Financial services help CTT Group stabilise profits

Growth in its parcels and financial services has helped CTT Correios de Portugal offset the decline of its mail business in the first quarter of the year. The slight growth reversed a five-year declining trend, the company said.

The newly privatised national postal operator in Portugal saw its underlying revenue grow 0.3% year-on-year in the first quarter of the year, to EUR 176.4m.

During the quarter underlying mail revenue slid 2.5% to EUR 129m, while express and parcels revenue grew by 3.8% to EUR 31.2m and financial services revenue grew by 19.9% to EUR 16.2m.

The underlying revenues excluded the impact of the sale of a 51.2% stake in CTT’s document management business, EAD, last month.

Operating costs fell by 0.7% year-on-year, to EUR 143.4m, despite a 1% rise in labour costs, which now represent 81.6% of total operating costs. The company said the second phase of its transformation programme achieved 19% more savings than expected in the quarter, a EUR 5m impact on pre-tax earnings.

Underlying net profits remained stable rising 0.4% to EUR 18.9m in the quarter, again thanks to financial and parcels services — financial services saw underlying profits rise 48.2% year-on-year to EUR 8.2m, with express and parcels underlying profit up 4.4% to EUR 1.5m.

The mail business saw its underlying profit down 8.9% to EUR 23.4m.

CTT said it countered some of the impact of the 9.5% drop in addressed mail volumes with a 5.3% price increase in its universal postal service. “Advertising mail is still suffering from the economic downturn,” the firm said.

The parcels business enjoyed a 15.7% volume increase thanks to e-commerce growth, although costs rose because of the implementation of a new business model under the firm’s transformation programme, which is designed to cope with business-to-consumer growth. CTT recently launched a unified Iberian delivery service, offering the same rates for customers in Portugal and Spain shipping anywhere on the peninsula.

The financial services division was boosted by strong growth in savings products, as was seen last year, with around EUR 1bn of savings and insurance products sold in the quarter, more than twice those in the first quarter of 2013.

Looking ahead, hopes are for a recovery in the Portuguese economy to slow the decline in addressed mail volumes.

CTT is also hoping regulatory approval for a postal bank could come in the third quarter, boosting its financial services business.