CTT - Correios De Portugal, S.A.

good day and welcome to ctt first half 2023 results call my name is priscilla and i'll be your coordinator for today's event please note this call is being recorded and for the duration of the call your lines will be on listen only however you will have the opportunity to ask questions at the end of the call this can be done by pressing star 1 on your telephone keypad to register your question if you require assistance at any point please press star 0 and you'll be connected to an operator i will now hand you over to your host mr Joao Bento, the CEO, Mr. Guy Pacheco, the CFO, to begin today's conference. Please go ahead, sir. Thank you.

Thank you, Priscilla. Good morning, everyone. Welcome to our first half webcast, where we are talking about the great quarter with all business areas performing very well. And I would emphasize the performance of Express and Parasoft. that through a robust growth in volumes, revenues and profitability, somehow rendered the right results, given the capacity investments that we had. This is indeed, for Express Investors, a record-setting quarter. If you follow me on the left-hand side of slide number four, We started exactly with parcels on Iberia, strong volume rebound across our E&P platform, driving revenues and profitable growth in Portugal and Spain. In Portugal, we have seen a sustained acceleration of volumes and revenues and margin. And in Spain, it was mostly a very strong growth both in large and small clients that provided this very interesting result and outlook. As for mail, we are now grabbing the benefits of the new price mechanism, given that price increases compensated volume declines. Nevertheless, we remain focused on profitability and on cost-cutting to deliver EBIT growth, and that's why with a sloppish revenues performance, we had a significant improvement on EBIT. As for the public debt, we are now back to what we are considering a normal or normalized demand of public debt, following the changes in the economic conditions of the main project, the savings certificate. And we remain focused on transforming the retail network towards services. namely with this new acceleration on insurance distribution where we are already observing the first very relevant results. As for the bank, Both volume, volumes growth and higher rates both contributed to improved profitability and the bank remained focused on strengthening client relations against the backdrop of healthy banking client growth in the quarter. With all this, we've seen revenues growing 12.7% year-on-year, reflecting the already mentioned growth in all segments, with E&P itself accelerating some 25% in the quarter year-on-year. And with that, we have produced a $22.7 million recurring EBIT, or roughly 90% growth. Finally, we are also showing a strong operating cash flow generation, $55.6 million in the first half, almost tripling the results from last year. Free cash flow went up to $48 million, or 12.5 times growth year-on-year. And this is also the quarter where we spread our dividend of around $18 million. or 125 cents per share. Consolidated net cash position of 7.6 million, a significant improvement again, and with the bank equity accounted, our net debt stood at now 174.6 million or down almost 18 million versus the numbers of year end 22. With that, we have, moving to slide number five, the details of the revenue and margins that somehow reflect the comments I've already produced, so quite obvious growth on all business areas. And then I would invite you to move to slide number six, where we describe our main features of E&P in Portugal. We have indeed registered the fifth consecutive quarter of sustained acceleration in volumes and in revenues, benefiting from operational leverage, and we have also seen very distinct results on margin. Indeed, this growth of revenues is based on growth in all types of clients, And therefore, we are showing this chart on the bottom left-hand side with the diversified client base, which implies resilience in this type of growth in the sense that, well, we cope with different dynamics in different parts of the economy that produce or induce last-mile deliveries. Revenues have grown significantly in Portugal, double digits, and growth in revenues is a combination of not only growth in volumes, but also an improvement in margin given better pricing. This is also a period where we have somehow absorbed all the main impacts of cost inflation that we've seen in recent times. Moving to the right-hand side, this generated an increased operational efficiency and leverage that allowed for a 34% growth in EBITDA and a 70% growth on EBIT, producing, again, a double-digit EBIT margin, which we render very, very relevant. Moving to slide number seven. We see the situation in Spain with record volumes driving increased profitability due to a much higher operating leverage, benefiting from private investments, as we've seen and we've referred many times in the past. We have built the capacity, we have the quality in Spain, and with volumes growing to numbers that we were aiming at and working towards this achievement, we are now seeing the results. Indeed, we have a 4-4 growth in the quarter, and in fact, it has been accelerating through the quarter. And again, this is the result of growth not only in large clients, but also in small clients. And you can observe on the bottom left side, we've seen in the quarter a 59% growth on smaller clients. Indeed, moving to the middle chart, we see that the top five clients have, in fact, reduced their contribution to growth. We rendered this as an interesting feature of the dynamics of the demand in Spain. We have produced 36.6% growth in revenues, 75% growth in EBITDA, and it's possible to qualify growth on EBIT with a significant growth of 1.2 million euros, which is a number we've never achieved before. So we have a very promising second quarter on E&P, both in Portugal and Spain, as I said, but also we also have good prospects for the year. And I'd like to invite now my colleague, João Souza, to comment on the Express and Passage Outlook and following for mail and financial services as well.

João, to you. Thank you, João. Like João was saying, in Portugal we have managed to have a justified customer base in business sector and also in the dimension of the company. That guarantees a better way to managing the uncertainty of the market. And in Spain, the increase of date of the SMEs and the consequent reduction of the dependence of the largest customers also gives us security to manage in a better way the numbers in Spain. In both countries, we see a very positive commercial pipeline that gives us a very positive outlook for the future and for the rest of the year. Coming for the mail business on slide eight, despite the effort of managing the drop mail traffic, getting market share in a share of quality in customers and managing churn with business solutions that is growing year on year, The address mail volume decreased minus 7.3% against the same period of last year, but the average revenue per item increased 7.1%. This comes from the new price calculation format. It also gives us a clear view for the future and helps us to control the decrease of mail volumes in the future from the price format. The increase in average price per item allow us to reach 90.8 million euros of revenues in this quarter. This is a very slight decrease compared with previous year of minus 0.8%. But also in this business area, we continue to control the costs to help to managing the drop mail in this business area. Coming for slide nine, financial services. After a strong growth in the recent quarters, we already have seen in the last weeks of June a daily placement equivalent to the historical values. We come from the same values that we have seen before this growth in the last quarters. We are doing several initiatives, mainly in customer experience, to help to maintain these volumes and managing the churn of these volumes. Nowadays, the customer can schedule the visit to a store in our website and upload all the documents. This helps us to reach the younger segment and also to manage in a better way these placements. So, as you can see in the market, this is very important. But saying this, the placement of the second quarter in 2023 growth compared with the same period in the previous year, more than 287%. In financial services, where are the public debt placements, we reach a revenue of 17.6 million, so plus 42.9%, and an EBIT of 9.9 million euros, an increase of 65.8% against last year. But what I want to highlight here is we continue to position the CTT Retail Network in a platform to sell savings, insurance and credit service to the Portuguese citizens. We have a powerful brand. We have a very important talking in our stores that allow us to bring more services to our stores. And it's still early days, but we're beginning selling insurance in April of this year. And we are already very happy with the performance. Nowadays, we have more than 85% of our stores already selling insurance. And we, as you can see in the numbers, in June we already reached more than 60,000 customers doing simulations and presenting our offer. This is very important also to managing the future. We see this like an avenue of growth because, as you know, insurance services is a monthly guaranteed revenue and allows us also to protect our future. Coming for the results of the bank, I'm going to ask you to... Thank you, João.