125) |
| Mergers | - | 35,215 | 833,509 | - | 429,307 | 43,375 | - | - | 1,341,406 |
| Closing balance | 35,489,704 | 322,733,584 | 107,351,938 | 2,479,248 | 48,312,318 | 21,472,844 | 1,971,616 | 1,398,407 | 541,209,658 |
| Accumulated depreciation | |||||||||
| Opening balance | 3,888,711 | 174,091,789 | 99,782,739 | 1,593,991 | 41,734,094 | 16,385,542 | - | - | 337,476,866 |
| Depreciation for the period | - | 8,420,076 | 4,180,955 | 53,402 | 2,079,555 | 1,195,715 | - | - | 15,929,703 |
| Disposals | (388) | (116,904) | (2,133,753) | - | (10,823) | - | - | - | (2,261,868) |
| Transfers and write-offs | - | 2,047,352 | (8,128,892) | 721,745 | (35,991) | - | - | - | (5,395,786) |
| Mergers | - | 35,215 | 832,322 | - | 410,013 | 42,757 | - | - | 1,320,307 |
| Closing balance | 3,888,322 | 184,477,527 | 94,533,371 | 2,369,138 | 44,176,849 | 17,624,014 | - | - | 347,069,222 |
| Accumulated impairment | |||||||||
| Opening balance | - | - | - | - | - | 420,483 | - | - | 420,483 |
| Other variations | - | - | - | - | - | (123,714) | - | - | (123,714) |
| Closing balance | - | - | - | - | - | 296,769 | - | - | 296,769 |
The depreciation recorded in the Company amounting to 17,551,181 Euros (15,929,703 Euros on 31 December 2015), is booked under the heading Depreciation/amortisation and impairment of investments, net (Note 47).
In the Group and the Company, as at 31 December 2016, Land and natural resources and Buildings and other constructions include 650,717 Euros (4,756,534 Euros as at 31 December 2015), related to land and property in co-ownership with MEO – Serviços de Comunicações e Multimédia, S.A..
During 2016, an exchange with MEO – Serviços de Comunicações e Multimédia, S.A. was performed and were accounted gains in the amount of 485,134 Euros.
In the year ended 31 December 2015, the Company reclassified to tangible fixed assets one property, which became a part of the operational activity, of 4,517,053 Euros and respective accumulated depreciation of 2,047,352 Euros, as a result of the retail network's development model.
According to the concession contract in force, after the latest amendments of 31 December 2013 (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 on 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) believes that CTT's assets do not include any public or private domain assets of the Portuguese State.
In the year ended 31 December 2015, the caption Changes in the consolidation perimeter in the Group, relates to the balances of the company Escrita Inteligente, S.A. acquired in December 2015.
During the year ended 31 December 2015, the most significant movements in Tangible Fixed Assets were the following:
The movements associated to additions and transfers relate mostly to the capitalisation of repairs in own and third-party buildings of CTT, CTT Expresso and Tourline.
It also includes the exchange made with MEO – Serviços de Comunicações e Multimédia, S.A., of 4 properties that were in joint ownership.
The amount of additions relates to the acquisition of motorcycles, tricycles and quadricycles in the amount of 912 thousand Euros, vans and trucks worth approximately 1,867 thousand Euros, tractors and trailers in the amount of 234 thousand Euros, pallet trucks for 35 thousand Euros, ATMs amounting to 336 thousand Euros, several operational equipment for a total amount of 40 thousand Euros, IT equipment worth 1,158 thousand Euros, scales amounting to 42 thousand Euros, postal containers in the amount of 90 thousand Euros and upgrades to mail sorting machines in the amount of 643 thousand Euros by CTT. CTT Expresso has recognised the upgrade to parcel sorting machines worth about 371 thousand Euros and the purchase of pallet truck of 76 thousand Euro. Payshop acquired 839 payment terminals in the amount of 155 thousand Euros and 1,250 scanners in the amount of 88 thousand Euros.
The amount of acquisitions relates essentially to the purchase of safes and security doors totalling 729 thousand Euros, various office equipment worth about 1,003 thousand Euros, medium and large size equipment for about 1,161 thousand Euros and the acquisition of several microcomputing equipment for approximately 537 thousand Euros by CTT. CTT Expresso acquired a system of file and virtualization backup in a total value of 308 thousand Euros. In Tourline the acquisitions refer to several office equipment worth about 27 thousand Euros.
The amount of acquisitions relates essentially to the acquisition of prevention and safety equipment in the amount of 1,653 thousand Euros, essentially regarding the Company.
The amounts under this heading are related to costs of improvements in own and third-party property.
The amounts recorded under write-offs, in the year ended 31 December 2016, with particular emphasis in Basic equipment, are mainly due to the write-offs of CTT assets that were fully depreciated.
In the Group and in the Company, as at 31 December 2016, the amount recorded under transfers of Land and natural resources and Buildings and other constructions include the total amount, net of depreciations, of 2,344,233 Euros regarding the transfer of real estate to non-current assets held for sale (Note 22).
The Group and the Company contractual commitments, related to Tangible fixed assets, are as follows:
| Group | Company | |
|---|---|---|
| Servers upgrades | 18,450 | 18,450 |
| Shelving equipment | 46,740 | 46,740 |
| Scale, digitizer and micrometer | 5,235 | 5,235 |
| Upgrades to mail sorting machines | 11,754 | 11,754 |
| Desktops and monitors | 2,260 | 2,260 |
| Safes and security doors | 100,072 | 100,072 |
| Pallets | 18,770 | 18,770 |
| 203,280 | 203,280 |
During the years ended 31 December 2016 and 31 December 2015, the movements which occurred in the main categories of the Group Intangible assets, as well as the respective accumulated amortisation, were as follows:
2016
| Group | Development projects | Computer Software | Industrial property | Other intangible assets | Intangible assets in progress |
Advance payments to suppliers |
Total |
|---|---|---|---|---|---|---|---|
| Intangible assets | |||||||
| Opening balance | 4,372,923 | 48,455,024 | 12,004,296 | 444,739 | 12,175,413 | - | 77,452,395 |
| Acquisitions | - | 7,715,502 | 17,573 | - | 10,114,453 | - | 17,847,528 |
| Disposals | - | (15,490) | - | - | - | - | (15,490) |
| Transfers and write-offs | - | 13,235,156 | 1,893 | - | (13,419,588) | - | (182,539) |
| Adjustments | - | (15,640) | (301,202) | - | - | - | (316,843) |
| Other movements | - | 357,918 | - | - | - | - | 357,918 |
| Closing balance | 4,372,923 | 69,732,469 | 11,722,559 | 444,739 | 8,870,277 | - | 95,142,968 |
| Accumulated amortisation | |||||||
| Opening balance | 4,350,412 | 36,912,898 | 8,120,329 | 444,739 | - | - | 49,828,379 |
| Amortisation for the period | 9,647 | 6,277,006 | 336,578 | - | - | - | 6,623,231 |
| Disposals | - | (15,490) | - | - | - | - | (15,490) |
| Transfers and write-offs | - | (150,959) | (454) | - | - | - | (151,413) |
| Adjustments | - | (2,289) | (56,173) | - | - | - | (58,463) |
| Other movements | - | - | - | - | - | - | - |
| Closing balance | 4,360,060 | 43,021,166 | 8,400,280 | 444,739 | - | - | 56,226,245 |
| Net intangible assets | 12,863 | 26,711,303 | 3,322,280 | - | 8,870,277 | - | 38,916,723 |
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | Development projects | Computer Software | Industrial property | Other intangible assets | Intangible assets in progress |
Total | ||
| Intangible assets | ||||||||
| Opening balance | 4,372,922 | 38,620,250 | 11,659,692 | 444,739 | 4,726,397 | 59,824,001 | ||
| Acquisitions | 84,441 | 5,386,048 | 342,437 | - | 11,911,640 | 17,724,566 | ||
| Transfers and write-offs | (84,441) | 4,448,727 | - | - | (4,502,826) | (138,540) | ||
| Changes in the consolidation perimeter | - | - | 2,167 | - | 40,201 | 42,368 | ||
| Closing balance | 4,372,922 | 48,455,024 | 12,004,296 | 444,739 | 12,175,413 | 77,452,394 | ||
| Accumulated amortisation | ||||||||
| Opening balance | 4,340,765 | 33,801,244 | 7,816,346 | 439,639 | - | 46,397,993 | ||
| Amortisation for the period | 12,060 | 3,471,192 | 344,597 | 5,100 | - | 3,832,949 | ||
| Transfers and write-offs | (2,413) | (359,537) | - | - | - | (361,949) | ||
| Adjustments | - | - | (40,614) | - | - | (40,614) | ||
| Closing balance | 4,350,412 | 36,912,898 | 8,120,329 | 444,739 | - | 49,828,379 | ||
| Net intangible assets | 22,510 | 11,542,126 | 3,883,967 | - | 12,175,413 | 27,624,015 |
The amortisation in the Group, for the year ended 31 December 2015, amounting to 6,623,231 Euros (3,832,949 Euros as at 31 December 2015) was recorded under Depreciation / amortisation and impairment of investments, net (Note 47).
During the years ended 31 December 2016 and 31 December 2015, the movements which occurred in the main categories of the Company Intangible assets, as well as the respective accumulated amortisation, were as follows:
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Company | Development projects | Computer Software | Industrial property | Other intangible assets | Intangible assets in progress |
Total |
| Intangible assets | ||||||
| Opening balance | 3,717,326 | 38,719,172 | 3,566,374 | - | 2,009,357 | 48,012,229 |
| Acquisitions | - | 679,023 | 17,573 | - | 5,664,626 | 6,361,222 |
| Disposals | - | - | - | - | - | - |
| Transfers and write-offs | - | 2,094,837 | 1,893 | - | (2,127,856) | (31,126) |
| Adjustments | - | (15,640) | - | - | - | (15,640) |
| Closing balance | 3,717,326 | 41,477,392 | 3,585,840 | - | 5,546,126 | 54,326,686 |
| Accumulated amortisation | ||||||
| Opening balance | 3,694,816 | 28,347,075 | 3,009,661 | - | - | 35,051,552 |
| Amortisation for the period | 9,647 | 4,423,323 | 40,604 | - | - | 4,473,575 |
| Disposals | - | - | - | - | - | - |
| Transfers and write-offs | - | - | - | - | - | - |
| Adjustments | - | (2,289) | 105 | - | - | (2,184) |
| Closing balance | 3,704,463 | 32,768,108 | 3,050,370 | - | - | 39,522,942 |
| Net intangible assets | 12,863 | 8,709,284 | 535,470 | - | 5,546,126 | 14,803,744 |
| Company | Development projects | Computer Software | Industrial property | 2015 Other intangible assets |
Intangible assets in progress |
Total |
| Intangible assets | ||||||
| Opening balance | 3,717,326 | 28,465,655 | 3,223,072 | - | 4,710,797 | 40,116,850 |
| Acquisitions | 84,441 | 4,654,861 | 326,469 | - | 1,775,205 | 6,840,977 |
| Transfers and write-offs | (84,441) | 4,783,837 | - | - | (4,476,645) | 222,750 |
| Mergers | - | 814,821 | 16,833 | - | - | 831,654 |
| Closing balance | 3,717,326 | 38,719,174 | 3,566,374 | - | 2,009,357 | 48,012,230 |
| Accumulated amortisation | ||||||
| Opening balance | 3,685,169 | 24,541,759 | 2,955,835 | - | - | 31,182,763 |
| Amortisation for the period | 12,060 | 3,001,272 | 36,994 | - | - | 3,050,326 |
| Transfers and write-offs | (2,413) | 2,413 | - | - | - | - |
| Mergers | - | 801,631 | 16,833 | - | - | 818,464 |
| Closing balance | 3,694,816 | 28,347,074 | 3,009,662 | - | - | 35,051,553 |
| Net intangible assets | 22,510 | 10,372,099 | 556,712 | - | 2,009,357 | 12,960,678 |
The amortisation in the Company, for the year ended 31 December 2015, amounting to 4,473,575 Euros (3,050,326 Euros as at 31 December 2015) was recorded under Depreciation / amortisation and impairment of investments, net (Note 47).
The caption Industrial property in the Group 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.
The transfers occurred in the year ended 31 December 2016 from Intangible assets in progress to Computer software refer to IT projects, which were completed during the year.
The amounts of 798,888 Euros and 306,256 Euros were capitalised in computer software or in intangible assets in progress as at 31 December 2016 and 31 December 2015, respectively, related to Company staff costs incurred in the development of these projects.
During the year ended 31 December 2015, the most significant movements of the Group companies in Intangible assets were the following:
The amount of acquisitions relates essentially to the purchase of software "IBM Datacap" in the amount of 118 thousand Euros, the acquisition of "SAFT-T Viewer" for 53 thousand Euros, "Management information software" in the amount of 207 thousand Euros and software "IBM Websphere (WSRR)" in the amount of 59 thousand Euros by CTT. In Banco CTT the acquisitions relate to software "TLM Corona" in the amount of 147 thousand Euros, software "SAC - Card management system" in the amount of 81 thousand Euros, "Reg Pro – Banking reports system" in the amount of 257 thousand Euros, "App account opening" in the amount of 416 thousand Euros and upgrades to "CBS – Core Banking System" in the amount of 4,113 thousand Euros.
As at 31 December 2016 the Group and the Company Intangible assets in progress, relate to IT projects which are under development, of which the most relevant are:
| Group | Company | |
|---|---|---|
| SGEE - System Management Express Shipping | 1,473,116 | - |
| Management information - Software | 1,061,580 | 727,776 |
| International (E-CIP) | 728,084 | 728,084 |
| CBS - Core banking system | 444,927 | - |
| OPICS - Treasury mangement | 631,122 | - |
| NAVE evolution | 380,583 | 380,583 |
| Mail products evolution | 349,801 | 349,801 |
| Digital platform - advertising mail | 455,995 | 455,995 |
| RAID - Software | 163,131 | 163,131 |
| Financial consolidation - Software | 150,431 | 150,431 |
| Audit management - software | 102,150 | - |
| DOL - Treatment and generation of scales | 90,038 | 90,038 |
| CIA - New portal of treatment | 97,049 | 97,049 |
| Mobility - Application Software | 104,626 | 104,626 |
| CTT Mobile | 109,647 | 109,647 |
| Virtualization platform | 122,901 | 122,901 |
| Setup Fujitsu | 361,351 | 361,351 |
| Simple Finance | 468,377 | 468,377 |
| Reg Pro - Banking report system | 46,296 | - |
| 7,341,205 | 4,309,789 |
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.
Contractual commitments relative to the Group and the Company Intangible assets are as follows:
| Group | Company | |
|---|---|---|
| CBS - Core Banking System | 7,078,870 | - |
| Card management system | 35,566 | - |
| APP Mobile CTT Expresso | 9,970 | - |
| Videoconferencing upgrade | 29,608 | 29,608 |
| SADIP - Dynamics Change Plans | 18,670 | 18,670 |
| 7,172,684 | 48,278 |
As at 31 December 2016 and 31 December 2015, the Group and the Company have the following assets classified as investment properties:
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Group | Company | |||||
| Land and natural resources |
Buildings and other constructions |
Total | Land and natural resources |
Buildings and other constructions |
Total | |
| Investment properties | ||||||
| Opening balance | 7,079,433 | 40,895,219 | 47,974,653 | 7,079,433 | 40,895,219 | 47,974,653 |
| Additions | - | - | - | - | - | - |
| Disposals | (890,140) | (8,088,615) | (8,978,754) | (890,140) | (8,088,615) | (8,978,754) |
| Transfers and write-offs | (2,268,245) | (14,433,825) | (16,702,070) | (2,268,245) | (14,433,825) | (16,702,070) |
| Closing balance | 3,921,049 | 18,372,780 | 22,293,828 | 3,921,049 | 18,372,780 | 22,293,828 |
| Accumulated depreciation | ||||||
| Opening balance | 239,427 | 26,669,509 | 26,908,936 | 239,427 | 26,669,509 | 26,908,936 |
| Depreciation for the period | - | 569,250 | 569,250 | - | 569,250 | 569,250 |
| Disposals | (25,824) | (5,432,025) | (5,457,848) | (25,824) | (5,432,025) | (5,457,848) |
| Transfers and write-offs | (3,506) | (10,306,485) | (10,309,991) | (3,506) | (10,306,485) | (10,309,991) |
| Closing balance | 210,097 | 11,500,249 | 11,710,347 | 210,097 | 11,500,249 | 11,710,347 |
| Accumulated impairment | ||||||
| Opening balance | - | 1,282,622 | 1,282,622 | - | 1,282,622 | 1,282,622 |
| Transfers/Adjustments | - | 8,876 | 8,876 | - | 8,876 | 8,876 |
| Closing balance | - | 1,291,498 | 1,291,498 | - | 1,291,498 | 1,291,498 |
| Net Investment properties | 3,710,951 | 5,581,032 | 9,291,983 | 3,710,951 | 5,581,032 | 9,291,983 |
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | Company | |||||||
| Land and natural resources |
Buildings and other constructions |
Total | Land and natural resources |
Buildings and other constructions |
Total | |||
| Investment properties | ||||||||
| Opening balance | 7,716,058 | 45,722,963 | 53,439,021 | 7,716,058 | 45,722,963 | 53,439,021 | ||
| Additions | 14,500 | 43,500 | 58,000 | 14,500 | 43,500 | 58,000 | ||
| Disposals | (173,376) | (854,186) | (1,027,562) | (173,376) | (854,186) | (1,027,562) | ||
| Transfers and write-offs | (477,748) | (4,017,057) | (4,494,805) | (477,748) | (4,017,057) | (4,494,805) | ||
| Closing balance | 7,079,434 | 40,895,220 | 47,974,654 | 7,079,434 | 40,895,220 | 47,974,654 | ||
| Accumulated depreciation | ||||||||
| Opening balance | 259,501 | 28,399,732 | 28,659,233 | 259,501 | 28,399,732 | 28,659,233 | ||
| Depreciation for the period | - | 752,365 | 752,365 | - | 752,365 | 752,365 | ||
| Disposals | (20,075) | (435,235) | (455,310) | (20,075) | (435,235) | (455,310) | ||
| Transfers and write-offs | - | (2,047,352) | (2,047,352) | - | (2,047,352) | (2,047,352) | ||
| Closing balance | 239,426 | 26,669,510 | 26,908,936 | 239,426 | 26,669,510 | 26,908,936 | ||
| Accumulated impairment | ||||||||
| Opening balance | - | 1,450,025 | 1,450,025 | - | 1,450,025 | 1,450,025 | ||
| Transfers/Adjustments | - | (167,403) | (167,403) | - | (167,403) | (167,403) | ||
| Closing balance | - | 1,282,622 | 1,282,622 | - | 1,282,622 | 1,282,622 | ||
| Net Investment properties | 6,840,008 | 12,943,087 | 19,783,095 | 6,840,008 | 12,943,087 | 19,783,095 |
These assets are not allocated to the Group and Company operating activities, nor have a specific future use.
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 2016 which were conducted by independent entities, amounts to 13,190,970 Euros (29,425,470 Euros as at 31 December 2015).
In the year ended 31 December 2016, the amount of disposals in the Company relates to the sale of six properties having the corresponding gains, of 1.2 million Euros, been recorded in the caption Other operating income.
In the year ended 31 December 2015, the Company reclassified to tangible fixed assets one property which became a part of the Group's activity in the amount of 4,517,053 Euros and respective accumulated depreciation of 2,047,352 Euros, as a result of the retail network's development model.
In the Group and in the Company, as at 31 December 2016, the amount recorded under transfers of Land and natural resources and Buildings and other constructions include the total amount, net of depreciations, of 6,412,766 Euros regarding the transfer of real estate to non-current assets held for sale (Note 22).
Depreciation for the year, of 569,250 Euro (752,365 Euros on 31 December 2015) was recorded in the caption Depreciation / amortisation and impairment of investments (losses / reversals) (Note 47).
Impairment losses of the Company for the period amounting to 8,876 Euros (167,403 Euros on 31 December 2015) were recorded in the caption Depreciation / amortisation and impairment of investments (losses / reversals) (Note 47) and are explained by the market value reduction observed in same buildings.
As at 31 December 2016 and 31 December 2015, the parent company, CTT - Correios de Portugal, S.A. and the following subsidiaries in which it holds control were included in the consolidation:
| 2016 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Percentage of ownership | Percentage of ownership | |||||||
| Company name | Place of business | Head office | Direct | Indirect | Total | Direct | Indirect | Total |
| Parent company: | ||||||||
| CTT - Correios de Portugal, S.A. | Portugal | Av. D. João II N.º 13 | ||||||
| 1999-001 Lisboa | - | - | - | - | - | - | ||
| Subsidiaries: | ||||||||
| CTT Expresso - Serviços Postais e | Portugal | Lugar do Quintanilho | ||||||
| Logística, S.A. ("CTT Expresso") | 2664-500 São Julião do Tojal | 100 | - | 100 | 100 | - | 100 | |
| Payshop Portugal, S.A. | Portugal | Av. D. João II N.º 13 | ||||||
| ("Payshop") | 1999-001 Lisboa | 100 | - | 100 | 100 | - | 100 | |
| CTT Contacto, S.A. (a) | Portugal | Av. D. João II N.º 13 | ||||||
| ("CTT Con") | 1999-001 Lisboa | 100 | - | 100 | 100 | - | 100 | |
| Mailtec Comunicação , S.A. | Portugal | Av. D. João II N.º 13 | ||||||
| ("Mailtec TI") | 1999-001 Lisboa | 100 | - | 100 | 100 | - | 100 | |
| Tourline Express Mensajería, SLU. | Spain | Calle Pedrosa C, 38-40 Hospitalet de | ||||||
| ("TourLine") | Llobregat (08908)- Barcelona - Spain | 100 | - | 100 | - | 100 | 100 | |
| Correio Expresso de Moçambique, S.A. | Mozambique | Av. Zedequias Manganhela, 309 | ||||||
| ("CORRE") | Maputo - Mozambique | 50 | - | 50 | 50 | - | 50 | |
| Escrita Inteligente , S.A. | Portugal | Av. D. João II N.º 13 | ||||||
| ("RONL") | 1999-001 Lisboa | 100 | - | 100 | 100 | - | 100 | |
| Banco CTT, S.A. | Portugal | Av. D. João II N.º 11 | ||||||
| ("BancoCTT") | 1999-001 Lisboa | 100 | - | 100 | 100 | - | 100 | |
(a) Previously named CTT Gest, S.A.
In relation to CORRE as the Group has the right to variable returns and the ability to affect those returns through its power over this company, it is included in the consolidation due to the fact that the Group controls its operating and financial business.
On 17 March 2016, CTT Expresso, S.A. sold to CTT – Correios de Portugal, S.A., 100% of the shareholding in the subsidiary Tourline Express Mensajería, SLU. This transaction had no impact on the consolidation perimeter.
Tourline Express Mensajeria, SLU, was, on 5 May 2015, subject to a share capital increase of 1,000,000 Euros.
On 16 May 2016 and 24 October 2016, the share capital of Banco CTT, S.A. has been increased by 26,000,000 Euros and 25,000,000 Euros, respectively, currently totalling 85,000,000 Euros.
In January 2015, a share capital increase occurred in Corre – Correio Expresso de Moçambique, S.A. in the amount of 670,030 Euros. This operation was accomplished through the incorporation of both shareholders' credits in Corre.
On 20 January 2015, but with effect as of 1 January 2015, the merger of Mailtec Holding, SGPS, S.A. into CTT was registered through the global transfer of the assets of Mailtec Holding, SGPS, S.A.. Following this merger, the shareholdings held by Mailtec Holding, SGPS, S.A. in Mailtec Comunicações, S.A., Mailtec Consultoria, S.A. and Mailtec Processos, Lda. are now held entirely by the parent company, CTT – Correios de Portugal, S.A..
On 10 August 2015, but with effect as of 1 January 2015, the merger of Post Contacto, Lda. and Mailtec Processos, Lda. into CTT Gest, S.A. was registered through the global transfer of the assets of Post Contacto, Lda. and Mailtec Processos, Lda.. Following this merger, the corporate name of CTT Gest, S.A. was changed to CTT Contacto, S.A..
During December 2015, a share capital increase occurred in Tourline Express Mensajería, SLU. in the amount of 12,000,000 Euros.
On 28 December 2015, but with effect as of 1 January 2015, the merger of Mailtec Consultoria, S.A. into CTT was registered through the global transfer of the assets of Mailtec Consultoria, S.A..
None of these transactions had an impact on the consolidation perimeter.
As at 31 December 2016 and 31 December 2015, the Group held the following interests in joint ventures, registered through the equity method:
| 2016 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Percentage of ownership | Percentage of ownership | |||||||
| Company name | Place of business | Head office | Direct | Indirect | Total | Direct | Indirect | Total |
| Ti-Post Prestção de Serviços informáticos, ACE (" Ti-Post") |
Portugal | R. do Mar da China, Lote 1.07.2.3 Lisboa |
49 | - | 49 | 49 | - | 49 |
| NewPost, ACE (a) | 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 |
| (a) Previously named Postal Network - Prestação de Serviços de Gestão de Infra-Estruturas de Comunicações, ACE. |
As at 31 December 2016 and 31 December 2015, the Group held the following interests in associated companies accounted for by the equity method:
| 2016 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Percentage of ownership | Percentage of ownership | |||||||
| Company name | Place of business | Head office | Direct | Indirect | Total | Direct | Indirect | Total |
| Multicert - Serviços de Certificação Electrónica, S.A. ("Multicert") |
Portugal | R. do Centro Cultural, 2 Lisboa |
20 | - | 20 | 20 | - | 20 |
| Payshop Moçambique, S.A. (a) | Mozambique | R. da Sé, 114-4º. Maputo - Mozambique |
- | 35 | 35 | - | 35 | 35 |
| Mafelosa, SL (b) | Spain | Castellon - Spain | - | 25 | 25 | - | 25 | 25 |
| Urpacksur, SL (b) | Spain | Málaga - Spain | - | 30 | 30 | - | 30 | 30 |
(a) Company held by Payshop Portugal, S.A., which is currently under liquidation. (b) Company held by Tourline Mensajeria, SLU, which currently has no activity.
During the year ended 31 December 2016, there were no changes in the consolidation perimeter.
During the year ended 31 December 2015, the consolidation perimeter changed as a result of the incorporation, on 6 February 2015, of CTT Serviços, S.A. with a share capital of 5,000,000 Euros, in the context of the incorporation process of Banco CTT.
On 24 August 2015, the corporate name of CTT Serviços, S.A. was changed to Banco CTT, S.A., as well as its main activity in order to accommodate the banking activity. On 17 December 2015, CTT acquired the company Escrita Inteligente, S.A., a start-up company in the digital area dedicated to the development of the solution named "Recibos Online".
Following the acquisition, the Group made an assessment of the fair value of the assets acquired and liabilities assumed in accordance with IFRS 3 - Business Combinations, and no significant differences between the carrying amounts of assets and liabilities and their fair values were identified.
The detail of the net assets of Escrita Inteligente and goodwill recorded related with this transaction as at 31 December 2015 is as follows:
| Book value | |
|---|---|
| Assets acquired | 63,469 |
| Liabilities acquired | 2,764 |
| Net assets acquired | 60,705 |
| Goodwill (Note 9) | 357,917 |
| Acquisition value | 418,622 |
During the year ended 31 December 2016 and following a new assessment of the fair value of the assets acquired and in accordance with IFRS 3 - Business Combinations, the initial Goodwill recognition of the purchase of Escrita Inteligente SA was adjusted, having been totally allocated to the IT platform "Recibos Online", as shown below:
| Book value | |
|---|---|
| Assts acquired | 421,386 |
| Liabilities acquired | 2,764 |
| Net assets acquired | 418,622 |
| Goodwill (Note 9) | - |
| Acquisition value | 418,622 |
As at 31 December 2016 and 31 December 2015, the Group Goodwill was made up as follows:
| Group | |||
|---|---|---|---|
| Year of acquisition |
2016 | 2015 | |
| Mailtec Comunicação, S.A. | 2004 | 7,294,638 | 7,294,638 |
| Payshop Portugal, S.A. | 2004 | 406,101 | 406,101 |
| Escrita Inteligente, S.A. | 2015 | - | 357,917 |
| 7,700,739 | 8,058,656 |
During the years ended 31 December 2016 and 31 December 2015, the movements in Goodwill were as follows:
| Group | ||||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | |||||
| Opening balance | 8,058,656 | 7,705,457 | ||||
| Acquisitions | - | 357,917 | ||||
| Adjustments | - | (4,718) | ||||
| Final measurement of goodwill | (357,917) | - | ||||
| Closing balance | 7,700,739 | 8,058,656 |
During the year ended 31 December 2016 in accordance with IFRS 3 - Business Combinations, the initial Goodwill recognition of the purchase of Escrita Inteligente, SA was revised based on information that allowed that amount to be fully assigned to the fair value of the "Recibos Online" computer platform. As a result, the amount of 357,917 Euros was reclassified to Intangible Assets - Computer Programmes.
In the year ended 31 December 2015, the acquisitions relate to the company Escrita Inteligente, S.A., with a corresponding Goodwill of 357,917 Euros.
The adjustments are related to the merger of Mailtec Consultoria, S.A. into CTT, and the corresponding Goodwill.
The recoverable amount of Goodwill is assessed annually or whenever there is indication of a possible loss of value. The recoverable amount is determined based on the value in use of the assets, computed using calculation methodologies supported by discounted cash flow techniques, considering the market conditions, the time value and business risks.
During the year ended 31 December 2016, in order to determine the recoverable amount of its investments, the Group performed impairment tests as at 31 December 2016 and 31 December 2015 based on the following assumptions:
| 2016 | |||||
|---|---|---|---|---|---|
| Company | Activity | Base for determining the recoverable amount |
Explicit period for cash flows |
Discount rate (WACC) |
Perpetutiy rate growth |
| Mailtec Comunicação, SA | Documental services | Equity Value/DCF | 5 years | 10.00% | 0.50% |
| Payshop Portugal, SA | Management of payment points network | Equity Value/DCF | 5 years | 10.82% | 0.50% |
| 2015 | |||||
| Company | Activity | Base for determining the recoverable amount |
Explicit period for cash flows |
Discount rate (WACC) |
Perpetutiy rate growth |
| Tourline Express Mensajeria, SLU | CEP and Logistics | Equity Value/DCF | 5 years | 10.00% | 0.50% |
| Mailtec Comunicação, SA | Documental services | Equity Value/DCF | 5 years | 9.02% | 0.50% |
| Payshop Portugal, SA | Management of payment points network | Equity Value/DCF | 5 years | 9.85% | 0.50% |
The increase in the discount rate (WACC) for the year ended 31 December 2016 was a result of the increase in the country's risk premium, measured by the yields' spreads of the Portuguese government bonds in relation to the free-risk bonds of the Eurozone.
The cash flow projections were based on the historical performance and the medium and long-term business plans, approved by the Board of Directors. As a consequence of this impairment analysis, the Group concluded that as at 31 December 2016 there were no impairment losses.
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Year of acquisition |
Initial value of Goodwill |
Impairment losses for the period |
Accumulated impairment losses |
Disposals | Carrying value |
|||
| Tourline Express Mensajería, SLU | 2005 | 20,671,985 | - | 20,671,985 | - | - | ||
| Payshop Moçambique, S.A. (a) | 2008 | 235,946 | - | 235,946 | - | - | ||
| 20,907,931 | - | 20,907,931 | - | - |
a) Held by Payshop Portugal, S.A., a subsidiary of CTT Group
| 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Year of acquisition |
Initial value of Goodwill |
Impairment losses for the period |
Accumulated impairment losses |
Disposals | Carrying value |
||
| Tourline Express Mensajería, SLU | 2005 | 20,671,985 | - | 20,671,985 | - | - | |
| Payshop Moçambique, S.A. (a) | 2008 | 235,946 | - | 235,946 | - | - | |
| 20,907,931 | - | 20,907,931 | - | - |
b) Held by Payshop Portugal, S.A., a subsidiary of CTT Group
Sensitivity analyses were performed on the results of these impairment tests, namely regarding the following key assumptions: (i) perpetuity growth rate and (ii) discount rates.
The results of the sensitivity analyses for PayShop and Mailtec Comunicação do not determine that there are indicators of impairment, according to the following tables:
| Maitec Comunicação (thousand euros) |
||||||||
|---|---|---|---|---|---|---|---|---|
| Variation of sovereign risk and variation of perpetuity growth (g) | ||||||||
| WACC Impairment * |
||||||||
| 8.0% | 9.0% | 10.0% | 11.0% | 12.0% | ||||
| 0.00% | 16,431 | 13,356 | 10,898 | 8,889 | 7,217 | |||
| 0.25% | 17,089 | 13,855 | 11,286 | 9,198 | 7,467 | |||
| g | 0.50% | 17,790 | 14,384 | 11,696 | 9,522 | 7,728 | ||
| 0.75% | 18,540 | 14,944 | 12,127 | 9,861 | 8,001 | |||
| 1.00% | 19,343 | 15,539 | 12,582 | 10,218 | 8,286 |
* impairment if negative
Payshop (thousand euros)
| Variation of sovereign risk and variation of perpetuity growth (g) | ||
|---|---|---|
| -------------------------------------------------------------------- | -- | -- |
| WACC | ||||||
|---|---|---|---|---|---|---|
| Impairment * 0.00% 0.25% g 0.50% |
8.8% | 9.8% | 10.8% | 11.8% | 12.8% | |
| 72,569 | 64,720 | 58,330 | 53,030 | 48,563 | ||
| 74,471 | 66,221 | 59,541 | 54,024 | 49,391 | ||
| 76,488 | 67,803 | 60,811 | 55,062 | 50,253 | ||
| 0.75% | 78,629 | 69,472 | 62,143 | 56,146 | 51,151 | |
| 1.00% | 80,907 | 71,236 | 63,543 | 57,281 | 52,086 |
* impairment if negative
During the years ended 31 December 2016 and 31 December 2015, the movements occurred in the Company in Investments in subsidiary companies were as follows:
| Company | ||
|---|---|---|
| 2016 | 2015 | |
| Opening balance | 65,166,836 | 42,644,640 |
| Equity method - proportion of net income | (4,669,220) | (4,087,062) |
| Distribution of dividends | (8,580,799) | (7,917,720) |
| Other | 51,059,883 | 34,526,978 |
| Closing balance | 102,976,700 | 65,166,836 |
The caption Other include the Banco CTT's share capital increases, occurred on 16 May 2016 and 24 October 2016, in the total amount of 51,000,000 Euros.
As at 31 December 2016 and 31 December 2015, the detail by company of Investments in subsidiary ofthe Company was as follows:
| 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Company | % held |
Assets | Liabilities | Equity | Net profit |
Goodwill | Investments | Provisions | Proportion of net profit |
| CTT Expresso,S.A. | 100% | 42,644,543 | 19,083,962 | 23,560,581 | 9,821,754 | - | 23,560,581 | - | 9,821,754 |
| CTT Contacto, S.A. | 100% | 4,536,738 | 2,081,835 | 2,454,903 | 1,445,047 | - | 2,454,903 | - | 1,445,047 |
| Payshop Portugal, S.A. | 100% | 9,644,371 | 2,375,635 | 7,268,736 | 5,452,364 | 406,101 | 7,268,736 | - | 5,452,364 |
| Mailtec Comunicação S.A. | 100% | 6,686,450 | 2,761,244 | 3,925,206 | 245,828 | 7,294,638 | 3,925,206 | - | 245,828 |
| CORRE - Correio Expresso Moçambique, S.A. | 50% | 1,799,265 | 1,640,994 | (158,271) | (526,656) | - | - | 79,135 | (184,193) |
| Escrita Inteligente, S.A. | 100% | 164,691 | 95,975 | 68,716 | (11,448) | - | 412,316 | - | (11,448) |
| Banco CTT, S.A. | 100% | 318,633,790 | 260,979,572 | 57,654,218 | (21,438,570) | - | 57,654,218 | - | (21,438,570) |
| Tourline Express Mensajería, SLU | 100% | 18,724,316 | 23,851,162 | (5,126,846) | (7,833,694) | - | - | 6,833,694 | - |
| 7,700,739 | 95,275,961 | 6,912,830 | (4,669,220) |
As referred in Note 8, on 17 March 2016, CTT Expresso, S.A. sold to CTT – Correios de Portugal, S.A., 100% of the shareholding in the subsidiary Tourline Express Mensajería, SLU..
| 2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Company | % held |
Assets | Liabilities | Equity | Net profit |
Goodwill | Investments | Provisions | Proportion of net profit |
| CTT Expresso,S.A. | 100% | 48,851,852 | 35,113,025 | 13,738,828 | (6,752,166) | - | 13,738,828 | - | (6,752,166) |
| CTT Contacto, S.A. | 100% | 5,056,112 | 1,879,064 | 3,177,048 | 2,167,192 | - | 3,177,049 | - | 2,167,192 |
| Payshop Portugal, S.A. | 100% | 10,220,247 | 2,513,777 | 7,706,470 | 5,890,097 | 406,101 | 7,706,469 | - | 5,890,097 |
| Mailtec Comunicação S.A. | 100% | 6,845,863 | 2,642,975 | 4,202,889 | 523,510 | 7,294,638 | 4,202,889 | - | 523,510 |
| CORRE - Correio Expresso Moçambique, S.A. | 50% | 2,154,331 | 1,801,239 | 353,092 | 10,705 | - | 143,827 | - | 5,352 |
| Escrita Inteligente, S.A. | 100% | 63,469 | 3,125 | 60,344 | (10,639) | 357,917 | 60,344 | - | (362) |
| Banco CTT, S.A. | 100% | 31,190,010 | 3,111,235 | 28,078,775 | (5,920,685) | - | 28,078,775 | - | (5,920,685) |
| 8,058,656 | 57,108,180 | - | (4,087,062) |
For the years ended 31 December 2016 and 31 December 2015, the net income in subsidiary companies arising from the application of the equity method, and stated under Gains/losses from subsidiaries, associated companies and joint ventures in the Income statement were recognised against the following items on the balance sheet:
| Company | ||
|---|---|---|
| 2016 | 2015 | |
| Investment in subsidiaries | ||
| CTT Expresso,S.A. | 9,821,754 | (6,752,166) |
| CTT Contacto, S.A. | 1,445,047 | 2,167,192 |
| Payshop Portugal, S.A. | 5,452,364 | 5,890,097 |
| Mailtec Comunicação S.A. | 245,828 | 523,510 |
| CORRE - Correio Expresso Moçambique, S.A. | (184,193) | 5,352 |
| Escrita Inteligente, S.A. | (25,765) | (362) |
| Banco CTT, S.A. | (21,438,570) | (5,920,685) |
| Tourline Express Mensajería, SLU | - | - |
| (4,683,537) | (4,087,062) | |
| Provisions - Investment in subsidiaries | ||
| CORRE - Correio Expresso Moçambique, S.A. | 79,135 | - |
| Tourline Express Mensajería, SLU | 6,833,694 | - |
| 6,912,830 | - | |
For the years ended 31 December 2016 and 31 December 2015, the Group and the Company investments in associated companies had the following movements:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Gross carrying value | ||||
| Opening balance | 255,695 | 227,418 | 255,214 | 937,732 |
| Equity method - proportion of net income | 40,565 | 28,277 | 40,565 | 28,277 |
| Other | - | - | - | (710,795) |
| Closing balance | 296,260 | 255,695 | 295,779 | 255,214 |
As at 31 December 2016 and 31 December 2015, the detail by company of the Group and the Company investments in associated companies were as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Multicert, S.A. | 295,779 | 255,214 | 295,779 | 255,214 |
| Urpacksur, S.L. | 481 | 481 | - | - |
| 296,260 | 255,695 | 295,779 | 255,214 |
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | % held |
Assets | Liabilities | Equity | Net profit |
Investments | Provisions | Proportion of net profit |
| Multicert - Serviços de Certificação Electrónica, S.A. (a) | 20% | 2,796,735 | 1,317,841 | 1,478,894 | 202,821 | 295,779 | - | 40,565 |
| Payshop Moçambique, S.A. (b) | 35% | n.d. | n.d. | n.d. | n.d. | - | - | n.d. |
| Mafelosa, SL (c) (d) | 25% | n.d. | n.d. | n.d. | n.d. | - | - | n.d. |
| Urpacksur (c) (d) | 30% | n.d. | n.d. | n.d. | n.d. | 481 | - | n.d. |
| 296,260 | - | 40,565 |
(a) Data reported as at December 2015
(b) Company held by Payshop Portugal, which is in liquidation process
(c) Companies held by Tourline Express Mensajeria
(d) Companies without activity
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | % held |
Assets | Liabilities | Equity | Net profit |
Investments | Provisions | Proportion of net profit |
| Multicert - Serviços de Certificação Electrónica, S.A. (a) | 20% | 2,767,973 | 1,491,901 | 1,162,488 | 113,584 | 255,214 | - | 28,277 |
| Payshop Moçambique, S.A. (b) | 35% | n.a. | n.a. | n.a. | n.a. | - | 189,775 | n.a. |
| Mafelosa, SL (c) (d) | 25% | n.a. | n.a. | n.a. | n.a. | - | - | n.a. |
| Urpacksur (c) (d) | 30% | n.a. | n.a. | n.a. | n.a. | 481 | - | n.a. |
| 255,695 | 189,775 | 28,277 |
(a) Data reported as at December 2014
(b) Company held by Payshop Portugal, which is in liquidation process
(c) Companies held by Tourline Express Mensajeria
(d) Companies without activity
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | % held |
Assets | Liabilities | Equity | Net profit |
Investments | Provisions | Proportion of net profit |
| Multicert - Serviços de Certificação Electrónica, S.A. (a) | 20% | 2,796,735 | 1,317,841 | 1,478,894 | 202,821 | 295,779 295,779 |
- - |
40,565 40,565 |
| (a) Data reported as at December 2015 | ||||||||
| 2015 | ||||||||
| Company | % held |
Assets | Liabilities | Equity | Net profit |
Investments | Provisions | Proportion of net profit |
| Multicert - Serviços de Certificação Electrónica, S.A. (a) | 20% | 2,767,973 | 1,491,901 | 1,162,488 | 113,584 | 255,214 255,214 |
- - |
28,277 28,277 |
(a) Data reported as at December 2014
The amount of 40,565 Euros, recorded in the year ended 31 December 2016 relates to the portion of 2015 income that had not been recognised in that year regarding Multicert, S.A.. No additional movements occurred in this participation since the company does not have updated financial information.
For the years ended 31 December 2016 and 31 December 2015, the net income in associated companies arising from the application of the equity method, and stated under Gains/losses from subsidiaries, associated companies and joint ventures in the Income statement were recognised against the following items on the balance sheet:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Investiments in associated companies | ||||
| Multicert, S.A. | 295,779 | 255,214 | 295,779 | 255,214 |
| Urpacksur, S.L. | 481 | 481 | - | - |
| 296,260 | 255,695 | 295,779 | 255,214 |
As at 31 December 2016 and 31 December 2015, the detail of the Group and the Company investments in joint ventures were as follows:
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | % held |
Assets | Liabilities | Equity | Net profit |
Investments | Provisions | Proportion of net profit |
| PTP & F, ACE | 51% | 1,230 | 1,230 | - | - | - | - | - |
| Ti-Post Prestação Serviços Informáticos, ACE (a) | - | - | - | - | - | - | - | - |
| NewPost, ACE (b) | 49% | 343,360 | 343,360 | - | - | - | - | - |
| - | - | - |
(a) The joint-venture has been dissolved during the year 2016
(b) Previously named Postal Network - Prestação de Serviços de Gestão de Infra-Estruturas de Comunicações, ACE
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | % held |
Assets | Liabilities | Equity | Net profit |
Investments | Provisions | Proportion of net profit |
| PTP & F, ACE | 51% | n.a. | n.a. | n.a. | n.a. | - | - | n.a. |
| Ti-Post Prestação Serviços Informáticos, ACE | 49% | n.a. | n.a. | n.a. | n.a. | - | - | n.a. |
| NewPost, ACE (a) | 49% | 644,541 | 644,541 | n.a. | n.a. | - | - | n.a. |
| - | - | - |
(a) Previously named Postal Network - Prestação de Serviços de Gestão de Infra-Estruturas de Comunicações, ACE
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | % held |
Assets | Liabilities | Equity | Net profit |
Investments | Provisions | Proportion of net profit |
| Ti-Post Prestação Serviços Informáticos, ACE (a) NewPost, ACE (b) |
- 49% |
- 343,360 |
- 343,360 |
- - |
- - |
- - |
- - |
- - |
| - | - | - |
(a) The joint-venture has been dissolved during the year 2016
(b) Previously named Postal Network - Prestação de Serviços de Gestão de Infra-Estruturas de Comunicações, ACE
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | % held |
Assets | Liabilities | Equity | Net profit |
Investments | Provisions | Proportion of net profit |
| Ti-Post Prestação Serviços Informáticos, ACE | 49% | n.a. | n.a. | n.a. | n.a. | - | - | n.a. |
| NewPost, ACE (a) | 49% | 644,541 | 644,541 | n.a. | n.a. | - | - | n.a. |
| - | - | - |
(a) Previously named Postal Network - Prestação de Serviços de Gestão de Infra-Estruturas de Comunicações, ACE
The other investments include non-listed capital instruments whose fair value cannot be reliably measured. The amounts of these instruments recognised at cost as at 31 December 2016 and 31 December 2015, in the Group and the Company, were as follows:
| Group and Company | ||||||
|---|---|---|---|---|---|---|
| Company | Head office | 2016 | 2015 | |||
| IPC-International Post Corporation | Brussels - Belgium | 6,157 | 6,157 | |||
| Eurogiro Network | Copenhagen - Denmark | 124,435 | 124,435 | |||
| Tagus Park | Lisbon - Portugal | 1,372,743 | 975,982 | |||
| CEPT | Copenhagen - Denmark | 237 | 237 | |||
| 1,503,572 | 1,106,812 |
During the year, no impairment loss was recognised in these investments.
There are no market prices available for the mentioned investments and it is not possible to determine fair value in the period using comparable transactions. These instruments were not measured through discounted cash flows since these could not be reliably determined.
At the reporting date, the Group does not intend to sell any of these investments.
As at 31 December 2016 and 31 December 2015, the Group Investments held to maturity included in current and non-current assets showed the following composition:
| Group | ||
|---|---|---|
| 2016 | 2015 | |
| Non-current | ||
| Debt securities and other fixed-income securities | ||
| Public issuers | 78,863,164 | - |
| Other issuers | 15,122,951 | - |
| 93,986,115 | - | |
| Current | ||
| Debt securities and other fixed-income securities | ||
| Public issuers | 878,115 | - |
| Other issuers | 230,313 | - |
| 1,108,428 | - | |
| 95,094,543 | - |
The analysis of the residual maturity of the investments held to maturity as at 31 December 2016, is detailed as follows:
| 2016 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Current | Non-current | |||||||||
| Due within 3 months | Over 3 months and less than 1 year |
Over 1 year and less than 3 years |
Over 3 years Undetermined |
Total | ||||||
| Debt securities and other fixed-income securities | ||||||||||
| Public issuers | 878,115 | - | 12,256,862 | 66,606,302 | - | 79,741,279 | ||||
| Other issuers | 22,818 | 207,495 | - | 15,122,951 | - | 15,353,264 | ||||
| 900,933 | 207,495 | 12,256,862 | 81,729,253 | - | 95,094,543 |
As at 31 December 2016 and 31 December 2015, the composition of the Group heading Financial assets available for sale is as follows:
| 2016 | 2015 | |
|---|---|---|
| Non-current | ||
| Debt securities and other fixed-income securities | ||
| Public issuers | 540,400 | - |
| Other issuers | 3,933,214 | - |
| 4,473,614 | - | |
| Current | ||
| Debt securities and other fixed-income securities | ||
| Public issuers | 139,180 | - |
| Other issuers | 1,834,531 | - |
| 1,973,711 | - | |
| 6,447,325 | - |
The analysis of the Financial assets available for sale and the corresponding residual maturity is detailed as follows:
| 2016 | |||||
|---|---|---|---|---|---|
| Fair value reserve | |||||
| Cost (1) | Positive | Negative | Impairment losses | Total | |
| Debt securities and other fixed-income securities | |||||
| Public-debt securities | |||||
| National | 679,406 | 174 | - | - | 679,580 |
| Foreign | - | - | - | - | - |
| Other issuers | |||||
| National | - | - | - | - | - |
| Foreign | 5,754,445 | 13,300 | - | - | 5,767,745 |
| 6,433,851 | 13,474 | - | - | 6,447,325 | |
(1) Acquisition cost regarding shares and other equity instruments and amortised cost regarding debt securities.
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Current | Non-current | |||||
| Due within 3 months |
Over 3 months and less than 1 year |
Over 1 year and less than 3 years |
Over 3 years | Undetermined | Total | |
| Debt securities and other fixed-income securities Public-debt securities |
||||||
| National | 14,866 | 124,314 | - | 540,400 | - | 679,580 |
| Foreign | - | - | - | - | - | - |
| Other issuers | ||||||
| National | - | - | - | - | - | - |
| Foreign | 562,258 | 1,272,273 | 3,614,529 | 318,685 | - | 5,767,745 |
| 577,124 | 1,396,587 | 3,614,529 | 859,085 | - | 6,447,325 |
As at 31 December 2016 and 31 December 2015, the Group headings Other banking financial assets and Other banking financial liabilities showed the following composition:
| 2016 | 2015 | |
|---|---|---|
| Current assets | ||
| Investments in credit institutions | 58,718,171 | - |
| Other | 336,132 | - |
| 59,054,303 | - | |
| Current liabilities | ||
| Other | 1,218,205 | - |
| 1,218,205 | - | |
Regarding the caption Investments in credit institutions, the scheduling by maturity is as follows:
| 2016 | 2015 | |
|---|---|---|
| Up to 3 months | 42,111,692 | - |
| From 3 to 6 months | 4,500,135 | - |
| From 6 to 12 months | 12,106,344 | - |
| 58,718,171 | - |
The Group and the Company activities imply exposure to financial risks. Financial risk is defined as the probability of obtaining results that are different from those expected, whether positive or negative, thus changing the net worth of the Group in a material and unexpected way. Risk management focuses on the unpredictability of financial markets and seeks to mitigate the adverse effects arising from this unpredictability on the Group and the Company's financial performance.
Under the non-banking activity, financial risk management integrates the Risk Management System of the Group and the Company reporting directly to the Executive Committee. The departments of Finance and Risk Management and Accounting and Treasury ensure the centralised management of financing operations, investment of surplus liquidity, exchange transactions as well as the counterparty risk management of the Group and the monitoring of the foreign currency exchange rate risk, according to the policies approved by the Executive Committee. Additionally, they are responsible for the identification, assessment, proposal and implementation of mitigating measures of financial risks that the Group and the Company are exposed to. The Group and the Company are developing an integrated risk management system.
Under the banking activity, Banco CTT has an independent risk management system, based on a set of concepts, principles, rules and on an organizational model applicable and adjusted to the specificities and to the regulatory framework of its activity.
Banco CTT's risk management and internal control policy aims to maintain an adequate relationship between its equity and the activity developed, as well as the corresponding risk profile assessment / return by line of business.
In this context, it is relevant to monitor and control the main types of financial risks - credit, market, liquidity and operational – to which the Bank's activity is subject to.
The financial risks of particular importance include credit risk, market risk, interest and exchange rate risk as well as liquidity risk.
Credit risk essentially refers to the risk that a third party fails on its contractual obligations, resulting in financial losses to the Group and the Company. Thus, credit risk basically resides in the accounts receivable from customers and other debtors, related to its operating and treasury activities.
The deterioration of economic conditions or adversities which affect economies may lead to difficulty or incapacity of customers to pay their liabilities, with consequent negative effects on the net income of the Group companies. For this purpose, an effort has been made to reduce the average receivable term and amount of credit granted to clients.
Under the non-banking activity, credit risk management is based on a set of standards and guidelines, part of the Granting of credit to customers Regulation ("Regulamento de Concessão de Crédito a Clientes" (RCCC)) and comprises the processes of credit granting, monitoring and debt recovery.
Considering the guiding principles of the Group and the Company Risk Management, a methodology of credit risk assessment is defined which allows, a priori, and based on the information available at the time, to evaluate the customer's capacity to comply with all its obligations on time and within the conditions established. Based on this evaluation, a credit limit is defined for the customer, whose progress is regularly monitored.
The credit risk in the accounts receivable is monitored on a regular basis by each business of the Group companies and monthly monitored by the Credit Committee with the purpose of limiting the credit granted to customers, considering the respective profile and the ageing of receivable of each customer, ensuring the follow-up of the evolution of credit that has been granted, and analysing the recoverability of the receivables.
Regarding Banco CTT, it was defined and implemented an impairment model based on IAS 39 and the respective reference criteria of the Bank of Portugal defined in Circular Letter no. 2/2014. In addition, the model takes into account definitions and criteria that have been published by EBA and future IFRS 9 standards.
The monitoring of Banco CTT's credit risk profile, in particular with regard to the evolution of credit exposures and the monitoring of losses, is carried out on a regular basis by the Risk Committee. Compliance with approved credit requirements and limits are also subject to review on a regular basis.
The impairment losses for accounts receivable are calculated considering essentially: (i) the ageing of the accounts receivable; (ii) the risk profile of each client; and (iii) the financial situation of the client. The movement of impairment losses of accounts receivable is disclosed in Notes 25 and 46. As at 31 December 2016, the Group and the Company believe that impairment losses in accounts receivable are adequately estimated and recorded in the financial statements.
In addition, within the scope of treasury activities, the credit risk essentially results from the cash deposits investments made both by the Group and the Company. With the purpose of reducing that risk, the Group and the Company policy is to invest in short/medium-term periods negotiated with several financial institutions, all with a relatively high credit rating (considering the rating of the Portuguese Republic).
The Group and the Company credit risk quality, as at 31 December 2016, related to these types of assets (Cash and cash equivalents as stated in Note 23, excluding the cash value) whose counterparties are financial institutions are detailed as follows:
| 2016 | ||
|---|---|---|
| Rating (1) | Group | Company |
| A1 | 4,874 | 4,874 |
| A3 | 43,509 | 0 |
| B (2) | 2,106 | 0 |
| B1 | 119,114,463 | 113,913,008 |
| B1- | 12,739,433 | 12,429,735 |
| B3 | 79,947,082 | 76,643,947 |
| Ba1 | 56,565,353 | 30,241,344 |
| Ba3 | 25,303,595 | 7,065,504 |
| Baa1 | 12,418,210 | 464,426 |
| Baa2 | 127,593,758 | 110,455,595 |
| Baa3 | 35,937,968 | 8,172,264 |
| BB- (3) | 10,001,263 | 10,001,263 |
| BBB+ (4) | 768,763 | 768,763 |
| Caa1 | 73,842,770 | 63,202,377 |
| Outros (5) | 8,721,809 | 285,636 |
| 563,004,956 | 433,648,736 | |
(1) Rating assigned by Moody's.
(2) Conversion of B rating by Fitch.
(3) Conversion of BB- rating by Standard & Poor's.
(4) Conversion of BBB+ rating by Fitch.
(5) Others with no rating.
As at 31 December 2016, the Group and the Company caption Cash and cash equivalents included term deposits of 385,211,431 Euros and 374,203,045 Euros, respectively (508,153,791 Euros and 470,241,000 Euros as at 31 December 2015) (Note 23).
The following table includes the maximum exposure to credit risk associated with financial assets held by the Group. These amounts include only financial assets subject to credit risk and do not reconcile with the consolidated balance sheet:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Non-current | ||||
| Investments held to maturity | 93,986,115 | - | - | - |
| Otherassets | 1,306,148 | 601,103 | 1,110,991 | 586,741 |
| Financial assets available for sale | 4,473,614 | - | - | - |
| Current | ||||
| Accounts receivable | 122,113,270 | 124,355,641 | 94,323,683 | 97,684,021 |
| Credit to bank clients | 7,103,905 | - | - | - |
| Investments held to maturity | 1,108,428 | - | - | - |
| Other assets | 19,660,308 | 12,590,310 | 18,226,686 | 12,056,248 |
| Financial assets available for sale | 1,973,711 | - | - | - |
| Other banking financial assets | 59,054,303 | - | - | - |
| Cash and cash equivalents | 563,004,956 | 576,218,894 | 433,648,736 | 532,167,006 |
| 873,784,759 | 713,765,948 | 547,310,095 | 642,494,016 |
Interest rate risk is essentially related to the interest obtained from the application of surplus liquidity and to the determination, through the impact of the discount rate, of the estimate of employee benefit liabilities. Gains arising from financial operations are important, therefore changes in interest rates have a direct impact on the Group and the Company Interest income.
In order to leverage the period/rate relationship on one hand and the risk/yield relationship on the other hand, the Group and the Company monitor the market trends on a regular and systematic basis. Cash investments follow criteria of financial risk diversification, both at term and institution levels, which are regularly reviewed and updated.
In the Group the investment of surplus liquidity, on 31 December 2016 and 31 December 2015, generated interest income of 671,599 Euros and 1,483,388 Euros, respectively (Note 49). Additionally, interest income is recorded for financial services in the caption Other operating income, in the years of 2016 and 2015, amounting to 334,714 Euros and 516,707 Euros, respectively (Note 42).
In the Company the investment of surplus liquidity, on 31 December 2016 and 31 December 2015, generated interest income of 923,633 Euros and 1,912,543 Euros, respectively (Note 49). Additionally, interest income is recorded for financial services in the caption Other operating income, in the years of 2016 and 2015, amounting to 334,714 Euros and 516,707 Euros, respectively (Note 42).
The Group and the Company generally negotiate their deposits at fixed rates, while loans are negotiated at variable rates. Due to the reduced amount of its loans, the Group and the Company believe that the difference between the financial assets fixed rate and the floating rate of the financial liabilities does not represent a significant potential impact on the income statement.
If the interest rates had a variation of 0.25 b.p., during the year ended 31 December 2016, the effect in the interest would have been 544 thousand Euros in the Group and 708 thousand Euros in the Company (742 thousand Euros and 885 thousand Euros as at 31 December 2015, respectively).
Under the non-banking activity, exchange rate risk is related to the existence of balances in currencies other than the Euro, in particular balances arising from transactions with foreign Postal Operators recorded in Special Drawing Rights (SDR) and the related changes on the fair value of the financial assets and liabilities, as a result of changes in foreign currency exchange rates.
The management of foreign exchange risk relies on the periodic monitoring of the degree of exposure to the exchange rate risk of assets and liabilities, with the reference of previously defined objectives based on the evolution of the international business activities.
As at 31 December 2016 and 31 December 2015, the net exposure (assets minus liabilities) of the Group amounted to 3,351,568 SDR (4,274,389 Euros at the exchange rate €/SDR 1.27534), and 988,959 SDR (1,258,777 Euros at the exchange rate €/SDR 1.27283), respectively.
As far as the Company is concerned, as at 31 December 2016 and 31 December 2015, the net exposure (assets minus liabilities) amounted to 1,902,678 SDR (2,426,561 Euros at the exchange rate €/SDR 1.27534), and 72,075 SDR (91,739 Euros at the exchange rate €/SDR 1.27283), respectively.
In the sensitivity analysis performed for the balances of accounts receivable and payable to foreign Postal Operators, on 31 December 2016 and 31 December 2015, assuming an increase / decrease in the exchange rate € / SDR of 10%, the Group's profit and losses would have been higher by 427,439 Euros and lower by 125,878 Euros, respectively. The impact on the Company's profit and losses would have been higher by 242,656 Euros and lower by 9,174 Euros, respectively
Liquidity risk may occur if the funding sources, such as cash balances, operating cash flows and cash flows from divestment operations, credit lines and cash flows obtained from financial operations, do not match the Group's financial needs, such as cash outflows for operating and financing activities and investments and shareholder remuneration. Based on the cash flow generated by operations and the available cash on hand, the Group and the Company believe that they have the capacity to meet their obligations.
Their main contractual obligations are related to the financing obtained (essentially financial leases) and respective interest, the operating leases and other non-contingent financial commitments.
The following tables detail the expected contractual obligations and financial commitments as at 31 December 2016 and 31 December 2015 for the Group and the Company and do not reconcile with the balance sheet:
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | Due within 1 year | Over 1 year and less Over 5 years than 5 years |
Total | |||||
| Financial liabilities | ||||||||
| Debts | 9,688,092 | 137,072 | - | 9,825,163 | ||||
| Accounts payable | 434,568,171 | - | - | 434,568,171 | ||||
| Banking client deposits and other loans | 253,944,840 | - | - | - | ||||
| Other current liabilities | 24,036,928 | - | - | 24,036,928 | ||||
| Non-financial liabilities | ||||||||
| Operating leases (Note 44) | 10,401,717 | 11,439,870 | - | 21,841,587 | ||||
| Non-contingent financial commitments (1) | 7,375,965 | - | - | 7,375,965 | ||||
| 740,015,712 | 11,576,941 | - | 497,647,814 | |||||
| 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Due within 1 year | Over 1 year and less than 5 years |
Over 5 years | Total | |||
| Financial liabilities | |||||||
| Debts | 7,088,293 | 1,037,265 | - | 8,125,558 | |||
| Accounts payable | 426,809,193 | - | - | 426,809,193 | |||
| Other current liabilities | 30,650,178 | - | - | 30,650,178 | |||
| Non-financial liabilities | |||||||
| Operating leases (Note 44) | 10,434,899 | 16,618,420 | - | 27,053,319 | |||
| Non-contingent financial commitments (1) | 9,906,104 | - | - | 9,906,104 | |||
| 484,888,667 | 17,655,685 | - | 502,544,352 |
(1) The non-contingent financial commitments are essentially related to contracts signed with tangible fixed assets and intangible assets suppliers and a corresponding liability has not been recognised in the balance sheet (Notes 5 and 6).
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Due within 1 year | Over 1 year and less than 5 years |
Over 5 years | Total | ||||
| Financial liabilities | ||||||||
| Debts | 725,593 | - | - | 725,593 | ||||
| Accounts payable | 416,423,188 | - | - | 416,423,188 | ||||
| Other current liabilities | 18,631,427 | - | - | 18,631,427 | ||||
| Non-financial liabilities | ||||||||
| Operating leases (Note 44) | 8,776,335 | 8,239,453 | - | 17,015,788 | ||||
| Non-contingent financial commitments (1) | 251,559 | - | - | 251,559 | ||||
| 444,808,102 | 8,239,453 | - | 453,047,555 | |||||
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Due within 1 year | Over 1 year and less than 5 years |
Over 5 years | Total | ||||
| Financial liabilities | ||||||||
| Debts | 469,999 | 726,294 | - | 1,196,293 | ||||
| Accounts payable | 413,516,024 | - | - | 413,516,024 | ||||
| Shareholders | 1,613,944 | - | - | 1,613,944 | ||||
| Other current liabilities | 26,166,116 | - | - | 26,166,116 | ||||
| Non-financial liabilities | ||||||||
| Operating leases (Note 44) | 8,963,676 | 14,144,316 | - | 23,107,992 | ||||
| Non-contingent financial commitments (1) | 696,588 | - | - | 696,588 | ||||
| 451,426,347 | 14,870,610 | - | 466,296,957 | |||||
(1) The non-contingent financial commitments are essentially related to contracts signed with tangible fixed assets and intangible assets suppliers and a
corresponding liability has not been recognised in the balance sheet (Notes 5 and 6).
The Group and the Company manage their capital to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group and the Company may adjust the amount of dividends paid to shareholders, issue new debt or sell assets to reduce debt.
The balance of capital structure is monitored on the basis of the adjusted solvency ratio, calculated as: Equity / Liabilities.
During the years ended 31 December 2016 and 2015, the Group and the Company maintained their high solvency ratio.
The solvency ratios at 31 December 2016 and 31 December 2015 were as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Equity | 233,326,782 | 251,834,754 | 233,405,918 | 251,659,972 |
| Liabilities | 1,080,977,768 | 867,637,454 | 803,032,619 | 829,177,850 |
| Amounts of third parties | 323,505,539 | 324,650,604 | 323,505,539 | 324,650,604 |
| Adjusted solvency ratio (1) | 30.8% | 46.4% | 48.7% | 49.9% |
(1) Equity / (Liabilities - Amounts of third parties in Cash and cash quivalents)
The Group's solvency ratio, during the year ended 31 December 2016, was significantly impacted by Banco CTT's liabilities, namely by the caption Credit to banking clients, which justifies the reduction observed in this ratio. Therefore, if the effect of Banco CTT had not been considered the
solvency ratio would be 46.3% and 46.5% in the years ended 31 December 2016 and 2015, respectively.
Regarding Banco CTT, the definition of the strategy to be adopted in terms of capital management is the responsibility of the Board of Directors.
Banco CTT has developed and formalised its methodology for the Internal Capital Assessment Adequacy Process (ICAAP), in order to ensure that the risks to which it is exposed are adequately assessed and that the internal capital it has is adequate in view of its risk profile. The methods and procedures adopted are based on the assessment and quantification of internal capital and the risks through quantitative and qualitative methods.
Banco CTT seeks to achieve high financial solidity by maintaining a total own funds ratio - the ratio between own capital and risk-weighted assets - comfortably above 8.625% (which includes capital preservation buffer), corresponding to the legal minimum as set out in Directive no. 2013/36 / EU and EU Regulation no. 575 / 2013, adopted on 26 June 2013 by the European Parliament and the Council.
The referred EU Regulation no. 575 / 2013 comprises a set of transitional provisions allowing the phased application of the requirements, providing the possibility for credit institutions to gradually accommodate the new requirements both at the level of own funds and at the level of minimum capital ratios .
As at 31 December 2016 and 31 December 2015, the Group and the Company Inventories are detailed as follows:
| 2016 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Company | ||||||
| Gross amount | Impairment losses | Net amount | Gross amount | Impairment losses | Net amount | ||
| Merchandise | 4,561,582 | 1,565,187 | 2,996,395 | 4,048,936 | 1,483,947 | 2,564,990 | |
| Raw, subsidiary and consumable materials | 2,944,342 | 579,327 | 2,365,015 | 2,642,023 | 531,560 | 2,110,463 | |
| Advances on purchases | 46,275 | - | 46,275 | 46,275 | - | 46,275 | |
| 7,552,199 | 2,144,514 | 5,407,685 | 6,737,234 | 2,015,507 | 4,721,728 | ||
| 2015 | ||||||
|---|---|---|---|---|---|---|
| Group | Company | |||||
| Gross amount | Impairment losses | Net amount | Gross amount | Impairment losses | Net amount | |
| Merchandise | 4,618,877 | 1,397,098 | 3,221,779 | 4,080,012 | 1,367,422 | 2,712,591 |
| Raw, subsidiary and consumable materials | 2,670,454 | 565,513 | 2,104,940 | 2,340,692 | 509,968 | 1,830,724 |
| Advances on purchases | 128,395 | - | 128,395 | 128,394 | - | 128,394 |
| 7,417,726 | 1,962,611 | 5,455,115 | 6,549,098 | 1,877,390 | 4,671,709 |
During the years ended 31 December 2016 and 31 December 2015, the details of Cost of sales related to the Group and the Company, were as follows:
| Group | Company | ||||
|---|---|---|---|---|---|
| Merchandise | Raw, subsidiary and consumable materials |
Total | Merchandise | Raw, subsidiary and consumable materials |
Total |
| 4,618,877 | 2,670,454 | 7,289,331 | 4,080,012 | 2,340,692 | 6,420,704 |
| 10,736,297 | 3,492,295 | 14,228,592 | 9,970,637 | 1,453,672 | 11,424,309 |
| (52,872) | |||||
| (264,507) | |||||
| 138,117 | |||||
| (6,690,959) | |||||
| 10,836,112 | 3,070,087 | 13,906,199 | 9,971,173 | 1,003,619 | 10,974,792 |
| (33,177) (122,069) 197,765 (4,561,581) |
(19,695) (142,439) 13,814 (2,944,342) |
(52,872) (264,508) 211,579 (7,505,924) |
2016 (33,177) (122,068) 116,525 (4,048,936) |
(19,695) (142,439) 21,592 (2,642,023) |
| 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Company | ||||||
| Merchandise | Raw, subsidiary and consumable |
Total | Merchandise | Raw, subsidiary and consumable |
Total | ||
| Opening balance | 5,240,512 | 2,716,730 | 7,957,242 | 4,678,616 | 2,437,601 | 7,116,217 | |
| Purchases | 13,256,802 | 3,206,079 | 16,462,881 | 12,351,740 | 1,447,096 | 13,798,836 | |
| Offers | (128,047) | (22,249) | (150,296) | (128,047) | (22,249) | (150,296) | |
| Adjustments | (358,796) | (305,354) | (664,150) | (217,275) | (252,182) | (469,457) | |
| Closing balance | (4,618,877) | (2,670,454) | (7,289,331) | (4,080,012) | (2,340,692) | (6,420,704) | |
| Cost of sales | 13,391,594 | 2,924,752 | 16,316,346 | 12,605,022 | 1,269,574 | 13,874,596 |
During the years ended 31 December 2016 and 31 December 2015, the movements in the Group Accumulated impairment losses (Note 25) were as follows:
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Group | Opening balance | Increases | Reversals | Utilisations | Closing balance | |
| Merchandise | 1,397,098 | 198,203 | (438) | (29,676) | 1,565,187 | |
| Raw, subsidiary and consumable materials | 565,513 | 21,592 | (7,778) | - | 579,327 | |
| 1,962,611 | 219,795 | (8,216) | (29,676) | 2,144,514 | ||
| 2015 | ||||||
| Group | Opening balance | Increases | Reversals | Utilisations | Closing balance | |
| Merchandise | 1,527,827 | 36,874 | (129,402) | (38,201) | 1,397,098 | |
| Raw, subsidiary and consumable materials | 676,836 | 35,091 | (146,414) | - | 565,513 | |
| 2,204,663 | 71,965 | (275,816) | (38,201) | 1,962,611 |
For the years ended 31 December 2016 and 31 December 2015, impairment losses of inventories were recorded in the Group net of reversals amounting to 211,579 Euros and (203,851) Euros, respectively, in the caption Cost of sales.
In relation to the Company, during the years ended 31 December 2016 and 31 December 2015, the movements in Accumulated impairment losses (Note 25) were as follows:
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Company | Opening balance | Increases | Reversals | Utilisations | Closing balance | |
| Merchandise | 1,367,422 | 116,525 | - | - | 1,483,947 | |
| Raw, subsidiary and consumable materials | 509,968 | 21,592 | - | - | 531,560 | |
| 1,877,390 | 138,117 | - | - | 2,015,507 | ||
| 2015 | ||||||
| Company | Opening balance | Increases | Reversals | Utilisations | Closing balance | |
| Merchandise | 1,489,626 | - | (122,204) | - | 1,367,422 | |
| Raw, subsidiary and consumable materials | 656,380 | - | (146,412) | - | 509,968 | |
| 2,146,006 | - | (268,616) | - | 1,877,390 |
For the years ended 31 December 2016 and 31 December 2015, impairment losses of inventories were recorded in the Company net of reversals amounting to 138,117 Euros and (268,616) Euros, respectively, in the caption Cost of sales.
As at 31 December 2016 and 31 December 2015 the Group and the Company heading Accounts receivable showed the following composition:
| Group | Company | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Third parties | 78,612,864 | 87,340,805 | 48,007,420 | 53,561,385 | |
| Postal operators | 43,391,679 | 36,877,789 | 40,070,049 | 33,848,638 | |
| Group companies (1) | 108,726 | 137,047 | 6,246,214 | 10,273,998 | |
| 122,113,270 | 124,355,641 | 94,323,683 | 97,684,021 |
(1) Includes subsidiary, associated and joint-ventures companies.
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Group | Company | |||||
| Gross amount | Accumulated impairment losses |
Net amount | Gross amount | Accumulated impairment losses |
Net amount | |
| Accounts receivable | ||||||
| Non-overdue | 62,406,680 | 111,575 | 62,295,105 | 45,285,440 | 111,575 | 45,173,865 |
| Overdue (1) : |
||||||
| 0-30 days | 11,116,694 | 90,023 | 11,026,671 | 7,144,634 | 90,023 | 7,054,611 |
| 30-90 days | 10,764,588 | 193,049 | 10,571,539 | 6,883,729 | 192,643 | 6,691,086 |
| 90-180 days | 2,268,369 | 476,384 | 1,791,984 | 985,243 | 468,907 | 516,335 |
| 180-360 days | 17,090,040 | 693,249 | 16,396,791 | 16,822,857 | 495,752 | 16,327,105 |
| > 360 days | 48,776,423 | 28,745,244 | 20,031,180 | 21,618,284 | 3,057,603 | 18,560,681 |
| 152,422,794 | 30,309,524 | 122,113,270 | 98,740,186 | 4,416,504 | 94,323,683 |
| 2015 | ||||||
|---|---|---|---|---|---|---|
| Group | Company | |||||
| Gross amount | Accumulated impairment losses |
Net amount | Gross amount | Accumulated impairment losses |
Net amount | |
| Accounts receivable | ||||||
| Non-overdue | 68,617,967 | - | 68,617,967 | 50,277,547 | - | 50,277,547 |
| Overdue (1): | ||||||
| 0-30 days | 10,721,851 | - | 10,721,851 | 8,348,386 | - | 8,348,386 |
| 30-90 days | 11,622,753 | - | 11,622,753 | 8,180,683 | - | 8,180,683 |
| 90-180 days | 5,308,371 | - | 5,308,371 | 3,754,749 | - | 3,754,749 |
| 180-360 days | 11,320,671 | 875,685 | 10,444,986 | 10,114,980 | 24,923 | 10,090,057 |
| > 360 days | 48,501,197 | 30,861,483 | 17,639,714 | 21,629,663 | 4,597,065 | 17,032,598 |
| 156,092,809 | 31,737,168 | 124,355,641 | 102,306,008 | 4,621,987 | 97,684,021 |
(1) The amounts regarding the foreign operators, although being overdue over 360 days, are within the normal period for the presentation and regularisation of the accounts.
The net amount of the accounts receivable balances overdue over 360 days is broken down as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Other accounts receivable | 412,718 | 396,387 | 443,695 | 1,227,234 |
| Foreign operators | 18,350,981 | 17,243,327 | 16,849,505 | 15,805,365 |
| Total | 18,763,699 | 17,639,714 | 17,293,200 | 17,032,599 |
| Foreign operators ‐ payable (Note 34) |
(22,974,682) | (16,456,906) | (22,469,414) | (16,026,493) |
The caption Foreign Operators relates to receivables associated with the distribution of postal items in Portugal with origin in other countries.
These operations fall within the scope of the regulations of the Universal Postal Union (UPU) that establishes the closing of the accounts on an annual basis which therefore is only made after the year end and originates the significant overdue balance with more than 360 days with these
customers. It should also be mentioned that the referred regulation establishes a period of up to 22 months for the presentation of the accounts and, therefore, the foreign operators balances reflect the expected trend of this specific business.
Regarding UPU regulations, the accounts between Foreign Operators are cleared by netting accounts. The credit risk is mitigated by the accounts payable balances related to these entities and by the advance payments on the net receivables of the year (Note 34).
The balance of national customers includes receivables of public entities and other clients that are also suppliers which will be netted with accounts payable balances and customers with debt payment plans.
For the national customers, the bank guarantees and advance deposits coverage over the customers receivables increased from 0.8% at the end of 2015 to 2.3% on 31 December 2016, in the Group and from 1.0% on 31 December 2015 to 2.9% at the end of 2016 in the Company.
| Group | Company | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Advance deposits Bank guarantees |
1,483,105 314,478 |
647,495 43,663 |
1,466,813 81,253 |
647,495 43,663 |
|
| Total | 1,797,583 | 691,159 | 1,548,066 | 691,159 |
During the years ended 31 December 2016 and 31 December 2015, the movement in the Group Accumulated impairment losses caption (Note 25) was as follows:
| 2016 | |||||
|---|---|---|---|---|---|
| Group | Opening balance | Increases | Reversals | Utilisations | Closing balance |
| Accounts receivable | 31,737,169 | 2,875,921 | (2,267,005) | (2,036,561) | 30,309,524 |
| 31,737,169 | 2,875,921 | (2,267,005) | (2,036,561) | 30,309,524 | |
| 2015 | |||||
| Group | Opening balance | Increases | Reversals | Utilisations | Closing balance |
| Accounts receivable | 30,498,785 | 4,625,870 | (2,025,960) | (1,361,526) | 31,737,169 |
| 30,498,785 | 4,625,870 | (2,025,960) | (1,361,526) | 31,737,169 |
For the years ended 31 December 2016 and 31 December 2015, impairment losses of accounts receivable were recorded in the Group (net of reversals) amounting to 608,918 Euros and 2,599,910 Euros, respectively, in the caption Impairment of accounts receivable, net (Note 46).
During the years ended 31 December 2016 and 31 December 2015, the movement in Accumulated impairment losses caption (Note 25) of the Company was as follows:
| 2016 | |||||
|---|---|---|---|---|---|
| Company | Opening balance | Increases | Reversals | Utilisations | Closing balance |
| Accounts receivable | 4,621,988 | 352,246 | (310,637) | (247,093) | 4,416,504 |
| 4,621,988 | 352,246 | (310,637) | (247,093) | 4,416,504 |
| 2015 | |||||
|---|---|---|---|---|---|
| Company | Opening balance | Increases | Reversals | Utilisations | Closing balance |
| Accounts receivable | 5,000,427 | 164,956 | (300,472) | (242,923) | 4,621,988 |
| 5,000,427 | 164,956 | (300,472) | (242,923) | 4,621,988 |
For the years ended 31 December 2016 and 31 December 2015, impairment losses of accounts receivable were recorded in the Company (net of reversals) amounting to 41,609 Euros and (135,516) Euros, respectively, in the caption Impairment of accounts receivable, net (Note 46).
As at 31 December 2016 and 31 December 2015, the Group caption Credit to banking clients was detailed as follows:
| Group | |||
|---|---|---|---|
| 2016 | 2015 | ||
| Domestic credit | 7,104,322 | - | |
| Overdrafts | 69,498 | - | |
| Factoring | 7,034,824 | - | |
| Credit risk impairment | (417) | ||
| 7,103,905 | - |
During the year ended 31 December 2016, the movement in the Group Accumulated impairment losses caption (Note 25) was as follows:
| 2016 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Opening balance |
Increases | Reversals | Utilisations | Closing balance |
||
| Credit to banking clients | - | 417 | - | - | 417 | ||
| - | 417 | - | - | 417 |
For the year ended 31 December 2016, impairment losses of Credit to banking clients were recorded in the Group (net of reversals) amounting to 417 Euros, respectively in the caption Impairment of accounts receivable, net (Note 46).
As at 31 December 2016 and 31 December 2015, the Deferrals included in current assets and current and non-current liabilities of the Group and the Company showed the following composition:
| Group | Company | ||||
|---|---|---|---|---|---|
| Restated | |||||
| 2016 | 2015 | 2016 | 2015 * | ||
| Assets deferrals | |||||
| Current | |||||
| Rents payable | 1,293,963 | 1,293,761 | 1,101,070 | 1,025,319 | |
| Meal allowances | 1,668,745 | 1,701,736 | 1,668,745 | 1,701,736 | |
| Company Agreement - Supplementary agreement compensation |
- | 1,457,575 | - | 1,457,575 | |
| Other | 3,166,223 | 3,715,517 | 2,168,180 | 2,817,640 | |
| 6,128,931 | 8,168,589 | 4,937,995 | 7,002,270 | ||
| Liabilities deferrals | |||||
| Non-current | |||||
| Deferred capital gains | - | 3,677,282 | - | 3,677,282 | |
| Deferred commissions | - | 1,000,000 | - | 1,000,000 | |
| Investment subsidy | 334,191 | 339,294 | 328,093 | 339,294 | |
| 334,191 | 5,016,576 | 328,093 | 5,016,576 | ||
| Current | |||||
| Deferred capital gains | 2,143,378 | 2,399,029 | 2,143,378 | 2,399,029 | |
| Phone-ix top ups | 158,698 | 206,329 | 158,698 | 206,329 | |
| Deferred comissions | 799,062 | 400,000 | 799,062 | 400,000 | |
| Investment subsidy | 17,299 | 11,201 | 11,201 | 11,201 | |
| Altice agreement | - | 9,583,333 | - | 6,388,889 | |
| Other | 1,059,172 | 1,145,538 | 1,057,509 | 1,144,779 | |
| 4,177,609 | 13,745,430 | 4,169,848 | 10,550,227 | ||
| 4,511,800 | 18,762,007 | 4,497,941 | 15,566,803 |
* Restated values: see note 3
In prior years, the Company sold certain properties, which were subsequently leased. The gains on these sales were deferred and are being recognised over the period of the lease contracts.
During the years ended 31 December 2016 and 31 December 2015, the amounts of 3,394,833 Euros and 1,511,128 Euros, respectively, were recognised under Other operating income in the income statement, in each year, related to the above-mentioned gains.
The amount recognised in the year ended 31 December 2016 includes 1,725,642 Euros regarding Conde Redondo building as a result of the lease contract termination.
In 2014 CTT signed an agreement with Cetelem, according to which CTT received an amount of 3 million Euros on the signing date. An amount of 1 million Euros, related to an entry fee was recognised at the beginning of the contract and the remaining 2 million Euros, for the nonrefundable fees will be recognised over the period of the contract. As at 31 December 2016 an amount of 799,062 Euros related to this contract was deferred.
Following the Memorandum of understanding signed with Altice and the acquisition of PT Portugal being completed by Altice, CTT received from Altice the agreed initial payment, which is being recognised in the income statement over the exclusive period for the negotiation of the partnerships. In the year ended 31 December 2016, the amounts of 9,583,333 Euros and 6,388,889 Euros, were recognised under Other operating income of the Group and the Company, respectively, related to this contract.
As at 31 December 2016, the amount of 8,756,999 Euros accounted in the caption Non-current assets held for sale relates to real estate located in Rua de S. José, subject to a promissory sharepurchase agreement in December 2016 which states the operation's completion within 12 months and were, according to IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations, reclassified to this caption.
As described in the referred standard, the associated depreciations of the real estate have ceased.
As at 31 December 2016 and 31 December 2015, there were no operations classified as discontinued operations.
As at 31 December 2016 and 31 December 2015, Cash and cash equivalents correspond to the value 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:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Cash | 55,806,142 | 27,430,823 | 41,419,386 | 27,375,713 |
| Slight deposits | 67,627,214 | 67,920,196 | 59,445,691 | 61,926,006 |
| Deposits in other credit institutions | 106,373,978 | - | - | - |
| Slight deposits in Banco of Portugal | 3,792,334 | 15,847 | - | - |
| Financial assets avaiable for sale | - | 129,060 | - | - |
| Term deposits | 385,211,431 | 508,153,791 | 374,203,045 | 470,241,000 |
| Cash and cash equivalents (Balance sheet) | 618,811,099 | 603,649,717 | 475,068,122 | 559,542,719 |
| Bank overdrafts | - | - | - | - |
| Sight deposits at Bank of Portugal | (3,792,334) | - | - | - |
| Outstanding checks / Checks clearing | (1,173,518) | - | - | - |
| Cash and cash equivalents (Cash flow statement) | 613,845,248 | 603,649,717 | 475,068,122 | 559,542,719 |
As at 31 December 2016 and 31 December 2015, the headings Other non-current assets and Other current assets of the Group and the Company had the following composition:
| Group | Company | ||||
|---|---|---|---|---|---|
| Restated | |||||
| 2016 | 2015 | 2016 | 2015* | ||
| Non-current | |||||
| Advances to staff | 420,140 | 466,086 | 420,140 | 466,086 | |
| Other receivables from staff | 2,136,596 | 1,558,326 | 2,136,596 | 1,558,326 | |
| INESC loan | - | 347,021 | - | 347,021 | |
| Labour compensation fund | 157,157 | 49,527 | 107,674 | 35,165 | |
| Other non-current assets | 340,541 | 191,853 | - | - | |
| Impairment | (1,748,286) | (2,011,710) | (1,553,419) | (1,819,857) | |
| 1,306,148 | 601,103 | 1,110,991 | 586,741 | ||
| Current | |||||
| Advances to suppliers | 426,429 | 31,205 | 413,045 | 17,859 | |
| Advances to staff | 4,000,289 | 2,736,705 | 4,004,036 | 2,735,621 | |
| INESC loan | - | 49,740 | - | 49,740 | |
| Postal financial services | 8,611,516 | 6,372,504 | 8,611,516 | 6,372,504 | |
| State and other public entities | 308,834 | 2,523,671 | 124 | 2,502,186 | |
| Debtors by accrued revenues | 8,143,083 | 4,784,068 | 7,232,076 | 4,251,090 | |
| Amounts collected on CTT behalf | 1,258,411 | 1,211,810 | 1,381,321 | 1,458,432 | |
| Guaranteed | 223,370 | 232,289 | - | - | |
| CGA reimbursements | - | 11,598 | - | 11,598 | |
| Advances to lawyers | 150,041 | 143,603 | - | - | |
| Debtors by asset disposals | 111,294 | 124,734 | 111,294 | 124,734 | |
| Philatelic agents | - | 45,486 | - | 45,486 | |
| Payshop agents | 447,961 | 456,001 | - | - | |
| Mobility allowances for Autonomous Regions | 3,559,130 | 2,824,438 | 3,559,130 | 2,824,438 | |
| Office for media | 1,602,406 | 494,216 | 1,602,406 | 494,216 | |
| Compensations | 84,588 | 100,588 | - | - | |
| Sundry debtors | 227,969 | 169,646 | 227,969 | 169,646 | |
| Other current assets | 9,051,927 | 9,104,698 | 7,418,691 | 7,904,327 | |
| Impairment | (8,173,677) | (8,480,056) | (6,776,775) | (7,099,641) | |
| 30,033,571 | 22,936,943 | 27,784,833 | 21,862,237 |
* Restated values: see note 3
The amounts recorded in the caption Postal financial services refer to receivables from the redemption of saving products and the sale of insurance.
As at 31 December 2016 and 31 December 2015, the debtors by accrued revenues refer to accrued interest, amounts not invoiced namely regarding postal financial services, philatelic products, philatelic agents and other amounts.
For the years ended 31 December 2016 and 31 December 2015, the movement in the Group Accumulated impairment losses (Note 25) was as follows:
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance | ||
| Other current and non-current assets INESC loan |
10,095,004 396,761 |
524,261 - |
(691,210) (396,761) |
(6,092) - |
- - |
9,921,963 - |
||
| 10,491,765 | 524,261 | (1,087,971) | (6,092) | - | 9,921,963 | |||
| 2015 | ||||||||
| Group | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance | ||
| Other current and non-current assets | 10,882,923 | 539,816 | (1,500,571) | (9,530) | 182,366 | 10,095,004 | ||
| INESC loan | 421,631 | - | (24,870) | - | - | 396,761 | ||
| 11,304,554 | 539,816 | (1,525,441) | (9,530) | 182,366 | 10,491,765 |
For the years ended 31 December 2016 and 31 December 2015, impairment losses (increases net of reversals) of Other current and non-current assets amounted to (563,710) Euros and (985,625) Euros, respectively, were booked under the heading Impairment of accounts receivable, net (Note 46).
Regarding the Company, during the years ended 31 December 2016 and 31 December 2015, the movement in the Accumulated impairment losses caption (Note 25) was as follows:
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance | ||
| Other current and non-current assets INESC loan |
8,522,736 396,761 |
459,471 - |
(652,013) (396,761) |
- - |
- - |
8,330,194 - |
||
| 8,919,497 | 459,471 | (1,048,774) | - | - | 8,330,194 | |||
| 2015 | ||||||||
| Company | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance | ||
| Other current and non-current assets | 8,610,979 | 379,305 | (467,548) | - | - | 8,522,736 | ||
| INESC loan | 421,631 | - | (24,870) | - | - | 396,761 | ||
| 9,032,610 | 379,305 | (492,418) | - | - | 8,919,497 | |||
For the years ended 31 December 2016 and 31 December 2015, impairment losses of Other current and non-current assets were recorded in the Company (net of reversals) amounting to (589,303) Euros and (113,113) Euros, respectively in the caption Impairment of accounts receivable, net (Note 46).
During the years ended 31 December 2016 and 31 December 2015, the following movements occurred in the Group's impairment losses:
| 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Group | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance | |||
| Non-current assets | |||||||||
| Tangible fixed assets | 296,769 | - | (123,714) | - | - | 173,055 | |||
| Investment properties | 1,282,622 | 12,491 | (3,615) | - | - | 1,291,498 | |||
| 1,579,391 | 12,491 | (127,329) | - | - | 1,464,553 | ||||
| Other non-current assets | 1,472,836 | 83,597 | - | - | 191,853 | 1,748,286 | |||
| INESC loan | 347,021 | - | (347,021) | - | - | - | |||
| TA105019 - Imparidade | 1,819,857 | 83,597 | (347,021) | - | 191,853 | 1,748,286 | |||
| 3,399,248 | 96,088 | (474,350) | - | 191,853 | 3,212,839 | ||||
| Current assets | |||||||||
| Accounts receivable | 31,737,169 | 2,875,921 | (2,267,005) | (2,036,561) | - | 30,309,524 | |||
| Credit to bank clients | - | 417 | - | - | - | 417 | |||
| Other current assets | 8,622,168 | 440,664 | (691,210) | (6,092) | (191,853) | 8,173,677 | |||
| INESC loan | 49,740 | - | (49,740) | - | - | - | |||
| 40,409,077 | 3,317,002 | (3,007,955) | (2,042,653) | (191,853) | 38,483,618 | ||||
| Merchandise | 1,397,098 | 198,203 | (438) | (29,676) | - | 1,565,187 | |||
| Raw, subsidiary and consumable | 565,513 | 21,592 | (7,778) | - | - | 579,327 | |||
| 1,962,611 | 219,795 | (8,216) | (29,676) | - | 2,144,514 | ||||
| 42,371,688 | 3,536,797 | (3,016,171) | (2,072,329) | (191,853) | 40,628,132 | ||||
| 45,770,936 | 3,632,885 | (3,490,521) | (2,072,329) | - | 43,840,971 |
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance | ||
| Non-current assets | ||||||||
| Tangible fixed assets | 420,483 | - | (123,714) | - | - | 296,769 | ||
| Investment properties | 1,450,025 | 246,789 | (414,192) | - | - | 1,282,622 | ||
| 1,870,508 | 246,789 | (537,906) | - | - | 1,579,391 | |||
| Other non-current assets | 1,421,001 | 51,835 | - | - | - | 1,472,836 | ||
| INESC loan | 371,891 | - | (24,870) | - | - | 347,021 | ||
| TA105019 - Imparidade | 1,792,892 | 51,835 | (24,870) | - | - | 1,819,857 | ||
| 3,663,400 | 298,624 | (562,776) | - | - | 3,399,248 | |||
| Current assets | ||||||||
| Accounts receivable | 30,498,785 | 4,625,870 | (2,025,960) | (1,361,526) | - | 31,737,169 | ||
| Other current assets | 9,461,922 | 487,981 | (1,500,571) | (9,530) | 182,366 | 8,622,168 | ||
| INESC loan | 49,740 | - | - | - | - | 49,740 | ||
| 40,010,447 | 5,113,851 | (3,526,531) | (1,371,056) | 182,366 | 40,409,077 | |||
| Merchandise | 1,527,827 | 36,874 | (129,402) | (38,201) | - | 1,397,098 | ||
| Raw, subsidiary and consumable | 676,836 | 35,091 | (146,414) | - | - | 565,513 | ||
| 2,204,663 | 71,965 | (275,816) | (38,201) | - | 1,962,611 | |||
| 42,215,110 | 5,185,816 | (3,802,347) | (1,409,257) | 182,366 | 42,371,688 | |||
| 45,878,510 | 5,484,440 | (4,365,123) | (1,409,257) | 182,366 | 45,770,936 |
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance | ||
| Non-current assets | ||||||||
| Tangible fixed assets | 296,769 | - | (123,714) | - | - | 173,055 | ||
| Investment properties | 1,282,622 | 119,559 | (110,683) | - | - | 1,291,498 | ||
| 1,579,391 | 119,559 | (234,397) | - | - | 1,464,553 | |||
| Other non-current assets | 1,472,836 | 80,582 | - | - | - | 1,553,418 | ||
| INESC loan | 347,021 | - | (347,021) | - | - | - | ||
| TA105019 - Imparidade | 1,819,857 | 80,582 | (347,021) | - | - | 1,553,418 | ||
| 3,399,248 | 200,141 | (581,418) | - | - | 3,017,971 | |||
| Current assets | ||||||||
| Accounts receivable | 4,621,988 | 352,246 | (310,637) | (247,093) | - | 4,416,504 | ||
| Other current assets | 7,049,900 | 378,889 | (652,013) | - | - | 6,776,776 | ||
| INESC loan | 49,740 | - | (49,740) | - | - | - | ||
| 11,721,628 | 731,135 | (1,012,390) | (247,093) | - | 11,193,280 | |||
| Merchandise | 1,367,422 | 116,525 | - | - | - | 1,483,947 | ||
| Raw, subsidiary and consumable | 509,968 | 21,592 | - | - | - | 531,560 | ||
| 1,877,390 | 138,117 | - | - | - | 2,015,507 | |||
| 13,599,018 | 869,252 | (1,012,390) | (247,093) | - | 13,208,787 | |||
| 16,998,266 | 1,069,393 | (1,593,808) | (247,093) | - | 16,226,758 | |||
| Company | Opening balance | Increases | 2015 Reversals |
Utilisations | Transfers | Closing balance | ||
| Non-current assets | ||||||||
| Tangible fixed assets | 420,483 | - | (123,714) | - | - | 296,769 | ||
| Investment properties | 1,450,025 | 246,789 | (414,192) | - | - | 1,282,622 | ||
| 1,870,508 | 246,789 | (537,906) | - | - | 1,579,391 | |||
| Other non-current assets | 1,421,001 | 51,835 | - | - | - | 1,472,836 | ||
| INESC loan | 371,891 | - | (24,870) | - | - | 347,021 | ||
| TA105019 - Imparidade | 1,792,892 | 51,835 | (24,870) | - | - | 1,819,857 | ||
| 3,663,400 | 298,624 | (562,776) | - | - | 3,399,248 | |||
| Current assets | ||||||||
| Accounts receivable | 5,000,427 | 164,956 | (300,472) | (242,923) | - | 4,621,988 | ||
| Other current assets | 7,189,978 | 327,470 | (467,548) | - | - | 7,049,900 | ||
| INESC loan | 49,740 | - | - | - | - | 49,740 | ||
| 12,240,145 | 492,426 | (768,020) | (242,923) | - | 11,721,628 | |||
| Merchandise | 1,489,626 | - | (122,204) | - | - | 1,367,422 | ||
| Raw, subsidiary and consumable | 656,380 | - | (146,412) | - | - | 509,968 | ||
| 2,146,006 | - | (268,616) | - | - | 1,877,390 | |||
| 14,386,151 | 492,426 | (1,036,636) | (242,923) | - | 13,599,018 |
As at 31 December 2016, the Company share capital was composed of 150,000,000 shares with the nominal value of 0.50 Euros each. The share capital is fully underwritten and paid-up.
18,049,551 791,050 (1,599,412) (242,923) - 16,998,266
As at 31 December 2016 and 31 December 2015 the Company's shareholders with greater than or equal to 2% shareholdings were as follows:
| 2016 | ||||
|---|---|---|---|---|
| Shareholder | No. of shares | % | Nominal value | |
| Gestmin SGPS, S.A. (1) | 14,576,115 | 9.717% | 7,288,058 | |
| Manuel Carlos de Melo Champalimaud | 284,885 | 0 .190% | 142,443 | |
| Manuel Carlos de Melo Champalimaud | Total | 14,861,000 | 9.907% | 7,430,500 |
| Standard Life Investments Limited (2) | 9,910,580 | 6.607% | 4,955,290 | |
| Ignis Investment Services Limited (2) | 97,073 | 0.065% | 48,537 | |
| Standard Life Investments (Holdings) Limited | Total | 10,007,653 | 6.672% | 5,003,827 |
| Allianz Global Investors GmbH(3) | Total | 7,552,637 | 5.035% | 3,776,319 |
| BNP Paribas Investment Partners Belgium S.A. (4) | 0.833% | |||
| BNP Paribas Investment Partners Luxembourg S.A. (4) | 2.972% | |||
| BNP Paribas Asset Management SAS (4) | 1.197% | |||
| BNP Paribas Investment Partners S.A. | Total | 7,502,430 | 5.002% | 3,751,215 |
| Norges Bank | Total | 7,422,099 | 4.948% | 3,711,050 |
| BlackRock, Inc. (5) | Total | 4,961,965 | 3.308% | 2,480,983 |
| F&C Asset Management plc (6) | 3,124,801 | 2.083% | 1,562,401 | |
| Banco de Montreal (6) | Total | 3,124,801 | 2.083% | 1,562,401 |
| Kames Capital PLC (7) | Total | 3,022,170 | 2.015% | 1,511,085 |
| Wilmington Capital, S.L. (8) | 3,020 ,368 | 2.014% | 1,510,184 | |
| Indumenta Pueri, S.L. (8) | Total | 3,020,368 | 2.014% | 1,510,184 |
| CTT, S.A. (own shares) (9) | Total | 600,531 | 0.400% | 300,266 |
| Other shareholders | Total | 87,924,346 | 58.616% | 43,962,173 |
| Total | 150,000,000 | 100.000% | 75,000,000 |
(1) Shareholding directly and indirectly attributable to Manuel Carlos de Melo Champalimaud.
(2) Company held by Standard Life Investments (Holdings) Limited.
(3) Previously, Allianz Global Investors Europe GmbH.
(4) Companies controlled by BNP Paribas Investment Partners S.A..
(5) The full chain of BlackRock, Inc. controlled undertakings through which the voting rights and/or financial instruments are effectively held may be consulted at the attachments of the qualifying holding press releases, available at: http://www.ctt.pt/ctt-e-investidores/relacoes-cominvestidores/comunicados.html?com.dotmarketing.htmlpage.language=1#panel2-1
(6) This qualified shareholding is imputable to F&C Asset Management plc, as the entity with whom each of F&C Management Limited, F&C Investment Business Limited and F&C Managers Limited are in a dominion relationship. F&C Asset Management plc is under the dominion of BMO Global Asset Management (Europe) Limited which in turn is under the dominion of the Bank of Montreal.
(7) Kames Capital PLC is acting as investment manager for Scottish Equitable PLC, Royal County of Berkshire Pension Fund, Kames Capital Investment Company (Ireland) PLC and Kames Capital ICVC and is the nominated holder of the voting rights and custodian of the shares to which voting rights are attached.
(8) Wilmington Capital, S.L. is controlled by Indumenta Pueri, S.L..
(9) The voting rights inherent to own shares held by the Company are suspended pursuant to article 324 of the Portuguese Companies Code.
| 2015 | ||||
|---|---|---|---|---|
| Shareholder | No. of shares | % | Nominal value | |
| Standard Life Investments Limited (1) | 9,910,580 | 6.607% | 4,955,290 | |
| Ignis Investment Services Limited (1) | 97,073 | 0.065% | 48,537 | |
| Standard Life Investments (Holdings) Limited | Total | 10,007,653 | 6.672% | 5,003,827 |
| Manuel Carlos de Melo Champalimaud | 33,785 | 0.023% | 16,893 | |
| Gestmin SGPS, S.A. (2) | 7,766,215 | 5.177% | 3,883,108 | |
| Manuel Carlos de Melo Champalimaud | Total | 7,800,000 | 5.200% | 3,900,000 |
| Artemis Fund Managers Limited (3) | 7,433,817 | 4.956% | 3,716,909 | |
| Artemis Investment Management LLP | 276,892 | 0.185% | 138,446 | |
| Artemis Investment Management LLP | Total | 7,710,709 | 5.140% | 3,855,355 |
| Allianz Global Investors Europe GmbH (AGIE)(4) | Total | 7,552,637 | 5.035% | 3,776,319 |
| A.A.-FORTIS-ACTIONS PETITE CAP. EUROPE (5) | 226,096 | 0.151% | 113,048 | |
| BNP PARIBAS A FUND European Multi-Asset Income (5) | 241,969 | 0.161% | 120,985 | |
| BNP PARIBAS B PENSION BALANCED (5) | 675,151 | 0.450% | 337,576 | |
| BNP PARIBAS B PENSION GROWTH (5) | 89,950 | 0.060% | 44,975 | |
| BNP PARIBAS B PENSION STABILITY (5) | 42,617 | 0.028% | 21,309 | |
| BNP PARIBAS L1 MULTI-ASSET INCOME (5) | 287,384 | 0.192% | 143,692 | |
| BNP PARIBAS SMALLCAP EUROLAND (5) | 1,569,016 | 1.046% | 784,508 | |
| Merck BNP Paribas European Small Cap (5) | 97,607 | 0.065% | 48,804 | |
| METROPOLITAN-RENTASTRO GROWTH (5) | 159,111 | 0.106% | 79,556 | |
| PARVEST EQUITY EUROPE SMALL CAP (5) | 3,863,880 | 2.576% | 1,931,940 | |
| PARWORLD TRACK EUROPE SMALL CAP (5) | 5,004 | 0.003% | 2,502 | |
| Stichting Bewaar ANWB – Eur Small Cap (5) | 149,732 | 0.100% | 74,866 | |
| Stichting Pensioenfonds Openbare Bibliotheken (5) | 130,657 | 0.087% | 65,329 | |
| BNP Paribas Investment Partners, Limited Company (5) | Total | 7,538,174 | 5.025% | 3,769,087 |
| Kames Capital plc (6) | 2,045,003 | 1.363% | 1,022,502 | |
| Kames Capital Management Limited (6) | 3,096,134 | 2.064% | 1,548,067 | |
| Aegon NV (6) | Total | 5,141,137 | 3.427% | 2,570,569 |
| Norges Bank | Total | 3,143,496 | 2.096% | 1,571,748 |
| F&C Asset Management plc (7) | 3,124,801 | 2.083% | 1,562,401 | |
| Bank of Montreal (7) | 3,124,801 | 2.083% | 1,562,401 | |
| Henderson Global Investors Limited (8) | 3,037,609 | 2.025% | 1,518,805 | |
| Henderson Group plc (8) | 3,037,609 | 2.025% | 1,518,805 | |
| CTT, S.A. (own shares) (9) | Total | 200,177 | 0.133% | 100,089 |
| Other shareholders | Total | 94,743,607 | 63.162% | 47,371,804 |
| Total | 150,000,000 | 100.000% | 75,000,000 |
(1) Company held by Standard Life Investments (Holdings) Limited.
(2) Shareholding directly and indirectly attributable to Mr. Manuel Carlos de Melo Champalimaud.
(3) Company held by Artemis Investment Management LLP.
(4) Previously named Allianz Global Investors Europe GmbH.
(6) As of 1 January 2015, as a result of a group corporate restructuring the client portfolios managed by Kames Capital Management Limited (a subsidiary of Kames Capital plc) have been transferred and are currently managed by Kames Capital plc. This qualified shareholding is attributable to the following chain of entities: (i) Kames Capital Holdings Limited, which holds 100% of Kames Capital plc; (ii) Aegon Asset Management Holding BV, which holds 100% of Kames Capital Holdings Limited; and (iii) Aegon NV, which holds 100% of Aegon Asset Management Holding BV.
(7) This qualified shareholding is imputable to F&C Asset Management plc, as the entity with whom each of F&C Management Limited, F&C Investment Business Limited and F&C Managers Limited are in a dominion relationship. F&C Asset Management plc is under the dominion of BMO Global Asset Management (Europe) Limited which in turn is under the dominion of the Bank of Montreal.
The commercial legislation regarding own shares requires that a non-distributable reserve must be created for the same amount of the acquisition price of such shares. This reserve is not available for distribution while the shares stay in the Company's possession. In addition, the applicable accounting standards determine that the gains or losses obtained with the sale of such shares are recognised in reserves.
As at 31 December 2016, the Company held 600,531 own shares, acquired in June 2015 and in March and August 2016, which represented 0.400% of the Company's share capital.
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.
In the years ended 31 December 2016 and 31 December 2015, the movements that occurred in this caption were as follows:
| Quantity | Value | Average price | |
|---|---|---|---|
| Balance at 31 December 2015 Acquisitions Disposals |
200,177 400,354 - |
1,873,125 3,224,411 - |
9.357 8.054 - |
| Balance at 31 December 2016 | 600,531 | 5,097,536 | 8.488 |
| Quantity | Value | Average price | |
| Balance at 31 December 2014 Acquisitions Disposals |
- 200,177 - |
- 1,873,125 - |
- 9.357 - |
| Balance at 31 December 2015 | 200,177 | 1,873,125 | 9.357 |
As at 31 December 2016 and 31 December 2015, the Group's and Company's heading Reserves showed the following composition:
| 2016 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Group | Company | |||||||||
| Legal reserves | Own shares reserves | Fair Value reserves |
Other reserves | Total | Legal reserves Own shares reserves | Fair Value reserves |
Other reserves | Total | ||
| Opening balance | 18,072,559 | 1,873,125 | (540) | 13,438,968 | 33,384,112 | 18,072,559 | 1,873,125 | - | 13,438,968 | 33,384,652 |
| Own shares acquisitions | - | 3,224,411 | - | (3,224,411) | - | - | 3,224,411 | - | (3,224,411) | - |
| Assets fair value | - | - | 14,014 | - | 14,014 | - | - | - | - | - |
| Share Plan | - | - | - | 1,493,546 | 1,493,546 | - | - | - | 1,493,546 | 1,493,546 |
| Closing balance | 18,072,559 | 5,097,536 | 13,474 | 11,708,102 | 34,891,671 | 18,072,559 | 5,097,536 | - | 11,708,102 | 34,878,197 |
| 2015 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Group | Company* | |||||||||
| Legal reserves | Own shares reserves | Fair Value reserves |
Other reserves | Total | Legal reserves Own shares reserves | Fair Value reserves |
Other reserves | Total | ||
| Opening balance | 18,072,559 | - | - | 13,701,408 | 31,773,967 | 18,072,559 | - | - | 13,701,408 | 31,773,967 |
| Own shares acquisitions | - | 1,873,125 | - | (1,873,125) | - | - | 1,873,125 | - | (1,873,125) | - |
| Assets fair value | - | - | (540) | - | (540) | - | - | - | - | - |
| Share Plan | - | - | - | 1,610,685 | 1,610,685 | - | - | - | 1,610,685 | 1,610,685 |
| Closing balance | 18,072,559 | 1,873,125 | (540) | 13,438,968 | 33,384,112 | 18,072,559 | 1,873,125 | - | 13,438,968 | 33,384,652 |
| * Restated values: see note 3 |
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.
As at 31 December 2016, this caption includes the amount of 5,097,536 Euros related to the creation of an unavailable reserve for the same amount of the acquisition price of the own shares held.
This heading 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.
As at 31 December 2016 and 31 December 2015 and 2014, this heading also records the amount recognised in these years related to the Share Plan that constitutes the long-term variable remuneration to be paid to the executive members of the Board of Directors under the new remuneration model of the Statutory Bodies defined by the Remuneration Committee in the total amount of 4,480,638 Euros.
During the years ended 31 December 2016 and 31 December 2015, the following movements were made in the Group and the Company heading Retained earnings:
| Group | Company | |||||
|---|---|---|---|---|---|---|
| Restated | ||||||
| 2016 | 2015 | 2016 | 2015* | |||
| Opening balance | 91,727,994 | 84,374,563 | 91,727,994 | 84,374,563 | ||
| Application of the net profit of the prior year | 72,065,283 | 77,171,128 | 72,065,283 | 77,171,128 | ||
| Distribution of dividends (Note 28) | (70,264,792) | (69,750,000) | (70,264,792) | (69,750,000) | ||
| Adjustments from the application of the equity method | 19,820 | 109,622 | 19,820 | 109,622 | ||
| Other movements | 40,906 | (177,319) | 54,380 | (177,319) | ||
| Closing balance | 93,589,211 | 91,727,994 | 93,602,685 | 91,727,994 |
* Restated values: see note 3
The Actuarial gains/losses associated to post-employment benefits, as well as the corresponding deferred taxes, are recognised in this heading (Note 32).
Thus, for the years ended 31 December 2016 and 31 December 2015, the movements occurred in this heading in the Group and in the Company were as follows:
| Group and company | ||||
|---|---|---|---|---|
| Restated | ||||
| 2016 | 2015* | |||
| Opening balance | (18,644,832) | (18,786,310) | ||
| Actuarial gains/losses - Healthcare (Note 32) | (11,827,990) | 114,181 | ||
| Tax effect - Healthcare (Note 50) | 3,334,998 | 27,297 | ||
| Closing balance | (27,137,824) | (18,644,832) | ||
* Restated values: see note 3
At the General Meeting of Shareholders held on 28 April 2016, a dividend distribution of 70,500,000 Euros was approved, corresponding to a dividend per share of 0.47 Euros, for the financial year ended 31 December 2015. The dividend was paid on 25 May 2016. The dividend amount assigned to own shares was transferred to Retained earnings, totalling 235,208 Euros.
| 2016 | |
|---|---|
| Assigned dividends | 70,500,000 |
| Dividends assigned to own shares | (235,208) |
| Dividends paid | 70,264,792 |
According to the dividends distribution proposal included in the 2014 Annual Report, at the General Meeting of Shareholders, which took place on 5 May 2015, a dividend distribution of 69,750,000 Euros regarding the financial year ended 31 December 2014 was proposed and approved. The dividend was paid on 29 May 2015.
During the years ended 31 December 2016 and 31 December 2015, the earnings per share were calculated as follows:
| 2016 | 2015 | |
|---|---|---|
| Net income for the period | 62,160,395 | 72,065,283 |
| Average number of ordinary shares | 149,527,101 | 149,883,331 |
| Earnings per share | ||
| Basic | 0.42 | 0.48 |
| Diluted | 0.42 | 0.48 |
The average number of shares is detailed as follows:
| 2016 | 2015 | |
|---|---|---|
| Shares issued at begining of the period | 150,000,000 | 150,000,000 |
| Own shares effect | 472,899 | 116,669 |
| Average number of shares during the period | 149,527,101 | 149,883,331 |
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 December 2016, the number of own shares held is 600,531 and its average number for the year ended 31 December 2016 is 472,899, reflecting the fact that the acquisition of own shares occurred in June 2015, March and August 2016.
There are no dilutive factors of earnings per share.
During the years ended 31 December 2016 and 31 December 2015, the following movements occurred in non-controlling interests:
| 2016 | 2015 | |
|---|---|---|
| Opening balance | 175,322 | (323,703) |
| Net profit for the year attributable to non-controlling interest | (263,328) | 5,352 |
| Other movements | 8,871 | 493,673 |
| Closing balance | (79,135) | 175,322 |
As at 31 December 2016 and 31 December 2015, non-controlling interests related to the following companies:
| 2016 | 2015 | |
|---|---|---|
| Correio Expresso de Moçambique, S.A. | (79,135) | 175,222 |
| (79,135) | 175,222 |
As at 31 December 2016 and 31 December 2015, Debt of the Group and the Company showed the following composition:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Non-current liabilities | ||||
| Bank loans | 87,202 | 95,241 | - | - |
| Leasing | 39,943 | 940,281 | - | 724,845 |
| Financiamentos obtidos | 127,145 | 1,035,522 | - | 724,845 |
| Current liabilities | ||||
| Bank loans | 8,726,161 | 6,028,197 | - | - |
| Leasing | 953,668 | 1,049,958 | 724,749 | 462,968 |
| Financiamentos obtidos | 9,679,829 | 7,078,155 | 724,749 | 462,968 |
| 9,806,974 | 8,113,677 | 724,749 | 1,187,813 | |
As at 31 December 2016, the interest rates applied to finance leases were between 0.23% and 0.51% (31 December 2015: between 0.60% and 0.83%) and the interest rates applied to other loans were between 1.09% and 2.25% (31 December 2015: 0.06% and 2.10%).
As at 31 December 2016 and 31 December 2015, the details of the Group bank loans were as follows:
| Group | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| Amount used | Amount used | |||||
| Financing entity | Limit | Current | Non-current | Limit | Current | Non-current |
| Bank loans | ||||||
| Banco Sabadell (Spain) | 400,000 | - | - | 400,000 | - | - |
| BBVA (Spain) | 500,000 | - | - | 500,000 | - | - |
| Millennium BCP | 9,750,000 | 8,726,161 | - | 9,750,000 | 5,991,565 | - |
| BIM - (Mozambique) | 218,270 | - | - | 218,270 | - | - |
| BIM - (Mozambique) | 131,873 | - | 87,202 | 131,873 | 36,632 | 95,241 |
| Other loans | ||||||
| Millennium BCP | - | - | - | 5,400,000 | - | - |
| BIM - (Mozambique) | 77,861 | - | - | 77,861 | - | - |
| Moza Banco (Mozambique) | 25,954 | - | - | 25,954 | - | - |
| 11,103,958 | 8,726,161 | 87,202 | 16,503,958 | 6,028,197 | 95,241 |
The financing negotiated with Spanish banks is intended to finance the operating activity of the subsidiary Tourline, subject to Eonia interest rate.
As at 31 December 2016 and 31 December 2015, the Group and the Company have the following assets under finance leases:
| 2016 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Company | ||||||
| Gross amount | Depreciation/accumulate d impairment losses |
Carrying amount | Gross amount | Depreciation/accumulated impairment losses |
Carrying amount | ||
| Land | 9,425,895 | 815,990 | 8,609,905 | 7,798,567 | 815,990 | 6,982,577 | |
| Buildings and other constructions | 4,963,685 | 1,498,212 | 3,465,473 | 81,701 | 33,616 | 48,085 | |
| Transport equipment | 19,371 | 18,854 | 517 - |
- | - | ||
| 14,408,951 | 2,333,056 | 12,075,895 | 7,880,268 | 849,606 | 7,030,662 | ||
| 2015 | |||||||
| Gross amount | Group Depreciation/accumulate d impairment losses |
Carrying amount | Gross amount | Company Depreciation/accumulated impairment losses |
Carrying amount | ||
| Land | 9,425,895 | 815,990 | 8,609,905 | 7,798,567 | 815,990 | 6,982,577 | |
| Buildings and other constructions | 4,963,685 | 1,397,118 | 3,566,567 | 81,701 | 30,162 | 51,539 | |
| Transport equipment | 19,371 | 18,854 | 517 | - | - | - |
The key contracts are the following:
CTT, S.A. is the lessee, under a leasing contract signed with IMOLEASING – Sociedade de Locação Financeira Imobiliária, S.A., of a property in the municipality of Maia (Porto) where the Mail Sorting Centre is located. The type of lease contract determines its classification as a lease, namely the fact there is an option to buy it for a residual value of approximately 6% of the contract value considered significantly lower than the estimated market value at the end of the contract. There are no contingent rents payable nor any restrictions.
The subsidiary CTT Expresso is the lessee of a property located in Perafita (Matosinhos) where is located the Operating Centre of the Northern Region, which includes an option to buy the asset at the end of the contract for a residual value considered significantly lower than the estimated market value at the end of the contract.
The monthly rents are calculated based on the initial contract value, and it is possible to exercise the call option by paying a residual value.
There are no other restrictions in the contracts that have been signed.
As at 31 December 2016 and 31 December 2015, the Group and the Company liabilities with financial lease contracts presented the following plan of due dates:
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Group | Company | |||||
| Capital | Interest | Total | Capital | Interest | Total | |
| Due within 1 year | 953,668 | 8,263 | 961,931 | 724,749 | 844 | 725,593 |
| Due between 1 to 5 years | 39,943 | 9,927 | 49,870 | - | - | - |
| Over 5 years | - | - | - | - | - | - |
| 39,943 | 9,927 | 49,870 | - | - | - | |
| Total | 993,611 | 18,190 | 1,011,801 | 724,749 | 844 | 725,593 |
| Group | 2015 | Company | ||||
| Capital | Interest | Total | Capital | Interest | Total | |
| Due within 1 year | 1,049,958 | 9,996 | 1,059,954 | 462,968 | 4,031 | 466,999 |
| Due between 1 to 5 years | 940,281 | 1,742 | 942,023 | 724,845 | 1,449 | 726,294 |
| Over 5 years | - | - | - | - | - | - |
| 940,281 | 1,742 | 942,023 | 724,845 | 1,449 | 726,294 | |
| Total | 1,990,239 | 11,738 | 2,001,977 | 1,187,813 | 5,480 | 1,193,293 |
For the years ended 31 December 2016 and 31 December 2015, the values paid by the Group in relation to leasing interest amounted to 7,014 Euros and 18,201 Euros, respectively. In the Company, for the same periods, the amounts paid were 2,958 Euros and 8,084 Euros, respectively.
Liabilities related to employee benefits refer to (i) post-employment benefits – healthcare, (ii) other benefits and (iii) other long-term benefits for the Statutory Bodies.
During the years ended 31 December 2016 and 31 December 2015, the Group and the Company liabilities presented the following movement:
| 2016 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Group | Company | |||||||||
| Liabilities | Equity | Liabilities | Equity | |||||||
| Healthcare | Other long-term employee benefits |
Total | Other long-term benefits statutory bodies |
Total | Healthcare | Other long-term employee benefits |
Total | Other long-term benefits statutory bodies |
Total | |
| Opening balance | 236,806,000 | 23,039,344 | 259,845,344 | 2,987,092 | 262,832,436 | 236,806,000 | 23,000,540 | 259,806,540 | 2,987,092 | 262,793,632 |
| Movement of the period | 12,304,199 | (4,313,362) | 7,990,837 | 1,493,546 | 9,484,383 | 12,304,199 | (4,274,558) | 8,029,641 | 1,493,546 | 9,523,187 |
| Closing balance | 249,110,199 | 18,725,982 | 267,836,181 | 4,480,638 | 272,316,819 | 249,110,199 | 18,725,982 | 267,836,181 | 4,480,638 | 272,316,819 |
| Group | 2015 | Company | ||||||||
| Liabilities | Equity | Liabilities | Equity | |||||||
| Healthcare | Other long-term employee benefits |
Total | Other long-term benefits statutory bodies |
Total | Healthcare | Other long-term employee benefits |
Total | Other long-term benefits statutory bodies |
Total | |
| Opening balance | 241,166,000 | 36,125,547 | 277,291,547 | 1,376,407 | 278,667,954 | 241,166,000 | 35,956,617 | 277,122,617 | 1,376,407 | 278,499,024 |
| Movement of the period | (4,360,000) | (13,086,203) | (17,446,203) | 1,610,685 | (15,835,518) | (4,360,000) | (12,956,078) | (17,316,078) | 1,610,685 | (15,705,393) |
| Closing balance | 236,806,000 | 23,039,344 | 259,845,344 | 2,987,092 | 262,832,436 | 236,806,000 | 23,000,540 | 259,806,540 | 2,987,092 | 262,793,632 |
The heading Other long-term benefits essentially refers to the on-going staff reduction programme and to the benefit Pensions for work accidents.
The caption Other long-term benefits for the Statutory Bodies refers to the long-term variable remuneration assigned to the executive members of the Board of Directors.
The details of the Group and the Company liabilities related to employee benefits, considering their classification, are as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Equity (Other reserves) | 4,480,638 | 2,987,092 | 4,480,638 | 2,987,092 |
| Non-current liabilities | 250,445,608 | 241,306,773 | 250,445,608 | 241,306,773 |
| Current liabilities | 17,390,573 | 18,538,572 | 17,390,573 | 18,499,767 |
| 272,316,819 | 262,832,437 | 272,316,819 | 262,793,632 |
As at 31 December 2016 and 31 December 2015, the costs related to employee benefits recognised in the consolidated and individual income statement and the amount recognised directly in Other changes in equity were as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Costs for the period | ||||
| Healthcare | 10,439,535 | 9,942,000 | 10,439,535 | 9,942,000 |
| Other long-term employee benefits | (873,135) | (7,075,980) | (878,989) | (7,104,436) |
| Other long-term benefits statutory bodies | 1,493,546 | 1,610,685 | 1,493,546 | 1,610,685 |
| 11,059,946 | 4,476,705 | 11,054,092 | 4,448,249 | |
| Other changes in equity | (11,827,990) | 114,181 | (11,827,990) | 114,181 |
| Healthcare | (11,827,990) | 114,181 | (11,827,990) | 114,181 |
As mentioned in Note 2.19, CTT is responsible for financing the healthcare plan applicable to certain employees. In order to obtain the estimate of the liabilities and costs to be recognised for each period, an actuarial study is performed by an independent entity every year, based on the Projected Unit Credit method, and according to assumptions that are considered adequate and reasonable, an actuarial study has been performed as at 31 December 2016.
The main assumptions followed in the Group and the Company actuarial study were:
| 2016 | 2015 | |
|---|---|---|
| Financial assumptions | ||
| Discount rate | 2.00% | 2.50% |
| Salaries expected growth rate | 2.25% | 2.25% |
| Pensions growth rate | Law no. 53-B/2006 (with ∆ GDP < 2%) |
Law no. 53-B/2006 (with ∆ GDP < 2%) |
| Inflation rate Health costs growth rate |
1.50% | 1.50% |
| - Infation rate | 1.50% | 1.50% |
| - Growth due to ageing | 2.00% | 2.00% |
| Demographic assumptions | ||
| Mortality table | TV 88/90 | TV 88/90 |
| Disability table | Swiss RE | Swiss RE |
The discount rate is estimated based on interest rates of private debt bonds with high credit rating ("AA" or equivalent) at the date of the balance sheet and with a duration equivalent to that of the liabilities with healthcare.
The decrease of the discount rate to 2.00% is motivated by the Group and the Company analysis of the evolution of the macroeconomic context taking into account a constant need to match the actuarial and financial assumptions to that reality.
The salaries expected growth rate is determined according to the salary policy defined by the Group and the Company.
The pensions expected growth rate is determined considering the estimated evolution of inflation and GDP growth rate.
The healthcare costs growth rate reflects the best estimate for the future evolution of these costs, considering the history of the plan's data.
The demographic assumptions are based on the mortality and disability tables considered appropriate for the actuarial assessment of this plan.
The evolution of the present value of the Group and the Company liabilities related to the healthcare plan has been as follows:
| 2016 | 2015 | 2014 | 2013 | 2012 | |
|---|---|---|---|---|---|
| Liabilities at the end of the period | 249,110,199 | 236,806,000 | 241,166,000 | 263,371,000 | 252,803,000 |
For the years ended 31 December 2016 and 31 December 2015, the movement which occurred in the present value of the defined benefits liability regarding the healthcare plan was as follows:
| Group and Company | ||||
|---|---|---|---|---|
| 2016 | 2015 | |||
| Opening balance | 236,806,000 | 241,166,000 | ||
| Service cost of the year | 3,977,000 | 4,042,000 | ||
| Interest cost of the year | 5,793,000 | 5,900,000 | ||
| Plan amendment | 1,369,535 | - | ||
| Pensioners contributions | 4,985,801 | 5,113,703 | ||
| (Payment of benefits) | (14,980,969) | (18,654,596) | ||
| (Other costs) | (668,158) | (646,926) | ||
| Actuarial (gains)/losses | 11,827,990 | (114,181) | ||
| Closing balance | 249,110,199 | 236,806,000 |
Under the human resources optimisation process (Note 45) some employees are no longer considered in the IOS healthcare plan ("Instituto das Obras Sociais") being from that date onwards covered by an insurance policy with the same coverages of the IOS healthcare plan and the same monthly contributions and co-payments in the existing terms. This revised plan has been considered as an amendment to the plan and therefore recognised in profit and loss under the caption Staff costs.
The total costs for the period were recognised as follows:
| Group and Company | |||
|---|---|---|---|
| 2016 | 2015 | ||
| Staff costs/employee benefits (Note 45) | 3,978,377 | 3,395,074 | |
| Other costs | 668,158 | 646,926 | |
| Interest expenses (Note 49) | 5,793,000 | 5,900,000 | |
| 10,439,535 | 9,942,000 |
As at 31 December 2016, the actuarial (gains)/losses in the amount of 11,827,990 Euros ((114,181) Euros as at 31 December 2015) were recognised in equity under Other changes in equity, net of deferred taxes of 3,334,998 Euros ((27,297) Euros as at 31 December 2015).
In this respect, the amount of the actuarial (gains)/losses accounted in 31 December 2016 regard to the change of discount rate and to the revision of the healthcare costs.
The best estimate the Group and the Company have at this date for costs related to the healthcare plan, which they expect to recognise in the next annual period is 9,415 thousand Euros.
The sensitivity analysis performed for the healthcare plan leads to the following conclusions:
into an increase of the health care plan liability for past services of about 5.2% amounting to a total of 261,942 thousand Euros.
As mentioned in Note 2.19, in certain situations, the Group and the Company has liabilities related to the payment of salaries in situations of Suspension of contracts, redeployment and release of employment, the allocation of subsidies of Support for termination of professional activity (which was eliminated as of 1 April 2013), the payment of the Telephone subscription fee, Pensions for work accidents, and Monthly life annuity. In order to obtain the estimate of the value of these liabilities and the costs to be recognised for each period, every year, an actuarial study is made by an independent entity, based on the Projected Unit Credit method, and according to assumptions that are considered adequate and reasonable. As at 31 December 2016, an actuarial study was requested to an independent entity to assess the liabilities at the reporting date.
The main assumptions followed in the assessment of the Group and the Company liabilities were:
| 2016 | 2015 | |
|---|---|---|
| Financial assumptions | ||
| Discount rate | 2.00% | 2.50% |
| Salaries growth rate (Suspension of contracts) | 2.25% | 2.25% |
| Pensions growth rate (Pension for work accidents, Monthly life annuity) |
1.50% | 1.50% |
| Inflation rate | 1.50% | 1.50% |
| Demographic assumptions | ||
| Mortality table | TV 88/90 | TV 88/90 |
| Disability rate | Swiss RE | Swiss RE |
For the determination of the Group's liabilities to employees in situations of Suspension of contracts, redeployment and release of employment, salary growth rates of 2.25% were considered for 2015 and following years. For the benefits Monthly life annuity and Pensions for work accidents the pensions growth rate was 1.50% since under an analysis performed to these benefits' historical data it was concluded that updates were normally associated with the upgrades of the Portuguese Harmonised Index of Consumer Prices (HICP). Regarding the remaining benefits, Telephone subscription fee and Support for termination of professional activity, no growth rate was considered since these benefits are not updated.
For the years ended 31 December 2016 and 31 December 2015, the movement of Group and the Company liabilities with other long-term employee benefits was as follows:
| Group | Company | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Suspension of contracts, redeployment and release of employment | |||||
| Opening balance | 8,234,231 | 17,810,243 | 8,195,426 | 17,641,312 | |
| Interest cost of the period | 171,857 | 379,359 | 171,614 | 374,291 | |
| Liabilities relative to new beneficiaries | 774,529 | - | 774,529 | - | |
| Curtailment | (616,318) | (4,782,194) | (616,318) | (4,782,194) | |
| (Payment of benefits) | (3,505,008) | (5,187,776) | (3,460,349) | (5,029,195) | |
| Actuarial (gains)/losses | 435,541 | 14,599 | 429,930 | (8,788) | |
| Closing balance | 5,494,833 | 8,234,231 | 5,494,833 | 8,195,426 | |
| Telephone subscription fee | |||||
| Opening balance | 4,518,270 | 4,832,775 | 4,518,270 | 4,832,775 | |
| Interest cost of the period | 107,145 | 114,854 | 107,145 | 114,854 | |
| Plan amendment | (1,513,395) | - | (1,513,395) | - | |
| (Payment of benefits) | (173,293) | (216,939) | (173,293) | (216,939) | |
| Actuarial (gains)/losses | (832,898) | (212,420) | (832,898) | (212,420) | |
| Closing balance | 2,105,828 | 4,518,270 | 2,105,828 | 4,518,270 | |
| Pension for work accidents | |||||
| Opening balance | 6,863,591 | 8,161,400 | 6,863,591 | 8,161,400 | |
| Interest cost of the period | 166,338 | 198,665 | 166,338 | 198,665 | |
| (Payment of benefits) | (436,651) | (472,298) | (436,651) | (472,298) | |
| Actuarial (gains)/losses | 756,028 | (1,024,176) | 756,028 | (1,024,176) | |
| Closing balance | 7,349,306 | 6,863,591 | 7,349,306 | 6,863,591 | |
| Monthly life annuity | |||||
| Opening balance | 3,423,253 | 5,282,395 | 3,423,253 | 5,282,395 | |
| Interest cost of the period | 84,398 | 130,698 | 84,398 | 130,698 | |
| (Payment of benefits) | (97,352) | (97,925) | (97,352) | (97,925) | |
| Actuarial (gains)/losses | 365,716 | (1,891,915) | 365,716 | (1,891,915) | |
| Closing balance | 3,776,015 | 3,423,253 | 3,776,015 | 3,423,253 | |
| Support for cessation of professional activity | |||||
| Opening balance | - | 38,734 | - | 38,735 | |
| Interest cost of the period | - | 484 | - | 484 | |
| (Payment of benefits) | - | (35,284) | - | (35,285) | |
| Actuarial (gains)/losses | - | (3,934) | - | (3,934) | |
| Closing balance | - | - | - | - | |
| Total | 18,725,982 | 23,039,344 | 18,725,982 | 23,000,540 |
During the years ended 31 December 2016 and 31 December 2015, the total costs for the year were recognised as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Staff costs/employee benefits (Note 45) | ||||
| Suspension of contracts, redeployment and release of employment | (178,324) | (4,767,595) | (183,935) | (4,790,982) |
| Telephone subscription fee | (2,346,293) | (212,420) | (2,346,293) | (212,420) |
| Pension for work accidents | 756,028 | (1,024,176) | 756,028 | (1,024,176) |
| Monthly life annuity | 365,716 | (1,891,915) | 365,716 | (1,891,915) |
| Support for cessation of professional activity | - | (3,934) | - | (3,934) |
| subtotal | (1,402,873) | (7,900,040) | (1,408,484) | (7,923,428) |
| Interest expenses (Note 49) | 529,738 | 824,060 | 529,495 | 818,992 |
| (873,135) | (7,075,980) | (878,989) | (7,104,436) |
In the year ended 31 December 2016, following the analysis of the historical data of the monthly medical costs per beneficiary and the number of beneficiaries of the Telephone subscription fee performed by the independent expert, a liability reduction was recorded in the amount of 2,369,824 Euros in the heading Staff costs since it related to long-term employee benefits.
Following the renegotiation of the conditions related to workers in situations of Suspension of contracts, redeployment and release of employment, CTT recorded a liability reduction in the amount of 616,318 Euros and 4,782,194 Euros, respectively, as at 31 December 2016 and 31 December 2015.
Under the referred human resources optimisation process, the Company recognised an increase of the liabilities related to the payment of salaries in situations of Suspension of contracts, redeployment and release of employment in the amount of 774,529 Euros related to a number of suspension of contracts agreements.
The actuarial losses regarding long-term employee benefits recognised as at 31 December 2016 mainly relates to the decrease of the discount rate which, according to IAS 19 – Employee benefits, were recognised in the caption Staff costs in the income statement.
As a result of the pensions growth rate change applied to the benefits Monthly life annuity and Pensions for work accidents the related liability decreased significantly, in the year ended 31 December 2015, which is reflected in results in Staff costs.
The best estimate that the Company has at this date for costs with other long-term benefits, which it expects to recognise in the next year is 343,841 Euros.
The sensitivity analysis performed on 31 December 2016 for the Other long-term benefits leads to the conclusion that, if the discount rate was reduced by 50 b.p., keeping everything else constant, this would give rise to an increase in liabilities for past services of approximately 5.00%, increasing to 19,662 thousand Euros.
CTT approved, with effect as from 31 December 2014, the Remuneration Regulation for Members of the Statutory Bodies, which defines the allocation of a long-term variable remuneration, to be paid in Company shares (Note 2.19). The number of shares to be allocated to members of CTT's Executive Committee is based on the performance evaluation results during the period of the term of office, until 31 December 2016, which consists of a comparison of the recorded performance of the Total Shareholder Return (TSR) of CTT shares and the TSR of a weighted peer group, composed of national and international companies (vesting conditions).
The evaluation period of CTT TSR performance compared to peers is from 1 January 2014 to 31 December 2016. The long-term variable remuneration is paid on 31 January 2017, by allocating shares of the Company, subject to a positive TSR of the shares of the Company at the end of the evaluation period, according to a maximum number of shares defined in the Regulation and corrected by maximum limits for each member of the Executive Committee.
On 31 December 2014, the liability of this long-term remuneration was calculated, based on the fair value of the shares, by an independent expert and by using a Black-Scholes methodology through the production of a Monte Carlo simulation model.
Therefore, as at 31 December 2016, CTT recorded a cost of 1,493,546 Euros corresponding to the period from 1 January 2016 to 31 December 2016, booked against Other reserves.
For the years ended 31 December 2016 and 31 December 2015, in order to face legal proceedings and other liabilities arising from past events, the Group and the Company recognised provisions, which showed the following movement:
| Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance | |
|---|---|---|---|---|---|---|
| 9,102,699 | 1,929,078 | (5,715,244) | (2,093,786) | 1,615,805 | 4,838,552 | |
| 14,358,103 | 139,058 | (6,613,918) | (7,883,243) | - | - | |
| 17,035,233 | 180,942 | (6,263,597) | (47,842) | (1,615,805) | 9,288,931 | |
| 40,496,035 | 2,249,078 | (18,592,759) | (10,024,871) | - | 14,127,483 | |
| 189,775 | - | (189,775) | - | - | - | |
| 46,522 | - | - | (46,522) | - | - | |
| 40,732,332 | 2,249,078 | (18,782,534) | (10,071,393) | - | 14,127,483 | |
| 2016 |
| 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance | |
| Non-current provisions | |||||||
| Litigations | 9,907,427 | 1,942,805 | (2,556,840) | (1,603,861) | 1,413,169 | 9,102,700 | |
| Onerous contracts | 16,854,955 | 1,291,580 | (670,798) | (3,117,634) | - | 14,358,103 | |
| Other provisions | 18,693,363 | 1,212,339 | (941,773) | (515,527) | (1,413,169) | 17,035,233 | |
| 45,455,745 | 4,446,724 | (4,169,411) | (5,237,022) | - | 40,496,036 | ||
| Investments in subsidiary and associated companies | 215,772 | - | - | - | (25,997) | 189,775 | |
| Restructuring | - | 1,880,000 | (167,398) | (1,666,081) | - | 46,521 | |
| Provisões | 45,671,517 | 6,326,724 | (4,336,809) | (6,903,103) | (25,997) | 40,732,332 |
The net amount between increases and reversals of provisions was recorded in the consolidated income statement under the caption Provisions, net and amounted to 16,343,680 Euros and (277,313) Euros as at 31 December 2016 and 2015, respectively.
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Company | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance |
| Non-current provisions | ||||||
| Litigations | 8,312,828 | 1,661,889 | (4,346,619) | (2,057,169) | 915,662 | 4,486,591 |
| Onerous contracts | 13,899,390 | 139,058 | (6,607,600) | (7,430,848) | - | 0 |
| Other provisions | 14,513,084 | - | (4,652,716) | (16,825) | (915,662) | 8,927,881 |
| 36,725,302 | 1,800,947 | (15,606,935) | (9,504,842) | - | 13,414,472 | |
| Investments in subsidiary and associated companies | - | 6,912,830 | - | - | - | 6,912,830 |
| Provisões | 36,725,302 | 8,713,777 | (15,606,935) | (9,504,842) | - | 20,327,302 |
| 2015 | ||||||
| Company | Opening balance | Increases | Reversals | Utilisations | Transfers | Closing balance |
| Non-current provisions |
| Non-current provisions | ||||||
|---|---|---|---|---|---|---|
| Litigations | 9,351,816 | 1,672,045 | (2,523,272) | (1,600,929) | 1,413,169 | 8,312,828 |
| Onerous contracts | 15,943,847 | 1,184,032 | (670,798) | (2,557,691) | - | 13,899,390 |
| Other provisions | 16,113,431 | 981,272 | (890,000) | (278,450) | (1,413,169) | 14,513,084 |
| 41,409,094 | 3,837,349 | (4,084,070) | (4,437,070) | - | 36,725,302 | |
| Investments in subsidiary and associated companies | 306,162 | - | - | (306,162) | - | - |
| Provisões | 41,715,256 | 3,837,349 | (4,084,070) | (4,743,232) | - | 36,725,302 |
The net amount between increases and reversals of provisions was recorded in the individual income statement under the caption Provisions, net and amounted to 13,805,988 Euros and (246,722) Euros as at 31 December 2016 and 2015, respectively.
The provisions for litigations were set up to face the liabilities resulting from lawsuits brought against the Group and the Company and are estimated based on information from their lawyers as well as on the termination of the mentioned lawsuits.
Following the termination of the Conde Redondo building lease contract, CTT recorded, in the first quarter of 2016, a reversal of the provision for onerous contracts regarding the lease contract of this building, in the amount of 2,913,557 Euros.
The utilisations relate to the payment of rents due during the period as well as part of the outstanding rents of the Conde Redondo building.
The increases regard the update of the assumptions used in 2015, namely the discount rate.
As a result of the restructuring of CTT retail network and the new sublease contracts, the associated profitability now exceeds the amount of the rents paid under the lease contracts in force, therefore, these contracts are no longer considered as onerous contracts.
Consequently, as at 31 December 2016 there are no amounts, at Group or Company level, recognised as onerous contracts. As at 31 December 2015 these amounts to 14,358,103 Euros and 13,899,390 Euros, respectively.
As at 31 December 2016 the provision, in the Group and the Company, to cover any contingencies relating to labour litigation proceedings not included in the current court proceedings related to remuneration differences and attendance bonuses that can be claimed by workers, amounts to 8,130,479 Euros (15,142,991 Euros and 12,991,795 Euros as at 31 de December de 2015, respectively).
The reversals recognised in CTT, S.A. include the result of the review of the calculation methodology associated with this provision through the incorporation of additional historical data, namely, information regarding the outcome of the legal proceedings.
At CTT Expresso, S.A., as a result of the favourable outcome of the court actions, in 2016, the probability of the provision was revised and the total amount of the provision, amounting to 2.1 million Euros, was reversed. Therefore, in 2016, these proceedings become to be considered as contingent liabilities.
As at 31 December 2015, in addition to the previously mentioned situations, this heading also includes in the Group and the Company:
The provision for investments in associated companies corresponds to the assumption by the Group of legal or constructive obligations regarding the associated company PayShop Moçambique, S.A.. The reversal recorded on 31 December 2016 results from the Group assessment in which it concluded that the previously existing obligations are no longer maintained.
The provision for investments in subsidiary companies corresponds to the assumption by the Company of legal or constructive obligations regarding the subsidiaries CORRE - Correio Expresso Moçambique, S.A. and Tourline Express Mensajería, SLU.
During the year ended 31 December 2015, a provision for restructuring was recognised in the accounts of the subsidiary Tourline Express Mensajería, SLU, for 1,880,000 Euros, following the human resources optimisation and restructuring process, timely disclosed by the parent company. The process aimed at increasing the operational efficiency of Tourline by reducing its staff costs, as well as improving and simplifying processes in the context of the restructuring plan implemented. This provision was recorded under the heading Staff costs in the consolidated income statement.
As at 31 December 2016 and 31 December 2015, the Group and the Company had provided bank guarantees to third parties as follows:
| Group | Company | |||
|---|---|---|---|---|
| Description | 2016 | 2015 | 2016 | 2015 |
| FUNDO DE PENSÕES DO BANCO SANTANDER TOTTA | 3,030,174 | 3,030,174 | 3,030,174 | 3,030,174 |
| PLANINOVA - Soc. Imobiliária, S.A. | 2,033,582 | 2,033,582 | 2,033,582 | 2,033,582 |
| LandSearch, Compra e Venda de Imóveis | 1,792,886 | 1,792,886 | 1,792,886 | 1,792,886 |
| NOVIMOVESTE - Fundo de Investimento Imobiliário | 1,523,201 | 1,523,201 | 1,523,201 | 1,523,201 |
| LUSIMOVESTE - Fundo de Investimento Imobiliário | 1,274,355 | 1,274,355 | 1,274,355 | 1,274,355 |
| Autoridade Tributária e Aduaneira | 590,000 | 590,000 | 590,000 | 590,000 |
| Lisboagás, S.A. | 190,000 | 190,000 | - | - |
| Autarquias | 183,677 | 183,677 | 183,677 | 183,677 |
| Courts | 167,107 | 200,087 | 145,887 | 172,867 |
| Solred | 80,000 | 80,000 | - | - |
| ACT Autoridade Condições Trabalho | 58,201 | 59,395 | 58,201 | 59,395 |
| TIP - Transportes Intermodais do Porto, ACE | 50,000 | 50,000 | - | - |
| INCM - Imprensa Nacional da Casa da Moeda | 46,167 | - | - | - |
| Fonavi, Nave Hospitalet | 40,477 | 40,477 | - | - |
| Record Rent a Car (Cataluña, Levante) | 40,000 | 40,000 | - | - |
| ANA - Aeroportos de Portugal | 34,000 | 34,000 | 34,000 | 34,000 |
| SPMS - Serviços Partilhados do Ministério da Saúde | 30,180 | 30,180 | 30,180 | 30,180 |
| SetGás, S.A. | 30,000 | 30,000 | - | - |
| Other entities | 29,992 | 7,694 | - | - |
| EPAL - Empresa Portuguesa de Águas Livres | 21,433 | 21,433 | - | - |
| EMEL, S.A. | 19,384 | 19,384 | - | - |
| Direção Geral do Tesouro e Finanças | 16,867 | 16,867 | 16,867 | 16,867 |
| Portugal Telecom, S.A. | 16,658 | 16,657 | 16,658 | 16,657 |
| Instituto de Gestão Financeira Segurança Social | 16,406 | - | 16,406 | 12,681 |
| Águas do Porto, E.M | 10,720 | 10,720 | - | - |
| SMAS Torres Vedras | 9,909 | 2,808 | 7,101 | - |
| Inmobiliaria Ederkin | 7,998 | 7,800 | - | - |
| Promodois | 6,273 | 6,273 | 6,273 | 6,273 |
| TNT Express Worldwide | 6,010 | 6,010 | - | - |
| Estradas de Portugal, EP | 5,000 | 5,000 | 5,000 | 5,000 |
| Consejeria Salud | 4,116 | 6,433 | - | - |
| Instituto do emprego e formação profissional | 3,718 | 3,718 | - | - |
| IFADAP | 1,746 | 1,746 | 1,746 | 1,746 |
| Águas de Coimbra | 870 | 870 | 870 | 870 |
| EURO BRIDGE-Sociedade Imobiliária, Lda | - | 2,944,833 | - | 2,944,833 |
| PT PRO - Serv Adm Gestao Part, S.A. | - | 50,000 | - | - |
| ARM - Águas e Resíduos da Madeira , SA | - | 12,681 | - | - |
| REN Serviços, S.A. | - | 9,818 | - | - |
| Universidad Sevilha | - | 4,237 | - | - |
| 11,371,107 | 14,336,996 | 10,767,064 | 13,729,244 |
According to the terms of some lease contracts of the buildings occupied by the Company's services, at the moment that 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 9,654,198 Euros as at 31 December 2016 (12,599,031 Euros as at 31 December 2015) in the Group and the Company. The decrease in the value of the guarantees provided is mainly explained by the termination of the lease contract of the Conde Redondo building, the guarantee of which amounted to 2,944,833 Euros.
As at 31 December 2016 and 31 December 2015, the Group subscribed promissory notes amounting to approximately 40.2 thousand Euros and 60.9 thousand Euros, respectively, for various credit institutions intended to secure complete and timely compliance with the corresponding financing contracts.
The Group and the Company also assumed financial commitments (comfort letters) in the amount of 1,170,769 Euros regarding the subsidiary Tourline and regarding the subsidiary Corre in the amount of 87,202 Euros, which are still active as at 31 December 2016.
As at 31 December 2015, the Group and theCompany assumed commitments regarding the sponsoring of "Taça da Liga" (League Football Cup) in the amount of 1.4 million Euros.
In addition, the Group and the Company also assumed commitments relating to real estate rents under lease contracts and rents for operating and financial leases.
The Group and the Company contractual commitments related to Tangible fixed assets and Intangible assets are detailed respectively in Notes 5 and 6.
As at 31 December 2016 and 31 December 2015, the Group and the Company heading Accounts payable showed the following composition:
| Group | Company | |||
|---|---|---|---|---|
| Restated | ||||
| 2016 | 2015 | 2016 | 2015* | |
| Non-current | ||||
| Other accounts payable | 375,379 | - | 375,379 | - |
| 375,379 | - | 375,379 | - | |
| Current | ||||
| Advances from customers | 3,039,657 | 3,043,051 | 3,025,041 | 3,027,486 |
| CNP money orders | 200,238,100 | 218,478,956 | 200,238,100 | 218,478,956 |
| Suppliers | 65,044,068 | 67,989,193 | 56,763,575 | 58,268,535 |
| Invoices pending confirmation | 8,559,890 | 9,834,805 | 5,188,920 | 6,619,310 |
| Fixed assets suppliers | 13,684,684 | 6,717,094 | 9,853,992 | 4,855,181 |
| Invoices pending confirmation (fixed assets) | 6,206,806 | 5,311,267 | 5,975,153 | 5,311,267 |
| Values collected on behalf of third parties | 8,955,667 | 5,881,304 | 6,524,493 | 5,881,304 |
| Postal financial services | 131,878,955 | 112,544,152 | 131,878,955 | 112,544,152 |
| Customers deposits | - | 52,422 | - | - |
| Other accounts payable | 7,255,873 | 6,039,433 | 7,111,748 | 5,419,959 |
| 444,863,700 | 435,891,677 | 426,559,977 | 420,406,149 | |
| 445,239,079 | 435,891,677 | 426,935,356 | 420,406,149 | |
* Restated values: see note 3
The value of CNP money orders refers to the money orders received from the National Pensions Centre (CNP), whose payment date to the corresponding pensioners will occur in the month after the closing of the year.
This heading records mainly the amounts collected related to taxes, insurance, savings certificates and other money orders. The increase in this caption as at 31 December 2016 is largely explained by the significant volume of subscription of savings/treasury certificates occurred in December 2016.
As at 31 December 2016 and 31 December 2015 the Group and the Company heading Suppliers showed the following composition:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Other suppliers | 24,775,505 | 30,016,791 | 15,350,811 | 20,239,343 |
| Postal operators | 40,255,896 | 37,972,402 | 39,112,081 | 36,622,929 |
| Group companies (1) | 12,667 | - | 2,300,683 | 1,406,263 |
| 65,044,068 | 67,989,193 | 56,763,575 | 58,268,535 |
(1) Includes subsidiary, associated and joint-ventures companies.
As at 31 December 2016 and 31 December 2015, the ageing of the Group and the Company balance of the headings Suppliers and Fixed assets suppliers is detailed as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Suppliers | ||||
| Non-overdue | 21,756,069 | 22,897,539 | 16,568,629 | 16,735,686 |
| Overdue (1) : |
||||
| 0-30 days | 4,836,160 | 6,425,563 | 3,069,261 | 4,782,144 |
| 30-90 days | 3,238,063 | 12,499,262 | 3,010,650 | 11,756,875 |
| 90-180 days | 1,266,746 | 1,423,112 | 930,853 | 1,164,070 |
| 180-360 days | 10,097,799 | 8,255,781 | 9,941,867 | 7,803,267 |
| > 360 days | 23,849,230 | 16,487,936 | 23,242,315 | 16,026,493 |
| 65,044,068 | 67,989,193 | 56,763,575 | 58,268,535 |
(1) The amounts regarding the foreign operators, although being overdue over 360 days, are within the normal period for the presentation and regularisation of the accounts.
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Fixed assets suppliers | ||||
| Non-overdue | 11,894,436 | 6,325,283 | 8,431,578 | 4,609,702 |
| Overdue: | ||||
| 0-30 days | 1,295,524 | 241,226 | 1,212,583 | 169,914 |
| 30-90 days | 311,145 | 42,735 | 86,847 | 41,677 |
| 90-180 days | 54,198 | - | 54,198 | - |
| 180-360 days | 70,948 | - | 30,167 | - |
| > 360 days | 58,432 | 107,850 | 38,619 | 33,887 |
| 13,684,684 | 6,717,094 | 9,853,992 | 4,855,181 |
The increase in the caption Fixed assets suppliers is directly related to the investment in basic equipment, with particular emphasis on the acquisition of vehicles and office equipment.
The current amount of accounts payable overdue over 360 days is as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Other suppliers | 874,548 | 31,030 | 772,902 | - |
| Foreign operators | 22,974,682 | 16,456,906 | 22,469,414 | 16,026,493 |
| Total | 23,849,230 | 16,487,936 | 23,242,315 | 16,026,493 |
| Foreign operators ‐ receivable (Nota 19) |
(18,350,981) | (17,243,327) | (16,849,505) | (15,805,365) |
The balances between Foreign Operators are cleared by netting accounts. These amounts are related to the accounts receivable balances related to these entities (Note 19).
As at 31 December 2016 and 31 December 2015, the composition of the heading Banking client deposits and other loans in the Group is as follows:
| Group | |||||
|---|---|---|---|---|---|
| 2016 | 2015 | ||||
| Sight deposits | 114,041,001 | - | |||
| Term deposits | 8,486,356 | - | |||
| Savings deposits | 131,417,483 | - | |||
| 253,944,840 | - |
The above mentioned amounts relate to Banco CTT clients' deposits. As at 31 December 2016, the residual maturity of banking client deposits and other loans, is detailed as follows:
| 2016 | ||||||
|---|---|---|---|---|---|---|
| In cash | 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 | 114,041,001 | - | - | - | - | 114,041,001 |
| Term deposits | - | 73,693,366 | 57,724,117 | - | - | 131,417,483 |
| Savings deposits | - | 8,486,356 | - | - | - | 8,486,356 |
| 114,041,001 | 82,179,722 | 57,724,117 | - | - | 253,944,840 | |
As at 31 December 2015, the deposits from Banco CTT's clients in the amount of 52,422 Euros were recognised under the caption Accounts payable.
As at 31 December 2016 and 31 December 2015, the Group and the Company heading Other current liabilities showed the following composition:
| Group | Company | |||
|---|---|---|---|---|
| Restated | ||||
| 2016 | 2015 | 2016 | 2015* | |
| Current | ||||
| Estimated holiday pay, holiday subsidy and other remunerations | 43,661,282 | 49,152,091 | 39,083,054 | 45,614,014 |
| Estimated supplies and external services | 24,036,928 | 30,650,178 | 18,631,427 | 26,166,116 |
| Staff | 58,708 | - | 16,690 | - |
| State and other public entities | - | - | - | - |
| Value Added Tax | 2,460,642 | 1,405,729 | 1,806,370 | - |
| Personal income tax withholdings | 3,251,340 | 3,367,641 | 2,929,183 | 3,074,365 |
| Social Security contributions | 5,191,423 | 5,139,856 | 4,702,091 | 4,710,392 |
| Caixa Geral de Aposentações | 751,533 | 776,789 | 740,839 | 776,789 |
| Local Authority taxes | 554,515 | 515,275 | 554,515 | 515,275 |
| Other taxes | 8,534 | 577 | 143 | 577 |
| Other | 2,587,820 | 784,739 | 2,818,889 | 555,628 |
| 82,562,725 | 91,792,877 | 71,283,201 | 81,413,156 |
* Restated values: see note 3
The decrease in the heading Estimated holiday pay, holiday subsidy and other remunerations mainly relates to the reduction in the accrual for variable remunerations to be attributed regarding 2016.
The amount considered in the heading Estimated supplies and external services as at 31 December 2015 results essentially from the increase in accrued costs following a transitional process adaptation situation by the new supplier of the Healthcare Plan management, which does not apply in 2016.
As at 31 December 2016 and 31 December 2015 the Group and the Company heading Income taxes receivable and Income taxes payable showed the following composition:
| Group | Company | |||
|---|---|---|---|---|
| Restated | ||||
| 2016 | 2015 | 2016 | 2015* | |
| Current assets | ||||
| Corporate income tax | 3,587,614 | - | 3,569,641 | - |
| Imposto a pagar | 3,587,614 | - | 3,569,641 | - |
| Current liabilities | ||||
| Corporate income tax | - | 7,922,942 | - | 7,923,944 |
| Imposto a pagar | - | 7,922,942 | - | 7,923,944 |
| 3,587,614 | (7,922,942) | 3,569,641 | (7,923,944) |
* Restated values: see note 3
The Company's current assets and current liabilities relative to corporate income tax were calculated as follows:
| Company | ||||
|---|---|---|---|---|
| Restated | ||||
| 2016 | 2015* | |||
| Estimated income tax | (19,644,847) | (24,882,795) | ||
| Estimated Group companies' income tax | 695,532 | (3,568,585) | ||
| Payments on account | 21,720,696 | 19,332,653 | ||
| Withholding taxes | 798,260 | 1,194,783 | ||
| 3,569,641 | (7,923,944) | |||
* Restated values: see note 3
As at 31 December 2016 and 31 December 2015, the categories of financial assets and liabilities regarding the Group were broken down as follows:
| 2016 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Loans and receivables |
Available-for-sale financial assets |
Other financial liabilities | Non-financial assets/liabilities |
Total | ||
| Assets | |||||||
| Other investments (Note 13) | - | 1,503,572 | - | - | 1,503,572 | ||
| Non - current investments held to maturity (Note 14) | - | - | - | - | 93,986,115 | ||
| Other non-current assets (note 24) | 1,306,148 | - | - | - | 1,306,148 | ||
| Non - current financial assets available for sale (Note 15) | - | 4,473,614 | - | - | 4,473,614 | ||
| Accounts receivable (Note 19) | 122,113,270 | - | - | - | 122,113,270 | ||
| Credit to bank clients (Note 20) | 7,103,905 | - | - | - | 7,103,905 | ||
| Current investments held to maturity (Note 14) | - | - | - | - | 1,108,428 | ||
| Other current assets (Note 24) | 19,133,946 | - | - | 10,899,625 | 30,033,571 | ||
| Current financial assets available for sale (Note 15) | - | 1,973,711 | - | - | 1,973,711 | ||
| Other banking financial assets (Note 16) | 58,718,171 | - | - | 336,132 | 59,054,303 | ||
| Cash and cash equivalents (Note 23) | 618,811,099 | - | - | - | 618,811,099 | ||
| Total Financial assets | 827,186,539 | 7,950,897 | - | 11,235,757 | 941,467,736 | ||
| Liabilities | |||||||
| Non-current accounts payable (Note 34) | |||||||
| Medium and long term debt (Note 31) | - | - | 127,145 | - | 127,145 | ||
| Current accounts payable (Note 34) | - | - | 434,568,170 | 10,295,530 | 444,863,700 | ||
| Banking client deposits and other loans (Note 35) | - | - | 253,944,840 | - | 253,944,840 | ||
| Short term debt (Note 31) | - | - | 9,679,829 | - | 9,679,829 | ||
| Cash and cash equivalents (Note 36) | - | - | 26,683,455 | 55,879,270 | 82,562,725 | ||
| Total Financial liabilities | - | - | 725,003,439 | 66,550,179 | 791,553,618 | ||
| 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Group | Loans and receivables |
Available-for-sale financial assets |
Other financial liabilities | Non-financial assets/liabilities |
Total | ||
| Assets | |||||||
| Other investments (Note 13) | - | 1,106,812 | - | - | 1,106,812 | ||
| Other non-current assets (Note 24) | 601,103 | - | - | - | 601,103 | ||
| Accounts receivable (Note 19) | 124,355,641 | - | - | - | 124,355,641 | ||
| Other current assets (Note 24) | 12,590,310 | - | - | 10,346,633 | 22,936,943 | ||
| Cash and cash equivalents (Note 23) | 603,649,717 | - | - | - | 603,649,717 | ||
| Total Financial assets | 741,196,771 | 1,106,812 | - | 10,346,633 | 752,650,215 | ||
| Liabilities | |||||||
| Medium and long term debt (Note 31) | - | - | 1,035,522 | - | 1,035,522 | ||
| Accounts payable (Note 34) | - | - | 426,756,771 | 9,134,906 | 435,891,677 | ||
| Short term debt (Note 31) | - | - | 7,078,155 | - | 7,078,155 | ||
| Cash and cash equivalents (Note 36) | - | - | 31,434,918 | 60,357,959 | 91,792,877 | ||
| Total Financial liabilities | - | - | 466,305,366 | 69,492,865 | 535,798,231 |
The Group believes that the fair value of its financial assets and liabilities is similar to its book value, with the exception of the following caption:
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| Book value | Fair value | Book value | Fair value | ||
| Financial assets Investments held to maturity |
95,094,543 | 94,701,870 | - | - |
Regarding the Company, as at 31 December 2016 and 31 December 2015, the categories of financial assets and liabilities were broken down as follows:
| 2016 | |||||
|---|---|---|---|---|---|
| Company | Loans and receivables |
Available-for-sale financial assets |
Other financial liabilities | Non-financial assets/liabilities |
Total |
| Assets | |||||
| Other investments (Note 13) | - | 1,503,572 | - | - | 1,503,572 |
| Shareholders (Note 51) | 8,025,158 | - | - | 822,241 | 8,847,398 |
| Other non-current assets (Note 24) | 1,110,991 | - | - | - | 1,110,991 |
| Accounts receivable (Note 19) | 94,323,683 | - | - | - | 94,323,683 |
| Other current assets (Note 24) | 18,226,686 | - | - | 9,558,147 | 27,784,833 |
| Cash and cash equivalents (Note 23) | 475,068,122 | - | - | - | 475,068,122 |
| Total Financial assets | 596,754,640 | 1,503,572 | - | 10,380,388 | 608,638,599 |
| Liabilities | |||||
| Non-curent accounts payable (Note 34) | |||||
| Current accounts payable (Note 34) | - | - | 416,423,188 | 10,136,789 | 426,559,977 |
| Shareholders (Note 51) | - | - | - | 7,341,360 | 7,341,360 |
| Short term debt (Note 31) | - | - | 724,749 | - | 724,749 |
| Cash and cash equivalents (Note 36) | - | - | 21,467,007 | 49,816,194 | 71,283,201 |
| Total Financial liabilities | - | - | 438,614,944 | 67,669,722 | 506,284,666 |
| 2015 | |||||
|---|---|---|---|---|---|
| Company | Loans and receivables |
Available-for-sale financial assets |
Other financial liabilities | Non-financial assets/liabilities |
Total |
| Assets | |||||
| Other investments (Note 13) | - | 1,106,812 | - | - | 1,106,812 |
| Shareholders (Note 51) | 9,029,828 | - | - | 1,011,393 | 10,041,221 |
| Other non-current assets (Note 24) | 586,741 | - | - | - | 586,741 |
| Accounts receivable (Note 19) | 97,684,021 | - | - | - | 97,684,021 |
| Other current assets (Note 24) | 12,056,246 | - | - | 9,805,991 | 21,862,237 |
| Cash and cash equivalents (Note 23) | 559,542,719 | - | - | - | 559,542,719 |
| Total Financial assets | 678,899,556 | 1,106,812 | - | 10,817,383 | 690,823,751 |
| Liabilities | |||||
| Medium and long term debt (Note 31) | - | - | 724,845 | - | 724,845 |
| Accounts payable (Note 34) | - | - | 413,516,025 | 6,890,124 | 420,406,149 |
| Shareholders (Note 51) | - | - | - | 1,613,945 | 1,613,945 |
| Short term debt (Note 31) | - | - | 462,968 | - | 462,968 |
| Cash and cash equivalents (Note 36) | - | - | 26,521,741 | 54,891,413 | 81,413,154 |
| Total Financial liabilities | - | - | 441,225,580 | 63,395,481 | 504,621,061 |
The Company believes that the fair value of its financial assets and liabilities is similar to its book value.
As at 31 December 2016 and 31 December 2015, the information regarding European Union subsidies or grants (Note 2.22) to the Group and the Company was as follows:
| 2016 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Group | Company | |||||||||
| Subsidy | Attributed amount |
Received amount |
Amount to be received |
Accumulated income |
Amount to be used |
Attributed amount |
Received amount |
Amount to be received |
Accumulated income |
Amount to be used |
| Investment subsidy | 9,833,915 | 9,680,599 | 153,316 | 9,482,425 | 351,490 | 9,815,622 | 9,662,306 | 153,316 | 9,476,327 | 339,295 |
| Operating subsidy | 94,486 | 94,486 | - | 94,486 | - | 70,864 | 70,864 | - | 70,864 | - |
| 9,928,401 | 9,775,085 | 153,316 | 9,576,911 | 351,490 | 9,886,486 | 9,733,170 | 153,316 | 9,547,192 | 339,295 |
| 2015 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Group | Company (*) | |||||||||
| Subsidy | Attributed amount |
Received amount |
Amount to be received |
Accumulated income |
Amount to be used |
Attributed amount |
Received amount |
Amount to be received |
Accumulated income |
Amount to be used |
| Investment subsidy | 9,833,915 | 9,680,599 | 153,316 | 9,465,126 | 368,789 | 9,815,622 | 9,662,306 | 153,316 | 9,465,126 | 350,496 |
| Operating subsidy | 94,486 | 94,486 | - | 94,486 | - | 70,864 | 70,864 | - | 70,864 | - |
| 9,928,401 | 9,775,085 | 153,316 | 9,559,612 | 368,789 | 9,886,486 | 9,733,170 | 153,316 | 9,535,991 | 350,496 | |
| * Restated values: see note 3 |
The amounts received as investment subsidy – FEDER - are recognised in the income statement, under the heading Other operating income, as the corresponding assets are amortised.
The financial contribution of the Instituto do Emprego e da Formação Profissional, I.P. ("Institute of Employment and Professional Training") ("IEFP"), received under the Employment Internships Programme configures the typology of Grants related to income or operational expenses and is recognised as revenue in the same period of the related expense.
The amounts received were initially deferred (Note 21) and transferred to the income statement to the caption Other operating income, to the extent that the expenses were recognised.
For the years ended 31 December 2016 and 31 December 2015, the significant categories of the Company revenue were as follows:
| Company | |||||
|---|---|---|---|---|---|
| 2016 | 2015 | ||||
| Sales | 19,247,627 | 22,892,730 | |||
| Mail services rendered | 447,593,802 | 461,183,181 | |||
| Postal financial services | 51,693,802 | 54,725,404 | |||
| Electronic vehicle identification devices | 6,111,035 | 6,054,633 | |||
| Telecommunication services | 926,045 | 1,283,540 | |||
| Other services | 5,485,005 | 4,839,931 | |||
| 531,057,316 | 550,979,418 |
Other services fundamentally concern:
| 2016 | 2015 | |
|---|---|---|
| Photocopies Certification | 226,737 | 253,102 |
| Reg. Aut. Madeira transport allowance | 829,740 | 565,383 |
| Others Philately | 125,822 | 230,555 |
| Costums presentation tax | 1,276,941 | 784,426 |
| Corfax | 160,908 | 229,965 |
| Non-adressed mail | 244,037 | 262,800 |
| Portugal Telecom services | 113,925 | 165,762 |
| Digital mailRoom | 337,383 | 330,015 |
| Other services | 2,169,512 | 2,017,925 |
| 5,485,005 | 4,839,931 |
As at 31 December 2016 and 31 December 2015, the composition of the Group heading Financial margin was as follows:
| Group | |||
|---|---|---|---|
| 2016 | 2015 | ||
| Interest and similar income | 416,006 | - | |
| Interest on held to maturity investments | 306,145 | - | |
| Interest on deposits at credit institutions | 64,721 | - | |
| Interest on credit to bank clients | 29,329 | - | |
| Interest on available for sale financial assets | 15,811 | - | |
| Interest and similar charges | 389,955 | - | |
| Interest from banking client deposits | 389,955 | - | |
| 26,051 | - |
For the years ended 31 December 2016 and 31 December 2015, the composition of the Group and the Company heading Other operating income was as follows:
| Group | Company | |||
|---|---|---|---|---|
| Restated | ||||
| 2016 | 2015 | 2016 | 2015* | |
| Supplementary revenues | 4,253,302 | 3,214,885 | 33,085,834 | 35,420,690 |
| Altice agreement | 9,583,333 | 5,416,667 | 6,388,889 | 3,611,111 |
| Early settlement discounts received | 47,453 | 85,154 | 14,876 | 47,120 |
| Gains inventories | 24,671 | 16,657 | 12,373 | 9,220 |
| Favourable exchange rate differences of assets and liabilities other than financing |
654,644 | 1,999,259 | 529,898 | 1,654,988 |
| Income from financial investments | 462,169 | 485,472 | 211,994 | 325,155 |
| Income from non-financial investments | 5,289,677 | 1,751,030 | 5,283,045 | 1,728,185 |
| Income from services and commissions | 614,028 | - | - | - |
| Interest income and expenses - financial services | 334,714 | 516,707 | 334,714 | 516,707 |
| VAT adjustments | 3,981,197 | 6,409,103 | 3,981,197 | 6,409,103 |
| Other | 1,881,754 | 2,115,962 | 1,072,210 | 186,632 |
| 27,126,942 | 22,010,897 | 50,915,030 | 49,908,911 |
* Restated values: see note 3
Regarding the Group and the Company, the interest related to the Financial Services segment is recognised under this caption (Note 2.22).
The amount related to VAT adjustments mainly results from the improvements made in the procedures of the VAT deduction methodology in the Company.
The caption Income from non-financial investments of the Group and the Compay includes the gains realised on the sale of six properties classified as Investment properties in the amount of 1.2 million Euros, as well as the gain in the amount of 1.7 million Euros regarding Conde Redondo building as a result of the lease contract termination.
Following the Memorandum of Understanding signed with Altice and being the acquisition of PT Portugal completed by Altice, CTT received from Altice the agreed initial payment, which is being recognised in the consolidated income statement over the exclusive period for the negotiation of possible partnerships, as provided in the Memorandum.
Regarding the Company, the caption Supplementary revenues fundamentally relates to:
| Company | ||||
|---|---|---|---|---|
| Restated | ||||
| 2016 | 2015* | |||
| Royalties | 500,000 | 500,000 | ||
| Services rendered to Group companies (1) | 27,699,090 | 30,656,478 | ||
| Rental of spaces in urban buildings | 2,650,924 | 2,706,780 | ||
| Other | 2,235,819 | 1,557,432 | ||
| 33,085,834 | 35,420,690 |
(1) Includes subsidiary, associated and joint-ventures companies.
* Restated values: see note 3
For the years ended 31 December 2016 and 31 December 2015, the composition of the Group and the Company heading External supplies and services was as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Subcontracts | 4,289,091 | 4,178,927 | - | 1,380 |
| Specialised services | 65,860,067 | 60,777,736 | 40,885,082 | 43,719,035 |
| Specialised services rendered by Group companies (1) | 103,071 | 296,271 | 4,811,859 | 8,630,861 |
| Materials | 2,362,427 | 1,840,512 | 1,565,699 | 1,735,038 |
| Energy and fuel | 14,977,762 | 15,073,806 | 13,012,223 | 12,641,773 |
| Staff transportation | 214,836 | 222,216 | 208,150 | 219,697 |
| Transportation of goods | 58,016,465 | 63,427,926 | 11,790,403 | 11,732,952 |
| Rents | ||||
| Vehicle operational lease | 7,774,394 | 7,488,749 | 6,878,901 | 6,628,875 |
| Other rental charge | 27,031,283 | 27,652,643 | 22,811,547 | 21,523,538 |
| Communication | 2,399,224 | 2,691,023 | 1,275,034 | 1,619,372 |
| Insurance | 3,100,116 | 3,498,473 | 1,958,375 | 2,198,994 |
| Royalties | 294,643 | 254,430 | - | - |
| Litigation and notary | 321,881 | 275,234 | 220,920 | 230,863 |
| Cleaning, hygiene and confort | 3,967,060 | 3,966,115 | 3,633,811 | 3,617,475 |
| Postal Agencies | 4,514,987 | 4,498,737 | 4,532,203 | 4,519,705 |
| Postal operators | 18,271,388 | 18,051,278 | 17,326,163 | 17,012,078 |
| Delivery subcontracting | 5,786,536 | 5,321,179 | 5,786,536 | 5,504,638 |
| Other services | 12,751,658 | 13,568,885 | 7,628,235 | 7,006,334 |
| Other services rendered by Group companies (1) | 175 | - | 3,252,241 | 4,469,501 |
| 232,037,064 | 233,084,139 | 147,577,382 | 153,012,109 |
(1) Includes subsidiary, associated and joint-ventures companies.
As at 31 December 2016 and 31 December 2015, the Group and the Company maintained medium and long-term liabilities in operating lease contracts of vehicles, with penalty clauses in the case of cancellation. The total amount of the future payments relative to operating leases is as follows:
| Group | Company | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Due within 1 year | 10,401,717 | 10,434,899 | 8,776,335 | 8,963,676 | |
| Due between 1 to 5 years Due over 5 years |
11,439,870 - |
16,618,420 - |
8,239,453 - |
14,144,316 - |
|
| 21,841,587 | 27,053,319 | 17,015,788 | 23,107,992 |
During the years ended 31 December 2016 and 31 December 2015, the costs incurred with operating lease contracts amounted to 7,774,394 Euros and to 7,488,749 Euros, respectively, by the Group, and 6,878,901 Euros and to 6,628,875 Euros, respectively, by the Company. These costs are recognised under the caption Supplies and external services in the income statement.
The operating leases relate to leasing agreements of short duration, in which the lessor transfers the temporary use of the asset to a third party upon payment of an income or rental.
Lease payments are made monthly by equal amounts during the period of the lease agreement and the recognition of the rent is considered as an expense which will also be performed on a linear basis (straight-line basis).
There is no recognition of any leased asset, because the lease is a rental in substance and there is no evidence that the lessee will obtain future economic benefits from the asset beyond the contract period.
The transfer of the legal ownership of the assets to the lessee at the end of the contract is not expected.
During the years ended 31 December 2016 and 31 December 2015, the composition of the Group and the Company heading Staff Costs was as follows:
| Group | Company | ||||
|---|---|---|---|---|---|
| Restated | |||||
| 2016 | 2015 | 2016 | 2015* | ||
| Statutory bodies remuneration | 4,571,640 | 4,136,712 | 3,237,036 | 3,708,714 | |
| Staff remuneration | 255,727,613 | 259,355,100 | 227,873,402 | 233,731,110 | |
| Empolyee benefits | 4,292,549 | (2,686,050) | 4,251,938 | (2,729,170) | |
| Indemnities | 6,634,938 | 5,891,115 | 6,390,333 | 4,030,742 | |
| Social Security charges | 56,892,888 | 56,482,830 | 50,328,638 | 50,259,929 | |
| Occupational accident and health insurance | 3,486,570 | 2,253,074 | 3,253,848 | 1,958,618 | |
| Social welfare costs | 6,728,690 | 6,297,590 | 6,439,521 | 6,069,367 | |
| Other staff costs | 52,593 | 42,509 | - | - | |
| Gastos com o pessoal | 338,387,481 | 331,772,879 | 301,774,716 | 297,029,310 |
* Restated values: see note 3
As at 31 December 2016 and 31 December 2015, the fixed and variable remunerations attributed to the members of the statutory bodies of the different companies of the Group, including CTT, were as follows:
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Group | Board of Directors | Audit Comittee | Remuneration Board | General Meeting of Shareholders |
Total | |
| Short-term remuneration | ||||||
| Fixed remuneration | 3,228,383 | 408,571 | 33,824 | 4,500 | 3,675,278 | |
| Annual variable remuneration | 896,362 | - | - | - | 896,362 | |
| 4,124,745 | 408,571 | 33,824 | 4,500 | 4,571,640 | ||
| Long-term remuneration | ||||||
| Defined contribution plan RSP | 223,500 | - | - | - | 223,500 | |
| Long-term variable remuneration - Share Plan | 1,493,546 | - | - | - | 1,493,546 | |
| 1,717,046 | - | - | - | 1,717,046 | ||
| 5,841,791 | 408,571 | 33,824 | 4,500 | 6,288,686 | ||
| 2015 | ||||||
| Group | Board of Directors | Audit Comittee | Remuneration Board | General Meeting of Shareholders |
Total | |
| Short-term remuneration | ||||||
| Fixed remuneration | 2,446,796 | 273,886 | 37,440 | 5,461 | 2,763,583 | |
| Annual variable remuneration | 1,373,129 | - | - | - | 1,373,129 | |
| 3,819,925 | 273,886 | 37,440 | 5,461 | 4,136,712 | ||
| Long-term remuneration | ||||||
| Defined contribution plan RSP | 207,458 | - | - | - | 207,458 | |
| Long-term variable remuneration - Share Plan | 1,610,685 | - | - | - | 1,610,685 | |
| 1,818,143 | - | - | - | 1,818,143 | ||
| 5,638,068 | 273,886 | 37,440 | 5,461 | 5,954,855 | ||
| Company | Board of Directors | Audit Comittee | 2016 Remuneration Board |
General Meeting of Shareholders |
Total | |
| Short-term remuneration | ||||||
| Fixed remuneration | 2,083,779 | 218,571 | 33,824 | 4,500 | 2,340,674 | |
| Annual variable remuneration | 896,362 | - | - | - | 896,362 | |
| 2,980,141 | 218,571 | 33,824 | 4,500 | 3,237,036 | ||
| Long-term remuneration Defined contribution plan RSP |
188,500 | - | - | - | 188,500 | |
| Long-term variable remuneration - Share Plan | 1,493,546 | - | - | - | 1,493,546 | |
| 1,682,046 | - | - | - | 1,682,046 | ||
| 4,662,187 | 218,571 | 33,824 | 4,500 | 4,919,082 | ||
| 2015 | ||||||
| General Meeting of | ||||||
| Company | Board of Directors | Audit Comittee | Remuneration Board | Shareholders | Total | |
| Short-term remuneration | ||||||
| Fixed remuneration Annual variable remuneration |
2,087,398 1,373,129 |
205,286 - |
37,440 - |
5,461 - |
2,335,585 1,373,129 |
|
| 3,460,527 | 205,286 | 37,440 | 5,461 | 3,708,714 | ||
| Long-term remuneration | ||||||
| Defined contribution plan RSP | 188,500 | - | - | - | 188,500 | |
| Long-term variable remuneration - Share Plan | 1,610,685 | - | - | - | 1,610,685 | |
| 1,799,185 | - | - | - | 1,799,185 | ||
| 5,259,712 | 205,286 | 37,440 | 5,461 | 5,507,899 |
Bearing in mind the new reality of CTT as an entity of private capital and admitted to trading on a regulated market, the Remuneration Committee (elected by the General Meeting on 24 March 2014 and composed of independent members) defined the new remuneration model for the statutory bodies which followed a benchmark study performed by a specialised firm and is already considered under the caption Statutory bodies' remuneration.
Following the remuneration model approved by the Remuneration Committee, it was decided to allocate a fixed monthly amount for an Open Pension Fund or Retirement Savings Plan to the executive members of the Board of Directors.
The long-term variable remuneration awarded to the executive members of the Board of Directors shall be paid at the end of the 2014-2016 term of office, with settlement date of 31 January 2017, in Company shares, and the amount of 1,493,546 Euros corresponds to the expense to be recognised in the period between 1 January 2016 and 31 December 2016 and was determined by an actuarial study performed by an independent entity. The annual variable remuneration will be determined and paid on an annual basis and was also defined by an actuarial study performed by an independent entity.
The variation in this heading is mainly a result of the reduction in the accrual for variable remunerations regarding 2016 as well as the reduction in Tourline's staff costs following the initiatives that begun in 2015.
The amount registered in the caption Employee benefits in the year ended 31 December 2015 mainly reflects the liability reduction related to workers in a situation of Suspension of contract, redeployment and release of employment as well as the liability reduction related to the benefits Pension for work accidents and Monthly life annuity due to the update of the pensions' growth rate.
In the year ended 31 December 2016 this caption includes the amounts of 1,845,604 Euros and 1,714,185 Euros regarding the Group and the Company, respectively, related to compensations paid for termination of employment contracts by mutual agreement.
As at 31 December 2016 this caption of the Company includes the amount of 4,001,903 Euros arising from the human resources' optimisation process which aimed at the efficiency of its Central Services.
Regarding the Group, as at 31 December 2015, this caption also includes the amount of 1,712,602 Euros related to the provision for restructuring recorded in Tourline following the human resources optimisation in the context of the restructuring plan currently being implemented in the Company.
Social welfare costs relate almost entirely to health costs incurred by the Group and the Company with the active workers, as well as expenses related to Health and Safety at work. The decrease in this caption results from changes that took place in CTT's Healthcare Plan following the revised Regulation of the Social Works (RSW) in 2015, according to which the fees that the beneficiaries pay to the system were increased by raising the monthly contributions and co-payments.
As at 31 December 2016 and 31 December 2015, the Group and Company heading Staff costs includes the amounts of 800,611 Euros and 807,237 Euros, respectively, related to expenses with workers' representative bodies.
For the years ended 31 December 2016, the average number of staff of the Group and the Company was 12,401 and 10,984 employees, respectively (12,445 employees and 10,908 employees as at 31 December 2015).
For the years ended 31 December 2016 and 31 December 2015, the detail of Impairment of inventories and accounts receivable, net, of the Group and the Company was as follows:
| Group | Company | ||||
|---|---|---|---|---|---|
| Restated | |||||
| 2016 | 2015 | 2016 | 2015* | ||
| Impariment losses | |||||
| Accounts receivable (Note 19) | 2,875,921 | 4,625,870 | 352,246 | 164,956 | |
| Credit to bank clients (Note 20) | 417 | - | - | - | |
| Other current and non-current assets (Note 24) | 524,261 | 539,816 | 459,471 | 379,304 | |
| Inventories (Nota 18) | - | 71,965 | - | 1 | |
| Total gastos de perdas por imparidade | 3,400,599 | 5,237,651 | 811,717 | 544,261 | |
| Reversals of impairment losses | |||||
| Accounts receivable (Note 19) | 2,267,005 | 2,025,960 | 310,637 | 300,472 | |
| Other current and non-current assets (Note 24) | 691,210 | 1,500,571 | 652,014 | 467,548 | |
| INESC loan (Note 24) | 396,761 | 24,870 | 396,761 | 24,870 | |
| Inventories (Note 18) | - | 275,816 | - | 268,617 | |
| Total rendimentos de perdas por imparidade | 3,354,976 | 3,827,217 | 1,359,412 | 1,061,506 | |
| Net movement of the period | (45,623) | (1,410,434) | 547,695 | 517,245 |
* Restated values: see note 3
For the years ended 31 December 2016 and 31 December 2015, the detail of Depreciation/ amortisation and impairment losses, net, regarding the Group and the Company was as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Tangible fixed assets | ||||
| Depreciation (Note 5) | 20,390,450 | 19,278,804 | 17,551,180 | 15,929,702 |
| Impairment losses (Note 5) | (123,714) | (123,714) | (123,714) | (123,714) |
| Intangible assets | ||||
| Amortisation (Note 6) | 6,623,232 | 3,832,949 | 4,473,575 | 3,050,326 |
| Impairment losses (Note 6) | - | - | - | - |
| Investment properties | ||||
| Depreciation (Note 7) | 569,250 | 752,365 | 569,250 | 752,365 |
| Impairment losses (Note 7) | 8,876 | (167,403) | 8,876 | (167,403) |
| Depreciações / amortizações e imparidad | 27,468,094 | 23,573,001 | 22,479,167 | 19,441,277 |
For the years ended 31 December 2016 and 31 December 2015, the breakdown of the Group and the Company heading Other operating costs was as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Taxes | 2,365,876 | 1,894,532 | 2,196,431 | 1,682,678 |
| Bad debts | 319,779 | 1,090,569 | 111,525 | 11,025 |
| Losses in inventories | 312,732 | 510,693 | 310,233 | 463,217 |
| Costs and losses from non-financial investments | 31,190 | 368,018 | 31,190 | 344,298 |
| Unfavourable exhange rate differences of assets | 700,833 | 2,029,152 | 344,789 | 1,711,387 |
| Donations | 1,235,977 | 908,366 | 1,235,977 | 908,366 |
| Banking services | 2,241,982 | 1,181,262 | 2,132,215 | 953,814 |
| Interest on arrears | 42,534 | 88,201 | 42,221 | 67,698 |
| Subscriptions | 722,743 | 804,791 | 669,073 | 754,109 |
| Expenses of services and commissions | 192,611 | - | - | - |
| Deposits Guarantee Fund/Resolution unified Fund | 680 | 51,000 | - | - |
| Indemnities | 443,179 | 490,023 | 372,799 | 346,599 |
| Other costs | 1,827,794 | 2,020,218 | 1,158,487 | 1,085,747 |
| Outros gastos e perdas operacionais | 10,437,910 | 11,436,825 | 8,604,940 | 8,328,937 |
For the years ended 31 December 2016 and 31 December 2015, the heading Interest Expenses of the Group and the Company had the following detail:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Interest expenses | ||||
| Bank loans | 68,775 | 77,473 | 3,994 | 5,749 |
| Financial leases | 7,014 | 18,201 | 2,958 | 8,084 |
| Other interest | 137,272 | 8,622 | 136,948 | 19,285 |
| Interest costs from employee benefits (Note 32) | 6,322,738 | 6,746,892 | 6,322,495 | 6,718,992 |
| Other interest costs | 4,307 | 10,212 | 203 | 22,595 |
| 6,540,106 | 6,861,401 | 6,466,598 | 6,774,705 |
During the years ended 31 December 2016 and 31 December 2015, the Group and the Company heading Interest income was detailed as follows:
| Group | Company | |||
|---|---|---|---|---|
| Restated | ||||
| 2016 | 2015 | 2016 | 2015* | |
| Interest income | ||||
| Deposits in credit institutions | 671,599 | 1,483,388 | 588,919 | 1,395,837 |
| Loans to Group companies (1) | - | - | 144,556 | 283,466 |
| Other supplementary income | - | 1,775 | - | 1,775 |
| 671,599 | 1,485,163 | 733,475 | 1,681,077 |
(1) Includes subsidiary, associated and joint-ventures companies.
* Restated values: see note 3
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 above 1,500,000 Euros and 5% of taxable profit above 7,500,000 up to 35,000,000 Euros and 7% of the taxable profit above 35,000,000 Euros. Tourline 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., Mailtec Comunicação, S.A., Payshop Portugal, S.A, CTT Contacto, S.A. and Banco CTT, S.A., through the Special Regime for the Taxation of Groups of Companies ("RETGS"). The remaining companies are taxed individually.
For the years ended 31 December 2016 and 31 December 2015, the reconciliation between the nominal rate and the effective income tax rate of the Group and the Company was as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Earnings before taxes | 85,244,706 | 104,609,981 | 85,900,107 | 100,813,654 |
| Nominal tax rate | 21.0% | 21.0% | 21.0% | 21.0% |
| 17,901,388 | 21,968,096 | 18,039,022 | 21,170,867 | |
| Tax Benefits | (354,479) | (198,588) | (352,413) | (190,773) |
| Accounting capital gains/(losses) | (543,069) | 17,549 | (390,889) | 21,899 |
| Tax capital gains/(losses) | (908,568) | (394,293) | (909,083) | (396,402) |
| Equity method | (8,518) | 5,938 | 2,284,719 | 879,222 |
| Provisions not considered in the calculation of deferred taxes | (148,483) | 19,167 | (148,483) | 19,167 |
| Impairment losses and reversals | 321,703 | (133,566) | 380,705 | (23,754) |
| Other situations, net | (405,990) | 959,041 | (345,075) | (339,381) |
| Adjustments related with - autonomous taxation | 1,386,243 | 1,628,892 | 1,356,233 | 1,571,866 |
| Adjustments related with - Municipal Surcharge | 1,233,829 | 1,496,378 | 947,754 | 1,189,739 |
| Adjustments related with - State Surcharge | 4,018,747 | 5,162,504 | 3,527,850 | 4,657,116 |
| Impact of the change in income tax rate (deferred tax) | 118,403 | (574,330) | 118,403 | (574,330) |
| Tax losses without deferred tax | 1,770,819 | 2,648,348 | - | (121,616) |
| Excess estimated income tax | (1,034,386) | (65,790) | (769,031) | - |
| Other effects, net | - | - | - | 884,751 |
| Income taxes for the period | 23,347,639 | 32,539,346 | 23,739,712 | 28,748,371 |
| Effective tax rate | 27.39% | 31.11% | 27.64% | 28.52% |
| Income taxes for the period | ||||
| Current tax | 20,179,216 | 28,469,567 | 20,869,417 | 24,882,794 |
| Deferred tax | 4,202,808 | 4,135,569 | 3,639,326 | 3,987,193 |
| Excess estimated income tax | (1,034,385) | (65,790) | (769,031) | (121,616) |
| Imposto sobre o rendimento do período | 23,347,639 | 32,539,346 | 23,739,712 | 28,748,371 |
In the year ended 31 December 2016, the heading Excess estimated income tax and reimbursement of tax includes the amount of 268,898 Euros regarding the tax credit allocated under the SIFIDE programme of 2014 of CTT – Correios de Portugal, S.A., the amount of 371,959 Euros related to the amortisations of Track&Trace software of 2008 which were considered, by Arbitral decision, deductible for Corporate Income Tax purposes. This heading also includes the amounts of 117,771 Euros and 267,672 Euros regarding the excess income tax estimate of 2015 of the Companies CTT, S.A. and CTT Expresso, S.A., respectively.
As at 31 December 2016 and 31 December 2015, the balance of the Group and the Company deferred tax assets and liabilities was composed as follows:
| Group | Company | ||||
|---|---|---|---|---|---|
| Restated | |||||
| 2016 | 2015 | 2016 | 2015* | ||
| Deferred tax assets | |||||
| Employee benefits - healthcare | 70,523,096 | 67,158,181 | 70,523,096 | 67,158,181 | |
| Employee benefits - other long-term benefits | 5,301,326 | 6,531,878 | 5,301,326 | 6,522,953 | |
| Deferred accounting capital gains | 606,790 | 1,723,242 | 606,790 | 1,723,242 | |
| Impairment losses and provisions | 3,030,558 | 8,997,558 | 2,990,166 | 8,280,788 | |
| Tax losses carried forward | 327,183 | 342,161 | - | - | |
| Impairment losses in tangible fixed assets | 360,333 | 405,373 | 360,333 | 405,373 | |
| Share Plan | 1,268,470 | 847,140 | 1,268,470 | 847,140 | |
| Land and buildings | 1,847,637 | 1,392,924 | 1,847,637 | 1,392,924 | |
| Tangible assets' tax revaluation regime | 2,680,786 | - | 2,680,786 | - | |
| Other | 274,583 | 137,484 | - | - | |
| 86,220,762 | 87,535,941 | 85,578,604 | 86,330,601 | ||
| Deferred tax liabilities | |||||
| Revaluation of tangible fixed assets before IFRS | 3,151,709 | 3,562,520 | 3,151,709 | 3,562,520 | |
| Suspended capital gains | 934,821 | 971,679 | 934,821 | 971,679 | |
| Other | 36,616 | 42,399 | - | - | |
| 4,123,146 | 4,576,598 | 4,086,530 | 4,534,199 | ||
* Restated values: see note 3
Due to the access to the Tangible assets' tax revaluation regime, established in Decree Law no. 66/2016 of 3 November, the Company recognised a deferred tax asset in the amount of 2,680,786 Euros.
As at 31 December 2016, the expected amount of deferred tax assets and liabilities to be settled within 12 months is 5.3 million Euros and 0.5 million Euros, respectively, regarding the Group and 5.3 million Euros and 0.4 million Euros, respectively, regarding the Company.
During the years ended 31 December 2016 and 31 December 2015, the movements which occurred under the deferred tax headings of the Group and the Company were as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Deferred tax assets | ||||
| Opening balances | 87,535,941 | 91,428,940 | 86,330,601 | 90,547,447 |
| Effect on net profit | ||||
| Employee benefits - healthcare | 29,917 | (733,228) | 29,917 | (733,228) |
| Employee benefits - other long-term benefits | (1,230,552) | (3,628,545) | (1,221,627) | (3,595,239) |
| Deferred accounting gains | (1,116,452) | (661,719) | (1,116,452) | (661,719) |
| Impairment losses and provisions | (5,967,001) | (1,142,594) | (5,290,622) | (1,014,836) |
| Conversion adjustments - derecognition of inventories | - | - | - | (91,864) |
| Tax losses carried forward | 2,857 | 24,628 | - | - |
| Impairment losses in tangible fixed assets | (45,040) | (91,864) | (45,040) | - |
| Share plan | 421,330 | 459,819 | 421,330 | 459,819 |
| Land and buildings | 454,713 | 1,392,924 | 454,713 | 1,392,924 |
| Tangible assets' tax revaluation regime | 2,680,786 | - | 2,680,786 | - |
| Other | 119,265 | 460,283 | - | - |
| Effect on equity | ||||
| Employee benefits - healthcare | 3,334,998 | 27,297 | 3,334,998 | 27,297 |
| Closing balance | 86,220,762 | 87,535,941 | 85,578,604 | 86,330,601 |
| Group | Company | ||||
|---|---|---|---|---|---|
| Restated | |||||
| 2016 | 2015 | 2016 | 2015* | ||
| Deferred tax liabilities | |||||
| Opening balances | 4,576,598 | 4,841,684 | 4,534,199 | 4,890,550 | |
| Effect on net profit | |||||
| Revaluation of tangible fixed assets before | |||||
| IFRS adoption | (410,811) | (231,295) | (410,811) | (231,295) | |
| Suspended capital gains | (36,858) | (23,274) | (36,858) | (23,274) | |
| Other | (5,783) | (10,517) | - | (2,381) | |
| Closing balance | 4,123,146 | 4,576,598 | 4,086,530 | 4,633,600 | |
* Restated values: see note 3
The tax losses carried forward are related to the losses of the subsidiaries Tourline and Escrita Inteligente and are detailed as follows:
| Company | Tax losses | Deferred tax assets |
|---|---|---|
| Tourline | 37,338,023 | 320,408 |
| Escrita Inteligente | 32,263 | 6,775 |
| Total | 37,370,285 | 327,183 |
Regarding 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 and 2016 have no time limit for deduction. As far as Escrita Inteligente is concerned, the tax losses refer to the years 2015 and 2016 and may be carried forward in the next 12 years.
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 2.5 million Euros in the Group and in the Company.
The Group and the Company policy for recognition of fiscal credits regarding SIFIDE is to recognise the credit at the moment of the effective receipt from the commission certification statement, certifying the eligibility of expenses presented in the applications for tax benefits.
In relation to the expenses incurred with R&D during 2014 of 736,033 Euros and according to the notification dated 18 January 2016 of the Certification Commission, a tax credit of 268,898 Euros was attributed to CTT.
Regarding the year ended 31 December 2015, for the expenses incurred with R&D of 3,358,151 Euros and e 1,437,765 Euros, the Group and the Company will have the possibility of benefiting from a tax deduction in income tax estimated at 2,556,380 Euros and 996,844 Euros, respectively. According to the notification dated 9 February 2017 of the Certification Commission, a tax credit of 1,057,603 Euros was attributed to CTT.
For the year ended 31 December 2016, the expenses incurred with R&D, of 1,895,281 Euros and 1,677,058 Euros, the Group and the Company will have the possibility of benefiting from a tax deduction in income tax estimated at 1,006,271 Euros and 826,237 Euros, respectively.
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 2013 (remain open and inclusive) may still be reviewed and corrected, since the income tax returns prior to this date have already been inspected.
The Board of Directors of the Company 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 December 2016.
The Regulation on Assessment and Control of transactions with CTT related parties defines related party as a qualified shareholder, officer, or even a third party related by any commercial or relevant personal interest and subsidiaries or associates or jointly controlled entities (joint ventures).
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 the Audit Committee of CTT.
The other Related parties' transactions are communicated to the Audit Committee for the purpose of subsequent examination.
During the years ended 31 December 2016 and 31 December 2015, the following transactions took place and the following balances existed with related parties, regarding the Group:
| 2016 | |||||
|---|---|---|---|---|---|
| Group | Accounts receivable | Accounts payable | Revenues | Costs | Dividends |
| Shareholders | - | - | - | - | 70,264,792 |
| Other shareholders of Group companies | |||||
| Associated companies | 2,038 | 12,667 | 12,224 | 84,674 | - |
| Jointly controlled | 106,496 | - | 522,308 | 18,664 | - |
| Members of the | |||||
| Board of Directors | - | - | - | 4,124,745 | - |
| General Meeting | - | - | - | 4,500 | - |
| Audit Committee | - | - | - | 408,571 | - |
| Remuneration Committee | - | - | - | 33,824 | - |
| 108,535 | 12,667 | 534,532 | 4,674,978 | 70,264,792 | |
| 2015 | |||||
| Group | Accounts receivable | Accounts payable | Revenues | Costs | Dividends |
| Shareholders | - | - | - | - | 69,750,000 |
| Other shareholders of Group companies | |||||
| Associated companies | 11,579 | 21,592 | 18,841 | 109,211 | - |
| Jointly controlled | 136,855 | 14,574 | 524,252 | 187,938 | - |
| Members of the | |||||
| Board of Directors | - | - | - | 3,819,925 | - |
| General Meeting | - | - | - | 5,461 | - |
| Audit Committee | - | - | - | 273,886 | - |
| Remuneration Committee | - | - | - | 37,440 | - |
| 148,434 | 36,166 | 543,093 | 4,433,860 | 69,750,000 |
During the years ended 31 December 2016 and 31 December 2015, the following transactions took place and the following balances existed with related parties, regarding the Company:
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Accounts receivable | Shareholders and Group companies (DB) |
Accounts payable | Shareholders and Group companies (CB) |
Revenues | Costs | Interest income | Dividends |
| Shareholders | - | - | - | - | - | - | - | 70,264,792 |
| Group companies | ||||||||
| Subsidiaries | 6,178,794 | 8,847,399 | 3,930,691 | 7,341,360 | 30,989,108 | 9,200,339 | 144,556 | - |
| Associated companies | 2,038 | - | 9,223 | - | 12,224 | 84,262 | - | - |
| Joint Ventures | 106,496 | - | - | - | 522,308 | - | - | - |
| Other related parties | 192 | - | - | - | - | - | - | - |
| Members of the | ||||||||
| Board of Directors | - | - | - | - | - | 2,980,141 | - | - |
| General Meeting | - | - | - | - | - | 4,500 | - | - |
| Audit Committee | - | - | - | - | - | 218,571 | - | - |
| Remuneration Board | - | - | - | - | - | 33,824 | - | - |
| 6,287,520 | 8,847,399 | 3,939,914 | 7,341,360 | 31,523,640 | 12,521,637 | 144,556 | 70,264,792 | |
DB - Debit balance; CB - Credit balance; include current and non-current balances
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Accounts receivable | Shareholders and Group companies (DB) |
Accounts payable | Shareholders and Group companies (CB) |
Revenues | Costs | Interest income | Dividends |
| Shareholders Group companies |
- | - | - | - | - | - | - | 69,750,000 |
| Subsidiaries | 7,509,804 | 10,041,220 | 2,965,125 | 1,613,945 | 30,769,481 | 12,380,647 | 283,466 | - |
| Associated companies | 11,579 | - | 21,592 | - | 18,841 | 55 | - | - |
| Joint Ventures | 136,855 | - | - | - | 15,575 | 1,317 | - | - |
| Other related parties | 2,690,121 | - | (1,542) | - | 1,297,272 | 3,780 | - | - |
| Members of the | ||||||||
| Board of Directors | - | - | - | - | - | 2,087,398 | - | - |
| General Meeting | - | - | - | - | - | 5,461 | - | - |
| Audit Committee | - | - | - | - | - | 200,786 | - | - |
| Remuneration Board | - | - | - | - | - | 37,440 | - | - |
| 10,348,359 | 10,041,220 | 2,985,175 | 1,613,945 | 32,101,169 | 14,716,884 | 283,466 | 69,750,000 | |
DB - Debit balance; CB - Credit balance; include current and non-current balances
Regarding the Company, as at 31 December 2016 and 31 December 2015, the nature and detail, by company of the Group, of the main debit and credit balances was as follows:
| 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Company | Accounts receivable | Shareholders and Group companies (DB) |
Total accounts receivable |
Accounts payable | Shareholders and Group companies (CB) |
Total accounts payable |
|||
| Subsidiaries | |||||||||
| Banco CTT, S.A. | 289,844 | - | 289,844 | - | 7,120,649 | 7,120,649 | |||
| CTT Expresso,S.A. | 3,081,067 | 4,190,294 | 7,271,361 | 2,504,508 | - | 2,504,508 | |||
| Payshop Portugal, S.A. | 81,704 | 6,947 | 88,651 | 448,163 | - | 448,163 | |||
| CTT Contacto, S.A. | 339,331 | 650,158 | 989,489 | 388,326 | 139,152 | 527,478 | |||
| Mailtec Comunicação S.A. | 62,837 | - | 62,837 | 581,137 | 81,559 | 662,697 | |||
| Escrita Inteligente, S.A. | 76,399 | - | 76,399 | - | - | - | |||
| CORRE - Correio Expresso Moçambique, S.A. | 980,271 | - | 980,271 | - | - | - | |||
| Tourline Express Mensajeria, S.A. | 1,267,342 | 4,000,000 | 5,267,342 | 8,556 | - | 8,556 | |||
| Associated companies | |||||||||
| Multicert - Serviços de Certificação Electrónica, S.A. | 2,038 | - | 2,038 | 9,223 | - | 9,223 | |||
| Joint Ventures | |||||||||
| Ti-Post Prestação Serviços Informáticos, ACE NewPost, ACE |
1,778 | - | 1,778 | - | - | - | |||
| Other related parties | |||||||||
| Payshop Moçambique, S.A.R.L. | 192 | - | 192 | - | - | - | |||
| 6,287,520 | 8,847,399 | 15,134,919 | 3,939,914 | 7,341,360 | 11,281,274 | ||||
DB - Debit balance; CB - Credit balance; include current and non-current balances
| 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Company | Accounts receivable | Shareholders and Group companies (DB) |
Total accounts receivable |
Accounts payable | Shareholders and Group companies (CB) |
Total accounts payable |
|
| Subsidiaries | |||||||
| Banco CTT, S.A. | 189,572 | - | 189,572 | - | 1,596,131 | 1,596,131 | |
| CTT Expresso,S.A. | 5,920,444 | 9,634,255 | 15,554,699 | 1,789,877 | - | 1,789,877 | |
| Payshop Portugal, S.A. | 114,755 | 199,578 | 314,333 | 455,610 | - | 455,610 | |
| CTT Contacto, S.A. | 516,407 | 177,560 | 693,968 | 441,484 | - | 441,484 | |
| Mailtec Comunicação S.A. | 115,422 | - | 115,422 | 278,155 | 17,814 | 295,969 | |
| CORRE - Correio Expresso Moçambique, S.A. | 653,203 | 29,827 | 683,031 | - | - | - | |
| Associated companies | |||||||
| Multicert - Serviços de Certificação Electrónica, S.A. | 11,579 | - | 11,579 | 21,592 | - | 21,592 | |
| Joint Ventures | |||||||
| Ti-Post Prestação Serviços Informáticos, ACE | 1,778 | - | 1,778 | - | - | - | |
| NewPost, ACE | 135,077 | - | 135,077 | - | - | - | |
| Other related parties | |||||||
| Tourline Express Mensajeria, S.A. | 2,689,929 | - | 2,689,929 | (1,542) | - | (1,542) | |
| Payshop Moçambique, S.A.R.L. | 192 | - | 192 | - | - | - | |
| 10,348,359 | 10,041,221 | 20,389,579 | 2,985,175 | 1,613,945 | 4,599,120 | ||
These amounts include the values related to loan contracts from CTT to the respective susbsidiaries. DB - Debit balance; CB - Credit balance; include current and non-current balances
1
| 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Fixed assets | Services to be | Fixed assets | Sales and services | Other operating | Supplies and external | Other operating | Interest Income |
| acquired | reinvoiced | sold | rendered | revenues | services | costs | ||
| Subsidiaries | ||||||||
| Banco CTT, S.A. | - | - | 86,384 | 119,157 | 347,902 | - | - | - |
| CTT Expresso,S.A. | 75,885 | 58,755 | 234,711 | 284,972 | 22,423,193 | 1,999,192 | 22,422 | 113,885 |
| Payshop Portugal, S.A. | - | - | - | 57,402 | 761,976 | 4,309,490 | - | 46 |
| CTT Contacto, S.A. | - | 88,502 | - | 1,360,816 | 3,129,281 | 1,864,502 | - | - |
| Mailtec Comunicação S.A. | - | 1,274,504 | - | 250,022 | 813,715 | 998,374 | - | - |
| Escrita Inteligente, S.A. | - | - | - | - | - | - | - | - |
| CORRE - Correio Expresso Moçambique, S.A. | - | - | - | - | 424,729 | - | - | - |
| Tourline Express Mensajeria, S.A. | 108,793 | 26,411 | - | 2,416 | 1,013,527 | 6,360 | - | 30,625 |
| Associated companies | ||||||||
| Multicert - Serviços de Certificação Electrónica, S.A. | - | - | - | 12,224 | - | 84,233 | 29 | - |
| Joint Ventures | ||||||||
| Ti-Post Prestação Serviços Informáticos, ACE | - | - | - | - | - | - | - | - |
| NewPost, ACE | - | - | - | - | 522,308 | - | - | - |
| Other related parties | ||||||||
| Payshop Moçambique, S.A.R.L. | - | - | - | - | - | - | - | - |
| 184,678 | 1,448,171 | 321,095 | 2,087,009 | 29,436,631 | 9,262,150 | 22,451 | 144,556 |
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Fixed assets acquired |
Services to be reinvoiced |
Fixed assets sold |
Sales and services rendered |
Other operating revenues |
Supplies and external services |
Other operating costs |
Interest Income |
| Subsidiaries | ||||||||
| Banco CTT, S.A. | - | - | - | 166 | 196,572 | - | - | - |
| CTT Expresso,S.A. | - | 129,038 | 442,228 | 292,683 | 21,797,649 | 3,440,390 | 20,827 | 283,466 |
| Payshop Portugal, S.A. | - | - | - | 47,503 | 1,125,963 | 4,319,262 | 213 | - |
| CTT Contacto, S.A. | - | 108,824 | - | 4,139 | 5,348,220 | 2,567,969 | - | - |
| Mailtec Comunicação S.A. | - | 1,107,119 | - | 644,184 | 1,127,168 | 2,031,987 | - | - |
| CORRE - Correio Expresso Moçambique, S.A. | - | - | - | - | 185,234 | - | - | - |
| Associated companies | ||||||||
| Multicert - Serviços de Certificação Electrónica, S.A. | - | - | - | 18,841 | - | - | 55 | - |
| Joint Ventures | ||||||||
| Ti-Post Prestação Serviços Informáticos, ACE | - | - | - | - | 15,575 | 1,317 | - | - |
| NewPost, ACE | - | - | - | - | - | - | - | - |
| Other related parties | ||||||||
| Tourline Express Mensajeria, S.A. | 84,441 | 9,869 | - | 15,207 | 1,282,065 | 3,780 | - | - |
| Payshop Moçambique, S.A.R.L. | - | - | - | - | - | - | - | - |
| 84,441 | 1,354,850 | 442,228 | 1,022,724 | 31,078,446 | 12,364,705 | 21,095 | 283,466 |
The information concerning the fees and services provided by the external auditors is detailed in items 46 and 47 of the Corporate Governance Report.
The environment is one of the relevant topics identified in the course of CTT stakeholders' materiality exercise and mapping and integrates the Sustainability strategy of the Group, from a perspective of risk and opportunity management. This approach and the related commitments assumed are expressed in statements and in CTT management standards, as shown in the Environment Policy, Policy of Energy, Carbon and Climate Change Management, Responsible Purchasing Policies and the Code of Conduct (internal) or Business & Biodiversity, Caring for Climate from United Nations and COP 21 Principles (external).
CTT actively participates in a wide range of environmental descriptors such as the energy efficiency, carbon and climate change management, certified environmental management systems, sustainable mobility and alternative fleets, biodiversity, waste management, responsible purchases or sustainable marketing, having been recognised with awards, both at national and international level. The campaigns carried out and the achievements are detailed in the "Sustainability Report of CTT".
In order to ensure the coverage of environmental liabilities arising from the Decree-Law no. 147/2008 of 29 July (Law of Environmental Responsibility), as amended by Decree-Law no. 245/2009 of 22 September, by Decree-Law no. 29A/2011 of 1 March and Decree-Law no. 60/2012 of 14 March, which establish the legal regime of liability for environmental damage, CTT took out an insurance to cover civil liability in the amount of 1,000,000 Euros per damage and insured period.
To the extent of our knowledge, there are no current environmental liabilities or obligations, whether legal or constructive, related to environmental matters that should lead to the constitution of provisions.
In accordance with the Regulatory Standard of the Instituto de Seguros de Portugal (Portuguese Insurance Institute) no. 15/2009-R of 30 December 2009, the Company discloses the relevant
information regarding the activity of insurance mediation according to article 4 of the above mentioned Regulatory Standard.
a) Description of the accounting policies adopted for the recognition of revenue
The insurance agent recognises revenue in accordance with the rules in force, i.e. when the mediator closes accounts with the Insurance companies. The issuance and repayment of insurance are recorded in each Post Office accounting document and allocated to the respective account, according to the respective nature.
b) Indication of total revenue received detailed by nature
| By nature | 2016 | 2015 |
|---|---|---|
| Cash | 2,452,267 | 3,542,063 |
| In-kind | ||
| 2,452,267 | 3,542,063 | |
| By type | 2016 | 2015 |
| Commissions | 2,452,267 | 3,542,063 |
| Fees | ||
| Other remuneration | ||
| 2,452,267 | 3,542,063 |
c) Indication of total revenues relating to insurance contracts intermediated by the Company detailed by Branch Life and Non-Life
| 2016 | ||||
|---|---|---|---|---|
| By entity | Branch Life | Branch Non-Life | ||
| Insurance Companies | 2,337,819 | 114,448 | ||
| Other mediators | ||||
| Customers (other) | ||||
| 2,337,819 | 114,448 |
d) Indication of the existence of concentration levels at the level of insurance companies, other mediators, which are equal or greater than 25% of the total remuneration earned by the portfolio
| By entity | 2016 | 2015 |
|---|---|---|
| Insurance Companies | ||
| FIDELIDADE | 90.10% | 90.05% |
| Other mediators | ||
| Customers (other) |
e) Values of customers' accounts, at the beginning at the end of the year, as well as the volume handled over the year applicable to insurance intermediaries that handle funds related to insurance contracts
| Accounts 'Customers' | 2016 | 2015 |
|---|---|---|
| Opening balance | - | - |
| Closing balance | - | - |
| Volume handled | ||
| Debt | 178,312,367 | 289,194,305 |
| Credit | 24,986,644 | 87,855,030 |
| Accounts receivable | Accounts payable | |||
|---|---|---|---|---|
| By entity | 2016 | 2015 | 2016 | 2015 |
| Policyholders, insureds or beneficiaries | ||||
| Insurance companies | 2,806,435 | 334,004 | 31,594 | 51,355 |
| Reinsurance undertakings | ||||
| Other mediators | ||||
| Customers (other) | ||||
| 2,806,435 | 334,004 | 31,594 | 51,355 |
| Accounts receivable | Accounts payable | |||
|---|---|---|---|---|
| By entity | 2016 | 2015 | 2016 | 2015 |
| Funds received in order to be transferred to insurance companies for payment of insurance premiums |
24,986,644 | 87,855,030 | 23,109,246 | 84,479,529 |
| Collecting funds in order to be transferred to insurance companies for payment of insurance premiums |
||||
| Funds entrusted to it by insurance companies in order to be transferred to policyholders, insureds or beneficiaries (or insurance companies in case the activity of reinsurance mediation) |
175,834,816 | 285,915,932 | 178,312,367 | 289,194,305 |
| Remuneration in respect of insurance premiums already collected and to be collected |
||||
| other mediators | ||||
| Total | 200,821,460 | 373,770,961 | 201,421,613 | 373,673,834 |
Note: The remaining paragraphs of the standard do not apply.
CTT's activity is regularly subject to inquiry and check-up procedures from the supervisory entities for verification of effective compliance with the rules and regulations in force. In this framework, the Company adopts an attitude of collaboration by providing the necessary clarifications and due answer.
Following a thorough analysis of the "statement of objections" that the Company received from the Competition Authority on 16 August 2016 concerning an infraction proceeding on the basis of an alleged obstruction of access of its competitors to the postal network infrastructure, CTT gave its answer within the legal deadline, which refuted those allegations and considered them as unfounded for the following main reasons:
The communication of a "statement of objections" does not correspond to a final decision of the Competition Authority regarding the procedure, as a final decision of this entity to impose a potential fine and / or penalties is still subject to a court appeal.
CTT developed, with the support of consultants, the relevant measures to establish a fund to which a part of the post-employment healthcare liabilities will be transferred. On 16 December 2016, CTT obtained the authorisation by the Supervisory Authority for Insurance and Pension Funds. However, considering the change of some the conditions to establish the Fund, it was decided to re-weigh the opportunity to proceed with the process during 2017.
In accordance with the Criteria for the Formulation of the Universal Service Prices laid down by ICP-Autoridade Nacional de Comunicações, the regulator of the communications sector (ANACOM) under article 14(3) of Law no. 17/2012, of 26 April, amended by Decree-Law no. 160/2013, of 19 November, CTT presented to ANACOM the proposal for the updated prices for 2017.
Following the announcement dated 15 December 2016, regarding the conclusion of the agreement for the acquisition of the total share capital of Transporta – Transportes Porta a Porta, S.A. ("Transporta"), on 2 March 2017, CTT was notified of the decision of non-opposition by the Competition Authority, without imposing any conditions to said acquisition. The acquisition is still subject to other conditions precedent agreed between the parties.
CTT, operating in a liberalized and competitive market, in which there has been a significant decrease in physical mail, has been developing an expansion and diversification's strategy, promoting and offering new services and businesses in neighbouring markets with potential synergies.
The acquisition of Transporta falls within this strategy, as it is an operator dedicated to the fractional transport of goods and to the provision of integrated logistics services, it will allow CTT to add to its portfolio a new offer of delivery of items above 30 kg and to create a new growth platform within the last-mile logistics and cargo value chain.
Pursuant to the remuneration policy approved by the Remuneration Committee of CTT for the 2014-2016 term of office and the Share Plan to the executive members of the Board of Directors of the Company approved by the General Meeting on 5 May 2015, CTT allocate, on 31 January 2017, a total of 600,530 own shares, nominative, ordinary, in the amount of 0.50 Euros each, representing 0.400% of the corresponding share capital, to the Company's executive members of the Board of Directors, as long-term variable remuneration.
The allocation took place, outside the trading platform, through the transfer of the Company's own shares previously acquired for such purpose, according to the evaluation of the fulfillment of the Total Shareholders Return objective established in the referred remuneration policy.
As a result of this allocation, as at 31 January 2017 and to this date, CTT hold 1 own share, which represent 0.000% of its share capital, with the voting right inherent to it suspended pursuant to article 324 of the Portuguese Companies Code.
On 9 March 2017, the Board of Directors of CTT decided to submit to the Annual General Meeting a proposal for approval of the following mutually conditioned operations and subject to the approval of the financial statements relating to the financial year of 2016 and the allocation of profits:
THE DIRECTOR OF ACCOUNTING & TREASURY THE BOARD OF DIRECTORS
| Risk | Our Response |
|---|---|
| CTT is a listed company and the ISAs assume that there is an increased risk of fraud related to when there is. pressure revenue over management to present budgeted results. Additionally, the CTT Group is active in several business areas (Post, Express & Parcels, Financial services and Banking) and the policies for the recognition of revenue are different as mentioned in notes 2.22 and 4. |
The audit procedures included, among others, the following: We tested the operating effectiveness of controls related with the revenue recognition process; We performed tests of details to the transactions (on a sample basis) namely in relation to the timing of revenue recognition; We also performed substantive analytical procedures and tests of the journal entries in order to identify and test the risk of fraud and eventual override of the implemented controls; and We evaluated the adequacy of the disclosures made by the Group in relation to revenue recognition, taking into account the applicable accounting framework. |
| Risk | Our Response |
|---|---|
| The responsibilities with post-employment health benefits and other long-term benefits of employees and board members involve a significant degree of judgment in the definition of long term assumptions, which might result in significant variances of the amounts booked in the financial statements as referred to in notes 2.19, 2.28 and 32. |
The audit procedures included, among others, the following: We evaluated the reasonableness of the assumptions and estimates utilized and the methodology for the actuarial calculation of the responsibility; We compared the information provided by management to the independent actuaries for the calculation of the responsibility; We evaluated the competence, independence and integrity of the actuary hired by management; and We evaluated the adequacy of the ٠ disclosures made by the Group in relation. employee benefits including the to sensitivity analyses, taking into account the applicable accounting framework |
| Risk | Our Response |
|---|---|
| CTT is a listed company and the ISAs assume that there is an increased risk of fraud related to when there pressure is. revenue over management to present budgeted results. Additionally, CTT is active in several business areas (Post and Financial services) and the policies for the recognition of revenue are different as mentioned in notes 2.22 and 40. |
The sudit procedures included, among others, the following: We tested the operating effectiveness of controls related with the revenue recognition process; We performed tests of details to the ٠ transactions (on a sample basis) namely in relation to the timing of revenue recognition; We also performed substantive analytical ۰ procedures and tests of the journal entries in order to identify and test the risk of fraud and eventual override of the implemented controls: and We evaluated the adequacy of the disclosures made by the Entity in relation to revenue recognition, taking into account the applicable accounting framework. |
| Our Response |
|---|
| The audit procedures included, among others, the following: We evaluated the reasonableness of the assumptions and estimates utilized and the methodology for the actuarial calculation of the responsibility; We compared the information provided by management to the independent actuaries. for the calculation of the responsibility; We evaluated competence. the independence and integrity of the actuary hired by management; and We evaluated the adequacy of the ш disclosures made by the Entity in relation to employee benefits including the sensitivity analyses, taking into account the anglicable |
| Provisions | ||
|---|---|---|
| Risk | Our response | |
| The provisions for labor contingencies included in the financial statements are based on the Board of Directors' best estimate about the timing and future cash outflows for its settlement, using assumption that require judgment, as referred to in notes 2.21, 2.28 and 33. |
The audit procedures included, among others, the following: We analyzed the lawsuits brought against CTT by third parties and the contingencies identified by CTT, namely supporting information and the replies to our confirmation requests from lawyers on the status of the lawsuits where CTT is involved: We considered the provisions and we ٠ challenged the assumptions that support the estimates of the Board of Directors; and We evaluated the adequacy of the disclosures made by CTT in relation to provisions, taking into account the |
| Risk | Our response |
|---|---|
| As referred in note 1.2, the Bank started its ctivity at the end of 2015, and opened to the oublic in March 2016 continuing during the year vith its strategy of investment and increase in the umber of branches. |
The audit procedures included, among others, the following: We analyzed the evolution of the activity of ٠ the Bank during 2016 as well as the revised budget for 2017 and assessed the variances |
| The development stage of the activity of a bank hat is in its starting point is relevant for the audit particularly relevant the trategy, being diustment and monitoring of the financial model. approved by the shareholder, to the market conditions in each moment, taking into |
vis a vis the initial plan; and We discussed with management the future п expectations, namely in relation to the start of the activity of credit concession, forms of financing and expected profitability. |
Avenida D. João II, no. 13 1999-001 Lisbon PORTUGAL Telephone: +351 210 471 836 Fax: +351 210 471 994
Email: [email protected] CTT Line 707 26 26 26 Workdays and Saturdays from 8h to 22h
André Gorjão Costa
Peter Tsvetkov Email: [email protected] Telephone: +351 210 471 087 Fax: +351 210 471 994
Brand and Communication Media Advisory Fernando Marante Email: [email protected] Telephone: +351 210 471 800
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