Earnings Release • Oct 31, 2017
Earnings Release
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Results Presentation
CTT – Correios de Portugal, S.A. 31 October 2017
This document has been prepared by CTT – Correios de Portugal, S.A. (the "Company" or "CTT") exclusively for use during the presentation of the results of the third quarter and the first nine months of 2017. As a consequence thereof, this document may not be disclosed or published, nor used by any other person or entity, for any other reason or purpose without the express and prior written consent of CTT. This document (i) may contain summarised information and be subject to amendments and supplements, and (ii) the information contained herein has not been verified, reviewed nor audited by any of the Company's advisors or auditors. Except as required by applicable law, CTT does not undertake any obligation to publicly update or revise any of the information contained in this document. Consequently, the Company does not assume liability for this document if it is used for a purpose other than the above. No express or implied representation, warranty or undertaking is made as to, and no reliance shall be placed on, the accuracy, completeness or correctness of the information or the opinions or statements expressed herein. Neither the Company nor its subsidiaries, affiliates, directors, employees or advisors assume liability of any kind, whether for negligence or any other reason, for any damage or loss arising from any use of this document or its contents. Neither this document nor any part of it constitutes a contract, nor may it be used for incorporation into or construction of any contract or agreement.
This document has an informative nature and does not constitute, nor must it be interpreted as, an offer to sell, issue, exchange or buy any financial instruments (namely any securities issued by CTT or by any of its subsidiaries or affiliates), nor a solicitation of any kind by CTT, its subsidiaries or affiliates. Distribution of this document in certain jurisdictions may be prohibited, and recipients into whose possession this document comes shall be solely responsible for informing themselves about, and observing any such restrictions. Moreover, the recipients of this document are invited and advised to consult the public information disclosed by CTT on its website (www.ctt.pt) as well as on the Portuguese Securities Exchange Commission's website (www.cmvm.pt). In particular, the contents of this presentation shall be read and understood in light of the financial information disclosed by CTT, through such means, which prevail in regard to any data presented in this document. By attending the meeting where this presentation is made and reading this document, you agree to be bound by the foregoing restrictions.
This presentation contains forward-looking statements. All the statements herein which are not historical facts, including, but not limited to, statements expressing our current opinion or, as applicable, those of our directors regarding the financial performance, the business strategy, the management plans and objectives concerning future operations and investments are forward-looking statements. Statements that include the words "expects", "estimates", "foresees", "predicts", "intends", "plans", "believes", "anticipates", "will", "targets", "may", "would", "could", "continues" and similar statements of a future or forward-looking nature identify forward-looking statements.
All forward-looking statements included herein involve known and unknown risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results, performance or achievements to differ materially from those indicated in these statements. Any forward-looking statements in this document reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the results of our operations, growth strategy and liquidity, and the wider environment (specifically, market developments, investment opportunities and regulatory conditions).
Although CTT believes that the assumptions beyond such forward-looking statements are reasonable when made, any third parties are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of CTT, what could cause the models, objectives, plans, estimates and/or projections to be materially reviewed and/or actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Forward-looking statements (in particular, the objectives, estimates and projections as well as the corresponding assumptions) do neither represent a commitment regarding the models and plans to be implemented, nor are they guarantees of future performance, nor have they been reviewed by the auditors of CTT. You are cautioned not to place undue reliance on the forward-looking statements herein.
All forward-looking statements included herein speak only as at the date of this presentation. Except as required by applicable law, CTT does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
| • given a negative evolution in 2Q17 (-7.6%) and 9M17 addressed volumes decline of 6.1%, 3Q17 (-7.2%), due to a high level of fixed costs. put a strong pressure on EBITDA, Two quarters of above normal declines in volumes indicate a trend of acceleration • Revenues from Retail & Distribution Networks utilisation by the growth businesses (Banco CTT and Express & Parcels, respectively) partially offset the impact of volumes decline on revenues, but with incremental costs |
|
|---|---|
| Express & Parcels |
• Portugal, offset by a decline in the E&P banking network business, Growth in parcels volumes in pressure on the distribution costs of the network (due to networks integration) • before the end of the year Spain performance continues to improve towards breakeven |
| Banco CTT & Financial Services |
• Growth in the customer base of Banco CTT was achieved with the need of temporary staff at the CTT Retail Network hires and additional costs • In Financial Services, in public debt stock fees received in 3Q16 resulted in a tough comparison the quarter, however, savings & insurance revenues are still above the level of last year |
KEY HIGHLIGHTS: Stabilisation of revenues as a result the development of the growth levers,
which, in turn, put pressure on the recurring operating costs, and the Transporta acquisition
€ million, except when otherwise indicated
| Financial results | Like-for-like 1 | |||||||
|---|---|---|---|---|---|---|---|---|
| 9M16 | 9M17 | Δ€ | Δ% | 9M16 | 9M17 | Δ€ | Δ% | |
| Recurring revenues | 517.1 | 518.0 | +0.9 | +0.2% | 509.6 | 512.3 | +2.7 | +0.5% |
| Recurring operating costs | 426.1 | 449.8 | +23.7 | +5.6% | 426.1 | 443.5 | +17.3 | +4.1% |
| Recurring EBITDA | 91.0 | 68.1 | -22.8 | -25.1% | 83.5 | 68.9 | -14.6 | -17.5% |
| Addressed mail (million items) |
FS savings flows 2 Parcels (million items) (€ billion) |
# Banco CTT current accounts (thousand) |
Banco CTT deposits (€ million) |
|||
|---|---|---|---|---|---|---|
| 9M17 | 555.4 | 23.5 | 4.6 | 190.6 | 540.4 | |
| vs. 9M16 | -6.1% | +21.1% | +29.8% | +322% | +197% |
1 Excluding €7.5m Altice revenues in 9M16 and €5.7m Transporta revenues and €6.4m Transporta recurring operating costs in 9M17.
KEY HIGHLIGHTS: Strong growth from the Express & Parcels, banking businesses and
the Transporta acquisition supported the increase in revenues
KEY HIGHLIGHTS: The larger part of the recurring costs increase resulted from the
Transporta acquisition and the growth in Banco CTT and Express & Parcels business units
KEY HIGHLIGHTS: The 9M17 recurring EBITDA performance was below expectations, driven by mail
volumes decline worse than forecast and the incremental costs of the networks
The Mail business unit was mainly responsible for the decline in the recurring EBITDA. This was due, on the one hand, to mail volumes decline worse than expected (c.€5m impact) and, on the other, to the fact that it owns the main operating assets of CTT (Retail & Distribution Networks) used in the development of the growth levers and hence incurring the largest part of the operating costs increase
€ million; % change vs. 9M16
| Adjusted 1 | |||
|---|---|---|---|
| 9M17 | ∆ % | 9M17 | ∆% |
| 289.8 | +36.5% | 293.3 | +70.8% |
| 48.6 | -0.9% | 52.1 | >> |
| 241.2 | +47.7% | 241.2 | +47.7% |
| -212.7 | -38.6% | -212.7 | -38.6% |
| -29.1 | -15.9% | -29.1 | -15.9% |
| -4.6 | +48.8% | -4.6 | +48.8% |
| -189.7 | -41.2% | -189.7 | -41.2% |
| 6.1 | +2.9% | 6.1 | +2.9% |
| 77.1 | 31.0% | 80.6 | >> |
| -74.2 | -3.3% | -74.2 | -3.3% |
| -72.0 | -2.5% | -72.0 | -2.5% |
| 43.6 | >> | 43.6 | >> |
| 46.5 | >> | 50.0 | >> |
| 665.3 | +12.2% | 345.3 | +51.8% |
| Reported |
Reflects the growth of Banco CTT deposits in the past 12 months
10
1 Cash flow from operating activities excluding changes in net Financial Services payables of +€40.6m (9M16) and -€3.5m (9M17), respectively. Cash at the end of the period excluding net Financial Services payables of €365.3m (Sep-16) and €320.0m (Sep-17).
2 These figures refer mostly to deposits with the Bank of Portugal and are not considered under Cash and equivalents in the Cash Flow statement. However, they are included in Cash and equivalents in the Balance Sheet (vs. Dec-16).
Net financial debt (cash)
Balance Sheet – 30 September 2017
The consolidated Balance Sheet reflects a growing weight of Banco CTT deposits (>33%) and financial assets
BUSINESS UNITS: Addressed mail volumes decline worse than guidance, together with
incremental costs for servicing E&P and Banco CTT, put a strong pressure on Mail EBITDA
Mail volumes 1 by type
| Metric | Avg. mail prices | Addressed mail | Transactional | Advertising | Editorial | Unaddressed mail |
|---|---|---|---|---|---|---|
| 9M17 | N/A | 555.4 | 475.3 | 49.4 | 30.7 | 368.2 |
| vs. 9M16 | +1.7% | -6.1% | -5.9% | -9.5% | -3.8% | +1.9% |
BUSINESS UNITS: Strong parcels volumes growth in Portugal, driven also by the Transporta acquisition, and especially in Spain, drove high-single digit growth in E&P revenues
1 Including internal and other revenues, and internal transactions with Spain and Mozambique.
2 Including €5.7m of Transporta (external & internal) revenues in 9M17.
3 Million items.
BUSINESS UNITS: Financial Services revenues were impacted by continued weakness in the payments business, mainly as a result of competitive price pressures
| Metric | Savings placements (€bn) |
Payments (m ops) |
Money orders & transfers (m ops) |
Credit (excl. Banco CTT) (€m) |
|---|---|---|---|---|
| 9M17 | 3.2 | 41.1 | 13.3 | 5.7 |
| vs. 9M16 | +10.3% | -6.6% | -4.9% | -24.7% |
BUSINESS UNITS: Banco CTT on track to achieve high-single digit FY17 revenues, while customer
acquisition continues stronger than anticipated, putting pressure on the Retail Network costs
1 Partnership with BNP Paribas Personal Finance (Cetelem).
2 Amount outside Banco CTT's Balance Sheet, representing the total outstanding balance of credit placed by Banco CTT branches.
03. Guidance update
| € million |
||||
|---|---|---|---|---|
| 9M16 | 9M17 | ∆ | ||
| Reported EBITDA | 82.9 | 59.3 | -23.6 | |
| Non-recurring items affecting EBITDA | 8.1 | 8.9 | +0.8 | |
| Revenues | -1.7 | - | +1.7 | |
| Staff costs | 3.2 | 3.0 | -0.1 | |
| ES&S & other op. costs | 6.7 | 5.9 | -0.8 | |
| Recurring EBITDA | 91.0 | 68.1 | -22.8 | |
| Reported EBIT | 70.4 | 36.3 | -34.0 | |
| Non-recurring costs affecting only EBIT | -7.0 | 1.3 | +8.3 | |
| Provisions (reinforcements / reductions) |
-7.6 | -0.3 | +7.4 | |
| Impairments and D&A (losses / reductions) |
0.6 | 1.5 | +0.9 | |
| Non-recurring items affecting EBITDA & EBIT | 1.1 | 10.2 | +9.1 | |
| Recurring EBIT |
71.4 | 46.5 | -24.9 |
€1.7m from recognised deferred gain due to early termination of vacant building lease contract in 1Q16
| € million |
Reported | 1 Recurring |
Banco CTT under equity method |
||||
|---|---|---|---|---|---|---|---|
| 9M16 | 9M17 | 9M16 | 9M17 | 9M16 | 9M17 | ||
| Revenues | 518.8 | 518.0 | 517.1 | 518.0 | 518.9 | 513.7 | |
| Operating costs | 436.0 | 458.7 | 426.1 | 449.8 | 417.5 | 436.7 | |
| EBITDA | 82.9 | 59.3 | 91.0 | 68.1 | 101.4 | 77.0 | |
| EBITDA margin | 16.0% | 11.4% | 17.6% | 13.2% | 19.5% | 15.0% | |
| EBIT | 70.4 | 36.3 | 71.4 | 46.5 | 89.9 | 56.1 | |
| Financial income / (costs) | -4.2 | -3.7 | -4.2 | -3.7 | -4.2 | -3.7 | |
| Subsidiaries, associates and joint ventures - gains / (losses) |
0.2 | 0.0 | 0.2 | 0.0 | -15.3 | -15.6 | |
| Earnings before taxes (EBT) | 66.4 | 32.6 | 67.5 | 42.8 | 70.4 | 36.8 | |
| Income tax for the period 2 | -20.6 | -13.2 | -19.0 | -11.7 | -24.6 | -17.4 | |
| Non-controlling interests - gains / (losses) |
-0.2 | -0.1 | -0.2 | -0.1 | -0.2 | -0.1 | |
| Net profit attributable to equity holders | 46.0 | 19.5 | 48.7 | 31.2 | 46.0 | 19.5 |
1 Recurring net profit excludes non-recurring revenues and costs and considers the theoretical (nominal) tax rate of CTT.
2 Average tax rate increases in 9M17 due to lower results from subsidiaries which carry a lower tax rate and non-recurring positive effects from provision reversals and real estate gains in 9M16.
| € million |
CTT | Banco CTT under equity method |
|||
|---|---|---|---|---|---|
| 31-Dec-16 | 30-Sep-17 | 31-Dec-16 | 30-Sep-17 | ||
| Non-current assets |
452.6 | 587.1 | 393.2 | 400.4 | |
| Current assets | 864.1 | 959.4 | 669.9 | 599.3 | |
| Assets | 1,316.7 | 1546.5 | 1,063.1 | 999.7 | |
| Equity | 233.3 | 181.7 | 233.3 | 181.7 | |
| Liabilities | 1,083.4 | 1364.8 | 829.8 | 818.0 | |
| Non-current liabilities | 269.5 | 264.7 | 269.5 | 264.7 | |
| Current liabilities | 813.8 | 1100.0 | 560.3 | 553.3 | |
| Equity and liabilities | 1,316.7 | 1546.5 | 1,063.1 | 999.7 | |
Contacts: Phone: +351 210 471 087 E-mail: [email protected]
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