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Csu second quarter results

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  • 1. CONFIDENCIALCSU Second Quarter ResultsAugust / 2006 Ricardo Ribeiro Leite Investor Relations Director investidorescsu@csu.com.br
  • 2. Company Overview The Profile of 2
  • 3. Leading Technology Services Provider In Brazil 12.8 million cards* The largest independent administrator of 142 million processed transactions credit cards 44% of market share Largest independent call center in Brazil 123 million calls Leading collection services provider 41.6 million collection contacts Leading loyalty programs 2.7 million managed accounts management Revenue in 2005 Gross Profit in 2005 R$ 336 mm R$ 64 mm CardSystem 35.2% CardSystem 74.3% TeleSystem TeleSystem MarketSystem** 20.5% 48.8% 0.8% Credit&Risk Credit&Risk 15.4% 4.6% MarketSystem*** It includes cards of the Caixa Econômica Federal contract 0.8% 3** Reflects the MarketSystems results since its acquisition in December of 2005.
  • 4. CSU Is The Backbone Of The Credit CardBusiness Of Its Clients CARDHOLDER Card Issuance Billing Customer Support/ ACQUIRER – NETWORK Call Center Issuers Credit analysis and Authorization processing Collections Processing Operational Control Other COMMERCIAL CREDIT CARD BRAND ESTABLISHMENT Purchase Data exchange Withdrawal Fraud Prevention CSU Provides its Clients a Fully Outsourced Solution to Card Administration 4
  • 5. Our Excellence In Credit Card Administration Fostered Other Leading Business UnitsFull Service Credit Systems Customer Cards and Fraud Interchange Transaction Operational Loyalty development/ Support Issuance Collection Prevention Process Control ProgramsImplementation analysis Diversification brought us: New business opportunities/ cross-selling Lower costs from scale gains High switching cost 5
  • 6. Very Attractive Investment Opportunity Attractive Industry Growth Market Leadership Fundamentals Impressive Growth In All Strong Growth Prospects Financial Metrics Diverse Premium Client Seasoned Management Portfolio with Excellent Team Relationship Track Record 6
  • 7. Leading Competitive Position AmongIndependent Players Credit Card Processing Market Credit Card Processing Market Top 10 Call Center Operators Top 10 Call Center Operators By Market Share By Market Share By Market Share By Market Share Telephone’s Companies 75% CSU Orbitall* 44% 27% Independents 25% CSU 28% EDS Certegy* Telefutura 21% 9% 20% Softway 18% Other* Orbitall and Certegy belong to Itaú and ABN/Bradesco, respectvely. 24% TeleperformanceSources: Gazeta Mercantil, Revista Época, ABECS, ABT / www. callcenter.inf.br (2004) / SERASA (2004) 9% 7
  • 8. Premium Client Portfolio With StrongHistorical Relationships Excellent contract renewal track record provides a steady steam of revenue 8
  • 9. Company Overview Industry 9
  • 10. Attractive Industry Fundamentals ToCredit Cards… Credit Cards per ‘000 Inhabitants* Credit Cards per ‘000 Inhabitants* Number of Credit Card Number of Credit Card In 2003 Millions 73.0 Brazil 264 68.0 Singapore 835 52.5 47.5 41.5 % 18 United Kingdom 1,200 35.3 GR 28.0 CA 23.6 USA 1,257 Japan 1,990 1999 2000 2001 2002 2003 2004 2005 06/06 Credit Penetration Credit Penetration Establishments (POS)* Establishments (POS)* Millions 1,187.3 Personal Loan Operations 177,1 874.9 158,1 % 36 122,6 628.3 GR 98,5 480.7 CA 98,1 349.8R$/Billions 2000 2001 2002 2003 2004 2002 2003 2004 2005 2006** Balances in December, except June (2006). 10 * POS for credit and debit cards.
  • 11. … And the Call Center Industry ExperiencingConsistent Growth With Great Potential Market Revenue Market Revenue Call Center Market R$ billions R$ billions Call Center Market (Workstations) (Workstations) 3.0 2.5 2.0 23% GR CA Outsourced 40% 2002 2003 2004 Workstations Workstations 000 000 In-Company 78.2 60% 68.0 59.0 5% R1 C AG 2002 2003 2004Sources: Brazilian association of company/customer relations ( ABRAREC), CSU. 11
  • 12. Brazilian Scenary 2006Electronic Payment Means• Credit Cards represent 79% of the financial transactions;• Bradesco and ABN AMRO formed a joint-venture and changed Certegyinto Fidelity;• Fidelity bought Proservice, a Bank’s back-office processer;• Carrefour has signed with Visa;• Itaú acquired Bank Boston;• Bradesco acquired Amex;• Losango announced Visa Card, with an expectation of 2 million cards for2007; Transactions (Credit Cards in Billions)• Implementation of the ”multiplo purpose card Nossa Caixa”; Estimated Annual Variation 23%• Migration of Caixa Econômica Federal’s card base in Oct/06. 151.2 160 140 123.0Call Center and Telemarketing 120 100• Call center: outsourced represents 53% of the market; 80 69.4• Industry grows 3 times more than the economy. 55.9 60 40 20 Credit and Collection 0 1H05 Total 2005 1H06 Total • Credit amount raised 0.7% in June; Estimate/2006 • Insolvency stays in 40%. Source: ABECS 2006 12
  • 13. Summarizing... • The Card Industry in Brazil is still under development: • Larger access and more people using electronic payments; • More Issuers; • More enabled issuers; • Consequent increase of the competition among issuers. Market 2006 More Competition Improvements for the Consumers • More technology • Larger access • Greater purchase potential • Meanwhile conpetition increases: • Better products offer • The access to the credit means of payment are facilitated; • The consumer’s purchase potential increases; • The Industry keeps recovering. 13
  • 14. Summarizing Market 2006 Market development More Competition Improvements to the consumer Economy recovery And this effects already start to be noticed in the market: • The growth in 2005 was the largest one in the last 5 years: 27.1%; • In 2005, 14 mm new cards were issued; • Increase in the credit card use habit: • More frequency and transactions of lower value; • New stablishments; • Increase in the use of card as a credit instrument; • Payment of other bills and services with cards. 14
  • 15. Growth Opportunities Entrance in New Markets Organic Cross-Selling Market Growth Opportunities Acquiring New Clients & Outsourcing 15
  • 16. Financial Information Financial Information 16
  • 17. Seazonality Gross Revenue(R$ millions) 98 87 90 90 83 76 68 64 56 57 48 49 46 40 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 2003 2004 2005 2006 17
  • 18. Strong Growth Track RecordCards base* Workstations* Billing contacts**(‘000) (‘000) CAGR 17% CAGR 83% CAGR 28% 10,059 3,308 41,627 11% 8,077 2,638 7,387 2,290 2,096 25,347 2,149 23,162 19% 7,421 991 5,238 5,787 2003 2004 2005 2003 2004 2005 2003 2004 2005 Credit Cards Private Label * Annual average * Monthly average ** Active and receptive Source: Company Filings 18
  • 19. Business Units’ Gross Revenue PerformanceShows Consistent Increase CardSystem CardSystem TeleSystem TeleSystemR$MM R$MM CAGR 14% CAGR 57% $163.3 $118.0 $97.6 $91.2 $107.3 $66.4 2003 2004 2005 2003 2004 2005 Credit & Risk Credit & Risk MarketSystem MarketSystemR$MM CAGR 27% R$MM $23.7 $22.6 $51.8 Full year prior to $41.1 acquisition $14.9 $32.3 2.6 2003 2004 2005 2003 2004 2005 19 Source: Company Filings
  • 20. Business Units’ Gross Revenue Evolution – 1H05x 1H06 CardSystem CardSystem TeleSystem TeleSystemR$ mm R$ mm CAGR 26% CAGR 0.3% $78.4 $64,8 $51.6 $78.2 1H05 1H06 1H05 1H06 Credit & Risk Credit & Risk MarketSystem MarketSystemR$ mm CAGR –2% R$ mm $16.4 CAGR 56% $10.5 $21.1 $20.5 1H05 1H06 1H05 1H06 Result before the acquisition 20 Source: CSU.
  • 21. Impressive Growth In All Financial Metrics Net Revenues Net Revenues Gross Profit Gross Profit R$MM $313.6 R$MM $63.7 CAGR 20% CAGR 34% $55.3 $229.4 $42.3 $177.9 $37.0 $30.6 $134.4 $96.7 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 EBITDA EBITDA Net Profit Net Profit R$MM R$MM $16.1 CAGR 25% CAGR 37% $60.3 $12.9 $10.2 $46.3 $34.2 $6.6 $6.5 $22.9 $17.0 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 Source: Company Filings 21
  • 22. Financial Metrics Evolution – 1H05 x 1H06 Net Revenue Net Revenue Gross Profit Gross Profit R$ mm $167.6 R$ mm $25.3 Var. 9% Var. 19% $23.2 $141.4 1H05 1H06 1H05 1H06 EBITDA EBITDA Net Profit Net Profit R$ mm R$ mm Var. 42% $32,1 * Var. –73%% $4,0 $22,6 $1,1* 1H05 1H06 1H05 1H06 * Excluding IPOs 22 expenses
  • 23. Solid And Predictable Cash Generation Cash From Operations Cash From Operations Net Debt* // EBITDA Net Debt* EBITDA R$MM R$MM CAGR 17% 1,4x $28.4 $23.6 $82,6 $18.0 $16.5 $15.4 $30,9 0,6x 1H06 (0.2x) 2001 2002 2003 2004 2005 2005 2005 Pro Forma Post IPO Net Debt Net Debt / EBITDA Net Debt Net Debt Net Debt / EBITD Net Debt / EBITDA * Bank debt - cash + leasing Solid and predictable cash generation with low indebtedness Source: Company Filings 23
  • 24. Investment Activities Expenditures AndDividend Payout Investment Activities Expenditures Investment Activities Expenditures Dividend Payout Dividend PayoutR$MM R$MM $43.6 $11.8 $11.4 $5.6 $15.6 $4.0 $12.5 $10.9 $3.2 $9.8 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 Payout* 85% 49% 116% 31% 71%* Payout is calculated as dividend+interest on shareholder’s equity divided by net profit Source: Company Filings 24
  • 25. Caixa Econômica FederalCaixa Projet:• Adjusted Contract Value R$ 204 mm;• Strong growth potential;• Beginning of monthly revenue starting on Out/06;• Rendering services period does not suffer alteration. Fonte: CSU 25
  • 26. Most Important Strategic Actions (2006)• Enlargement of the market share for the CardSystem andMarketSystem units: • Implementation of the Caixa Project (out./06); • Acquisition of New Clients; • Attention to the cards change trend from Private Label to Branded.• Enlargement of the profitability of the TeleSystem andCredit&Risk Units: • Action plan execution focused on the enlargement of business profitability of both units. 26
  • 27. Excellent Performance Against Comparables Peer Group Peer Group ROE ‘05 ROE ‘05 Sales ‘05 vs. ‘04 Sales ‘05 vs. ‘04 EBITDA Margin EBITDA Margin 30.2% 30.2% 36.7% 36.7% 19.2% 19.2% Certegy 34.0% 7.5% 21.2% 21.2% 16.8% Heartland 30.4% 38.5% 7.9% Euronet Worldwide 22.5% 39.4% 14.1% Total System Svcs 20.8% 35.0% 27.3% FirstData 20.0% 4.8% 29.8% Global Payments 19.0% 8.8% 26.7% Outsourcers Alliance Data Systems 18.9% 23.5% 22.6% Outsourcers EFunds 12.0% (9.1%) 23.9%Financial ProcessingFinancial Processing Global Cash 22.2% 22.2% n.m. 17.9% 17.9% 12.7% 21.7% ICT Group 12.5% 23.3% 8.8% Sykes 10.7% 6.0% 10.6% Sitel 8.4% 14.3% 14.3% 8.7% 9.0% 9.0% 0.0% Techteam 7.6% 30.1% 7.6% Call Centers Call Centers Teletech 9.3% 9.3% 7.3% 3.2% 9.0% 27
  • 28. Superior Corporate Governance 100% common shares Novo Mercado (100% Tag Along) Free float of 39% voting shares Two independent board members: Maílson Ferreira da Nóbrega (Former Minister of Finance in Brazil) Rubens Barbosa (Former Ambassador from Brazil in London and Washington) Solid relationship track record with minority shareholders Private Equity funds investment in 1997 28
  • 29. Superior Corporate Governance Audit Committee and Internal Controls Website Section for the investors Communication with the market Press releases results in Portuguese and English Conference Calls and webcasts in Portuguese and English Preparation of a Stock Option program for the executives Alignment of interests between administration and shareholders 29
  • 30. Shareholder Composition Shareholder Composition Shareholder Composition FREE FLOAT 39% Controlling Group 61% 48,571,597 shares The controlling group represents 61% of CSU’s total capital 30
  • 31. Conclusion Conclusion 31
  • 32. Very Compelling Investment Opportunity Attractive Industry Growth Market Leadership Fundamentals Impressive Growth In All Strong Growth Prospects Financial Metrics Diverse Premium Client Seasoned Management Portfolio with Excellent Team Relationship Track Record 32
  • 33. CONFIDENCIALCSU Second Quarter ResultsAugust / 2006 Ricardo Ribeiro Leite Investor Relations Director investidorescsu@csu.com.br

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