CTT Correios de Portugal. Company Presentation

Transcription

1 CTT Correios de Portugal Company Presentation

2 Disclaimer DISCLAIMER This document has been prepared by CTT Correios de Portugal, S.A. (the Company or CTT ) exclusively for use during roadshows and conferences during the month of. 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. Thus being, the Company does not assume liability for this document if it is used with 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 in its website ( as well as in the Portuguese Securities Exchange Commission s website ( 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. FORWARD-LOOKING STATEMENTS This communication contains forward-looking information and statements about CTT, including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, capital expenditures, synergies, products and services, and statements regarding future performance. Forward-looking statements are statements that are not historical facts and are generally identified by the words expects, anticipates, believes, intends, estimates and similar expressions. Although CTT believes that said assumptions 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, that could cause 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 are not guarantees of future performance. They have not been reviewed by the auditors of CTT. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date they were made. All subsequent oral or written forward-looking statements attributable to CTT or any of its members, directors, officers, employees or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements included herein are based on information available to CTT on the date hereof. 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. CTT Company Presentation 2

3 Agenda I Company overview II Key highlights III Key highlights 1 st quarter 2014 IV 2014 outlook V Appendix CTT Company Presentation 3

4 Company overview CTT a balanced portfolio of businesses with CTT (2013) Revenues: 705m Recurring EBITDA: 123m Market cap: 1.190m (as at 30 April 2014) Mail Express & Parcels Financial Services Operational data 892M addressed mail 529M unaddressed mail 25.3M 17BN Volume of money moved N. Employees N. Vehicles 10,013 3,412 1,170 2, (2013) Portugal Portugal & Spain Portugal % Revenues 74% 18% 8% % EBITDA 71% 7% 22% Strategic Objective Profitability Growth & Profitability Growth & Profitability CTT Company Presentation 4

5 Company overview a clear strategy chosen and actively pursued FOCUS ON VALUE IN MAIL BUSINESS EXPAND FINANCIAL SERVICES BUILD ON LEADERSHIP TO CAPTURE GROWTH IN EXPRESS & PARCELS 4 EFFICIENCY CONSTANT MANAGEMENT OF COSTS AND SCALE THROUGH CONTINUOUS TRANSFORMATION PROGRAMMES CTT Company Presentation 5

6 Company overview based upon the company s competitive advantages Highly profitable & market leading Mail business in Portugal 1 2 Strongly positioned to expand Financial Services Iberian Express & Parcels 3 platform Unique retail and distribution network with high capillarity and strong brand in Portugal Continuous operational efficiency management Skilled management team and employees with extensive experience in the industries they serve 7 Strong cash flow generation, liquidity and high dividend payout CTT Company Presentation 6

7 Company overview Highly profitable and market leading Mail business Volume decline in line with other EU players 2013 addressed mail volume growth (%) Austrian Post Deutsche Post An Post Royal Mail ** bpost *** La Poste Itella CTT Poste Italiane Correos**** Post Danmark % PostNL Average ***** -5.8% 2012 addressed mail per capita* 0.4 Reference in Europe in terms of profitability 2013 EBITDA margin (%) bpost Austrian Post Royal Mail La Poste Deutsche Post Poste Italiane Correos **** An Post CTT 17.3 PostNL Note: EBITDA margins and volume declines are based on the reported numbers by each company. Differences in the way different companies report those numbers may exist. * Addressed items, ex newspapers including international volumes, 2012 data. Source: Morgan Stanley Research, except CTT data. Addressed mail definition varies by company. ** On a like-for-like 52 week basis. *** Domestic mail volumes only. **** Numbers for The 2013 Annual Report is not yet available. ***** The average excludes CTT N/A Itella Post Danmark Average ***** 9.2% CTT Company Presentation 7

8 Company overview Strongly positioned to expand Financial Services Partners Savings & Insurance Exclusive network for the distribution of public debt for retail (i.e. Savings and Treasury Certificates ) Leader in the sales of life insurance products Payment solutions Unparalleled nationwide cash payment network (bills, taxes, phone cards, etc.) Payments institution licensed by the Bank of Portugal strong agents network (CTT & Payshop agents) 71.5 million transactions in 2013 Transfers Strong position in the transfers market Payment of pensions and other social benefits CTT Company Presentation 8

9 Company overview Iberian Express & Parcels platform Leader in the Express & Parcels market in Portugal Significant Iberian presence Portugal Express & Parcels market share (4Q13) * Others 6.7% 15.9% 3.8% 5.1% 5.7% 6.0% 7.9% 28.6% 20.3% Porto Lisbon Spain Madrid Barcelona Balearic islands Canary islands +4.4 p.p. vs. 4Q12 * Source: ICP-Anacom. CTT Company Presentation 9

10 Company overview History of solid financial performance Key consolidated financials million Revenues % growth (4.0%) (6.7%) (1.3%) Operating Costs 1 (686) (652) (610) (583) % growth (5.0%) (6.4%) (4.5%) EBITDA % margin 14.0% 14.9% 14.6% 17.3% EBIT % margin 9.9% 10.5% 8.0% 12.4% Financial results 2 (13) (2) (4) (4) Net income % margin 7.4% 7.2% 5.0% 8.7% Capex % revenues 3.9% 3.5% 2.0% 1.8% Number of salaries accounted for in each fiscal year 4 The EBITDA of 2013 was 18m (+17.1%) above that of the previous year, although in 2013 it incorporates the payment of the Christmas salary additional pay (est. 17m impact) which was not paid to the employees in Capex ( m) EBITDA Capex ( m) Dividends ( m) -25% p.a. +10% p.a. +19% p.a % 97% 140% 98% Payout Source: Company information. 1 Excludes depreciation, amortization, impairments and provisions; 2 Includes gains/losses in associated companies; 3 Net income attributable to parent company shareholders; 4 In Portugal it is standard practice to have 14 salary payments per year 1 for each month of the year plus 1 for Summer holidays and 1 for Christmas holidays CTT Company Presentation 10

11 Company overview based on continuous operational efficiency management Despite mail volume and revenue declines, CTT has managed to achieve constant levels of operational performance, based on important productivity improvements Revenues ( m) -4% p.a. Revenues / Heads ( 000s/head) +1% p.a Staff Costs / Revenues (%) European operators 2012 average 1 : 49.7% Recurring EBITDA ( m) Staff costs / Heads ( 000s/head) +3% p.a. -1% p.a % 14.9% 15.5% 17.4% EBITDA Margin Source: Companies information. 1 Average of the EU operators as at December 2012, including: Austrian Post, Deutsche Post, La Poste, Post NL, Royal Mail, bpost, Postnord, Swiss Post, Posteitaliane and Correos. CTT Company Presentation 11

12 Agenda I Company overview II Key highlights III Key highlights 1 st quarter 2014 IV 2014 outlook V Appendix CTT Company Presentation 12

13 2013 key highlights The rate of decline of revenues slows down 1. Pricing lever used to mitigate mail volume decline m % % Total Revenues million % % Addressed mail revenue per item (right axis) Addressed mail revenues (left axis) 2. FS & Express & Parcels revenues grow m % Financial Services Express & Parcels revenues only -1.3% below 2012 figures due to: Mail revenues decline at a slower rate (-2.1%) vs. previous years as price increase mitigates the impact of volume declines; Financial Services revenues increase 5.5%; Express & Parcels posts 1.2% revenue growth, reverting the declining trend since 2006 CTT Company Presentation 13

14 2013 key highlights Staff and ES&S costs reduce significantly Operating costs * million % -10.0% Integration and optimisation of the sorting, transportation and distribution networks, with a reduction. in the level of outsourcing % Right-sizing of the retail network with the reduction of 125 own branches Total staff were reduced by 6.0% to 12,383. The number of permanent staff was reduced by 4.7% to 11,730, largely as a result of voluntary retirements. Fixed-term contracts were down by 24% -2.8% Other Op Costs External Supplies & Services 2013 Staff Costs Circa 17m of extra staff costs associated with the payment of Christmas subsidy. (returning to 14 months of salary payments), were fully compensated by efficiency gains * Do not include amortisations, depreciations, provisions, impairment losses and non-recurring costs. CTT Company Presentation 14

15 2013 key highlights EBITDA grows at double digit rates, due to the Transformation Programme Reported EBITDA million +17% EBITDA 2012 Δ Revenues Mail & Other Δ Revenues FS & E&P Δ Staff costs Δ ES&S costs Δ Other op. costs EBITDA 2013 Clarification of regulatory framework (pricing) mitigates. the impact of volume declines Renegotiation of contracts and launch of new products in FS. New product. offer for B2C parcels and commercial effectiveness Optimisation & rationalisation of operations & distribution and right-sizing of the retail network,.. enabled staff reduction and release to support some insourcing of activities CTT Company Presentation 15

16 2013 key highlights Solid financial position & strong cash flow generation support high dividend Solid financial position million % Financial debt % Cash & equivalents, net of payables % Net financial debt (cash) (228.8) (229.8) 0.5% Strong cash flow generation million % Cash flow from operating activities % Cash flow from investment activities % Operating free cash flow % High dividend payout Cash-flow million % Working capital: 2012 exceptional year due to decrease of 29m in. receivables through a more active credit management (days of receivables) Operating Free cash flow % Net profit (reported) % Dividend % Dividend payout 139.9% 98.3% p.p. Dividend / Operating free cash flow 42.4% 54.3% 11.9 p.p. CTT Company Presentation 16

17 2013 key highlights Summary of business units performance million January-September 4Q13 FY % % % Mail Recurring EBITDA % % % Non-recurring costs % % % Reported EBITDA % % % Financial Services Recurring EBITDA % % % Non-recurring costs Reported EBITDA % % % Express & Parcels Recurring EBITDA % % % Non-recurring costs Reported EBITDA % % % Summary: 1. Active management of portfolio performance: strong recurring 4Q13 in Mail and Financial Services enable CTT to absorb the privatisation costs without significantly impacting the full year performance and also accelerate the restructuring and optimisation in Express & Parcels, meaning non-recurrent restructuring costs 2. Two growth levers: growth potential in Express & Parcels and in Financial Services provides a platform for future revenue expansion CTT Company Presentation 17

18 Agenda I Company overview II Key highlights III Key highlights 1 st quarter 2014 IV 2014 outlook V Appendix CTT Company Presentation 18

19 1Q14 key highlights Like-for-like revenues grow 0.3%, inverting the5 year declining trend Revenues million -0.3% Revenues (pro-forma, excluding impact of EAD sale) ** million % % % % % % % Q13 1Q14 1Q13 Express & Parcels Financial Services 1Q14 Mail, Business Solutions & Other* Express & Parcels Financial Services Mail, Business Solutions & Other* * Other revenues include income related to CTT Central Structure and intragroup eliminations amounting to - 5.6m in 1Q14 and - 7.3m in 1Q13. ** Pro-forma revenues exclude the impact of EAD in the reported revenues the EAD numbers are included in the 1Q13 accounts and not in the 1Q14 ones, in the pro-forma results no EAD revenues are included. CTT Company Presentation 19

20 1Q14 key highlights Costs continue to decrease, despite sales growth Operating costs * million -0.7% % The sale of EAD accounted for 0.7m of the decrease in total. operating costs % 55.7 ES&S decrease as a result of insourcing activity in Financial Services and Express & Parcels. Transformation. Programme initiatives, better procurement and more fuel efficient fleet also responsible % 81.6 Additional staff costs associated with the end of the salary cuts for public sector employees (as a result of the company s privatisation) were. mitigated by 5.1% reduction in headcount (660 employees) Easter vacations in 2Q14 with negative impact on staff costs comparison 1Q13 1Q14 Other Op Costs External Supplies & Services Staff Costs * Excluding amortisations, depreciations, provisions, impairment losses and non-recurring costs. CTT Company Presentation 20

21 1Q14 key highlights EBITDA grows 5.2% as a result of strong FS growth and efficiency management Reported EBITDA million 5.2% 18.5% 17.6% EBITDA 1Q13 Δ Revenues Mail & Other Δ Revenues FS & E&P Δ Staff costs Δ ES&S costs Δ Other op. costs EBITDA 1Q14 5.3% average increase in prices mitigates the impact of mail. volume declines % EBITDA margin Financial Services EBITDA grows by almost 50% Continuation. of the positive trend in Express & Parcels 2 nd phase of the Transformation Programme resulting in a ~ 5m positive impact 7. on EBITDA, 19% higher than planned CTT Company Presentation 21

22 1Q14 key highlights Solid net cash and liquidity position Balance Sheet million Assets Liabilities & Equity 1,100 1,106 1,100 1,106 Cash & equivalents % 310-8% 286 Financial Services payables Other current liabilities 7 7 Financial Debt (ST&LT) Other current assets * % 298 Employee benefits Employee benefits tax credit Other non-current assets Non-current liabilities PP&E Equity Q * Includes Financial Services receivables of 2m and 10m in 2013 and 1Q14, respectively. 1Q m healthcare liabilities Net financial debt (cash) = ST Debt of 4m + LT Debt of 3m + Net Financial Services payables of 276m - Cash and cash equivalents of 545m = (262)m Net debt (cash) = Total employee benefits of 298m - Total employee benefits tax credit of 88m - Net cash of 262m = (53)m Strong liquidity position: Current assets / Current liabilities = 150%, up 5.7 p.p. vs. 4Q13 CTT Company Presentation 22

23 1Q14 key highlights Cash flow generation stays at high levels Net financial cash / (debt) * million + 32m Dec-13 Net financial cash / (debt) 1Q14 Net profit 1Q14 Increase in Suppliers accounts payable 1Q14 Depreciation - Capex Other 31-Mar-14 Net financial cash / (debt) Result of more balanced Working Capital management (ongoing uniformisation. of payables / receivables terms). 2m positive cash flow impact from the sale of EAD * Cash and equivalents less Long & Short-term financial debt less Net Financial Services payables. CTT Company Presentation 23

24 1Q14 key highlights Summary of business units performance million 1Q13 1Q14 % Mail Recurring EBITDA % Non-recurring costs % Reported EBITDA % Financial Services Recurring EBITDA % Non-recurring costs % Reported EBITDA % Express & Parcels Recurring EBITDA % Non-recurring costs % Reported EBITDA % Revenues decline 4.3% as the 9.5% drop in addressed mail volumes is mitigated by an average 5.3% increase in the prices of USO services. Volume decline more pronounced due to tough. YoY comparison. Advertising mail still suffering from economic downturn. Operating costs fall 3.3%, driven by 11.9% drop in ES&S The revised partnership agreements in 2013 and robust sales of savings products continue. to support strong (19.9% YoY) growth in revenues, continuing the 4Q13 growth trend Confirmation of the growth trend from 2H13, with 3.8% YoY revenue growth, driven by 15.7% increase in volumes as result of strong increase in B2C parcels.. Higher costs due to implementation of new business model to address growth and Transformation Programme initiatives CTT Company Presentation 24

25 Agenda I Company overview II Key highlights III Key highlights 1 st quarter 2014 IV 2014 outlook V Appendix CTT Company Presentation 25

26 2014 outlook Outlook for 2014 is confirmed Revenues & Volumes Structural decline in addressed mail volumes to continue, could slow down with domestic consumption growth Double-digit volume growth in Express & Parcels, driven by B2C Goal of stable revenues (+/-1% revenue growth) Growing businesses (Financial Services and Express & Parcels) to mitigate the decline in Mail revenues Investment & Growth Capex of circa 20m Consumer credit offering launch until the Summer of 2014 Decision on Postal Bank in 3Q14 Cash Flow Balance Sheet optimisation measures to continue e.g. Working Capital optimisation Employee benefits management in order to monetise the tax asset Earnings & Dividend Low single digit growth in recurring EBITDA Policy of at least 90% dividend payout and using distributable reserves to support growth in dividends CTT Company Presentation 26

27 Agenda I Company overview II Key highlights III Key highlights 1 st quarter 2014 IV 2014 outlook V Appendix CTT Company Presentation 27

28 Appendix FY13 - Mail EBITDA margin grows to 16% Revenue by type million 10,000 8,000 6,000 4,000 2,000 Other Business Solutions USO parcels Advertising mail Editorial mail Transactional mail Average headcount & revenue / employee # 12, , Average revenue / employee % % % -6.0% 4.1% , s Average headcount (left axis) Units % Addressed mail volumes m items % Unaddressed mail volumes m items % Revenues m % Operating Costs m % EBITDA m % EBITDA Margin % 12.5% 16.0% +3.5 p.p. Recurring EBITDA m % Marginal decline (-0.5%) in transactional mail, the segment more impacted by price increase and the introduction of zonal pricing Advertising mail still suffering from economic downturn and lower spending on advertising. Customers choose unaddressed advertising mail due to its price Headcount reduction fully absorbs revenue decline, enabling productivity gains. Revenue per employee rises 4.1% Operating costs reduce by 6.0%, as a result the EBITDA margin rises to 16%. Non-recurring saving with positive impact on Mail EBITDA in 2013 CTT Company Presentation 28

29 Appendix FY13 - FS EBITDA grows 8.3% on the back of strong growth in savings product sales Revenues million % % % Units % Payments m % Money orders & transfers m ops % Savings & insurance flows * m 3,069 3, % Revenues m % Operating Costs m % EBITDA m % EBITDA Margin % 43.9% 45.0% +1.1 p.p. Recurring EBITDA m % * Amount of placements and redemptions. Other Savings & Insurance Payments Transfers Strong position in the payments market, processing more than 70 million payments, but affected by economic downturn and electronic substitution Strong growth in savings and insurance product flows, together with the increased fees from renegotiation of the agreements, more than off-setting the decline in payments and money transfers Postal bank license obtained, an option to consider in 2014 in order to leverage retail network and maximise efficiency CTT Company Presentation 29

30 Appendix FY13 - Express & Parcels back to revenue growth, inverting the historical trend Revenues million +1.2% Units % % 1.0% Volumes Portugal m items % Volumes Spain m items % Revenues m % Operating Costs m % EBITDA m % EBITDA Margin % 7.1% 5.7% -1.4 p.p. Recurring EBITDA m % 2012 Mozambique Spain 2013 Portugal Reorganisation of commercial activities and increased integration of Iberian offer drive revenue growth since start of 2H13 Leadership in the domestic market: 25.8% market share at the end of 1Q13; 28.6% by year-end * Restructuring process ongoing to better align product portfolio and network efficiency with customer needs and position it for expected growth in B2C in both Portugal and Spain * Source: ICP-ANACOM. CTT Company Presentation 30

31 Appendix 1Q14 - Mail volume decline mitigated by price increase and efficiency mgmt. Revenues by type million Other Business Solutions USO parcels Advertising mail Editorial mail Transactional mail Q13-4.3% Addressed mail volumes by type Million items Advertising mail Editorial mail Transactional mail Q % Q Q14 Recurring million 1Q13 1Q14 % Revenues % Sales and services rendered % Other % Operating costs * % External supplies and services % Staff costs % Other % EBITDA % EBITDA margin 18.2% 17.3% -0.9 p.p. * Excluding amortisations, depreciations, provisions, and impairments. Revenues decline 4.3% (3.6% excluding the impact of the EAD sale), as the 9.5% drop in addressed mail volumes is mitigated by an average 5.3% increase in the prices of USO services Circa 1m of the revenue decline due to the sale of EAD Mail volume decline is more pronounced due to a tough March YoY comparison customers anticipated purchases before the price increase came into effect in April 2013 and one-off mailing campaigns. Advertising mail still suffering from economic downturn (TV is starting to recover but this not yet visible in mail) Operating costs fall by 3.3%, driven by 11.9% decline in ES&S. Staff costs not fully comparable between 1Q13 and 1Q14 should be comparable on half-year basis CTT Company Presentation 31

32 Appendix 1Q14 - Stellar growth in FS EBITDA, as a result of savings product sales Revenues by type million Other Q % Savings & insurance Volumes by type Million operations (external clients) Other Q13-7.0% Savings & insurance Q14 Payments Q14 Payments Transfers Transfers Recurring million 1Q13 1Q14 % Revenues % Sales and services rendered % Other % Operating costs * % External supplies and services % Staff costs % Other % EBITDA % EBITDA margin 41.2% 50.8% 9.6 p.p. * Excluding amortisations, depreciations, provisions, and impairments. The revised partnership agreements in 2013 and robust sales of savings products continue to support strong growth in revenues in 1Q14, continuing the 4Q13 growth trend Circa 1bn of savings and insurance products sold in 1Q14, up 260% vs. 1Q13, transactions up ~50% vs. 1Q13 ES&S costs grow due to sales incentive schemes (directly related to revenues performance) Other costs decline 5.6% due to efficiency management and back-office technology improvements (online front office) Stellar EBITDA growth, of almost 50% with EBITDA margin 9.6 p.p. above the 1Q13 level CTT Company Presentation 32

33 Appendix 1Q14 - Express & Parcels continues the growth trend from 2H13, driven by B2C Revenues by region million Q13 Mozambique +3.8% Spain Q14 Portugal & other* * Include internal & other revenues of 0.3m in 1Q13 and 0.6m in 1Q14 Volumes by region Thousand items 5, ,926 2,637 1Q13 Mozambique +15.7% Spain 6, ,397 3,027 1Q14 Portugal Recurring million 1Q13 1Q14 % Revenues % Sales and services rendered % Other % Operating costs * % External supplies and services % Staff costs % Other % EBITDA % EBITDA margin 4.8% 4.8% 0.0 p.p. * Excluding amortisations, depreciations, provisions, and impairments. Confirmation of the growth trend from 2H13, with 3.8% YoY revenue growth, driven by 15.7% increase in volumes as a result of strong increase in the B2C parcels. B2C segment growth drives negative pricing mix effect (lower average price) Higher costs driven partially by the implementation of new business model to address growth in the B2C market and the strong growth in volumes Transformation Programme initiatives having significant impact on costs mainly in Spain, due to accelerated restructuring of the network. They will continue to have relevant impact during 2014 CTT Company Presentation 33

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