CTT Correios de Portugal S A : Consolidated results – Full Year 2023

2023 Consolidated Results

CTT - Correios de Portugal, S.A.

2023 Consolidated Results

• Revenues1 reached €985.2m in 2023 (+€78.6m; +8.7% y.o.y), underpinned by Express & Parcels (+€81.6m; +31.5% y.o.y); Banco CTT (+€21.8m; +17.3% y.o.y) and Financial Services & Retail (+€2.1m; +3.4% y.o.y), and partially attenuated by Mail & Other (-€26.8m;-5.8% y.o.y). For the first time in CTT's history, in 4Q23 E&P was the biggest contributor to both revenues and recurring EBIT.
• Mail & Other revenues reached €434.1m in 2023. Excluding a project related to the sale of laptops and the rerun of the legislative elections that took place in 2022, Mail & Other revenues would have been flattish (-€1.8m;-0.4% y.o.y), benefiting from growth in transactional mail (+€4.5m; +1.3% y.o.y, excluding the elections impact).
• Express & Parcels again achieved in 4Q23 a strong double-digit growth in revenues (+55.9% y.o.y) and in volumes (+70.7% y.o.y), having accelerated versus 3Q23 (+35.5% y.o.y in revenues; +46.7% y.o.y in volumes), driven mainly by the performance in Spain (+107.4% y.o.y in revenues; +126.8% y.o.y in volumes). Growth acceleration in 4Q23 boosted revenues of this segment to €340.6m in 2023.
• Banco CTT revenues grew to €147.7m in 2023, underpinned by net interest income, which amounted to €98.8m (+€24.4m; +32.9% y.o.y). This performance was driven by growth in auto and mortgage loans, while benefiting from the favourable evolution of interest rates. Banco CTT is growing towards its 2025 targets, driven by the solid expansion of the client base, with the number of current accounts reaching 647k (+45k y.o.y), and by a €1b increase in business volumes in 2023.
• Financial Services & Retail recorded revenues of €62.8m in 2023. Growth was driven by the exceptionally high contribution of public debt certificates, especially savings certificates, in 1H23. As from June, the new features of this product and higher competition from bank deposits led to a decline in 2H23.
• Recurring EBIT reached €87.6m in 2023 (+€23.0m; +35.7% y.o.y), even higher than the guidance, which was twice revised upwards throughout the year. The margin reached 8.9% (7.1% in 2022) with strong growth in Express & Parcels, Financial Services & Retail and Banco CTT.
• Operating cash flow stood at €114.4m in 2023 (+€14.9m; +14.9% y.o.y).
• Net profit2 of €60.5m in 2023 (+€24.1m ; +66.2% y.o.y).
• On the back of strong growth in Iberian E&P, we expect recurring EBIT in 2024 to be above €88m, assuming public debt placements of c. €3.0b.

Consolidated results

								€ million
	2022	2023	Δ	Δ%	4Q22	4Q23	Δ	Δ%
Revenues1	906.6	985.2	78.6	8.7%	243,8	269.8	26.0	10.6%
Mail & Other	460.9	434.1	(26.8)	(5.8%)	115,4	111.1	(4.4)	(3.8%)
Express & Parcels	259.0	340.6	81.6	31.5%	71.2	111.1	39.8	55.9%
Banco CTT	126.0	147.7	21.8	17.3%	36.0	39.6	3.7	10.2%
Financial Services & Retail	60.7	62.8	2.1	3.4%	21.2	8.0	(13.2)	(62.3%)
Operating costs	777.3	833.3	56.0	7.2%	201.4	233.5	32.1	15.9%
EBITDA1	129.3	151.9	22.6	17.5%	42.5	36.3	(6.2)	(14.5%)
Depreciation & amortisation	64.8	64.3	(0.4)	(0.7%)	16.7	16.8	0.1	0.6%
Recurring EBIT	64.5	87.6	23.0	35.7%	25.8	19.5	(6.3)	(24.3%)
Specific items	8.4	9.8	1.4	16.6%	12.6	(1.2)	(13.8)	(109.5%)
EBIT	56.1	77.8	21.7	38.6%	13.1	20.7	7.6	57.8%
Net profit for the period2	36.4	60.5	24.1	66.2%	8.1	25.0	16.9	»

• Excluding specific items.

• Consolidated, attributable to equity holders. In individual accounts, net profit attributable to equity holders amounted to €70.8m.

CTT - Correios de Portugal, S.A. - Share capital EUR 71,957,500.00 - Lisbon commercial registry and fiscal no. 500 077 568

Avenida dos Combatentes, 43 - 14th Floor - 1643-001 LISBOA - PORTUGAL2 ctt.pt

2023 Consolidated Results

1. Operational and Financial Performance

Consolidated revenues

CTT revenues reached €985.2m in 2023 (+€78.6m; +8.7% y.o.y), underpinned by Express & Parcels (+€81.6m; +31.5% y.o.y); Banco CTT (+€21.8m; +17.3% y.o.y) and Financial Services & Retail (+€2.1m; +3.4% y.o.y), and partially attenuated by Mail & Other (-€26.8m;-5.8% y.o.y).

As mentioned above, for the first time in CTT's history, in 4Q23 Express & Parcels was the biggest contributor to revenues.

Mail & Other

In 2023, Mail & Other revenues amounted to €434.1m (-€26.8m;-5.8% y.o.y). This decline versus 2022 was impacted by two effects registered in 1Q22: (i) the revenues from the laptop sale project (€21.5m) in the business solutions segment; and (ii) additional revenues from international outbound mail in February 2022 due to the rerun of legislative elections in the European constituency (€3.5m), which specifically impacted transactional mail revenues.

Excluding those effects, the revenues of this business unit would have been flattish (-€1.8m;-0.4% y.o.y), benefiting from the growth in transactional mail (+€4.5m; +1.3% y.o.y, excluding the elections impact).

In 2023, transactional mail revenues reached €342.6m (+€1.0m; +0.3% y.o.y), due to the positive performances of registered mail (+€8.8m; +7.0% y.o.y) and international inbound mail (+€0.8m; +4.6% y.o.y). International outbound mail revenues decreased by €0.9m (-2.1% y.o.y) penalised by the additional revenues from the legislative elections in 1Q22. Excluding this impact, they would have grown by €2.6m (+6.7% y.o.y). There were declines in ordinary mail (-€6.2m;-4.7% y.o.y), priority mail (-€1.3m;-16.3% y.o.y) and green mail (-€0.4m;-4.4% y.o.y).

The other business lines posted decline: editorial mail (-€0.7m;-5.3% y.o.y), advertising mail (-€4.5m;-26.0% y.o.y), parcels of the universal postal service (-€0.1m;-1.5% y.o.y), philately (-€0.1m;-2.9% y.o.y), and other mail products and services (-€0.8m;-17.9% y.o.y).

In philately, special mention to the launch on 9 October, World Postal Day, of the philatelic issue "Saint Francis of Assisi - 800 Years of the Greccio Nativity Scene", the first one issued by CTT on 100% recycled paper.

In 2023, business solutions recorded revenues of €44.8m (-€22.5m;-33.5% y.o.y). Excluding the effect of the additional sale of laptops that took place in 1Q22, the decline would have been €1.0m (-2.2% y.o.y) and is related to the lack of investment in tradable goods businesses in 2023, unlike the previous year.The business process services (BPO) business grew with the full incorporation of Newspring, a company specialising in BPO and contact centres, acquired by CTT in 2021, and with the attraction and implementation of new businesses in different sectors. Noteworthy are (i) the increase in revenues from the solution for managing administrative offences and administrative instructions, (ii) the higher volume of hybrid mail produced by the new version of the "e-Carta" platform, which is a tool for the clients to optimise their internal mail sending processes, and (iii) the growth of the digital components, with the provision of mailing services (invoices) with Qualified Digital Signature pursuant to Decree-Law no. 28/2019 of 15 February.

3

2023 Consolidated Results

In 2023, addressed mail volumes declined by 8.0% y.o.y. Excluding the one-off volumes of international outbound mail in February 2022, due to the rerun of the legislative elections in the European constituency, this decrease would have been 7.8% y.o.y.

Mail volumes

							Million items
	2022	2023	Δ	Δ%	4Q22	4Q23	Δ	Δ%
Transactional mail	391.5	365.1	(26.4)	(6.7%)	92.6	86.2	(6.3)	(6.8%)
Advertising mail	38.6	30.9	(7.7)	(19.9%)	10.4	9.0	(1.4)	(13.5%)
Editorial mail	27.6	25.1	(2.5)	(9.0%)	7.2	6.3	(0.9)	(12.0%)
Addressed mail	457.6	421.1	(36.5)	(8.0%)	110.1	101.5	(8.6)	(7.8%)
Unaddressed
advertising mail	424.6	259.1	(165.5)	(39.0%)	109.7	61.1	(48.6)	(44.3%)

Transactional mail volumes decreased by 6.7% y.o.y in 2023.

Ordinary mail declined by 7.5% y.o.y as a consequence of the intrinsic trend in the postal sector due to the digital transformation of communications.

In 2023, international outbound mail decreased by 10.0% y.o.y (-4.2% y.o.y excluding the volumes from the elections) and international inbound mail recorded a decrease of 8.9% y.o.y.

In the opposite direction, registered mail volumes continued to grow (+4.1% y.o.y), driven by the dynamics of contractual customers, especially the government and banking & insurance sectors.

The average price change of the universal postal service3 in 2023 was +6.24% y.o.y. At the revenue level, volume declines were more than compensated by the price increase and by the favourable evolution of the transactional mail volume mix.

Addressed advertising mail volumes posted a decrease of 19.9% y.o.y and unaddressed advertising mail decreased by 39.0% y.o.y. The rising price of paper has led some clients to opt for a more digital strategy. New strategic partnerships have been established with various institutions to extend and complement the digital advertising offer, thus seeking to anticipate needs and add value to customers.

Express & Parcels

Express & Parcels revenues amounted to €340.6m in 2023 (+€81.6m; +31.5% y.o.y), due to high growth in volumes both in Spain and Portugal, benefiting from market share gains and increased adoption of e-commerce.

Revenues in Portugal recorded €149.1m in 2023 (+€16.9m; +12.8% y.o.y) and volumes totalled 38.9 million items (+17.6% y.o.y).

CEP revenues amounted to €135.8m in 2023 (+€16.9m; +14.3% y.o.y), with an 18.4% y.o.y. increase of volumes per working day. This growth was underpinned essentially by e-commerce (B2C) customers, particularly large global marketplaces and international e-sellers. The risk of business concentration is significantly low, given the high sectoral diversification of CEP customers.

The increase centred on e-commerce activity is a result of the significant growth in e-commerce, driven by greater access to the internet, convenience in transactions and the continuous development of payment systems, promoting a safer experience for consumers.

• Includes letter mail, editorial mail and parcels of the universal postal service, excluding international inbound mail.

4

2023 Consolidated Results

The banking documents delivery product line recorded revenues of €4.3m in 2023 and remained stable (-0.3% y.o.y) in a moment when the capillarity of banking networks and the collection/delivery frequency have been decreasing, partly offset by price increases.

Revenues of the cargo product line amounted to €4.0m in 2023 (-19.2% y.o.y). This decrease is related to the change in the operating strategy, which aimed at repositioning this product line within positive margin levels (the contribution margin4 in 2023 was 18.5%). This implied the exit of some customers as well as the withdrawal from some activity sectors without operating synergies.

The logistics product line, which is a pillar of the development of the vertical integration strategy with CEP, recorded revenues of €3.9m in 2023 (+13.5% y.o.y). This evolution was underpinned by business growth from current and new customers, both in e-commerce and B2B.

CTT continued to roll out its Locky locker network, which surpassed 820 lockers installed in Portugal, plus circa 330 already contracted and more than 600 under negotiation. In total, the Locky locker network includes around 1,150 lockers installed and/or contracted. Locky lockers are part of the CTT delivery points network, the largest and most capillary national network, with more than 3,000 points where customers can collect and send as well as return their parcels with maximum convenience, 24 hours a day in most lockers, every day of the week. These lockers are available in various locations around the country, namely in shopping centres, supermarkets, gas stations and intermodal transport platforms or, in the case of private lockers, in condominiums and in office/business areas. Locky lockers are an agnostic network and, since 4Q23, another carrier, in addition to CTT, has been using this locker network. The work of the Locky offer was recognised at the Portugal Digital Awards, where CTT won in the "Best of Customer & Consumers Project" category.

Revenues in Spain stood at €186.8m in 2023 (+51.9% y.o.y), with 61.7 million items (+57.4% y.o.y). Of particular note is the remarkable double-digit growth from 2Q23 onwards both in revenues (+36.6% y.o.y in 2Q23; +58.0% y.o.y in 3Q23; +107.4% y.o.y in 4Q23) and volumes (+44.2% y.o.y in 2Q23; +68.9% y.o.y in 3Q23; +126.8% in 4Q23), with 4Q23 volumes more than doubling those of 4Q22.

The growth achieved is fuelled by strategic customers, namely international e-sellers, who continued to perform well, leveraged on the onboarding of relevant new customers. It is also underpinned by a stronger marketing and commercial activity more focussed on the customer portfolio of all segments, especially smaller clients (i.e. those with daily volumes below 20,000 items) who achieved a positive performance and thus contributed to improved revenue diversification. This growth was possible due to the investments made in anticipation of market expansion in Spain.

It should be emphasised that CTT Express maintained a quality service with high delivery efficiency rates and an increase in volumes per working day of +57.7% y.o.y in 2023.

The new unit in San Fernando de Henares is already operating at full capacity, adding to the capacity of the sorting network and providing the customs clearance service integrated in the last-mile delivery, thus significantly reducing delivery times for extra-EU volumes.

In addition, more than 10,000 convenience points in Spain have been incorporated into the network, which, when added to CTT's network in Portugal, is the largest convenience point network in the entire Iberian Peninsula.

This growth consolidated the profitability of CTT Express, which enabled it to achieve a positive recurring EBIT of €6.7m in 2023 in individual accounts, contributing to the good performance of the CTT Group. This recurring EBIT corresponds to a 3.4% margin. It should be noted that CTT Express had achieved recurring EBIT break-even in 2022.

Revenues in Mozambique in 2023 amounted to €4.7m (+21.0% y.o.y). This growth was driven by a partnership with a freight forwarder in Africa which started at the end of 1Q22.

• Revenues minus direct operating costs (excludes overheads, essentially buildings and fleet).

5

2023 Consolidated Results

Banco CTT

Banco CTT revenues reached €147.7m in 2023 (+€21.8m; +17.3% y.o.y). Revenue growth was due to the positive performance of net interest income, which totalled €98.8m in 2023 (+€24.4m; +32.9% y.o.y). Interest received increased by €51.7m compared to 2022, benefiting from higher interest rates and volume growth. Interest paid increased by €27.3m compared to 2022 due to the increase in interest rates on customer deposits and securitisations of auto loans.

Interest from auto loans amounted to €53.1m in 2023 (+€8.0m; +17.7% y.o.y), benefiting from the growth of the loan portfolio net of impairments of €860.3m (+13.2% vs. December 2022), as well as from a stable 6.2% average yield in 2023 compared to 2022. Auto loans production stood at €270.3m in 2023 (+3.0% y.o.y).

Interest from mortgage loans stood at €23.2m in 2023 (+€17.6m; +314.8% y.o.y), taking into account that Euribor rates were significantly higher than in the same period of the previous year. Base interest rates for mortgage loans reflected strong growth as a result of the rise in key interest rates defined by the European Central Bank (ECB), due to the increase in inflation in the Euro area. The mortgage loan portfolio net of impairments totalled €727.5m in 2023 (+10.5% vs. December 2022). Mortgage loan production amounted to €212.2m in 2023 (+€66.7m; +45.8% y.o.y).

Also worthy of note is other interest received, which increased by €22.5m in 2023 compared to 2022, to which essentially contributed the liquidity surplus at Banco de Portugal.

The cartão Universo consumer credit portfolio generated revenues of €20.9m in 2023 (-€0.8m;-3.6% y.o.y), based on an average RWA in 2023 amounting to €297.5m. The end of the partnership on 31 December 2023, in view of the current economic context, in particular interest rates and the associated cost of risk, will thus improve the risk profile and strengthen Banco CTT's balance sheet and solvency, increasing its flexibility.

Commissions received in this business unit reached €46.2m in 2023 (+€0.7m; +1.6% y.o.y), as under the current economic environment the focus has been placed on growing resources, namely on balance sheet.

Customer deposits (retail) stood at €3,091.0m in December 2023 (+37.7% vs. December 2022), with a 174.4% increase in remunerated deposits and a 16.5% reduction in sight deposits compared to December 2022. The number of accounts reached 647k at the end of 2023 (+45k y.o.y).

The loan-to-deposit ratio (consolidated) reached 51.0% as at the end of December 2023.

The cost of risk (consolidated and accumulated as at December 2023) stood at 1.3%, down by

0.1 p.p. compared to December 2022, influenced by higher levels of risk in the consumer credit portfolios, in particular with the Universo card. Is should be noted that the end of the activity related to the Universo card will reduce the risk associated with the credit portfolio of Banco CTT.

Banco CTT is therefore well positioned to achieve the 2025 objectives announced in September 2023:

• Reach 700k to 750k accounts (compared to 647k in 2023);
• Grow in customer resources and loans to customers to business volumes of over €7b (compared to €5.8b in 2023);
• Deliver on profitability, with pre-tax profits between €25m and €30m (compared to €21.0m in 2023).

6

2023 Consolidated Results

Financial Services & Retail

Financial Services & Retail revenues amounted to €62.8m in 2023 (+€2.1m; +3.4% y.o.y). This positive performance, when compared to 2022, stems from financial services, namely public debt certificates, especially savings certificates, which showed different performances over the course of the year.

In the first five months of 2023, public debt certificates reached record issuance levels, driven by the product's greater attractiveness. The change in marketing conditions, namely lower interest rates and a decrease in the maximum amount that can be placed by each subscriber, reduced the public debt certificates' attractiveness and limited their placement throughout the rest of the year.

Financial services (excluding other revenues) posted revenues of €50.7m in 2023 (+€8.8m; +21.1% y.o.y).

Public debt certificates (Savings Certificates and Treasury Certificates Savings Growth) posted revenues of €44.4m in 2023 (+€10.9m; +32.7% y.o.y).

Throughout 2023, subscriptions of these certificates amounted to €12,590.1m, with an average of €50.8m/day (€32.7m/day in 2022), which compares with €8,138.0m subscribed throughout 2022 (and with a €4.1b average in the 2019-21).

The favourable performance of public debt certificates made it possible to absorb the negative evolution of money orders, which recorded revenues of €4.2m in 2023 (-€1.8m;-30.3% y.o.y).This decrease was due to the fact that, in 2022, money orders were boosted by the issue of new social benefits, as part of the extraordinary support granted within the pandemic context, combined with the structural downturn resulting from the replacement of this means of payment, mostly by bank transfers.

CTT reinforced the commercial dynamism not only of non-banking financial products, in the area of non-life insurance, including auto, health, personal accidents, multi-risk, among others, by entering into a distribution agreement with Generali, but also in the provision of services, in particular the partnership with Prosegur for the sale of alarms, launched at the end of September.

Retail products and services (excluding other revenues) reached €10.8m in revenues in 2023 (-€7.3m;-40.2% y.o.y). The strategy defined for the retail network includes repositioning it as a retail service platform, distributing: (i) public debt; (ii) insurance products; (iii) mail and express and parcels products and services, primarily under self-service form; and (iv) convenience services for citizens. Naturally, this repositioning, including the decision to discontinue the marketing of some products, such as scratch cards in July 2023, impacted the evolution of this activity in 2023.

7

2023 Consolidated Results

Operating Costs

Operating costs totalled €907.4m in 2023 (+€56.9m; +6.7% y.o.y).

Operating Costs

								€ million
	2022	2023	Δ	Δ%	4Q22	4Q23	Δ	Δ%
Staff costs	351.8	382.6	30.8	8.8%	88.3	99.8	11.5	13.0%
ES&S	337.9	391.5	53.6	15.9%	88.8	120.4	31.7	35.6%
Impairments & provisions	26.3	25.8	(0.5)	(1.8%)	8.9	5.3	(3.7)	(41.2%)
Other costs	61.3	33.4	(27.9)	(45.5%)	15.3	8.0	(7.3)	(47.9%)
Operating costs (EBITDA)	777.3	833.3	56.0	7.2%	201.4	233.5	32.1	15.9%
Depreciation & amortisation	64.8	64.3	(0.4)	(0.7%)	16.7	16.8	0.1	0.6%
Specific items	8.4	9.8	1.4	16.6%	12.6	(1.2)	(13.8)	(109.5%)
Corporate restructuring costs	9.2	(15.3)	(24.5)	«	3.9	(21.4)	(25.3)	«
and strategic projects
Other non-recurring revenues	(0.9)	25.1	25.9	»	8.8	20.2	11.5	130.8%
and costs
Operating costs	850.5	907.4	56.9	6.7%	230.7	249.1	18.4	8.0%

Staff costs increased by €30.8m (+8.8% y.o.y) in 2023, mostly as a result of the salary increase (+€15.9m), including the increase in minimum wage. Additionally, the growth in the Express & Parcels business, as well as in the contact centre and document management in the Mail & Other business solutions line also contributed to this evolution in costs.

External supplies & services costs increased by €53.6m (+15.9% y.o.y) mainly due to the growth in direct costs of the Express & Parcels services (+€50.8m), with this growth being partly offset by the reduction in direct costs of Mail services (-€13.2m) also as a result of the impact of the elections in 1Q22.

Impairments and provisions decreased by €0.5m in 2023 (-1.8% y.o.y), as a result of the reduction in impairments in the express business line (-€0.8m). This reduction was partially offset by the growth in the mortgage loan portfolio.

Other costs decreased by €27.9m (-45.5% y.o.y), mainly due to the business solutions laptop sale project that took place in 1Q22 (-€20.7m).

Depreciation & amortisation decreased by €0.4m (-0.7% y.o.y) in 2023, positively impacted by the revision of the useful life of some assets (-€3.6m). This effect was partly offset by increased amortisations due to investment in IT systems (+€2.8m) and sorting equipment (+€0.4m).

Specific items amounted to €9.8m in 2023, due to: (i) restructuring costs, namely suspension agreements of employment contracts (+€21.3m); (ii) the new conditions defined in the Plan of Social Action (-€38.7m); (iii) strategic projects (+€2.1m); (iv) the increase in impairment losses (+€13.9m), including extraordinary losses and the costs related to the early termination of the lease agreement of the former headquarters; and (v) transaction costs associated with the start-up of the Real Estate business (+€10.9m), including taxes paid on the acquisition of the properties. In the context of the suspension agreements of employment contracts, it should be mentioned that the amount of €21.3m refers to (i) costs relating to staff exits that took place during 2023 (116 employees corresponding to a total amount of €7.9m) and (ii) a provision of €13.4m already registered in 2023 for the exit of around 200 employees, which is estimated to occur in 2024.

8

2023 Consolidated Results

Staff

On 31 December 2023, the number of CTT employees (permanent employees and fixed-term employees) was 13,670, up by 1,164 compared to 31 December 2022 (+9.3% y.o.y).

Headcount

	31.12.2022	31.12.2023	∆	∆%
Mail & Other	10,612	11,381	769	7.2%
Express & Parcels	1,345	1,693	348	25.9%
Banco CTT	513	558	45	8.8%
Financial Services & Retail	36	38	2	5.6%
Total, of which:	12,506	13,670	1,164	9.3%
Permanent	11,192	11,386	194	1.7%
Fixed-term contracts	1,314	2,284	970	73.8%
Portugal	11,788	12,637	849	7.2%
Other geographies	718	1,033	315	43.9%

There was an increase in the number of employees in the expanding business units, namely the Express & Parcels business unit (+348) and Banco CTT (+45). The Mail & Other business unit also grew, as a result of the increment in the Contact Centre and the Document Management activity of the business solutions area (+378) as well as the increased insourcing of the EMS distribution by the base mail network (+448) due to the strong growth of CEP volumes at the end of 2023, which was partially compensated by the prosecution of the Human Resources optimisation programme underway mainly in the central structure (-116).

Together, the areas of operations and distribution within the mail network (5,361 employees, of whom 3,902 are delivery postmen and women) and the retail network (2,165 employees) represented circa 66.1% of CTT's permanent staff.

Recurring EBIT

Recurring EBIT stood at €87.6m in 2023 (+€23.0m; +35.7% y.o.y), with a margin of 8.9% (7.1% in 2022) as a result of the strong growth in Express & Parcels (+€11.2m, +131.5% y.o.y); Banco CTT (+€11.0m (+76.1% y.o.y); Financial Services & Retail (+€5.5m, +18.0% y.o.y), and a decrease in Mail & Other (-€4.7m;-44.1% y.o.y.).

Recurring EBIT by business unit

								€ million
	2022	2023	Δ	Δ%	4Q22	4Q23	Δ	Δ%
Recurring EBIT by business unit	64.5	87.6	23.0	35.7 %	25.8	19.5	(6.3)	(24.3)%
Mail & Other	10.7	6.0	(4.7)	(44.1%)	5.9	1.1	(4.8)	(82.0%)
Express & Parcels	8.5	19.7	11.2	131.5%	3.8	7.7	3.9	103.6%
Banco CTT	14.4	25.4	11.0	76.1%	4.9	7.3	2.4	49.6%
Financial Services & Retail	30.8	36.4	5.5	18.0 %	11.2	3.5	(7.7)	(68.9)%

In 4Q23 the strong growth of recurring EBIT in Express & Parcels compared to 4Q22 (+€3.9m) was driven by the growth of recurring EBIT in Spain (+€2.9m y.o.y), which was underpinned by the increase in volumes (+126.8% y.o.y), mainly e-commerce. It should be highlighted that in 4Q23 and for the first time in CTT's history, E&P was the biggest contributor to recurring EBIT. Worthy of note is also the contribution of Banco CTT (+€2.4m vs 4Q22). Both these business areas acted as growth levers, in line with the strategy implemented.

9

2023 Consolidated Results

Financial results and Net profit

Consolidated financial results amounted to -€16.2m(-€6.8m;-72.5% y.o.y) in 2023.

Financial Results

								€ million
	2022	2023	Δ	Δ%	4Q22	4Q23	Δ	Δ%
Financial results	(9.4)	(16.2)	(6.8)	(72.5)%	(2.3)	(4.6)	(2.3)	(100.3%)
Financial income, net	(9.2)	(16.2)	(7.0)	(76.0)%	(2.3)	(4.6)	(2.3)	(99.4%)
Financial costs and losses	(9.3)	(16.9)	(7.6)	(82.3)%	(2.3)	(4.6)	(2.3)	(97.1%)
Financial income	0.0	0.6	0.6	»	0.0	0.0	0.0	«
Gains/losses in subsidiaries,	(0.2)	0.0	0.2	99.8 %	0.0	0,0	0,0	(104.2%)
associated companies and
joint ventures

Financial costs and losses incurred amounted to €16.9m, mainly incorporating financial costs related to post-employment and long-term employee benefits of €7.2m, the most significant increase of which is due to the increased discount rate in the 2022 valuation, the impact of which was felt in 2023, as well as interest expense associated to finance lease liabilities linked to the implementation of IFRS 16 for an amount of €3.5m, and interest expense on bank loans for an amount of €5.6m, whereby the use of the Commercial Paper and Factoring line programmes largely explains the increase.

In 2023, CTT obtained a consolidated net profit attributable to equity holders of €60.5m, which is €24.1m above 2022. The evolution of the consolidated net income was positively impacted by the growth of recurring EBIT (+€23.0m) and the favourable evolution of income tax for the period (-€9.3m); it was negatively affected by (i) the worsening of financial results (-€6.8m), and (ii) specific items (-€1.4m).

Investment

In 2023, Capex stood at €36.1m (-€0.9m;-2.4% y.o.y), which is in broadly line with the previous year. The 2023 investment was mainly directed towards: (i) information systems (€23.4m; -€0.4m,-1.5% y.o.y), to increase the efficiency of operations, cybersecurity and improve the customer experience; (ii) buildings and facilities (€4.8m; +€0.3m, +5.7% y.o.y), including investment in the new headquarters; and (iii) equipment (€3.9m; -€2.3m,-37.1% y.o.y), a reduction explained by the strong investment in the expansion of the express and parcels network in Portugal and Spain in 2021 and 2022 and partly offset by the growth in investment in the Locky locker network.

In 4Q23, to respond to the growth acceleration in E&P volumes, investment reached €19.5m (+€2.4m; +14.1% y.o.y), with the increase mainly targeted at information systems and equipment.

Following the E&P business growth, it is anticipated that in 2024 investment will continue to be mainly directed towards sorting machines, mostly in Spain, information systems and the Locky lockers network.

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