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Edited Transcript of CTT.EP earnings conference call or presentation 17-Mar-20 11:30am GMT

Full Year 2019 CTT Correios de Portugal SA Earnings Call

LISBOA Apr 3, 2020 (Thomson StreetEvents) -- Edited Transcript of CTT Correios de Portugal SA earnings conference call or presentation Tuesday, March 17, 2020 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Guy Patrick Guimarães de Goyri Pacheco

CTT - Correios De Portugal, S.A. - CFO & Executive Director

* João Afonso Ramalho Sopas Pereira Bento

CTT - Correios De Portugal, S.A. - CEO & Executive Director

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Conference Call Participants

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* António Seladas

A|S Independent Research - Analyst

* Filipe Martins Leite

Banco Português de Investimento, S.A., Research Division - Research Analyst

* Marco Limite

Barclays Bank PLC, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the CTT Full Year 2019 Results Conference Call. (Operator Instructions)

I must advise you that this conference is being recorded today on Tuesday, the 17th of March 2020. I would now like to hand the conference over to your first speaker today, Mr. João Bento, CEO. Please go ahead.

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João Afonso Ramalho Sopas Pereira Bento, CTT - Correios De Portugal, S.A. - CEO & Executive Director [2]

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Good morning, everybody. Welcome to our results presentation. Well, in spite of the situation we are living, it's -- I think we have good news. 2019 has been a year of transition with, as everybody knows, a significant change in leadership. And by the end of the year, we have a fully renewed executive team.

Coming to the numbers, we have seen a 4.6% revenue growth, a significant acceleration from 1.4% last year. We believe this is a trend to maintain. Regarding the EBITDA, we have delivered -- actually, we are delivering in all aspects, with over EUR 100 million of EBITDA and a 12% growth over last year.

On the cost front, we have a commitment of EUR 15 million of additional savings on top on -- in the framework of our operating transformation plan. We have not only met that objective, but also exceeded it, actually exceeded it by 10%, reaching EUR 16.5 million of additional savings.

Mail, which is, of course, our -- still our main business line with -- showing a significant resilience with volumes decline higher than expected but very well compensated by the mix and the price effect. So Mail revenues with a light decline of 2.1%. And on the Parcels front, a significant growth, mostly in Portugal. Spain is facing a special situation and has its own recovery plan. But in fact, we grew volume in Parcels significantly in Portugal. Although, this also brought, given the capacity constraints, a significant rise in cost.

Moving to the bank. This was, in fact, one of the greatest news of 2019 since the bank anticipated operations breakeven for the third quarter, which has been announced already, with the EUR 3.7 million, and in fact, a very successful sorting of 321 Crédito, reaching positive EBITDA growth, and it's actually in its fourth year of operation.

We have also a very interesting year in terms of financial services, with a very strong savings performance, which, by the way, remains resilient. And in fact, this area contributed very significantly to our results of last year.

If we move to next slide, we have -- zooming in our Mail with this new chart that we have previous -- for the previous quarter. Growth in higher value mail, in fact, compensates, mitigates, almost fully compensate the declines. As I said, we have our main negative in terms of ordinary and priority general mail, letter mail, in fact. But we have then a very interesting behavior in both regards, registered mail, which is now being actively pushed by our -- in our shops and very good news in what regards international mail, both outbound and inbound, with a significant growth, inbound itself growing more than 20%.

And in fact, this was one of the main contributions for an almost stable revenues in Mail.

We have also some good news in the front of Business Solutions, still very small, but this is one of the new growth areas that we are now getting in, and we believe will be a significant growth area for 2020.

Moving to the next slide. We have basically in Parcels, as we claim, a very strong top line performance in the fourth quarter. In Portugal, with 22% growth; 13% decline in Spain, that would have been, in fact, that would have been, in fact, a slight growth, if not, by the loss of Amazon last year.

In fact, the holiday period was extremely interesting. And we also grabbed a few new significant customers. So this is, in fact, one of the good news for Parcels. We are now seeing some resilience in this growth in the sense that after the peak period, we have not converged to the previous values, but we are converging to higher values.

In what regards public debt placements, we continue -- we have shown a continued ability to capture savings, which is one of the main most interesting facets of our Retail Network. 2 amazing quarters, I would say, the third and the fourth quarter. And in fact, this provided a 50% -- more than 50% growth in public debt placements for the year.

If we move to the next slide, a bit of zooming in the bank figures. I think you may call it a great performance in the last quarter, both in current accounts and customer funds, all lines growing, the number of accounts steadily reaching 0.5 million, very interesting customer deposits and current account behavior, but also interesting behavior in terms of returning funds.

We have, of course, since the acquisition of 321 Crédito, a significant improvement in the credit, and the loan-to-deposit ratio, and in fact, we have reached the end of the year with almost 70% of conversion ratio.

In the next slide, Slide 8. We have specific items above guidance. This is due to the delay of a capital gain related to one of the buildings, which is a significant building we were expecting to sell in the fourth quarter.

This has been delayed. Nothing of concern here. We are, in fact, now trying to find a better pricing for that asset. But overall, the operating cost savings, as I said before, realized EUR 16.5 million of additional revenues. And we had some, both in terms of cash and capital gains, some asset sales at a lower level than we were expecting. This is only a matter of delay, it's nothing more than that.

We have in the next slide, Slide 9, something that we are now reporting with a bit more visibility. We are very proud of our, let's call it, sustainability performance, ESG, in general, but sustainability and environmental sustainability, in particular. We are very well -- we have been very well scored in the quality of our environmental reporting.

But better than that is our environmental behavior with savings in terms of CO2 emissions, carbon emissions clearly on the top of our sector, a very good behavior in terms of energy consumption, of our expanding -- ever-expanding ecological fleet. We have actually now, as we speak, the largest electrical fleet in Portugal.

And also regarding people, we have increased our training hours and the substantial increase in voluntary work initiatives.

And by the way, this is not only nice words, we are now seeing customers that, for the first time, are presenting us the need to behave in a greener way, and we have actually the first delivery contract already in place for a full green delivery for a great world player in terms of retail.

So I would now move to the details of the financials, and I will ask my colleague, our CFO, Guy Patrick, to lead the presentation.

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Guy Patrick Guimarães de Goyri Pacheco, CTT - Correios De Portugal, S.A. - CFO & Executive Director [3]

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Thank you, João. So moving to Page 11. We saw all the key financial indicators improving in the quarter and in the full year. Revenues with a strong growth of 9.6% in the quarter, or 4.9% if we exclude the inorganic effect of 321 Crédito, and all business units showing growth. As a result, we -- all the revenues grew 4.6% in the full year. EBITDA also growing 11% in the quarter, with a strong contribution of the Banco CTT and financial services. EBITDA growing 12% in the full year. Net income growing 35.8% to EUR 29.2 million. Specific items, higher than expected, as João already commented, because of the delay of this capital gain related with the real estate assets. And OpEx growing in the fourth quarter 9.3% as a result of the consolidation of 321 Crédito, strong growth in Express & Parcels and mainly actuarial effects in the Mail division that I'll explain later.

On the next page, we can see the details of our revenues, our revenues with a growth of 4.6%. Mail showing growth in the last 2 quarters with a strong mix effect underpinned by registered mail and inbound mail as we have seen in the recent past.

Express & Parcels continued to sustain growth with improvement of 5.3% in the quarter, with a 2.4% growth in the year. Portugal grew 11.6% as a result of a strong volume growth in this quarter of 22%. Spain improving sequentially, but still in the process of compensating the loss of this big customer and declining 6.4% revenues in the quarter. Banco CTT growing EUR 29.3 million, EUR 8.3 million organically in the full year with 29.3% in the quarter on the same basis. Financial services growing 27.2% in the full year following the recovery of the public debt subscription that now reached almost EUR 4.0 billion, with the last quarter above EUR 1.0 million, pretty much in line with the third quarter. So 2 fantastic quarters in these business units.

Moving to OpEx on the next page. Our OpEx grew 3.4% in the year or EUR 21.2 million, EUR 12.7 million resulting from the 321 Crédito and the growth of Banco CTT.

Express & Parcels growing EUR 8.1 million or 9.7% as a result of 10.7% volumes increase in Portugal. We are seeing and we saw during last year, a strong inflation in labor and fuel costs during that year. And some capacity bottlenecks that affected the unit cost of the division in Portugal.

Mail costs remained flat, but with the growth on the fourth quarter of 6.3%. That achieved -- that offset the savings that were achieved until the 9 months. The cost of this division was negatively impacted by actuarial losses on this year of EUR 1.1 million, and last year, had a positive impact also from actuarial gains of EUR 3.5 million. And that results a EUR 4.6 million delta for this year. We also had higher direct costs in line with the growth of revenues and more temporary works to deal with a new quality standard.

Financial services declining EUR 1.0 million as a result of a strong cost discipline, as we are seeing throughout this year. In next slide, we can see our EBITDA evolution. EBITDA growing 12.2%, driven by the bank. And financial services, Mails still declined 8.2%, in line with revenues and the OpEx evolution that we saw in the fourth quarter.

Express & Parcels suffering mainly by the performance in Spain. We are executing the plan to turn around this operation, and we expect to start showing results on the coming quarter on Spain.

Portugal also suffered from margin compression. EBITDA margin now stands at 6.4%, and this is as a result of those cost inflations that I already mentioned. Banco CTT improving its EBITDA EUR 16.6 million, EUR 3.5 million organically as we continued to see net interest margin and commissions continue expanding. Financial Services, basically benefiting of 51.9% increase in the public debt placements and that explains the movement on EBITDA.

In next page, 15, we can see our balance sheet that continues to reflect the sustained increase in customers and deposits of the bank that now stands in EUR 1.3 billion, and credit to clients that now reached EUR 885.8 million. Banco CTT have a core Tier 1 ratio of 19.1% in the end of 2019.

Our health care liabilities increased now in the end of the year, EUR 25.4 million, due to the interest rate decline that affected the discount rates of these liabilities. The discount rates have decreased from 2.1% to 1.6%, and that was the main driver of this increase.

In the Slide 16, we can see our cash flow and financial debt. Our cash flow -- operating cash flow reached EUR 44.5 million, despite the increase of CapEx that we had to do this year to modernize our networks and continue to increase our productivity levels. Free cash flow stood at EUR 32.3 million and also benefiting from the EUR 6.8 million of nonrecurrent tax refund that we saw on the third quarter. Our net debt now stands at EUR 60 million, including EUR 84 million in lease liabilities. If we exclude these lease liabilities, we have a consolidated cash position of EUR 24 million.

I'll now hand you over back to João Bento to share his views on the outlook.

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João Afonso Ramalho Sopas Pereira Bento, CTT - Correios De Portugal, S.A. - CEO & Executive Director [4]

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Thank you, Guy. Well, I believe 2020 might be a great year. It is certainly a very important year for 2 facts: we are celebrating 500 years of mail services in Portugal and -- which is quite extraordinary. We are being reported as the oldest company in the country. And we are also -- we are also closing the present concession for the universal service provision in a year where we believe the bank will have a significant landmark because it's going to reach net -- positive net profit and where we are hoping to improve significantly our Express & Parcels margin.

So all in all, it's going to be a year of very significance. We are now under significant uncertainty regarding the impacts of this COVID-19 crisis. And having debate is the best option to provide where we stand, we believe that it's too early to evaluate those impacts. And we have decided to provide guidance which does not take into account the impacts of COVID-19. We will update everyone as soon as we feel things are stable enough for us to understand that kind of impact. Those impacts apart, so we've -- we're being very careful because we don't want to mislead anyone. We think the year is going to be a year of mid-single-digit revenue growth, with a few growth levers that are being now implemented with the contribution of 321 with a wider offering for -- especially for businesses. And this will lead to a growth in EBITDA, very significant, again, which we have predicted to be above EUR 110 million or to the high single digit -- sorry, and leading to high single-digit growth in EBITDA. This should reflect improvements in Express & Parcels margins and capacity and also on Banco CTT on top of our continued efficiency measures as the main contributors for this growth in EBITDA and in EBIT.

We have proposed and we are proposing to the general meeting of shareholders a sound increase in dividend, which is reasonably in line with the recurrent growth in net profit with a dividend proposal of EUR 0.11 per share, which means a 10% increase year-on-year.

As I said, it's going to be a very important year because of the end of the concession. And -- but we are very, I would say, confident that things are going to be in the right side regarding this.

We are now in formal discussions with government for quite some time. There have been very interesting public statements regarding the need to have more sustainable concession contract, and the need to take into account the transformation that the postal sector is crossing.

And in fact, all the objective signs that we receive are very interesting. We have been actively showing our interest in becoming -- in remaining, I should say, the universal service provider of a more sustainable concession contract. So this is -- the outlook stands good. We are going to have an interesting process, and we are very optimistic regarding that.

Moving to Mail. It's -- we are now forecasting, again, without the impact of COVID-19, we are providing a decline in the 6% to 8% range, mostly because the substitution of mail. This decline is also less aggressive than last year because some of the substitution already occurred this year. And on the other hand, we have the special impacts of additional 2 working days. And so we remain with similar -- with a similar guidance for Mail decline.

We have significant CapEx effort. We are forecasting double-digit growth in Parcel, both in Portugal and in Spain. And this, of course, implies increased capacity, actually efficiency in Parcels is also a matter of capacity. Because we need to increase our capacity and our automation and eliminate bottlenecks that we face this year.

And in fact, January and February already confirmed, in some cases, exceeded our expectations, we are a bit sorry that the COVID-19 seems to be -- well, at least complicating situation ahead.

I would like to provide the final remarks before moving to Q&A because we are moving a number of things in the company. And I should say, with that model, is that I'm very proud of what we've accomplished in this first month as CEO.

The company seems to be improving its move toward the need for change and to speed up the pace of transformation from an internal perspective. But also from the public perception of what we are doing. I'm very happy that I've been able to gather a great team of executive colleagues and a remarkable set of first-line managers. Well, 2 last ones should join in the forthcoming weeks. So I face 2020 with a lot of confidence. We are facing the new term, a new team, which I feel it's finally my team and the new Board. We are celebrating 500 years of mail in Portugal. This also shows the importance and the resilience of CTT as the postal operator. We are highly valued by clients and the population in general. And we have also shown an ability to transform them through that, and the fact that we are celebrating 500 years is a very good sign of that. I believe we are now basically, I should say, reinventing this company.

We are fighting for a much improved concession contract for universal service provision, which I'm more than sure it's going to be ahead of us early next year. We are moving to become more efficient. We are widening our offer for B2B and B2C. We have now in place a much higher sales power, and I believe we are now moving faster than before, and moving fast seems to be an important issue these days.

In times of uncertainty, our experience and resilience, I think, are key to overcome these new obstacles and unknown. Of course, we are now prioritizing and focus on avoiding material disruption. We -- while protecting employees, of course, clients as well. And we are actually very actively coordinated with the authorities. So in spite of these constraints, I remain extremely positive.

And of course, me and my team remain available to clarify possible new questions and ready to remote meetings.

This time, we can only have remote meetings to call video whatever applies. So my main word is a word of confidence. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Filipe Leite from CaixaBank.

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Filipe Martins Leite, Banco Português de Investimento, S.A., Research Division - Research Analyst [2]

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I have 3 questions, if I may. First one on COVID-19. And if you can share with us the impact felt until now, namely in terms of volume drops in both Mail and Express & Parcels? And also, if you can give us more detail on your contingency plan, namely, if you are considering the closure of some post offices, changes in the delivery network or any other change to the normal operations of the company? And also related with the issue of COVID-19, if you can share with us the specific impact until now in terms of inbound and outbound mail, that was, as you mentioned, one of the main reasons for the strong mix effect felt in last year?

Second question on mail price. And if for this year, it was already approved, the mail price increase, and if you can share with us.

And last one on the Universal Postal Service concession. When do you expect to close the negotiations with the government or when you expect to be able to provide more details regarding the new contract?

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João Afonso Ramalho Sopas Pereira Bento, CTT - Correios De Portugal, S.A. - CEO & Executive Director [3]

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Thank you. Well, starting with the impact of COVID-19. The more visible impact that we are facing is related with -- in terms of operations, I will start there. As some of you might be aware, government has decided to close schools last week. And although, the mail services are considered essential services with a formal meeting, meaning that we need to keep -- and our employees need to be to keep the functioning, we are facing some people not coming toward because of that. Anyway, the impact that we are feeling are reasonably marginal.

In our own shops, actually, we have 18 shops not opening yesterday. Things are improving, I think, as -- from now on because we are reorganizing things. Where we are facing a higher impact is in terms of our agent, what we called the mail post. There, we have some, I would say, roughly 10% impact in terms of availability.

So far, in shops attendance, we don't feel any decline, but it's very likely that it will happen soon. The main senses, and it's impossible to measure right now, that we feel is regarding B2B parcels because now things are slightly confused, I think, society and the economy is reorganizing itself with some of the retail networks closing -- announcing closures of about 2 weeks.

And -- but we are still unable to see how this will impact. The particular case of inbound and the -- and inbound from China. We have, in rough terms, 20% growth January-on-January. This is one of the reasons, and the same applies for parcel in general. We have seen a huge increase in the peak season as we can see in the fourth quarter volumes. And then after the peak season, volumes came down to a level which is much higher than before. So very good news. On the inbound, we have about 20% growth. And on February, we are looking at something around 15% decline. This is not the 35% decline. It's because we -- there are 3 reasons for inbound in China eventually decline: one is decline in demand from buyers; the other one, the lack of supply because of some of the production problems that occurred in China; and the third one, is logistics.

And in fact, what we see is that we don't see a significant incline in acquisitions. We didn't face a significant problem in production in China. But we know that, and this is objective, we are now receiving a lot of cargo by mail and sea. So part of this decline in February is associated with basically a slower arrival of parcels. So we don't know exactly what's going to happen. But the behavior of buyers and the behavior of suppliers seems to be good. And China, things in China seem to be improving. And so we are not yet able to provide a clear guidance. But we don't -- we are not very pessimistic. On the mail price, we have made our proposal to an ecom in the usual way and using the usual deadline. We are now interacting with them with clarifications, and the answer is not yet being formally approved. But it should happen, we think, soon.

Final question on the negotiations. We don't know yet, and we can only disclose public information. One of the good pieces of public information that has been disclosed by the Secretary of Statewide Communication. Actually, while visiting one of our mail sorting facilities, was that negotiations are going to start formally, for sure, in the first semester. And also, for sure, need to be concluded by the end of this year. Concluding by the end of this year -- before the end of this year, I mean, is very important in the sense that by no means we would accept to postpone the existing contracts with the existing regulatory conditions in terms of quality and pricing.

And so this is very important. The mood and the relations with government are, I would say, extremely positive. And the level of interaction is very smooth. And I might disclose also that what seems to be the formal process is what we call public procurement tender with prequalification. This is good news in the sense that it's public procurement, so it's totally safe of any kind of litigation from the European Commission or from anyone around because it's a public procurement process.

And with prequalification, also good news because we are obviously the only one able to prequalify. And therefore, it's the best combination between a sound and solid process and the process that is -- it's not very slow.

I can provide a slight additional color on the 2 main -- the 3 main issues on the concession contract. Basically, concession contract for the U.S. has 3 pillars, I would say, criteria of density, criteria of quality and the formation of price.

And the declaration that we know, and it has been publicly declared already, that the main concern of government regarding basically the criteria is that there will be CTT-owned shops in every municipality.

We are already doing that, and we feel very comfortable with that. That's the reason.

The second one, quality criteria. The Secretary of State himself said very explicitly that this criteria -- and the minister as well this week in Parliament. They have mentioned that these quality criteria are unsustainable. And of course, we need to have a sound quality criteria in line with our European benchmarks. And finally, pricing, there is also a very distinct comment regarding the fact that the mail price and the cost of mail for the Portuguese economy and for the families is very low.

So there is also scope for pricing. So generally speaking, we feel confident that we're going to have, I would say, at least more interesting concession contract than it has today.

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Operator [4]

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I will now move to our next question, and it's from the line of Marco Limite from Barclays.

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Marco Limite, Barclays Bank PLC, Research Division - Research Analyst [5]

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So my first question is on DPS. You are saying that this represent a 10% increase compared to the last year. But in terms of payout, what's the right base to compare the dividend to -- so shall we compare it to the reported net profit, the underlying net profit? So also in 2020, shall we think about DPS year-on-year increase? Or shall we think about a specific kind of range of payout that you generally think about?

And my second question is also about your Parcel business where the EBIT is a couple of million dollars year-on-year despite volumes growing 11%. I'm just wondering which are the main headwinds there. And if you are probably running above kind of your capacity, and as a consequence, you kind of need to invest more, not only in 2020, but let's say, over the next few years?

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João Afonso Ramalho Sopas Pereira Bento, CTT - Correios De Portugal, S.A. - CEO & Executive Director [6]

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Thank you very much. Well, in fact, in terms of dividends, the policy that had been announced and was not changed is that we should have a dividend in line with net profit result. This was out of a serious reaction, domestic reactions to the fact that the company were paying a very high dividend and more than once using reserves.

So what was paid last year, EUR 0.10 was in line with the net profit and reflected a 77% payout ratio. This year, we have reasonably improved the net profit results, but with a strong one-off effect, which is a tax recovery that was very interesting. And we thought that we should have a similar payout ratio regarding that more recurrent result, which is a result without tax effect. And in fact, we are at 70% payout if we use that and a 10% increase in dividend. And that net result is a 14% increase on the previous year.

So it seems to be reasonable. We would like to keep growing our net profit recurrently, and therefore, increasing our dividend recurrently as well.

In terms of the Parcel business, in fact, the problem, as already stated by Guy and by myself, is it was basically a problem of capacity. This company didn't exist for quite some time in its capacity. And we faced during the peak season, we were very often above 2x our nominal capacity. Working at 2x nominal capacity in any way in this business is, of course, a very good source for additional costs and lack of efficiency. What we are doing now, and most of our CapEx this year in Portugal and Spain is for additional capacity in sorting equipment is, in fact, trying to make sure that we are not only able to grow our business, but to do it in a more profitable way.

And we are doing investments that copes for these sudden efficiency acquisition and some future growth. So this is not the recurrent effort in terms of investment.

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Marco Limite, Barclays Bank PLC, Research Division - Research Analyst [7]

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Okay. So in your current guidance, you are kind of assuming that EBIT in the Parcel business is going to grow year-on-year, right?

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João Afonso Ramalho Sopas Pereira Bento, CTT - Correios De Portugal, S.A. - CEO & Executive Director [8]

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Yes.

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Marco Limite, Barclays Bank PLC, Research Division - Research Analyst [9]

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I understand that most of the growth will be from Banco CTT, but I guess there is still some scope for growth in the Parcels business, how you delever.

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João Afonso Ramalho Sopas Pereira Bento, CTT - Correios De Portugal, S.A. - CEO & Executive Director [10]

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That's right.

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Operator [11]

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(Operator Instructions) Your next question comes from the line of António Seladas from A|S Independent.

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António Seladas, A|S Independent Research - Analyst [12]

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Two questions for me. One is related with the capital increase on Banco CTT. I think, you did it one over the last quarter, so if you can explain what was the reason because I was not expecting it. And the second question is related to specific costs for 2020, if you can provide a figure or a guidance.

And I think it will be the last year of your operational transformation plan, if you can confirm, please?

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João Afonso Ramalho Sopas Pereira Bento, CTT - Correios De Portugal, S.A. - CEO & Executive Director [13]

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Thank you. Well, in fact, the capital increase for the bank was totally expected -- to be expected and it was announced.

When the bank applied to Bank of Portugal for the acquisition of 321, it was made a condition by the Bank of Portugal to work the operation, but the bank would have this additional cost -- capital increase. The bank did increase its capital because it needs more capital. The Bank has, I would say, in my personal view, and in the bank's, exactly the same view as well, a very strong capital structure, but this was a formal requirement by the Bank of Portugal. That was, by the way, confirmed just before formalizing it. We have also, although, it's not in your question, let me rephrase this.

We have also decided that the bank had a lot of -- well, most of our capital allocation was done in last year was done to the bank. I don't need to comment on that. It's done. But what we know now is that we won't need more capital allocated to the bank to compensate for losses from now on for obvious reasons.

But the bank needs to grow and needs to grow its asset base and so it might need additional capital for grow its asset base, so I would say, capital for growth, which is good.

And we have decided, and that has been announced as well, that further capital to allow the Bank to grow should be brought by partners and -- so that CTT dilutes its position. So no more capital increases, and that has been stated before. And unless the ones that have already been announced, I mean. Coming to the specific costs on 2020 and the last year of OTP, I will ask my colleague, Guy Pacheco, to answer that one.

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Guy Patrick Guimarães de Goyri Pacheco, CTT - Correios De Portugal, S.A. - CFO & Executive Director [14]

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Thank you, João. Our guidance on EBIT, it's a clean EBIT, so it includes specific items. So it's on the guidance. We are working on a scenario of reduction. We're not guiding more than this. So we are assuming a decline in specific items. That will lead to that EBIT growth. On OPT (sic) [OTP] Operational Transformation Plan, it's the last year, yes, of the announced plan. Although we continued to make efforts to continue to transform our company, and we expect savings from that transformation effort to continue for the next year. We'll be providing you with more color on that on the coming quarters.

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João Afonso Ramalho Sopas Pereira Bento, CTT - Correios De Portugal, S.A. - CEO & Executive Director [15]

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But let me come back to these specific items to open a new stream. In fact, some of the specific items, even this year, are related with real estate sales. We have announced in previous calls that we are working on optimization of our real estate. And this is a complex operation. We've been very active on that and there is some complexity, especially in the tax optimization aspect.

And we have some progress on that. We have now a couple of schemes that are -- will enable us to speed up that process. And we have also -- and to take a formal valuation of our asset base, and we have completed that as of last year. And with the conditions that we have in the end of last year, it's worth probably in excess of EUR 200 million, which is quite substantially more than we have. And so well, we are still looking at the -- we are still looking at the regulatory and fiscal issues. But that's going to have an impact in our specific items for next year -- for this year.

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Operator [16]

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We have no further questions. That does conclude our conference for today. Thank you for participating. You may all disconnect.

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João Afonso Ramalho Sopas Pereira Bento, CTT - Correios De Portugal, S.A. - CEO & Executive Director [17]

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Thank you.