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CTT - 3Q18 Results Review - Revenues rose 2% y/y. Recurring EBITDA increased 22% y/y

31 Oct 2018

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CTT reported yesterday after market close its 3Q18 results. 3Q18 revenues stood at €169.7mn, +2.3% y/y. 3Q18 recurring EBITDA reached €19.0mn, +22.1% y/y. Recurring net income stood at €0.6mn (vs. net loss of €0.8bn in 3Q17). 

Recurring revenues were up by 2.3% y/y in 3Q18 at €169.7mn, reflecting the growth in Express & Parcels (+€3.1mn, including +€0.3mn from Transporta), Banco CTT (+€1.6mn) and Mail & Other (+€2.4mn), that offset Financial Services (-€3.2mn), impacted negatively by the decline in subscriptions which led to lower commissions from public debt products. At FY17 results, CTT guided towards a small increase in revenues in FY18, supported by Express & Parcels and Banco CTT (9M18 recurring revenues rose +1.3% y/y to €524.8mn).

Recurring operating costs increased by 0.3% y/y, or +€0.4mn, to €150.7mn, including +€1.5mn in recurring costs from Banco CTT (+€0.1mn from Transporta, acquired in 2Q17). Reported operating costs rose by 1.8% y/y to €155.1mn, including +€2.6mn related to the Operational Transformation Plan (mainly indemnities associated with negotiated staff exits).

Reported EBITDA rose by 9.3% y/y in 2Q18 to €14.8mn or +22.1% y/y to €19.0mn on a recurring basis. At FY17 results, CTT guided towards a stable recurring EBITDA y/y, contingent on mail volumes development and Financial Services evolution (9M18 recurring EBITDA fell by 4.6% y/y to €65.0mn).

Reported net profit stood at €3.6mn in 3Q18, vs. €1.8mn in 3Q17 (€0.6mn in 3Q18 on a recurring basis, vs. -€0.8mn in 3Q17). Net financial cashreached €93mn in 3Q18 (vs. 92mn in 2Q18).

Mail: Addressable mail volume declined by 5.3% y/y in 3Q18 or -7.1% y/y in 9M18 (after -7.9% y/y in 1H18), vs. CTT’s guidance range for FY18 of -5% to -6%. Unaddressed mail volumes fell 20.8% y/y in 3Q18 or -14.0% y/y in 9M18 (after -10.1% y/y in 1H18). Revenues rose by 2.1% y/y in 3Q18 (or +€2.7mn) to €126.3mn. Recurring EBITDA rose 25.3% y/y to €18.0mn, on higher margins y/y (14.3% in 3Q18 vs. 11.7% in 3Q17), and lower recurring costs (-0.9% y/y to €108.2mn in 3Q18), reflecting cost reductions from the operational transformational plan.

Financial Services: revenues fell by 23.2% y/y (or -€3.2mn) in 3Q18 to €10.5mn, with weakness seen across the board, as savings and insurance (-35.8% y/y), payments (-3.9% y/y) and transfers (-15.1% y/y) all fell vs. 3Q17. Recurring EBITDA in the division declined by 20.5% y/y to €4.4mn in spite of higher margins y/y (41.8% in 3Q18, vs. 40.4% in 3Q17). Recurring operating costs fell by 25.1% y/y to €6.1mn. The decline in the high incremental margin public debt products revenues impacted profitability.

E&P: revenues increased by 9.1% y/y in 3Q18 (or +€3.1mn) to €36.5mn (+14.7% y/y in 9M18 or +10.2% y/y excluding Transporta). Revenues in Portugal rose by 10.4% y/y to €23.0mn. E&P volumes rose by 5.2% y/y in Portugal (+14.6% y/y in 9M18 or +10.1% y/y excluding Transporta). Volumes grew by 11.3% y/y in Spain (revenues increased by 6.3% y/y). Profitability improved y/y on the back of a 0.8% recurring EBITDA margin in the quarter (vs. -1.7% in 3Q17), although below the margin recorded in 2Q18 (3.1%). Recurring operating costs rose by 6.4% y/y, reflecting the higher top line.

Postal Bank: the number of accounts and deposits continued to increase in 3Q18. Customer deposits finished the quarter at €789.6mn (+€53.2mn q/q in 3Q18), while the number of accounts increased by 11.4% q/q. Credit to clients stood at €201.8mn as of the end of 3Q18, o.w. mortgages reached €184.1mn (vs. €149.2mn as of the end of 2Q18, o.w. mortgages reached €131.8mn). Consumer credit production stood at €12mn in 3Q18 (€30mn in 9M18). Revenues stood at €6.3mn in 3Q18, +32.8% y/y (or +€1.6mn y/y). 3Q18 recurring EBITDA stood at -€3.8mn (vs. -€3.9mn in 3Q17), after -€4.3mn in 2Q18.

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