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Investor Presentation     September 2011
Disclaimer• This notice may contain estimates for future events. These estimates merely reflect the expectations of  the C...
Multiplus is a loyalty network Members can gather all points                                                          Powe...
Innovative business model                      Low CAPEX  Debit free                         Dividend player              ...
SPREAD                                       BREAKAGE                                  //Month                     Month  ...
Solid Track Record                       Gross Billings                                    Breakage Rate (12 months averag...
Appendix III:Exclusive and Strategic Relationship with TAM      Operational Agreement Assures the Most Appealing Products ...
Multiplus is a loyalty network            A loyalty network connecting consumers and companies                The first ai...
Multiplus is a loyalty network            A loyalty network connecting consumers and companies               The first air...
Flexible Business Model                       CORE BUSINESS    Accrual             Redemption               Coalition     ...
Coalition Partnerships Network   (members can earn and redeem points)                                                     ...
Accrual and Redemption Partnerships*                   Accrual                        Redemption                          ...
Business Model         Gross Billings of points               Multiplus sells points …                      Costs of rewar...
Capilarity Project                   CONCEPT                         Accrual and balance checking at the point-of-sale    ...
Non-airline tickets redemptions                  POINTS REDEEMED IN NON-AIRLINE TICKETSAs % of total points redeemed      ...
Growth Opportunities                      Credit Card Usage                                                               ...
Main Strategic Objectives User-friendly Interface (new website, new tools, etc.)                                          ...
Appendix
Appendix I:Typical Accrual and Redemption FlowsAccrual flow: cash in due to sales of points to partners                   ...
Appendix II:Shareholders’ Structure and Stock Performance Shareholders’ Structure                    Average Stock Price a...
Appendix IV:Loyalty Market Penetration    as % of population                                                              ...
Appendix V:2Q11 Highlights                 OPERATING HIGHLIGHTS• 18.5 bln points issued, a growth of 51.4% versus 2Q10 and...
Appendix VI:Income Statement         (R$ thousand)                                                           2Q11 vs      ...
Appendix VII:Currency Hedge     FUNDAMENTALS                                                      POSITION IN JUN 2011 (US...
Appendix VIII:Balance Sheet and Cash Flow(R$ thousands)                                                        2Q11 vs    ...
Appendix IX:Adjusted EBITDA  (R$ thousand)                                                                                ...
Thank you.                           Investor Relations                             +55 11 5105 1847             invest@mu...
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Investor Presentation - September 2011

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Transcript of "Investor Presentation - September 2011"

  1. 1. Investor Presentation September 2011
  2. 2. Disclaimer• This notice may contain estimates for future events. These estimates merely reflect the expectations of the Company’s management, and involve risks and uncertainties. The Company is not responsible for investment operations or decisions taken based on information contained in this communication. These estimates are subject to changes without prior notice.• This material has been prepared by Multiplus S.A. (“Multiplus“ or the “Company”) includes certain forward-looking statements that are based principally on Multiplus’ current expectations and on projections of future events and financial trends that currently affect or might affect Multiplus’ business, and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of each could cause actual financial condition and results of operations to differ materially from those set out in Multiplus’ forward-looking statements. Multiplus undertakes no obligation to publicly update or revise any forward looking statements.• This material is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Likewise it does not give and should not be treated as giving investment advice. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment. 2
  3. 3. Multiplus is a loyalty network Members can gather all points Powerful support for partners to from several programs in one acquire and retain clients single account over 8.5 mln positive network effect generating strong growth more than 160 members partnerships +19.5% YoY 18.5 bln +28.8% YoY points sold in 2Q11 +51.4% YoY Exclusive and Strategic Relationship with TAM Multiplus 15 years tenor Operational Agreement (extended for additional 2009: spin-off from TAM’s loyalty program five-year periods ) 2010: beginning of operations as separated Air tickets: high value perception with the most appealing product business unit and IPO to the public TAM SA holds 73,2% stake Most Desired Airline in Brazil (Ibope Research) and Star Alliance 3
  4. 4. Innovative business model Low CAPEX Debit free Dividend player requirement Strong cash Scalable Negative generation business working capital Point expiration Breakage 4
  5. 5. SPREAD BREAKAGE //Month Month Month O ~1O 24 Point Expiration Interest Income
  6. 6. Solid Track Record Gross Billings Breakage Rate (12 months average) R$ millions % 34.3% +30 bps +4.3% +30 bps 339,9 354,6 23,3% 300,0 325,2 23,0% 23,0% 264,0 22,6% 22,6% 2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q11 Members Free Cash Flow to Equity In millions R$ millions +19.5% +7.7% +4.0% +26.3% 326,6 327,7 8,6 304,3 285,5 8,0 8,3 259,4 7,2 7,6 2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q11 Note: Excluding dividends and capital reduction effects 6
  7. 7. Appendix III:Exclusive and Strategic Relationship with TAM Operational Agreement Assures the Most Appealing Products to the Members = Air Tickets Airlines ● Leading airline in the Brazilian market and largest airline in Latin America ● Only Brazilian company with long haul flights ● Most Desired Airline in Brazil – Ibope Research ● High penetration in South American flights ● There is no restriction to redeem points in domestic and within South America flights ● Access to Star Alliance benefits ● 15 years tenor Operational Agreement (automatically extended for additional five-year periods ) Detachment from cost and perceived value with the most appealing product to the public 7
  8. 8. Multiplus is a loyalty network A loyalty network connecting consumers and companies The first airline loyalty program in Brazil More than 1,000 destinations worldwideover 8.5 mln more than 160 members partnerships +19.5% YoY positive network effect +28.8% YoY • Sca Powerful support for partners to acquire and retain clients • Low Members can gather all points from several • Rec programs in one single account +28.8% YoY • Ma *based o 8
  9. 9. Multiplus is a loyalty network A loyalty network connecting consumers and companies The first airline loyalty program in Brazil More than 1,000 destinations worldwideover 8.5 mln more than 160 members partnerships +19.5% YoY positive network effect +28.8% YoY • Sca Powerful support for partners to acquire and retain clients • Low Members can gather all points from several • Rec programs in one single account +28.8% YoY • Ma *based o 9
  10. 10. Flexible Business Model CORE BUSINESS Accrual Redemption Coalition Outsourcing CRM Partners Partners Partners Partners Partners buy Multiplus buys Two-way flow: Multiplus Multiplus points from points, products exchange of manages the leverages theMultiplus to award or services from points, products loyalty program of database from its its customers partners to deliver and services (buy the partner network and (Ex. banks, parking to its members and sell) between (systems and offers CRM and stores) (Ex. donation and Multiplus and operations) services tickets) coalition partners (Ex. air travel, e-commerce and gas station) 10
  11. 11. Coalition Partnerships Network (members can earn and redeem points) Magazine Air Travel Travel Agency Gas Stations Bookstore Hotels Telecom Pay-TV Apparel Education Suscriptions - Stock Exchange - Drugstore Real Estate Universities e-Commerce Beauty and Furniture and Gym Food Home Centers Groceries Insurance Car Rental Group Buying Pension Plan Healthy DecorationNote: blank slots refer to targeted segments 11
  12. 12. Accrual and Redemption Partnerships* Accrual Redemption Donation Financial Institutions Leisure Other *non exhaustive 12
  13. 13. Business Model Gross Billings of points Multiplus sells points … Costs of rewards TAM Air Tickets Retail, Industry and Services …and buys rewards Others Banks Current Current 26% Sources of Profit 98% Spread 3% Margin between point price and cost of rewards 2% 71% Breakage Points expiring without being redeemed Long Term Target Interest income on the float Long Term Target Gap between sales and redemptions of points Cross-selling of services Outsourcing and CRM 15 to 20% 15 to 20% Note: based on 2Q11 13
  14. 14. Capilarity Project CONCEPT Accrual and balance checking at the point-of-sale • spread the loyalty concept • speed up the capillarity strategy penetrating new market segments • increase sales in retail market Standard rule: 1 Real ($) = 1 Multiplus point Special rules allowed (such as minimum ticket) adding more value to the partner Multiplus as one product of Redecard’s sales team TIMELINESince June 2011: Pilot at 2 restaurants (Japengo)August 2011: rollout to 50 merchants in São PauloDecember 2011: rollout to at least 350 merchants in Brazil Collect points here 14
  15. 15. Non-airline tickets redemptions POINTS REDEEMED IN NON-AIRLINE TICKETSAs % of total points redeemed Attractive offers to members 2,5% 2,1% Books Fuel Clothing Hotels Courses Magazines 0,8% Donations Pay-TV 0,4% 0,4% 0,4% 0,5% 0,4% 0,5% 0,5% 0,5% DVDs Telecom services 0,2% 0,2% Electronics Tickets Mar-11 Feb-11 Jun-11 Jun-10 Nov-10 Apr-11 Jul-10 Aug-10 Sep-10 Dec-10 Jan-11 May-11 Oct-10NOTE: it includes points issued before 2010 (TAM’s inventory) COALITION AND REDEMPTION PARTNERSOPERATIONAL IN SETUP PROCESS ROADMAP Groceries Entertainment Restaurants Beauty Others 15
  16. 16. Growth Opportunities Credit Card Usage Consumption Credit Card Transaction Value (R$ billions) Personal Consumption Expenditure (R$ billions) CAGR +22% CAGR +12% 2.226 1.966 1.787 314 1.594 256 1.429 215 174 142 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Source: ABECS Source: IBGE Passenger Traffic (Airline Segment) Wealth Distribution RPK in Brazil (billions) 23% Social classes* (% of the population) 70 57 48 44 40 2005 2010 2006 2007 2008 2009 2010 Source: ANAC Source: Research Cetelem- Ipsos 2010 *Note: Average income of classes D and E - R$ 6,126/year; class C - R$13,944/year; and classes A and B - R$ 75,942 /year. 16
  17. 17. Main Strategic Objectives User-friendly Interface (new website, new tools, etc.) New Partners (and partnerships of higher added value) Client New redemption options Experience (coalition) Operational Efficiency Shareholder Brand Return Publicity New members Breakage Management Cash Management Publicity of new concept New services Actions at sales outlet (CRM and outsourcing) Costs sharing with partner 17
  18. 18. Appendix
  19. 19. Appendix I:Typical Accrual and Redemption FlowsAccrual flow: cash in due to sales of points to partners PARTNER WITH STANDALONE PROGRAM POINTS A earns accumulates Partner’s converts to Points Program MEMBER buys Products and PARTNER WITH NO STANDALONE PROGRAM (consumer) Services B earnsRedemption flow: cash out due to purchase of points, products and services from partners and suppliers COALITION AND REDEMPTION PARTNERS POINTS C converts to accumulates Partner’s earns Points Products Program and MEMBER redeems Services D earns (consumer) MULTIPLUS WEBISITE Products and E earns Services 19
  20. 20. Appendix II:Shareholders’ Structure and Stock Performance Shareholders’ Structure Average Stock Price and Average Daily Trading Volume Average Daily Trade Volume (R$ million) 29,66 29,28 Average Stock Price 28,85 28,32 27,95 TAM S.A. 26,29 27,40 25,48 24,99 25,80 24,74 23,36 19,96 17,48 17,87 15,99 16,58 16,17 14,90 z z 19,4 73,17% 26,83% 15,3 13,3 12,8 10,5 9,7 9,5 8,8 8,2 7,9 7,6 6,1 6,6 6,4 5,0 5,6 4,1 2,1 2,4 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2010 2011 20
  21. 21. Appendix IV:Loyalty Market Penetration as % of population Multiplus member base penetration as % of population North 52,8 3,6 Northeast 2,5 46,9 Central-West 6,4 Southeast 35,7 5,2 31,0 27,6 27,3 South 4,5 23,7 23,5 21,0 18,0 15,7 13,4 13,0 9,5 9,4 4,4 3,8 2,3 Qantas Program AUS AirMiles CAN AirMiles UK Velocity AUS Club Premier MEX JAL Mileage Bank JPN Miles&More DEU FlyBuys AUS Flying Blue FRA Aeroplan CAN Multiplus BRA Smiles BRA Nectar UK Nectar ITA LANPASS CHL Sky Miles USA FlyBuys NZL AAdvantage USASource: Principal Global Indicators and Companies’ website and reportsNotes:1. Programs belonging to airlines: Flying Blue to AirFrance/KLM; Sky Miles to Delta Airlines; AAdvantage to American Airlines; Miles&More to Lufthansa; JAL Mileage Bank to Japan Airlines; Velocity to Virgin Blue; Smiles to Gol Airlines; and Club Premier to AeroMexico2. Programs associated with airlines: FlyBuys NZL with Air New Zealand; FlyBuys AUS with Jet Set; Aeroplan with AirCanada; AirMiles UK with British Airways; and Multiplus with TAM Airlines. 21
  22. 22. Appendix V:2Q11 Highlights OPERATING HIGHLIGHTS• 18.5 bln points issued, a growth of 51.4% versus 2Q10 and of 9.2% versus 1Q11• 10.9 bln points redeemed, compared to 3.2 bln points in 2Q10 and 9.0 bln points in 1Q11• Average Breakage rate (12 months) of 23.3%, versus 23.0% in both periods 2Q10 and 1Q11 FINANCIAL HIGHLIGHTS• Gross Billings of points of R$ 354.6 mln, an growth of 34.3% versus 2Q10 and of 4.3% compared to 1Q11• Net Revenue of R$ 285.1 mln, compared to R$ 93.5 mln in 2Q10 and R$ 242.0 mln in 1Q11• Net Income of R$ 81.2 mln, versus R$ 23.1 mln in the 2Q10 and R$ 70.9 mln in 1Q11 (margin of 28.5%)• Adjusted EBITDA of R$ 81.3 mln, 3% higher than 2Q10 and 8.8% lower than 1Q11 (margin of 24.8%) 22
  23. 23. Appendix VI:Income Statement (R$ thousand) 2Q11 vs 2Q11 vs 2Q10 2Q11 1Q11 Income Statement 2Q10 1Q11 Gross revenue 102.951 314.567 205,6% 266.104 18,2% Sale of points 75.250 224.200 197,9% 191.749 16,9% TAM Airlines - TLA 7.312 44.821 513,0% 35.883 24,9% Banks, Retail, Industry and Services 67.938 179.379 164,0% 155.866 15,1% Breakage 24.239 83.621 245,0% 71.145 17,5% Hedge 0 3.448 N.A. 0 N.A. Other revenues 3.462 3.299 -4,7% 3.210 2,8% Taxes on sales -9.482 -29.505 211,2% -24.124 22,3% Net Revenue 93.469 285.063 205,0% 241.980 17,8% Cost of the points redeemed -51.205 -174.085 240,0% -136.226 27,8% Air tickets -51.087 -171.880 236,4% -135.621 26,7% Other products / services -118 -2.205 1762,2% -605 264,4% Accounting Adjustments -20 - -100,0% 0 N.A. Total cost of services rendered -51.225 -174.085 239,8% -136.226 27,8% Gross Profit 42.244 110.978 162,7% 105.754 4,9% Gross Margin 45,2% 38,9% -6,3p.p. 43,7% -4,8p.p. Shared services -2.012 -1.907 -5,2% -1.907 0,0% Personnel expenses -3.257 -6.991 114,6% -9.256 -24,5% Marketing -269 -4.175 1449,5% -2.052 103,4% Depreciation 0 -1.173 N.A. -1.032 13,7% Other -5.532 -6.399 15,7% -7.948 -19,5% Total Operating Expenses -11.070 -20.645 86,5% -22.194 -7,0% Total Costs and Operating Expenses -62.295 -194.730 212,6% -158.420 22,9% Operating Income 31.174 90.333 189,8% 83.560 8,1% Operating Margin 33,4% 31,7% -1,7p.p. 34,5% -2,8p.p. Financial Income/Expenses 3.853 33.825 778,0% 25.184 34,3% Income before income tax and social contribution 35.027 124.158 254,5% 108.744 14,2% Income tax and social contribution -11.898 -42.990 261,3% -37.857 13,6% Net Income 23.129 81.168 250,9% 70.887 14,5% Net Margin 24,7% 28,5% 3,7p.p. 29,3% -0,8p.p. 23
  24. 24. Appendix VII:Currency Hedge FUNDAMENTALS POSITION IN JUN 2011 (USD mln) 2011 2012 2013 2014 Total NOTIONAL 48.0 84.0 37.0 2.0 171.0• Multiplus is exposed to PUT* 1.67 1.68 1.74 1.77 - foreign exchange risk as most of the agreements with CALL* 1.78 1.80 1.85 1.87 - * average strike prices (BRL/USD) financial institutions are denominated in USD.• These partners represented SENSITIVITY ANALYSIS approximately 70% of Impact on company’s cash flow (Notional: USD 171.0 mln) R$ million Multiplus’ gross billings in 5,3 5,3 5,3 5,3 R$1,45/USD 5,2 2Q11. R$1,55/USD• The Financial Risk 4,0 3,5 R$1,65/USD 3,3 Policy determines coverage 2,9 2,9 2,9 2,9 3,1 limits and the list of eligible 2,5 2,2 2,1 1,9 1,9 financial instruments 1,3 1,3 1,0 1,0 0,9 0,9 0,6 0,6 0,6 0,6 0,7 0,7 0,6 0,4 0,2 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 24
  25. 25. Appendix VIII:Balance Sheet and Cash Flow(R$ thousands) 2Q11 vs 2Q11 vs 2Q10 2Q11 1Q11 (R$ thousand)Balance Sheets 2Q10 1Q11 Cash Flow 2Q11Assets 1.062.523 1.013.420 -4,6% 1.482.205 -31,6% Net Income 81.168Current assets 789.208 830.818 5,3% 1.306.111 -36,4%Cash and cash equivalentes 2.403 23.820 891,3% 16.868 41,2% Depreciation/Amortization 1.173Investments 333.862 644.884 93,2% 928.663 -30,6% Accounts Receivable -10.208Accounts Receivable 64.638 131.529 103,5% 121.321 8,4%Related Parties 382.919 22.320 -94,2% 236.848 -90,6% Accounts Payable -14.712 Current account 95.127 22.320 -76,5% 57.149 -60,9% 5.412 Taxes Prepaid expenses 287.792 0 -100,0% 179.699 -100,0%Deferred income tax and social contribution 5.025 1.823 -63,7% 1.858 -1,9% Related Parties 45.821Derivative Instruments 0 5.540 N.A. 0 N.A. Prepaid Expenses 179.699Other receivables 361 901 149,2% 553 62,8% Deferred Revenue and Breakage liabilities 46.301Non-current assets 273.315 182.602 -33,2% 176.094 3,7% Other assets and liabilities -5.591Prepaid expenses 265.610 0 -100,0% 0 N.A.Long term investments 0 155.588 N.A. 151.083 3,0% Operating Cash Flow 329.062Deferred income tax and social contribution 568 268 -52,8% 763 -64,9%Property, plant and equipment 0 1.127 N.A. 1.156 -2,5%Intangible 0 17.900 N.A. 17.995 -0,5% Capex -3.672Intangible assets 7.137 7.720 8,2% 5.097 51,5% Cash Flow from Investing Activities -3.672Liabilities and shareholder’s equity 1.062.523 1.013.420 -4,6% 1.482.205 -31,6% Net proceeds from public offer 0Current liabilities 362.979 779.941 114,9% 732.181 6,5% Capital -600.014Suppliers 1.766 3.151 78,5% 17.863 -82,4%Taxes and fees payable 6.003 15.465 157,6% 10.583 46,1% Dividends 0Deferred revenue 239.671 604.173 152,1% 551.709 9,5% 2.300 Capital ReserveBreakage liabilities 110.938 133.683 20,5% 139.846 -4,4%Derivative Instruments 0 2.663 N.A. 0 N.A. Cash Flow from Financing Activities -597.714Other liabilities 4.602 20.806 352,1% 12.180 70,8% Increase (Decrease) in Cash -272.324Equity 699.544 233.479 -66,6% 750.025 -68,9%Capital 669.063 69.049 -89,7% 669.063 -89,7%Remuneration Plan 0 6.455 N.A. 4.155 55,4% Cash at beginning of period* 1.096.614Reserves 0 5.919 N.A. 5.919 0,0%Retained Earnings (loss) 30.481 152.056 398,9% 70.887 114,5% Cash at end of period* 824.292 25
  26. 26. Appendix IX:Adjusted EBITDA (R$ thousand) 2Q11 vs 2Q11 vs 2Q10 2Q11 1Q11 Adjusted EBITDA 2Q10 1Q11 Operating Income 31.174 90.333 189,8% 83.560 8,1% Depreciation and Amortization 0 1.173 N.A. 1.032 13,7% EBITDA 31.174 91.506 193,5% 84.592 8,2% Margin 33,4% 32,1% -1,3p.p. 35,0% -2,9p.p. Gross Billings of points 263.968 354.554 34,3% 339.885 4,3% Other Revenues in the period 3.462 6.746 94,8% 3.210 110,2% Tax on Gross Billings -24.737 -33.420 35,1% -31.736 5,3% Net Billings 242.693 327.880 35,1% 311.359 5,3% Revenue from the sale of points -99.489 -307.821 209,4% -262.894 17,1% Other Revenues in the period -3.462 -6.746 94,8% -3.210 110,2% Tax on Revenue 9.523 29.097 205,6% 24.615 18,2% Net Revenue -93.428 -285.470 205,6% -241.490 18,2% Future redemptions costs: Balance of points to be redeemed variation -101.514 -52.601 -48,2% -65.312 -19,5% Adjusted EBITDA 78.926 81.316 3,0% 89.150 -8,8% Margin 32,5% 24,8% -7,7p.p. 28,6% -3,8p.p. Future redemptions costs: Breakage ratio variation 706 3.383 378,9% 3513 -3,7% Average cost per 10,000 points variation 2.456 24 -99,0% 10.630 -99,8% Adjusted EBITDA w/ previous period adjustments 82.088 84.722 3,2% 103.293 -18,0% Margin 33,8% 25,8% -8,0p.p. 33,2% -7,3p.p.Note: A spreadsheet with a calculation log of the cost of future redemptions is available on the Company’s IR website(www.multiplusfidelidade.com.br/ri). Below is a short description of the main lines:• Change in the breakage ratio: represents the impact of the breakage ratio on total number of points issued in the previous 24 months (Multiplus points mature in 2 years).• Change in the balance of points to be redeemed: the impact of the change in the balance of points to be redeemed (excluding points already redeemed and breakage points) considering the average cost in the last 12 months.• Average cost per 1,000 points variation: the impact of variation of average cost on the balance of points to be redeemed in the previous period. 26
  27. 27. Thank you. Investor Relations +55 11 5105 1847 invest@multiplusfidelidade.com.br www.multiplusfidelidade.com.br/ir
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