Investor Presentation - September 2011

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Conference New York - 05/10/2011 - 06/10/2011


  • 1.Investor Presentation September 2011

2. Disclaimer This notice may contain estimates for future events. These estimates merely reflect the expectations ofthe Companys management, and involve risks and uncertainties. The Company is not responsible forinvestment operations or decisions taken based on information contained in this communication. Theseestimates are subject to changes without prior notice. This material has been prepared by Multiplus S.A. (Multiplus or the Company) includes certainforward-looking statements that are based principally on Multiplus current expectations and onprojections 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 managements expectations thatinvolve a number of business risks and uncertainties, any of each could cause actual financial conditionand 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 oran offer to buy or sell any securities or related financial instruments. Likewise it does not give and shouldnot 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 orimplied, is provided in relation to the accuracy, completeness or reliability of the information containedherein. It should not be regarded by recipients as a substitute for the exercise of their own judgment.2 3. Multiplus is a loyalty network Members can gather all pointsPowerful support for partners to from several programs in one acquire and retain clientssingle accountover 8.5 mlnpositive network effect generating strong growthmore than 160memberspartnerships +19.5% YoY18.5 bln+28.8% YoY points sold in 2Q11+51.4% YoY Exclusive and Strategic Relationship with TAMMultiplus 15 years tenor Operational Agreement (extended for additional2009: spin-off from TAMs 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 publicTAM SA holds 73,2% stake Most Desired Airline in Brazil (Ibope Research) and Star Alliance 3 4. Innovative business modelLow CAPEXDebit free Dividend playerrequirementStrong cash Scalable Negativegenerationbusiness working capitalPoint expirationBreakage 4 5. SPREAD BREAKAGE//Month MonthMonth O~1O 24 Point ExpirationInterest Income 6. Solid Track Record Gross BillingsBreakage Rate (12 months average)R$ millions% 34.3%+30 bps+4.3% +30 bps339,9354,623,3%300,0325,2 23,0% 23,0%264,0 22,6%22,6%2Q103Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q11 Members Free Cash Flow to EquityIn millionsR$ millions+19.5%+7.7% +4.0% +26.3% 326,6327,78,6 304,3 285,5 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 effects6 7. Appendix III:Exclusive and Strategic Relationship with TAMOperational Agreement Assures the Most Appealing Products to the Members = Air TicketsAirlines 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 valuewith the most appealing product to the public 7 8. Multiplus is a loyalty networkA loyalty network connecting consumers and companiesThe first airline loyalty program in BrazilMore than 1,000 destinations worldwideover 8.5 mlnmore than 160 memberspartnerships+19.5% YoYpositive network effect+28.8% YoY ScaPowerful support for partners to acquire andretain clients LowMembers can gather all points from several Recprograms in one single account +28.8% YoY Ma*based o8 9. Multiplus is a loyalty networkA loyalty network connecting consumers and companies The first airline loyalty program in Brazil More than 1,000 destinations worldwideover 8.5 mlnmore than 160 memberspartnerships+19.5% YoYpositive network effect+28.8% YoY ScaPowerful support for partners to acquire andretain clients LowMembers can gather all points from several Recprograms in one single account +28.8% YoY Ma *based o 9 10. Flexible Business Model CORE BUSINESSAccrual Redemption CoalitionOutsourcing CRM PartnersPartners Partners PartnersPartners buyMultiplus buysTwo-way flow: Multiplus Multiplus points from points, productsexchange ofmanages theleverages theMultiplus to award or services frompoints, productsloyalty program of database from its its customerspartners to deliver and services (buythe partnernetwork and (Ex. banks, parking to its members and sell) between(systems andoffers CRM and stores) (Ex. donation andMultiplus and operations) services tickets) coalition partners(Ex. air travel, e-commerce andgas station)10 11. Coalition Partnerships Network (members can earn and redeem points)MagazineAir Travel Travel Agency Gas StationsBookstoreHotels TelecomPay-TV ApparelEducation Suscriptions- Stock Exchange- Drugstore Real Estate Universitiese-Commerce Beauty andFurniture andGymFood Home Centers Groceries Insurance Car Rental Group Buying Pension PlanHealthy DecorationNote: blank slots refer to targeted segments 11 12. Accrual and Redemption Partnerships* AccrualRedemptionDonation Financial Institutions Leisure Other *non exhaustive 12 13. Business Model Gross Billings of points Multiplus sells points Costs of rewards TAM Air Tickets Retail, Industry and Servicesand buys rewardsOthers BanksCurrentCurrent26% Sources of Profit 98% Spread3% Margin between point price and cost of rewards2% 71% Breakage Points expiring without being redeemed Long Term TargetInterest income on the floatLong 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 2Q1113 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 ($) = 1 Multiplus point Special rules allowed (such as minimum ticket) addingmore value to the partner Multiplus as one product of Redecardssales team TIMELINESince June 2011: Pilot at 2 restaurants (Japengo)August 2011: rollout to 50 merchants in So PauloDecember 2011: rollout to at least 350 merchants in Brazil Collect points here14 15. Non-airline tickets redemptionsPOINTS REDEEMED IN NON-AIRLINE TICKETSAs % of total points redeemedAttractive offers to members2,5%2,1%BooksFuelClothing HotelsCoursesMagazines0,8%DonationsPay-TV 0,4% 0,4% 0,4% 0,5% 0,4% 0,5% 0,5% 0,5%DVDs Telecom services 0,2% 0,2%ElectronicsTickets Mar-11Feb-11 Jun-11 Jun-10 Nov-10 Apr-11Jul-10Aug-10 Sep-10Dec-10 Jan-11 May-11Oct-10NOTE: it includes points issued before 2010 (TAMs inventory)COALITION AND REDEMPTION PARTNERSOPERATIONAL IN SETUP PROCESSROADMAPGroceriesEntertainmentRestaurantsBeautyOthers15 16. Growth OpportunitiesCredit Card UsageConsumptionCredit Card Transaction Value (R$ billions)Personal Consumption Expenditure (R$ billions)CAGR +22%CAGR +12%2.226 1.966 1.787314 1.594256 1.429215 174 142 2006 200720082009 20102006 2007 20082009 2010Source: ABECS Source: IBGEPassenger Traffic (Airline Segment)Wealth DistributionRPK in Brazil (billions) 23% Social classes* (% of the population) 70 57 484440 20052010 2006 2007200820092010Source: ANACSource: 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. Main Strategic Objectives User-friendly Interface (new website, new tools, etc.) New Partners (and partnerships of higher added value)Client New redemption optionsExperience (coalition)Operational EfficiencyShareholder BrandReturn PublicityNew membersBreakage ManagementCash ManagementPublicity of new conceptNew services Actions at sales outlet(CRM and outsourcing)Costs sharing with partner17 18. Appendix 19. Appendix I:Typical Accrual and Redemption FlowsAccrual flow: cash in due to sales of points to partnersPARTNER WITH STANDALONE PROGRAM POINTSA earnsaccumulatesPartners converts toPointsProgramMEMBERbuys Products andPARTNER WITH NO STANDALONE PROGRAM (consumer)ServicesB earnsRedemption flow: cash out due to purchase of points, products and services from partners and suppliers COALITION AND REDEMPTION PARTNERSPOINTSC converts toaccumulates Partners earnsPointsProducts ProgramandMEMBER redeemsServicesDearns (consumer)MULTIPLUS WEBISITEProductsandE earnsServices 19 20. Appendix II:Shareholders Structure and Stock Performance Shareholders StructureAverage Stock Price and Average Daily Trading VolumeAverage Daily Trade Volume (R$ million)29,66 29,28Average Stock Price28,85 28,32 27,95TAM S.A.26,2927,4025,48 24,99 25,8024,7423,3619,96 17,4817,8715,99 16,58 16,1714,90z z 19,4 73,17%26,83%15,313,312,810,5 9,7 9,5 8,88,2 7,9 7,6 6,1 6,6 6,4 5,05,6 4,1 2,1 2,4Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecJanFebMarApr May Jun Jul Aug 2010201120 21. Appendix IV:Loyalty Market Penetrationas % of populationMultiplus member base penetration as % of populationNorth 52,83,6 Northeast2,5 46,9Central-West6,4Southeast35,75,231,027,6 27,3 South 4,523,7 23,521,018,015,713,413,0 9,59,44,4 3,8 2,3 Qantas Program AUS AirMiles CAN AirMiles UK Velocity AUSClub Premier MEX JAL Mileage Bank JPN Miles&More DEUFlyBuys AUSFlying Blue FRA Aeroplan CANMultiplus BRASmiles BRA Nectar UK Nectar ITA LANPASS CHLSky 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. 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 1Q11FINANCIAL 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. Appendix VI:Income Statement (R$ thousand) 2Q11 vs 2Q11 vs2Q10 2Q111Q11 Income Statement2Q101Q11 Gross revenue102.951 314.567205,6% 266.104 18,2% Sale of points75.250224.200 197,9%191.74916,9%TAM Airlines - TLA7.312 44.821 513,0% 35.88324,9%Banks, Retail, Industry and Services 67.938179.379 164,0%155.86615,1% Breakage24.239 83.621 245,0% 71.14517,5% Hedge03.448N.A. 0N.A. Other revenues 3.4623.299 -4,7% 3.210 2,8% Taxes on sales-9.482-29.505 211,2%-24.12422,3% Net Revenue 93.469 285.063205,0% 241.980 17,8% Cost of the points redeemed-51.205 -174.085 240,0% -136.22627,8%Air tickets -51.087 -171.880 236,4% -135.62126,7%Other products / services-118 -2.205 1762,2%-605 264,4% Accounting Adjustments -20- -100,0% 0N.A. Total cost of services rendered-51.225 -174.085 239,8% -136.22627,8% Gross Profit42.244 110.978162,7% 105.7544,9% Gross Margin45,2%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 -1.173N.A.-1.03213,7% Other -5.532 -6.39915,7% -7.948-19,5% Total Operating Expenses -11.070-20.64586,5%-22.194-7,0% Total Costs and Operating Expenses -62.295 -194.730 212,6% -158.42022,9% Operating Income31.17490.333189,8%83.5608,1% Operating Margin33,4%31,7%-1,7p.p. 34,5%-2,8p.p. Financial Income/Expenses3.853 33.825 778,0% 25.18434,3% Income before income tax and social contribution35.027 124.158254,5% 108.744 14,2% Income tax and social contribution -11.898-42.990 261,3%-37.85713,6% Net Income23.12981.168250,9%70.887 14,5% Net Margin24,7%28,5% 3,7p.p. 29,3%-0,8p.p.23 24. Appendix VII:Currency Hedge FUNDAMENTALSPOSITION IN JUN 2011 (USD mln) 2011 20122013 2014TotalNOTIONAL48.0 84.0 37.02.0 171.0 Multiplus is exposed toPUT*1.67 1.68 1.741.77 -foreign exchange risk asmost of the agreements with CALL* 1.78 1.80 1.851.87 -* average strike prices (BRL/USD)financial institutions aredenominated in USD. These partners representedSENSITIVITY ANALYSISapproximately 70% ofImpact on companys cash flow (Notional: USD 171.0 mln)R$ millionMultiplus gross billings in5,35,3 5,35,3R$1,45/USD 5,22Q11.R$1,55/USD The Financial Risk4,03,5 R$1,65/USD3,3Policy determines coverage 2,9 2,9 2,92,9 3,1limits and the list of eligible 2,52,22,11,91,9financial instruments1,31,3 1,01,0 0,9 0,9 0,6 0,60,60,60,70,7 0,60,4 0,2 3Q11 4Q11 1Q12 2Q12 3Q12 4Q121Q132Q133Q13 4Q13 1Q14 24 25. Appendix VIII:Balance Sheet and Cash Flow(R$ thousands)2Q11 vs 2Q11 vs2Q102Q111Q11(R$ thousand)Balance Sheets2Q101Q11Cash Flow2Q11Assets1.062.523 1.013.420-4,6%1.482.205 -31,6%Net Income81.168Current assets 789.208 830.8185,3%1.306.111 -36,4%Cash and cash equivalentes2.40323.820 891,3% 16.86841,2%Depreciation/Amortization1.173Investments 333.862 644.88493,2%928.663-30,6%Accounts Receivable -10.208Accounts Receivable64.638 131.529 103,5%121.321 8,4%Related Parties 382.91922.320-94,2% 236.848-90,6% Accounts Payable-14.712Current account95.12722.320-76,5%57.149-60,9%5.412TaxesPrepaid expenses287.7920-100,0% 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 05.540N.A.0 N.A.Prepaid Expenses 179.699Other receivables361 901149,2% 553 62,8%Deferred Revenue and Breakage liabilities 46.301Non-current assets 273.315 182.602-33,2% 176.0943,7%Other assets and liabilities -5.591Prepaid expenses265.6100-100,0%0 N.A.Long term investments0155.588N.A. 151.083 3,0%Operating Cash Flow 329.062Deferred income tax and social contribution568 268 -52,8%763 -64,9%Property, plant and equipment01.127N.A. 1.156 -2,5%Intangible 0 17.900N.A.17.995 -0,5% Capex-3.672Intangible assets 7.137 7.720 8,2%5.09751,5%Cash Flow from Investing Activities -3.672Liabilities and shareh...