Ctt - Correios De Portugal Sa · EURONEXT:CTT
Ctt - Correios De Portugal Sa — CTT - Correios de Portugal — Goldman Sachs Business Services, Transport and Leisure Conference (May 2018)
38 slides from Ctt - Correios De Portugal Sa's conference presentation, May 2018
Slide 1: CTT 1Q18 Results Roadshows
ctt CTT -Correios de Portugal 1Q18 Results Roadshows Goldman Sachs Business Services, Transport and Leisure Conference _ CTT-Correios de Portugal, S.A. May2018
Slide 2: Disclaimer
Disclaimer ctt DISCLAIMER This documenthas been prepared by CTT - Correios de Portugal, S.A. (the "Company’ or “CTT"}exclusively for use during the roadshows for the presentation of the 1 quarter 2018 results. Asa consequence thereof, this document may not be disclosed or published, nor used by any
Slide 3: Agenda
AGENDA fh. ctt My & company overview / BW @ Kevuicuticuts fu | STRATEGIC UPDATE & OP. TRANSFORMATION PLAN / OY wi KeEVFINANCIALS lv | </ BUSINESS UNITS /
Slide 4: Company Overview
MJ company OVERVIEW — it “ ia ? fi Vhs q . Ne
Slide 5: Postal operators globally are diversifying their business model
POSTAL OPERATORS GLOBALLY ARE DIVERSIFYING THEIR BUSINESS MODEL, BECOMING LESS DEPENDENT ON THE MAIL BUSINESS; CTT IS STILLIN THE EARLY STAGES OF THIS TRANSFORMATION ctt Revenues per line of business Sector CIT > Postal operators have been adapting their business model to offset the Other Th 6% Grow
Slide 6: Mail volume has been declining since 2001
MAIL VOLUME HAS BEEN DECLINING SINCE 2001, WITH CTT DELIVERING TODAY C. 50% OF THE VOLUME DISTRIBUTED THEN ctt Addressed mail volumes evolution Billion items; CAGR (%) 201 & Q@ ~ 2001-2011 2011-2014 2014-2016 2017 -2.5% -3.7% -5.6% -7.2% U____J Sovereign debt crisis )) Mait volumes had been dectinin
Slide 7: CTT investing to capture growing parcel flows
CTT HAS BEEN INVESTING TO CAPTURE THE GROWING FLOWS OF PARCELS, HAVING GROWN >23% INE&P VOLUMES IN 2017, WITH POSITIVE IMPACTS FROM THE TRANSPORTA ACQUISITION AND THE TURNAROUND IN SPAIN CAGR 12-17 23 Spain +7% 14 14 12 13 11 ¢ Portugal +9% 2012 2013 2014 2015 2016 2017 ctt A16-17 +26% 422% > InPort
Slide 8: Great potential for e-commerce growth in Iberia
THERE IS STILL A GREAT POTENTIAL FOR GROWTH OF E-COMMERCE IN IBERIA, SINCE IT IS STILL LAGGING BEHIND OTHER EUROPEAN COUNTRIES IN ONLINE RETAIL ctt ommerce pene! fon Domestic e-commerce parcels per capita 1. a) x 9 > 4 Averai 0 parcels / capita 26 22 -1-2 16 17 18 parcels / capita 1 a 2 = ANIA > S 0
Slide 9: Banco CTT is growing rapidly
BANCO CTT IS GROWING RAPIDLY AND HAS BEEN WELL RECEIVED BY THE POPULATION - IN 2017 THE NUMBER OF CURRENT ACCOUNTS TRIPLED TO 226K AND CUSTOMER DEPOSITS DOUBLED TO €619M ctt bancoctt Current accounts evolution Vy) September to December June Expansion to 202 branches Insurance offer 226,001 December
Slide 10: Transformation
Postal business GROWTH Adjust HR policies and deepen the ES&S cost Grow above market in parcels and value- reduction efforts added services (mail & parcels) TRANSFORMATION Reinforce HR optimisation programme and Continue Banco CTT’s path to breakeven rationalise non-core assets Optimise the Retail N
Slide 11: Key Highlights
Slide 12: Solid EBITDA generation in a quarter marked by seasonal effects
SOLID EBITDA GENERATION IN A QUARTER MARKED BY SEASONAL COMPARISON EFFECTS ctt Positive evolution of the growth levers offsets the revenues decline of the legacy businesses % 8% Supported by strong growth in Banco CTT (+€1.1m, +28.8% proforma for incorporation of Payshop), E&P (+€3.2m, +10.8%), the
Slide 13: Addressed mail volumes decline higher than guidance range
ADDRESSED MAIL VOLUMES DECLINE HIGHER THAN THE GUIDANCE RANGE DUE TO SEASONAL EFFECTS; STRONG ACTIVITY IN THE GROWTH BUSINESSES CONTINUES ctt Addressed mail volumes(Q -0.4% Easter Easter 2047 Fvisguidance 1988 range S% FY16 guidance range FYLT guidance MAIL 6.1% Addressed mail volumes decline = adju
Slide 14: 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2015 2016 2017 2018 • • • •
Slide 15: Strategic Update & Operational Transformation Plan
g STRATEGIC UPDATE & . OPERATIONAL TRANSFORMATION PLAN
Slide 16: Initiatives along the five pillars of the Express & Parcels strategy
SEVERAL INITIATIVES ARE BEING IMPLEMENTED ALONG THE FIVE PILLARS OF THE EXPRESS & PARCELS STRATEGY Itis estimated that the last-mile e-commerce market growth will accelerate in the coming years givenitsunderpenetrationin Portugal Strengthen CTT's offerto growin the B2C market and leverage on the dev
Slide 17: Two years since launch, Banco CTT has built a strong franchise
TWO YEARS SINCE LAUNCH, BANCO CTT HAS BUILT A STRONG FRANCHISE SQ Customers >300 thousand Current >250 accounts thousand Deposits ve Credit? >€160m Baby Boomers Generation X Generation Y (Millennials) Generation Z Banco CTT Market Banco CTT Market Banco CTT Market Banco CTT Market 16 Sil, 34 38 41 2
Slide 18: Strategy for Banco CTT based on four key pillars
THE STRATEGY FOR BANCO CTTIS BASED ON FOUR KEY PILLARS BANCO CTT FOOTPRINT The Portuguese population shows preference for Banco CTT when asked about which bank theyintend to open anewaccount* © Expand Banco CTT's footprint, by acquiring new clients, accounts and deposits oO Invest in digital channel
Slide 19: Operational transformation plan execution exceeding initial expectations
OPERATIONAL TRANSFORMATION PLAN EXECUTION EXCEEDING INITIALEXPECTATIONS Total recurring operating cost savings % FY18 savings objective secured Total non-recurring revenues / capital gain % FY18 capital gain objective secured S Total non-recurring costs 1FY18estimated recurring operating cost saving
Slide 20: Cost reductions in line; HR optimisation exceeding target
COST REDUCTIONS IN LINE; HR OPTIMISATION INITIATIVE EXCEEDING TARGET fh. ctt FY18 savings FY18 savings secured? objective * No variable compensation for the Executive Committee for 2017 & 2018 * Reduction in fixed compensation for the Board members in 2018 (vs. Dec-17 level) * Renegotiation of contr
Slide 21: Distribution network initiative advancing in line with plan
DISTRIBUTION NETWORK INITIATIVE ADVANCING IN LINE WITH THE ORIGINAL PLAN Optimise the Retail Network maintaining proximity to the citizens Reengineer the Distribution Network FY18 savings secured? First wave of converting into postal agencies or closing post offices with low customer demand complete
Slide 22: Key Financials
Slide 23: Quarterly net profit impacted by restructuring costs
QUARTERLY NET PROFIT IMPACTED BY THE RESTRUCTURING COSTS OF THE OPERATIONAL TRANSFORMATION PLAN ctt 8 financial and operational performance € million, except when otherwise indicated Reported Recurring? Financial indicators 1Q17 1Q18 A% 1Q17 1918 A% Revenues 177.0 176.9 -0.0% 177.0 176.9 -0.0% Opera
Slide 24: Strong E&P and Banco CTT revenues growth offset legacy decline
STRONG EXPRESS & PARCELS AND BANCO CTT REVENUES GROWTH OFFSET THE DECLINE OF THE LEGACY BUSINESSES ctt Revenues breakdown € million; % change vs. prior year; % of total € million Financial Banco CTT1 cs ae tSS be ) ESM (128.8%) .8m (-37.0% 46.5 | +1.1 | Express 3a E&P, excl. Transporta & Parcels €36
Slide 25: Recurring operating costs under control
RECURRING OPERATING COSTS UNDER CONTROL, INCREASING ONLY AS A RESULT OF GROWTH IN ACTIVITY AND THE TRANSPORTA ACQUISITION ctt operating costs Operating costs breakdown € million; % change vs. prior year; % of total € million @ Other €6.1m (+33.2%) @ I Recurring op. costs Transporta +60 06) _ = Catmn
Slide 26: EBITDA evolution
EBITDA EVOLUTION REFLECTS THE LOSS OF HIGH INCREMENTAL MARGIN PRODUCT REVENUES IN FINANCIAL SERVICES AND LESS WORKING DAYS IN THE MAIL BUSINESS ctt 8 recurring EBI EBITDA breakdown € million; % change vs. prior year; % of total € million BancoCTT -€4.3m ¢-1.5%) Financial y Services €3.1m (58.2%) €22
Slide 27: Adjusted cash flow influenced by payment of indemnities
THE ADJUSTED CASH FLOW WAS INFLUENCED BY THE PAYMENT OF INDEMNITIES BOOKED BOTH IN 4Q17 ANDIN1Q18, AS PART OF THE OPERATIONAL TRANSFORMATION PLAN ctt Cash flo € million; % change vs. prior year Reported (Excl. FS float & onlst ea json finassets) | 1Q17 1918 b% 1Q17 1918 D% = €14.7m indemnities Fromo
Slide 28: Balance sheet reflects increasing weight of Banco CTT
THE BALANCE SHEET REFLECTS THE INCREASING WEIGHT OF BANCO CTT IN THE BUSINESS AND THE HIGH NET FINANCIAL CASH POSITION ctt alance Sheet — 31 March 20: € million; % change vs. 31 December 2017 1,594 1,594 Financial Services payables Cash & cash equivalents. + | Cash & cash equivalents +€495) Banco CT
Slide 29: Business Units
Slide 30: Mail: seasonal effects on volumes offset by pricing and mix
MAIL: SEASONAL EFFECTS ON MAIL VOLUMES ALMOST FULLY OFFSET BY PRICING AND STRONG POSITIVE PRODUCT REVENUES MIX ctt 1Q18 Revenues by type EBIT! € million; % change vs. prior year € million ~ Transactional €105.0m (-€3.0™;-2.8%) ~ Advertising €6.3m(-€1.0m;-13.7%) ~ Editorial €3.9M-€0.2m;-4.4%) 24.6 23
Slide 31: Express & Parcels: significant contribution to revenues growth
EXPRESS & PARCELS: E&P BEGINNING TO SHOW SIGNIFICANT CONTRIBUTION TO REVENUES GROWTH, AS ARESULT OF VERY HEALTHY VOLUMES EVOLUTION BOTH IN PORTUGAL AND IN SPAIN ctt Revenues by region Operating costs EBIT! € million; % change vs. prior year € milion € milion - Portugal & other? €22.8m(+€5.2m;+29,7%)
Slide 32: Financial Services: loss of high margin public debt revenues
FINANCIAL SERVICES: THE LOSS OF HIGH INCREMENTAL MARGIN PUBLIC DEBT PRODUCTS REVENUES IMPACTED THE FINANCIAL SERVICES PROFITABILITY ctt 1Q18 Revenues by type? Operating costs? € million; % change vs. prior year € million (‘S ea - 8.1 ~ Savings & Insurance €3.7M(-€5.9M;-61.3%) 6.7 ~ Payments? eincoai
Slide 33: Banco CTT: revenues growth reflects net interest margin expansion
BANCO CTT: THE REVENUES GROWTH OF BANCO CTT REFLECTS THE EXPANSION OF THE NET INTEREST MARGIN, AS LIQUIDITY IS BEING DEPLOYED IN HIGHER YIELDING ASSETS, INCLUDING CREDIT 1Q18 Revenues Operating costs € million; change vs. prior year € million | Net interest income €1.5m (+€1.1m) ee 9.394 ~ Interest
Slide 34: Appendix
Slide 35: Consolidated Results
CONSOLIDATED RESULTS €million Reported Recurring? Reece Pano 1Q17 1918 1Q17 1918 1Q17 1918 Revenues 177.0 176.9 177.0 176.9 174.7 173.7 Operating costs 152.1 158.5. 148.9 154.2 144.9 150.9 EBITDA 249 18.4 28.0 22.7 29.8 22.8 EBITDA margin 14.1% 10.4% 15.8% 12.8% 17.1% 13.1% Ravan amortisations, impa
Slide 36: Balance Sheet
BALANCE SHEET fh. ctt million rc ~—CieTT under equity method 7 31-Dec-17. 31-Mar-18 31-Dec-17. 31-Mar-18 Non-current assets 678.5 776.1 413.4 4247 Current assets 930.3 818.3 557.3 481.6 Assets 1,608.8 1,594.5 970.7 906.3 Equity 184.0 187.9 184.0 187.9 Liabilities 1,424.8 1,406.5 786.8 718.4 Non-curr
Slide 37: Non-recurring items affecting EBITDA
NON-RECURRING ITEMS AFFECTING EBITDA PREDOMINANTLY RELATED TO THE OPERATIONAL TRANSFORMATION PLAN ctt million -— Non-recurringitems— 1Q17 1Q18 Recurring EBITDA 28.0 22.7 Non-recurring items affecting EBITDA 3.1 4.3 —_— €3.7m indemnities related to the Revenues 0.0 0.0 a Operational Transformation Pl
Slide 38: CTT Investor Relations
CTT Investor Relations Contacts: Phone: +351 210 471 087 E-mail: investors@ctt.pt