3 q08 results presentation

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  • 1. CSU CARDSYSTEM SA 3Q08 Conference Call November 7, 2008 investidorescsu@csu.com.br 1
  • 2. Disclaimer This presentation may include forward-looking statements about future events or results according to the regulations of Brazilian and international securities and exchange commissions. These statements are based on certain assumptions and analyses by the Company that reflect its experience, the economic environment, future market conditions and events expected by it, many of which are beyond its control. Important factors that may lead to significant differences between actual results and the statements of expectations about future events or results include the company’s business strategy, economic conditions in Brazil and abroad, technology, financial strategy, client business development, financial market conditions, uncertainty regarding the results of its future operations, plans, objectives, expectations and intentions, among others. As a result of these factors, the actual results of the Company may significantly differ from those mentioned or implicit in the statement of expectations about future events or results. The information and opinions contained in this presentation should not be understood as a recommendation to potential investors and no investment decision should be based on the veracity, currency or completeness of this information or these opinions. No advisors to the company or parties related to them or their representatives will be responsible for any losses that may result from the use or the contents of this presentation. 2
  • 3. Card Market and the CardSystem Growth of the Cards Market (ABECS) CardSystem Card Base Performance End of September - Million End of September - Million 106 89 76 19 64 15,6 51 165 11,4 112 137 10,1 82 96 7 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Private Label Credit Card Base  The cards market maintained a constant and linear growth;  CardSystem’s Private Label and Credit Private Label + Credit Market CardSystem card bases consistently outperformed the CAGR 05 to 08 19.5% 28.4% market growth; CAGR 07 to 08 19.9% 21.8%  CSU’s CAGR last year was 21.8%, compared to the market’s CAGR of 19.9%. In the last 4 years average, CAGR Source: Abecs, CSU was 28.4% and 19.5%, respectively. 3
  • 4. CardSystem – Operational Data Issue of cards in CSU's base (quartely issue - million) 1.724 1.353 1.119 1.043 4Q07 1Qq08 2Q08 3Q08 Source: CSU  CardSystem continues to grow year after year. A total of 5.2 million cards were issued in the past 12 months;  The chart illustrates the growth trend in card issues every quarter. Traditionally, card issues are higher towards the end of the year;  Sales to existing clients at the beginning of 2008, showing the positive scenario for co-branded cards. 4
  • 5. MarketSystem Operational Data MarketSystem - Processed Accounts (million) 2.34 2.12 1.97 2.04 1.84 1.9 1.77 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 MarketSystem - Processed Accounts Source: CSU  High-growth market;  Consistent growth in the number of managed accounts;  Porto Seguro’s loyalty program grew above MarketSystem portfolio’s average in the period. 5
  • 6. TeleSystem/Credit&Risk  A new decree regulating contact center services. Companies must comply with regulations by December 1, 2008;  TeleSystem is prepared to offer services that comply with the new regulations;  We shut down the Santo André site and transferred the operations to Alphaville and Recife. Workstations in operation TeleSystem and Credit&Risk 3,977 4,095 3,930 3,872 3,880 3,375 3,322 3,331 3,193 3,114 2,546 2,612 3,476 3,445 646 737 758 776 763 619 435 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 WS's Credit&Risk WS’s TeleSystem 6
  • 7. Santo André Migration Project  R$ 5.0 million spent for closing the Santo André site and prepare the Alphaville and Recife sites to which operations were transferred;  With the consolidation, the company intends to improve the quality of services and save R$ 2.4 million per Recife year;  CSU has contact center operations in Alphaville, Curitiba, Rio de Janeiro and 634 Belo Horizonte Recife. Rio de Janeiro  The company’s DPC is in Belo 3056 2553 Horizonte and the backup site is in the Barueri city of São Paulo. São Paulo Curitiba 7
  • 8. CSU (Consolidated) Gross Revenue (R$ million) Cost of Services Rendered (R$ million) 8.8% 11.33% 75.5 101.2 90.9 69.3 CSU 3Q07 3Q08 3Q07 3Q08 Gross Profit (R$ million)  Growth driven mainly by CardSystem and 18.6 MarketSystem; 15.3  Wider range of services rendered to a few clients increases operational synergies  Economies of scale contribute to increase 16,% CSU Gross Margin 3Q07 3Q08 18,1% 8
  • 9. CSU (Consolidated) General and Administrative Expenses EBITDA (R$ million) and Net Result (R$ million) (R$ millions) EBITDA Margin (%) 9.8% 40.8% 17.1 15.6 16.7 11.9 17.7% 14% 1.0 2º Tri/08 2º Tri/08 1º Tri/08 (0.2) 3Q07 3Q08 3Q07 3Q08 3Q07 3Q08 14%  Expenses with migration of contact center units impacted net profit by approximately R$2.5million in the quarter;  The 40% increase in EBITDA is due to the growth in the payment processing and management unit. 9
  • 10. CardSystem / MarketSystem Gross Revenue (R$ thousand) Gross Profit (R$ thousand) and EBITDA (R$ thousand) and Gross Margin (%) EBITDA Margin (%) 23.3% 32.5% 16.9 13.7 55.6 20.1% 42.0 35.1% 18.2 32.8% 15.2 38.8% 35.3% CSU CSU 3Q07 3Q08 3Q07 3Q08 3Q07 3Q08  32.5% growth in gross revenue at CardSystem / MarketSystem between 3Q07 and 3Q08, driven by the higher card volumes in CSU’s base and managed accounts;  Gross profit up by 20.1% and EBITDA up by 23.3%  Higher card issues in 3Q08 reduced CardSystem’s gross margin. Cost of issues and dispatch of new cards have narrower margins than other services provided by the unit. 10
  • 11. TeleSystem/Credit&Risk Gross Revenue (R$ million) Cost (R$ million) 48.9 -6.8% -7.2% 45.6 45.4 42.2 3Q07 3Q08 3Q07 3Q08  Gross revenue fell by 6.7% between 3Q07 and 3Q08 due to the cancellation of unprofitable contracts at the end of 2007.  Cost of services rendered dropped from R$ 45.4 million in 3Q07 to R$ 42.2 million in 3Q08. 11
  • 12. TeleSystem/Credit&Risk Gross Profit (R$ million) EBITDA (R$ million) 266% n.d. 0.5 (0.2) 0.1 (1.8) 3Q07 3Q08 3Q07 3Q08  Results improved significantly compared to 3Q07. CSU’s profitability increased, both in terms of Gross Profit and EBITDA, as a result of the restructuring in the Call Center unit.  Workstations in operation in 3Q08 offered products that are either different from or complementary to those offered by our competitors.  The company will maintain strict control over the TeleSystem and Credit&Risk units in order to optimize operations and achieve higher profitability. 12
  • 13. Performance of Financial Indicators Gross Revenue (million) 101.16 96.90 90.9 86.2 88.4 3Q07 4Q07 1Q08 2Q08 3Q08 EBTIDA CSU (R$ million) 16.7 15.8 15.0 11.3 11.9 3Q07 4Q07 1Q08 2Q08 3Q08 EBTIDA Margin (R$ million) 17.52% 17.70% 18.27% 14.00% 14.10% 3Q07 4Q07 1Q08 2Q08 3Q08 13
  • 14. Results - Units Gross Revenue (R$ million) 55.59 48.91 50.01 47.03 42.47 45.57 46.85 43.61 41.96 41.23 3Q07 4Q07 1Q08 2Q08 3Q08 CardSystem / MarketSystem TeleSystem / CreditSystem EBTIDA (R$ million) 17.37 13.70 15.26 13.61 15.42 (0.21) (1.83) (0.42) 0.54 (2.29) 3Q07 4Q07 1Q08 2Q08 3Q08 CardSystem / MarketSystem TeleSystem / CreditSystem 14
  • 15. Debt and Capex Debt - R$ thousand Debt: 3Q08 3Q07 2Q08 Short Term Debt 49.7 48.9 47.4  CSU reduced its net debt from R$ 98.0 Financing and Debt loan 35.1 25.0 29.7 million to R$ 95.2 million in 3 months; Leasing 14.6 23.9 17.6 -  Reduction in short-term debt and use Long Term Debt 46.6 76.1 53.3 of the overdraft account; Financing and Debt loan 38.4 59.2 44.7 Leasing 8.1 16.9 8.6  The company’s debt profile remains - comfortable; Gross Debt 96.2 125.0 100.6 - (-) Cash 1.1 3.5 2.7  Cash generation and excellent working Net Cash (Debt) 95.2 121.6 98.0 capital management are the main factors for the improved debt situation. Debt Breakdown  CSU has no debts indexed to the dollar, (End of the Period– R$ million) or derivatives contracts. The company’s debt is in reais and indexed to the interbank (CDI) rate. Working Capital Leasing Short Term Working Capital BNDES 15
  • 16. Debt and Capex Impact of the Monetary Im pacto da Política Monetária sobre Custo da Dívida Policy on Cost of Debt Debt: 123 114  The graph shows the impact of the 100 98 108 107 recent variations in the interbank rate 100 96 (CDI) on the Company's financial 100 103 expenses. 90 85 4Q07 4T07 1Q08 1T08 2Q08 2T08 3Q08 (***) 3T08 (***) Gross Debt Total - Fechamento Dívida Bruta CDI - Financial Cost - CDI CUSTO FINANCEIRO CDI (Média Mensal no período) - Average CAPEX:  Investments focused on CardSystem and MarketSystem; Capex - R$ million 3Q08 3Q07 Chg. % 2Q08 Chg. %  Development and customization of Systems (SW and HW) 6.2 10.3 -40.0% 4.4 39.7% VisionPlus; Caixa Project 0.1 3.1 -96.6% 0.1 15.4%  Reform of the contingency site; Other 2.2 1.1 96.6% 0.8 181.0% Capex 8.4 14.5 -41.7% 5.3 59.9%  Preparations at the Alphaville and Recife sites to receive call center operations from the Santo André site; 16
  • 17. Socio-Environmental Sustainability CSU carries out the following Socio-Environmental Responsibility projects:  CSU Institute Provides job-oriented training.  Centro Crescer Sorrindo (Grow-up Smiling Center) Crèche for children from low-income communities in Belo Horizonte  Environmental Responsibility Material collected from selective waste collection of the recycling project is donated to the NGO Reciclar (Recycle), Santo André sanitation company and the CSU institute. 17
  • 18. Main Strategies  Growth with focus on the card processing unit ;  Rigorous control of operational management and profitability at TeleSystem and Credit&Risk;  Improve profitability and margins of CSU as a whole. 18
  • 19. CSU CardSystem S/A  Questions ??? Décio Burd Phones: (55 11) 3030-3821 Email: investidorescsu@csu.com.br Site: www.csu.com.br/ri 19