CTT Relatório Integrado 2020 CEO
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CTT Relatório Integrado 2020
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Financial Indicators

CTT Relatório Integrado 2020
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Community Indicators

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Sustainability indicators

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Operational indicators

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Guidance delivered

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2020 will be marked in everyone's memory by how the widespread COVID-19 pandemic impacted people and companies' daily lives. For CTT, the year was characterized by the magnitude of the challenge generated by the consequent crisis, but also by the extraordinary way we reacted to difficulties and found opportunities in adversity. It is also marked by the 500 years of the postal service in Portugal hallmark, a very relevant moment in the company's history.

The unique situation caused by the adverse pandemic context came, particularly from March onwards, to significantly change consumers' and companies' habits, accelerating the ongoing changes in the postal sector paradigm. We have witnessed a historical growth in parcels volumes, boosted by the rapid adoption of e‑commerce as a substitute of physical retail. On the other hand, we have also observed a very significant acceleration of the decrease in mail volumes through increased digitalization in corporate communication, driven by the distancing circumstances imposed by the pandemic.

We have put forward in the early days of the lockdown period, and in a very agile manner, a plan to respond to the created circumstances based on six key pillars: 1) protecting our people; 2) adapting operations to the "new normal"; 3) ensuring liquidity; 4) reducing costs and preserving the financial structure; 5) intensifying commercial action; 6) "counterattacking" by developing new business opportunities.

In a context in which we had to simultaneously manage a very adverse operational crisis and the need to ensure continuity alternatives, we maintained high levels of effectiveness, supporting the Iberian economy, and keeping our participation in essential logistics chains fully and permanently operational. In Portugal, we reacted even more widely to the difficulties, launching, at an early stage of the pandemic, an innovative set of solutions for the development of e-commerce, with particular emphasis on SMEs, which proved to be a key positioning to face the crisis.

This innovative wave included very impactful measures for the development of e-commerce. I would highlight: the launch of the tool to create online shops -- Criar Lojas Online CTT --, today, with more than 1800 registered stores; the campaign to attract new e-sellers and e-buyers to the Dott marketplace; the digital reconstruction of countless regional fairs -- where more than 75,000 local products were already traded; and the speedy implementation of the "CTT Comércio Local" app, aimed at very small businesses, in a partnership with municipalities. The scope and impact of these initiatives were such that one might state that, in response to the COVID-19 crisis, CTT emerged as the foremost e-commerce promoter in Portugal and the most prominent agent for Portuguese SMEs' effective digitalization.

But, besides companies, this repositioning has also targeted individual customers with a wide offer which included not only awareness campaigns such as CTT #FiqueEmCasa, but also: promotions to collection and delivery services without face-to-face contact; home delivery of medicines -- more than 30,000 so far -- in a partnership with the National Association of Pharmacies; delivery to nursing homes and health establishments of sanitizer gel manufactured and offered by Hovione; an innovative solution designed for home delivery of citizen cards, under which more than 150,000 cards have been delivered to this date; streamlined access to individual protection products to deal with the pandemic; as well as the very significant effort to pay pension cheques at home. An excellent example of agility and time-to-market was the partnership with the National Association of Pharmacies for delivering medicines at home, which was drafted, designed, negotiated, and operationalized in just one week immediately after the start of the first mandatory lockdown period.

The vigorous reaction to a situation of great adversity and with significant declines in mail demand -- our most significant source of income and margin until this year -- makes us proud and with a feeling of accomplishment. The vital role in the outbreak and evolution of the crisis symbolically marks the year 2020 and illustrates how 500 years of history generated an intrinsically innovative company capable of renewing and repositioning itself.

But the disruption to the normal flow of events caused by the pandemic crisis has not only affected the normal business flow. The government also invoked this context to justify the impossibility of launching the process to grant the new Universal Postal Service concession, given that the current one should have terminated on 31 December. In these circumstances, the contract was unilaterally extended by the grantor until the end of 2021, under an exceptional circumstances' consideration, to enable defining the conditions under which the next contract should be in force and develop an adequate awarding procedure during the current year. For this purpose, a governmental working group was set up in February 2021 to reflect on the postal sector's new reality and the contemporary vocation of a public postal service while streamlining the preparatory work for the new concession. CTT remained very active throughout the year to search for solutions that may ensure a balanced and sustainable concession contract, necessary conditions for it to become a concessionaire in the next cycle. We remain very firm on this route, and will continue to mobilize all the initiatives deemed appropriate.

The adverse context that worsened in March forced the company to reformulate its priorities and set extremely demanding objectives, which were shared with the market, with a new ambitious full-year guidance announced in August in the presentation of 1^st ^half 2020 results, following the most challenging semester in the company's recent history. But the remarkable work carried out and the restless reaction to the crisis allowed us to comply with this guidance, both in EBITDA and EBIT -- €90.5m and €34.5m, respectively --, even reaching a marginal increase in revenues to €745.2m (+0.7%). Of note was the performance in the 4^th^ quarter, which enabled the highest operating result in a quarter since the beginning of 2016.

From the point of view of the results, I would highlight some very significant aspects. On the one hand, the extraordinary accomplishment achieved by Banco CTT, in obtaining a positive net result for the year, in line with the announced target, but despite the large unfavorable impacts of the crisis affecting the financial sector. Secondly, Spain's parcels operation continued to converge towards the turnaround, with very expressive growth in volumes and revenues, albeit with a more unfavorable B2C-B2B mix in terms of price and cost. The performance of CTT Express in Spain, associated with the sustained growth and the improvement in market share and productivity in Portugal, allowed for a very significant jump in this business area's contribution to the consolidated results of CTT. Thirdly, the size already achieved and, especially, the unprecedented growth in Business Solutions, built upon the original opportunities in mail BPO (mail management) and printing & finishing, which provides reasonable indications that it may become a new growth path for the company. Finally, a word on the exceptional performance in the Financial Services & Retail business area, as levels of success in placing savings products, and in particular, public debt, remained very promising.

In addition to the financial performance aspects, the year was marked by a permanent focus on environment and climate change concerns. The company achieved a leadership position in sustainability, obtaining the maximum score of Leadership A, thus integrating the A-List of the 2020 Carbon Disclosure Project, the most relevant international carbon stock exchange rating. It positions CTT as one of only four companies in Portugal with this distinction and nine worldwide in the transport and distribution sector. In the same line, CTT ranked second amongst postal operators in the sustainability program of IPC - International Postal Corporation. These recognitions enshrine the work carried out and progress achieved in terms of carbon management and combating climate change.

2020 was also a year in which we reinforced the brand's value, renewing it in Portugal and Spain while various recognitions were awarded. Amongst others I would emphasize the distinction, for the 17^th^ time, as a "Portuguese Brand of Trust," the Human Resources magazine "Diversity and Inclusion" category award, and the selection as one of the finalists to the "Project of the Year" of the European Logistics Association. Finally, Banco CTT was elected leader in Customer satisfaction by ECSI Portugal.

A look to the future

After a very atypical year, 2021 should set up, despite the persistence of the pandemic crisis, a year of recovery and relaunch of CTT on a transformation path in which we intend to continue to assert ourselves as the agent that best combines the physical and digital dimensions in order to support companies' digitalization, with particular emphasis on e-commerce, positioning ourselves as the right partner in providing business and commerce services.

We want to act and be seen as being faster, better and greener. Faster, in the diversification of the portfolio and acceleration of CTT growth levers. Better, in the efficiency levels in comparison with our peers. And greener, due to the continued progress in reducing the carbon footprint, in line with a leading performance in Portugal and within the sector.

For this purpose, it is crucial to preserve Mail business sustainability either through the unrelenting search for operational redesign leading to greater efficiency, or through the restitution of balance and sustainability factors to the Universal Postal Service, within a new concession in which we can participate.

We also want to remain focused on being more than the best logistics partner for B2B, with the increased diversification of our offer, leveraging the combination of physical and digital. We intend to continue developing our value proposition in Business Solutions focusing on SMEs and municipalities, on the consolidation and growth of BPO, advertising and document management solutions, and exploring solutions to promote the digital presence of companies and management tools.

In Express & Parcels, we want to continue to lead in the development of e-commerce in Portugal and to make progress in establishing a distinctive and more profitable Iberian CEP platform. We want to lead through a value proposition of integrated services for customers, ranging from improving and expanding the presence of online sales channels (dott.pt; creation of online shops, local commerce app) to payment services, instant delivery, pick-up, and returns solutions, which are innovative and convenient for the customer, but also for the recipients -- customers of our customers. We want to boost our Iberian CEP platform, leveraging on 20 new sorting centers and new automatic sorters in Spain and Portugal and strengthening the distribution network to accommodate increased volumes, thus ensuring best-in-class performance. Besides, we will continue to develop relevant adjacent business lines for fulfillment already in 2021.

In B2C, the aim is to maximize the value generated in the digital and physical channels -- CTT post offices, CTT agents, and Payshop Agents. We will further the modernization, digitalization, and convenience across our incomparable retail network, accelerating 24x7 and self-service offer of core products. We will proceed with a route of proximity to the population by strengthening our retail network following the reopening of 23 post offices in municipalities during 2020. We also aim to expand and grow the supply of financial services by developing a full CTT-branded offer, leveraging on the extraordinary savings placement capacity consistently demonstrated with public debt securities.

At Banco CTT, and after the first year it contributed positively to CTT's net result, we will continue to accelerate the profitability of a retail, predominantly digital bank for people. We will be active in attracting new business partnerships, developing the current business lines and expanding into new ones, continuing to consolidate an equity story sufficiently attractive to consider value-creating capital partnerships.

To support growth, it will be critical to further improving the organization, with a focus on four main transformation axes: operations, through the modernization plan for infrastructures under implementation, the systematic review of the distribution model, and the improvement of customer support and incident management; people, by maximizing professional development and experience, allowing all workers to be agents of change and to contribute to the transformation of CTT; technology, with the structural transformation of our application ecosystem and the development of agile working methodologies; and finally, processes, by enhancing digitalization, internal processes, and interaction with customers, accelerating innovation and expanding a more agile way of operating.

Last but not least, we want to continue to lead and set an example of sustainability in our sector, on an international level, and in the general Portuguese business landscape. We will continue to strengthen our ecological fleet, implement more efficient solutions in our buildings and expand the development of green initiatives, particularly in the last mile, contributing to the reduction of the carbon footprint and a more sustainable future.

Final Notes

2020 was undoubtedly a challenging year for CTT. A year with unexpected and severe challenges due to the pandemic context, but it is my view that we can be proud of having risen to the events and the role played with our daily presence in the economy and in supporting our customers. This would not have been possible without our employees' unparalleled commitment, either towards the company -- by closing ranks to overcome adverse moments -- or in the social role, the public service, and support to the population which were daily led by those who were always at the forefront. Thanking all of them and not forgetting anyone, I must highlight our postmen and front office staff. But I would like to express my profound gratitude to everyone -- our customers, our suppliers, our partners, our shareholders, our new Board of Directors and Chairman and, finally, my great executive team.

2021 will be a year to reinforce our role as a vital agent in the markets where we operate. We will continue to consolidate roots for the future, ensuring that a new concession contract of which we can be a part guarantees conditions for providing a balanced and sustainable public service in the long term.

It will be a critical year to define the future in the medium term and reinforce our business diversification levers. We will strengthen the growth cycle, helped by changes in consumption habits and the growth of e-commerce, together with the expansion of our portfolio of products and services for companies. We will continue to assert ourselves as the shortest path -- physical and digital -- for everyone to send and receive items and for their savings, credit, and insurance. We count on the strength of our retail network and the constant affirmation of Banco CTT. And we hope to alleviate the crisis that has disturbed the economy so much and has eroded mail revenues.

Being faster, better and greener, we keep, increasingly so,

connecting people and companies, committed to deliver!

João Bento, Chief Executive Officer