Earnings Release • Jul 31, 2018
Earnings Release
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1H18 Results Presentation
This document has been prepared by CTT - Correios de Portugal, S.A. (the "Company" or "CTT") exclusively for use during the presentation of the 1st half 2018 results. As a consequence thereof, this document may not be disc 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 supplement 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 revis 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 t 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 liabilit 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 co 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 subsi 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 responsibl 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 Secu 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 d 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 dire 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", "pr "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 diff 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 growth strategy and liquidity, and the wider environment (specifically, market developments, investment opportunities and requlatory 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 u 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 di 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 the 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 st result of new information, future events or otherwise.
$-0.3\%$
Mail & other
Return to revenues growth as positive evolution in the growth levers offsets declines in the legacy businesses Supported by strong growth in Banco CTT (+€2.0m, +23.3% 2), E&P (+€11.1m, +17.7%, or +€6.5m, +10.7% excluding the Transporta acquisition), and the resilience of Mail revenues, aided by pricing and strong product mix
Addressed mail volumes decline higher than the guidance range mitigated by strong positive product mix effect International and registered mail revenues growth and price increase offset the impact of -7.9% addressed mail volumes decline on revenues. Decline of -7.2% adjusted for the effect of -1 working day in the half. The year will finish with +2 working days (+3 in 4018)
Stabilisation of the recurring operating costs, increasing only in growth-related areas, as the OTP1 starts to have a positive impact on overheads
Recurring operating costs decline in Mail & other (-1.1%) and Financial Services (-14.4%) and increase mainly as a result of growth in activity in Banco CTT and E&P
€14.0m of FY18 recurring cost savings secured vs. initial objective of €13.8m (€5.3m of savings already impacting the P&L in1H18)
€1.9m impact of delay of implementation of price increase to April, to be recovered in the subsequent 3 quarters with a projected 4.7% average price increase. Final decision on quality of service and pricing (except on volumes projections3) for 2019 & 2020 issued by ANACOM in July.
1 Operational Transformation Plan. 2 Payshop migrated to Banco CTT business unit in Jan-18, the numbers for 1H17 are proforma. 3 New Draft Decision issued by ANACOM on this topic.
$+0.9%$
total
$£46.1m$
5
$-20.6\%$
$3Q$
$4Q$
2017
$1Q$
$2Q$
$3Q$
40
2018
$1Q$
$2Q$
$3.0$
$3Q$
$4Q$
2017
$1Q$
$2Q$
$3Q$
$4Q$
2018
$1Q$
$\overline{7}$
$2Q$
Preserve the value of the Mail business through the implementation of a sizeable Operational Transformation Plan to improve profitability, reinforce quality of service and sustain the midterm transformation of the Company
Consolidate CTT's positioning as a strong and integrated Iberian CEP operator, leader in the last-mile distribution in Portugal, leveraging on the e-commerce growth trend
Develop an innovative and fast-growing retail banking & financial services player focused on simplicity, transparency and proximity
Progress has been made on all initiatives...
Adjust HR policies and deepen the ES&S cost reduction efforts
Reinforce HR optimisation programme and rationalise non-core assets
Optimise the Retail Network maintaining proximity to the citizens
Reengineer the Distribution Network to improve operational efficiency and quality of service
| €7.1 $m$ $(vs. \in 3.9m plan)$ |
|---|
| E1.1m $(vs. \in 3.9m plan)$ |
| €1.4m $(vs.\epsilon2.3m plan)$ |
Financial and operational performance
$\epsilon$ million, except when otherwise indicated
| Quarter | Half | ||||||
|---|---|---|---|---|---|---|---|
| Financial indicators | 2Q17 | 2Q18 | $\Delta\%$ | 1H17 | 1H18 | $\Delta\%$ | |
| Revenues | 175.2 | 178.2 | $+1.7%$ | 352.1 | 355.1 | $+0.9%$ | |
| Recurring operating costs $1$ | 150.6 | 154.8 | $+2.8%$ | 299.5 | 309.1 | $+3.2%$ | |
| Recurring EBITDA 1 | 24.6 | 23.3 | $-5.0%$ | 52.6 | 46.1 | $-12.4%$ | |
| Reported Net profit | 7.4 | 0.9 | $-87.9%$ | 17.7 | 6.3 | $-64.8%$ | |
| Recurring Net profit 1 | 11.4 | 10.3 | $-10.0\%$ | 26.4 | 21.1 | $-19.9%$ | |
| Ε | Unaddressed mail Addressed mail $\equiv$ (million items) (million items) |
Parcels Lange Parcels (million items) |
G Savings & insurance € flows (€ billion) |
BCTT credit to clients $\Box$ (E million) |
|||
| 2Q18 volumes | 172.1 | 110.8 | 9.2 | 0.9 | 34.7 | ||
| vs. 2Q17 | $-6.7%$ | $-13.0%$ | $+18.8%$ | $-32.4%$ | +337.6% |
1Excludingnon-recurring costs affecting EBITDA of €3.7m and €10.7m and affecting EBITDA and EBIT of €4.1m and €10.9m in 2Q17 and 2Q18, respectively. Excludingnon-recurring costs affecting EBITDA of €6.9m and affecting E €7.9m and €17.2m in 1H17 and 1H18, respectively. Recurring net profit excludes non-recurring revenues and costs and considers the theoretical (nominal) tax rate of CTT.
1 Payshop migrated to Banco CTT business unit in Jan-18 (proforma figures used for 1H17 for FS and Banco CTT). 2 Including income related to CTT Central Structure and Intragroup Eliminations amounting to -€18.8m in 1H17 and -€20.3m in 1H18.
1 Payshop migrated to Banco CTT business unit in Jan-18 (proforma figures used for 1H17 for FS & Banco CTT).
Cash flow
| Reported | (Excl. FS float & Banco CTT deposits and fin. assets) | ||||||
|---|---|---|---|---|---|---|---|
| 1H17 | 1H18 | ∆% | 1H17 | 1H18 | ∆% | Impacted by $E24.0$ m in payments related to the |
|
| From operating activities | 296.7 | 189.9 | $-36.0%$ | 35.8 | $1.1$ | $-96.9\%$ | OTP, including €22.2m of indemnities for |
| Cashflow excl. FS float & Banco CTT | 42.2 | $3.6 -$ | $-91.4%$ | negotiated staff exits in 4Q17&1H18 |
|||
| Banco CTT cash flow | $-6.4$ | $-2.5$ | 60.5% | ||||
| From investing activities | $-117.9$ | $-133.5$ | $-13.2%$ | $-21.2$ | $-15.5$ | 27.0% | |
| Capex payments | $-22.9$ | $-17.1$ | 25.3% | $-22.9$ | $-17.1$ | 25.3% | |
| of which Banco CTT | $-4.4$ | $-3.6$ | 19.1% | $-4.4$ | $-3.6$ | 19.1% | €8.3m Capex in 1H18 |
| Banco CTT investments and fin. assets | $-96.7$ | $-118.0$ | $-22.0%$ | ||||
| Other | 1.7 | 1.6 | $-4.1%$ | 1.7 | $1.6\phantom{0}$ | $-4.1%$ | |
| Operating free cash flow | 178.8 | 56.4 | $-68.4%$ | 14.6 | $-14.4$ | $-198.3\%$ | |
| From financing activities | $-73.8$ | $-65.0$ | 11.9% | $-73.8$ | $-65.0$ | 11.9% | |
| of which Dividends | $-72.0$ | $-57.0$ | 20.8% | $-72.0$ | $-57.0$ | 20.8% | |
| Other | $-3.6$ | $-26.5$ | $-644.4\%$ | 0.1 | 0.0 | $-100.0\%$ | |
| Net change in cash | 101.5 | $-35.1$ | $-134.6\%$ | $-59.0$ | $-79.4$ | $-34.5%$ | |
1 Cash flow from operating and investing activities excluding changes in Net Financial Services payables and the following items from the CF statement, all of them relating to Banco CTT financial activity: "Banking custo clients", third parties' "Other operating assets and liabilities" regarding Banco CTT, "Investments in securities", "Deposits at Bank of Portugal" and "Other banking financial assets".
Balance Sheet - 30 June 2018
€ million; % change vs. 31 December 2017
1 Including Financial Services receivables of €4m and €9m as at Dec-17 and Jun-18, respectively. 2 including current and non-current liabilities 3 Including€67m of Banco CTT's own cash.
100 1 Other revenues include + £2.6m of revenues from lottery sales, which were partially suspended in 1H17 (+ £1.7mimpact in 1H18); similarly, operating costs include + £2.4m in CGS related to this product in 1H18, vs. €0
DROVE STRONG REVENUES GROWTH AND HEALTHY INCREASE IN PROFITABILITY
$+20.4%$
$+10.0\%$
$+19.1%$
1 Including revenues from intra-group transactions with companies of other business units and other operating income of Portugal, Spain and Mozambique. 2 Including Transporta revenues in 1H18 (€6.8m in Cargo & Logistics and €0.1m in Other).
$+19.7%$
vs. 1H17
$-5.4%$
1 Payshop business migrated to Banco CTT Business Unitin Jan-18 (proforma figures presented for 1H17).
2 Consumer credit & credit cards sold in partnership with BNP Paribas Personal Finance (Cetelem). The 1H17 revenues included a fixed commission fee of €0.8m from an insurance provider for the launch of sale of insurance 3 Amount outside CTT's Balance Sheet, representing the amount of credit placed in 1H18, in partnership with BNP Paribas Personal Finance (Cetelem).
| € million | Reported - | Recurring 1 $-$ | Reported with Banco CTT under equity method 2 |
|||
|---|---|---|---|---|---|---|
| 1H17 | 1H18 | 1H17 | 1H18 | 1H17 | 1H18 | |
| Revenues | 352.1 | 355.1 | 352.1 | 355.1 | 346.8 | 348.0 |
| Operating costs | 306.4 | 324.1 | 299.5 | 309.1 | 292.2 | 308.3 |
| EBITDA | 45.7 | 31.0 | 52.6 | 46.1 | 54.6 | 39.8 |
| EBITDA margin | 13.0% | 8.7% | 14.9% | 13.0% | 15.7% | 11.4% |
| Depreciations, amortisations, impairments & provisions |
$-15.2$ | $-16.7$ | $-14.2$ | $-14.5$ | 13.8 | 15.3 |
| EBIT | 30.6 | 14.3 | 38.4 | 31.6 | 40.8 | 24.5 |
| Financial income / (costs) | $-2.4$ | $-2.8$ | $-2.4$ | $-2.8$ | $-2.4$ | $-2.8$ |
| Associated companies - gains / (losses) | 0.0 | 0.1 | 0.0 | 0.1 | $-8.2$ | $-7.9$ |
| Earnings before taxes (EBT) | 28.2 | 11.7 | 36.0 | 28.9 | 30.3 | 13.9 |
| Income tax for the period | 10.5 | 5.4 | 9.7 | 7.7 | $-12.6$ | $-7.6$ |
| Non-controlling interests | $-0.05$ | 0.03 | $-0.05$ | 0.03 | $-0.05$ | 0.03 |
| Net profit attributable to equity holders | 17.7 | 6.3 | 26.4 | 21.1 | 17.7 | 6.3 |
1 Recurring net profit excludes non-recurring revenues and costs and considers the theoretical (nominal) tax rate of CTT.
2 Payshop migrated to Banco CTT business unit in Jan-18 (proforma figures presented for 1H17).
| $\epsilon$ million | CTT | With Banco CTT under equity method $1$ |
||||
|---|---|---|---|---|---|---|
| 31-Dec-17 | $30$ -Jun-18 | 31-Dec-17 | 30-Jun-18 | |||
| Non-current assets | 678.5 | 867.1 | 413.4 | 415.2 | ||
| Current assets | 930.3 | 925.5 | 557.3 | 620.6 | ||
| Assets | 1,608.8 | 1,792.6 | 970.7 | 1,035.7 | ||
| Equity | 184.0 | 131.8 | 184.0 | 131.8 | ||
| Liabilities | 1,424.8 | 1,660.8 | 786.8 | 904.0 | ||
| Non-current liabilities | 282.7 | 272.2 | 282.7 | 272.1 | ||
| Current liabilities | 1,142.0 | 1,388.6 | 504.1 | 631.8 | ||
| Equity and Liabilities | 1,608.8 | 1,792.6 | 970.7 | 1,035.7 | ||
| $\epsilon$ million | Non-recurring items - | ||
|---|---|---|---|
| 1H17 | 1H18 | ||
| Recurring EBITDA | 52.6 | 46.1 | |
| Non-recurring items affecting EBITDA | 6.9 | 15.1 | €13.2m of indemnities related to the |
| Other operating income | 0.0 | 0.01 | Operational Transformation Plan |
| Staff costs | 2.9 | 13.3 | |
| ES&S & other op. costs | 4.0 | 1.7 | €1.3m of strategic studies, €0.5m of which |
| Reported EBITDA | 45.7 | 31.0 | related to the Operational Transformation Plan |
| Recurring EBIT | 38.4 | 31.6 | |
| Non-recurring costs affecting only EBIT | 1.0 | 2.2 | |
| Provisions (reinforcements / reductions) | $-0.1$ | 1.7 | $£1.4m$ provision related to the Spanish Competition Authority fine |
| Impairments and D&A (losses / reductions) | 1.1 | 0.4 | |
| Non-recurring items affecting EBITDA & EBIT | 7.9 | 17.2 | |
| Reported EBIT | 30.6 | 14.3 | |
Contacts: Phone: +351 210 471 087 E-mail: [email protected]
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