CTT - Correios de Portugal SA · EURONEXT:CTT
CTT - Correios de Portugal SA — CTT - Correios de Portugal — 9M15 Earnings Presentation
41 slides from CTT - Correios de Portugal SA's earnings presentation, December 2015
Slide 1: 9M15 Results Roadshows
9M15 Results Roadshows 13th Berenberg European Conference December 2015 1
Slide 2: Disclaimer
Disclaimer DISCLAIMER 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 2015. As a consequence thereof, this document may not be disclosed or publis
Slide 3: Agenda
Agenda 01. Company overview 02. 9M15 results 03. Banco CTT 04. 2020 business ambition 3
Slide 4: The postal services industry is going through a significant transformation phase
Company overview The postal services industry is going through a significant transformation phase Globalisation Digitalisation Liberalisation Substitution E-Commerce Privatisation effect Much more scrutiny What can be digital… Online shopping…a new and competition will be digital paradigm and an opp
Slide 5: CTT is a dynamic postal services operator with a balanced portfolio of businesses
Company overview CTT is a dynamic postal services operator with a balanced portfolio of businesses… 72% 10% 18% 68% 28% 4% Mail & other Financial Services Express & Parcels MAIL BUSINESS SAVINGS & RETAIL PAYMENTS TRANSFERS PORTUGAL SPAIN MOZAMBIQUE SOLUTIONS INSURANCE PAYSHOP NETWORK SERVICES CREDIT
Slide 6: Leveraging on its unique networks and iconic brand
Company overview … leveraging on its unique networks and iconic brand CTT Retail & Distribution networks 1 National and international recognition (awards) “Trusted Brand and Trusted Brand for the Environment 2015” Reader’s Digest 1,706 621 2015: 14 awards (YTD) Postal Post Offices Agencies “Trusted
Slide 7: Reporting consistently strong results since the IPO
Company overview Reporting consistently strong results since the IPO, delivering on the promise… Reversing the reported revenues declining trend (since 2013) Strong recurring EBITDA 2 growth (since 2012) € million CAGR 2011-2013 % growth vs. previous year € million CAGR 2011-2013 % growth vs. Recurr
Slide 8: Proven track record of shareholder value creation
Company overview …with a proven track record of shareholder value creation Share price significantly outperforming the benchmark 1 Offering an attractive dividend yield 1 € 10€10 CTT PSI 20 5.3% € 9€9 +64% 8€8 € 3.9% €531m of capital 3.7% appreciation 7€7 € + €129.75m of 2.7% dividends 6€6 € 5€5 € -
Slide 9: CTT presents a distinctive and attractive equity story
Company overview CTT presents a distinctive and attractive equity story Two independent Unique networks growth levers • Extensive (FS and E&P) nationwide Retail • Diversified business Network model leveraging on • High capillarity competitive skills • Backbone to all • Significant shared business ac
Slide 10: Agenda
Agenda 01. Company overview 02. 9M15 results 03. Banco CTT 04. 2020 business ambition 10
Slide 11: Postal Bank project costs impacting the financial indicators
9M15 results | Key highlights Postal Bank project costs impacting the financial indicators Financial and operational performance € million, except when indicated otherwise Excluding Postal Bank project Including Postal Bank project (like-for-like) 5 Financial indicators: 9M14 9M15 Δ% 9M15 Δ% Reporte
Slide 12: Revenues grow by 1.9% on a recurring basis
9M15 results | Key highlights Revenues grow by 1.9% on a recurring basis, with positive contributions from all businesses 9M15 recurring revenues Revenues breakdown € million; % change vs. prior year; % of total € million +1.3% Financial Services 538.1 €57.9m (+6.3%) 11% +2.1 +3.4 Express & Parcels
Slide 13: Operating costs increase as Postal Bank project spending ramps-up
9M15 results | Key highlights Operating costs increase as Postal Bank project spending ramps-up 9M15 like-for-like recurring operating costs 1 Operating costs breakdown € million; % change vs. prior year; % of total € million +0.9% +2.6% Other 440.7 €20.0m (+11.5%) 5% External Supplies +7.6 & Servic
Slide 14: Postal Bank project spending ramps-up as launch date approaches
9M15 results | Key highlights Postal Bank project spending ramps-up as launch date approaches Postal Bank project spending € million Recurring costs Non-recurring costs Capex €2.8m €4.8m €8.9m 16.5 1.2 7.7 7.6 1.5 3.3 1.7 1.1 Staff costs ES&S and Strategic, tax Training, HR Postal Bank Core Banking
Slide 15: Growth in FS revenues and Mail efficiency drive recurring EBITDA margin up
9M15 results | Key highlights Growth in FS revenues and Mail efficiency drive recurring EBITDA margin up by 20 bps 9M15 like-for-like recurring EBITDA 1 Recurring EBITDA 2 breakdown € million; % change vs. prior year; % of total € million +5.8% +3.0% +2.1 Financial Services 29% €33.4m (+16.5%) +3.4
Slide 16: Strong 3Q15 adjusted operating FCF generation
9M15 results | Key highlights Strong 3Q15 adjusted operating FCF generation, supported also by €15m Altice payment Cash flow € million Reported Adjusted 1 Accounts receivable reduction in 3Q15 (€15.8m) 9M14 9M15 ∆% 9M14 9M15 ∆% €9.0m variable remuneration paid in From operating activities 207.4
Slide 17: Strong cash position maintained in a year of high investment
9M15 results | Key highlights Strong cash position maintained in a year of high investment Adjusted cash at the end of the period 1 € million -€14.5m 278.9 Net profit non cash effects 264.4 -1.3 +16.7 -69.8 +50.6 -22.9 +12.1 €15m payment received in July 2015 €2.9m revenues recognised in 9M15
Slide 18: The Balance Sheet reflects higher level of cash Capex
9M15 results | Key highlights The Balance Sheet reflects higher level of cash Capex Balance Sheet Assets Liabilities & Equity € million 1,181 1,181 1,149 1,149 398 375 Financial Services payables Cash & cash equivalents 665 -5.2% 630 +€69.75m dividend paid 196 +8.4% 212 Other current liabilities 4
Slide 19: Mail benefits from lower than expected addressed mail volumes decline
9M15 results | Business units performance 1 Mail benefits from lower than expected addressed mail volumes decline 9M15 Mail revenues by type Recurring operating costs 2 Recurring EBITDA 2 € million, % change vs. prior year € million € million USO Parcels Other 1 +1.8% €4.9m (-4.0%) €50.6m (+6.6%) 33
Slide 20: Network integration process in Portugal still to have a relevant impact on E&P results
9M15 results | Business units performance 2 Network integration process in Portugal still to have a relevant impact on E&P results 9M15 E&P revenues by region Recurring operating costs 2 Recurring EBITDA 2 € million, % change vs. prior year € million € million +5.7% Mozambique 94.6 -66.9% €1.7m (+37
Slide 21: Strong revenues growth allows FS to absorb Banco CTT recurring op. costs
9M15 results | Business units performance 3 Strong revenues growth allows FS to absorb the Banco CTT recurring op. costs 9M15 FS recurring revenues by type Recurring operating costs 2 Recurring EBITDA 2 € million, % change vs. prior year € million € million +5.8% +16.5% Credit Other 1 -5.1% +6.8% 27
Slide 22: Updated guidance
9M15 results | Outlook Updated guidance Addressed mail volumes decline in the -3% / -4% range, better than the -5% initial Revenues & target volumes Growth in revenues, supported by MoU with Altice Like-for like (excluding Banco CTT project) recurring costs to decline Operating costs & High
Slide 23: Non-recurring items affecting the results
9M15 results | Appendix Non-recurring items affecting the results € million 9M14 9M15 ∆ Reported EBITDA 101.6 97.4 -4.2 Non-recurring items affecting EBITDA 0.1 7.4 7.3 €3.0m non-recurring FS Revenues -3.0 0.0 3.0 revenues in 9M14 (Cetelem) €1.9m provision for Tourline Staff costs 1.1 1.2 0.1 HR opt
Slide 24: Postal Bank project spending within management estimates
9M15 results | Appendix Postal Bank project spending (€16m Capex & Opex) within management estimates Financial performance – Postal Bank project impact Including Postal Bank project 1 Excluding Postal Bank project 9M15 Postal € million 9M14 CTT 9M15 CTT ∆% 9M15 CTT ∆% Bank proj. 2 Reported revenues
Slide 25: Agenda
Agenda 01. Company overview 02. 9M15 results 03. Banco CTT 04. 2020 business ambition 25
Slide 26: Success of Banco CTT – no-frills concept
Banco CTT Success of Banco CTT – “no-frills” concept Market research – Banco CTT acceptance Banco CTT target and value proposition “Do you consider the offer interesting?” 53% Yes Young Population with less Current CTT Target professionals sophisticated customers requirements “Would you be willing t
Slide 27: Banco CTT will replicate the success factors common to postal banking players
Banco CTT Banco CTT will replicate the success factors common to postal banking players Many postal banks have common characteristics along … which are also being replicated by Banco CTT key dimensions… ▪1 Value proposition structured around four key principles: Value proposition structured around f
Slide 28: Roll-out of Banco CTT will be completed in years
Banco CTT Roll-out of Banco CTT will be completed in 3 years, with a clear operational delivery model in place Operational delivery model 1 Roll-out 83 Post offices Up to 604 with Banco CTT dedicated 84 space 402 250 250 84 Post offices with Banco CTT 202 dedicated 250 counter 79 <270 123 Up to 270
Slide 29: Banco CTT expected to have higher market share in accounts than in deposits
Banco CTT Banco CTT is expected to have a higher market share in accounts than in deposits OVERALL MARKET 133 107 2014 € billion 24 2 12 1 Current accounts Deposits Mortgages Consumer loans (million accounts) (individuals) MARKET SHARE TARGETS ~5-6% 3 ~3-4% 3 7.5 - 10% (10-year target) ≥3 - 4% ≥2 -
Slide 30: Client acquisition and product penetration ambition aligned with other EU postal banks
Banco CTT Both client acquisition and product penetration ambition is aligned with other EU postal banks Market share by product for the local postal banking player Postal banks with more than 10 years of activity; 2014 Current accounts Deposits Mortgages (stock) Consumer loans 15% 9% 5% 3% 1 15% 8%
Slide 31: Value creation anchored in 4 main key success factors
Banco CTT Sustained improvement in value creation over time is anchored in 4 main key success factors Banco CTT’s financials ambition Key success factors Remarks 4%2 6%2 • Long-term aspiration of 1 million Revenues 1 Number of 650-750 clients aligned with European € million accounts 375-475 postal b
Slide 32: Long run aspiration for cost-to-income ratio towards ~50%
Banco CTT Long run aspiration for Cost-to-income ratio to lean towards ~50% Banco CTT’s financials ambition REVENUES € million Banco CTT’s products 1 Third-party products ~65-70 ~30-35 ~25-30 ~20-25 2018E 2020E 2018E 2020E OPERATING COSTS (before shared costs with CTT) € million Direct Staff costs E
Slide 33: Migration of Financial Services to Banco CTT
Banco CTT Migration of Financial Services to Banco CTT Migration to Banco CTT 2014 revenues 1 Provider Initial plan Revised plan Staying in FS Migrating to bank Public debt certificates SAVINGS & Life insurance Year 1 with ramp-up €29m €2m INSURANCE Non-life insurance Year 0 with ramp-up Post office
Slide 34: Business plan update led to upward adjustments in capital needs until 2020
Banco CTT Business plan update led to upward adjustments in capital needs until 2020 Total equity investment until 2020 € million Benchmark CET 1 1 ~150-170 3Q15 +45 / +60 Bank 1 13.2% +15 / +20 -5 / -10 100 Bank 2 10.6% Detail in the previous slide Bank 3 15.7% Bank 4 11.0% 2 Initial plan Target 15
Slide 35: Strong investment needed in the initial years to support the bank's launch
Banco CTT Strong investment needed in the initial years to support the bank’s launch CTT’s projected investment in Banco CTT (2016E-2017E) € million 2016E 2017E Impacting reported EBITDA Estimated Estimated Estimated recurring non-recurring Capex costs ~€45m costs ~€20m ~€40m ~85 ~17.5-22.5 ~65 ~10-
Slide 36: To summarise… Banco CTT's objectives
Banco CTT To summarise… Banco CTT’s objectives Banco CTT long-term aspiration 1 Capture the strong market opportunity (more than 25% of the Portuguese market willing to subscribe to Banco CTT’s offer), leveraging existing CTT clients and an appealing • Customer accounts ~1m value proposition • Mkt s
Slide 37: Agenda
Agenda 01. Company overview 02. 9M15 results 03. Banco CTT 04. 2020 business ambition 37
Slide 38: CTT 2020 ambition – Mail
2020 business ambition CTT 2020 ambition – Mail Mail (including Retail Network offer) VOLUMES & PRICING REVENUES EBITDA MARGIN CAGR % Δ Margin (p.p.) -3% to -5% volumes declines 0% / -2% p.a. in the mid-term >0 p.p. • Dependent on the growth of the economy (domestic consumpt.) Utilisation of the pri
Slide 39: CTT 2020 ambition – Express & Parcels
2020 business ambition CTT 2020 ambition – Express & Parcels Express & Parcels Portugal VOLUMES REVENUES EBITDA MARGIN Portugal; CAGR % Portugal; Δ Margin (p.p.) Relevant B2C / e-commerce >5% volumes growth – ~30% of the revenues +2 / +4 p.p. • Double-digit growth in volumes p.a. Small B2B volumes g
Slide 40: CTT 2020 ambition – Financial Services (including Banco CTT)
2020 business ambition CTT 2020 ambition – Financial Services (including Banco CTT) Financial Services (including Banco CTT) PRODUCT OFFER REVENUES EBITDA MARGIN CAGR % % ~13-15% Some products will >50% migrate to Banco CTT to stimulate cross- 35% / 40% selling Integrated offer of Banco CTT’s produc
Slide 41: CTT Investor Relations
CTT Investor Relations Contacts: Phone: +351 210 471 857 E-mail: investors@ctt.pt 41
CTT - Correios de Portugal — 9M15 Earnings Presentation on 6ix