UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K/A
REPORT OF FOREIGN ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16 OF THESECURITIES
EXCHANGE ACT OF 1934
RULE 13a-16 OR 15d-16 OF THESECURITIES
EXCHANGE ACT OF 1934
For the month of August, 2011
Commission
File Number 000-5149
CONTAX PARTICIPAÇÕES S.A.
(Exact name of Registrant as specified in its Charter)
Contax Holding Company
(Translation of Registrant's name in English)
Rua do Passeio, 56 – 16th floor
Rio de Janeiro, RJ
Federative Republic of Brazil
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.
Form 20-Fþ Form 40-Fo
annual reports under cover Form 20-F or Form 40-F.
Form 20-Fþ Form 40-Fo
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yeso Noþ
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yeso Noþ
Contax Participações S.A. (“Company” or “Contax”) (Bovespa: CTAX3, CTAX4; OTC: CTXNY) hereby announces its results for the second quarter of 2011 (2Q11).
The financial information in this report was prepared in accordance with International Financial Reporting Standards (IFRS) and the accounting practices adopted in Brazil, including Brazilian corporate law and the pronouncements, guidelines and interpretations issued by the Accounting Pronouncements Committee (CPC) and approved by the CVM (Brazilian Securities and Exchange Commission) applicable to the Company’s operations. The 2Q10 information presented herein was modified in relation to the previously reported figures in order to comply with IFRS, thereby ensuring better comparability with the 2Q11 figures, which are also being presented in accordance with IFRS.
Contents |
About Contax | 2 |
Highlights | 3 |
Main Indicators | 4 |
Operating Performance | 5 |
Financial Performance | 7 |
Net Operating Revenue (NOR) | 8 |
Costs and Expenses | 10 |
EBITDA | 13 |
Depreciation and Amortization | 16 |
Net Financial Result | 16 |
Net Income | 16 |
Net Cash / (Debt) | 17 |
Investments (CAPEX) | 17 |
Attachments | 18 |
1. Income Statement | 18 |
2. Balance Sheet | 20 |
3. Cash Flow | 21 |
4. EBITDA Reconciliation | 22 |
Disclaimer | 23 |
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About Contax |
Contax S.A. is one of the largest global Business Process Outsourcing (BPO) companies with broad expertise in Customer Relationship Management (CRM). By providing customized consulting services that differentiate it from competitors, Contax is an integral part of its clients’ ecosystem and delivery chain and helps them make the most of their business.
Currently, the Company operates predominantly in the customer service, debt collection, telemarketing, retention, back-office, technology services and trade marketing segments. Contax has132 clients and its business strategy prioritizes the development of long-term relationships with large companies in diverse market sectors that use its services, including telecommunications, finance, utilities, services, government, healthcare and retail, among others. In June 2011, Contax had operations in Argentina, Brazil, Colombia and Peru, and maintained a commercial presence in the U.S. and Spain, with a total of100.5 thousand employees.
The Company’s consolidated results presented herein include the results of Contax S.A., Todo Soluções em Tecnologia (“Todo!”), Ability Comunicação Integrada Ltda. (“Ability”), Contax Sucursal Empresa Extranjera (“Contax Argentina”), Contax Colombia (“Contax Colômbia”) and the companies making up the Allus Group (“Allus”), Stratton Spain S.L., Allus Spain S.L., Stratton Argentina S.A., Stratton Peru S.A. and Multienlace S.A..
2
Highlights |
§ In a Notice to the Market published in May 2011, the Company announced theconclusion of its acquisition of Allus, one of Latin America’s leading providers of contact center services, with operations in Argentina, Colombia and Peru, and commercial activities in the United States and Spain. Consequently, Allus’s financial and operating results for May and June of this year were consolidated into Contax’s 2Q11 results presented herein.
§ Net Operating Revenue (NOR) totaledR$711.4 millionin2Q11, 21.7% up year-on-year and 13.9% less than in1Q11.
§ EBITDA came toR$46.7 million, 34.5%down on 2Q10and 1.7%less than in1Q11.
§ TheExtraordinary Shareholder’s Meeting of July 1, 2011 approved themerger of Dedic GPTI, one of Brazil’s four largest contact center and IT service companies which was previously owned by the Portugal Telecom Group. The merger will allow Contax to expand its contact center services and speed up the consolidation of the IT service market, which began with the creation of Todo in 2009.
§ OnJuly 20, 2011, the Company paiddividends totalingR$100 million, as approved by the Annual Shareholder’s Meeting of April 25, 2011.
§ In 2Q11, Contax receivedseven awards in the contact center category in the2011 Brazilian Direct Marketing Association (ABEMD) Awards and was also named theContact Center Company of the Year, in the large operations category, in the 12th edition ofthe Customer Service Awardsgranted byConsumidor Moderno magazine.
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Main Indicators |
Quarterly Data | 2Q11 vs. 1Q11 | 2Q11 vs. 2Q10 | ||||
Key Figures | 2Q11 | 1Q11 | 2Q10 | Δ % | Δ % | |
Net Revenues | (R$ Million) | 711.4 | 624.5 | 584.7 | 13.9% | 21.7% |
EBITDA | (R$ Million) | 46.7 | 47.5 | 71.3 | -1.7% | -34.5% |
EBITDA Margin | (%) | 6.6% | 7.6% | 12.2% | -1.0 p.p. | -5.6 p.p. |
Net Income | (R$ Million) | 5.0 | 10.3 | 26.5 | -50.9% | -81.0% |
Cash* | (R$ Million) | 235.2 | 416.1 | 345.8 | -43.5% | -32.0% |
Debt* | (R$ Million) | 488.6 | 452.3 | 266.5 | 8.0% | 83.4% |
Net/(Debt) Cash* | (R$ Million) | (180.1) | 35.2 | 125.9 | n.m. | n.m. |
Capex*** | (R$ Million) | 280.4 | 18.7 | 33.5 | 1,398.6% | 737.5% |
Workstations* | (units) | 46,730 | 37,312 | 35,979 | 25.2% | 29.9% |
Employees* | (units) | 100,523 | 91,941 | 81,367 | 9.3% | 23.5% |
n.m. not measured | ||||||
* Final position in each period | ||||||
** Current assets' Cash and Cash Equivalent only. | ||||||
*** Includes Allus Group acquisition ammount of R$ 241.7 million | ||||||
Half-Year Data | 6M11 vs. 6M10 | |||
Key Figures | 6M11 | 6M10 | Δ % | |
Net Revenues | (R$ Million) | 1,336.0 | 1,141.4 | 17.0% |
EBITDA | (R$ Million) | 94.3 | 135.8 | -30.6% |
EBITDA Margin | (%) | 7.1% | 11.9% | -4.8 p.p. |
Net Income | (R$ Million) | 15.3 | 50.0 | -69.4% |
Cash* | (R$ Million) | 235.2 | 345.8 | -32.0% |
Debt* | (R$ Million) | 488.6 | 266.5 | 83.4% |
Net/(Debt) Cash* | (R$ Million) | (180.1) | 125.9 | n.m. |
Capex*** | (R$ Million) | 299.2 | 55.1 | 442.5% |
Workstations* | (units) | 46,730 | 35,979 | 29.9% |
Employees* | (units) | 100,523 | 81,367 | 23.5% |
n.m. not measured | ||||
* Final position in each period | ||||
** Current assets' Cash and Cash Equivalent only. | ||||
*** Includes Allus Group acquisition ammount of R$ 241.7 million | ||||
4
Operating Performance |
The second quarter of 2011 was marked by important advances in the Company's implementation of the new strategic cycle, which has been positioning Contax as one of the world’s leading Business Process Outsourcing (BPO) companies with broad expertise in Customer Relationship Management (CRM). This more wide-ranging operation seeks to maximize the value of the relationship between Contax’s clients and their consumers, by integrating multiple contact channels throughout Latin America in a process known as Customer Performance.
In May 2011, the Company announced the conclusion of the acquisition of Allus, one of Latin America’s leading contact center service providers, with operations in Argentina, Colombia and Peru and commercial activities in the United States and Spain, marking an important step in the Company’s plans to expand internationally through the extensive Spanish-speaking market.
As a result of this acquisition conclusion, Allus’s results were consolidated into Contax’s results as of May 2011, contributing with a net revenue of R$51.4 million to the 2Q11 total.
The Extraordinary Shareholders’ Meeting of July 1, 2011 approved the merger of Dedic GPTI, one of Brazil’s four largest contact center and IT service companies which was previously owned by the Portugal Telecom Group (“PT”). As a result, Contax will expand its contact center services and speed up its consolidation on the IT service market, which began with the creation of Todo in 2009. For the purposes of the merger, Contax issued 4.9 million shares (1.9 million common shares and 3.0 million preferred shares) which were transferred to PT, increasing the Company’s capital by R$178.2 million. Dedic GPTI's financial results will be consolidated into Contax’s figures as of 3Q11.
In general, the Company’s 2Q11 results continued to be influenced by Brazil’s strong economic growth, which on the one hand increased demand for the Company’s services, particularly in the financial and retail segments, but on the other presented certain operational challenges. The country’s rapid economic expansion has had a direct impact on the labor market and, consequently, unemployment, which has fallen to exceptionally low levels, in turn affecting the contact center and debt collection industry as a whole, especially in São Paulo, where the increased offer of jobs, particularly in the retail and service sectors, heightened competition for qualified labor. As a result, the company’s operating margins were affected by the upturn in personnel costs.
Contax has been doing everything possible to minimize these impacts by adopting measures to attract, retain and motivate its operators. It has also been further diversifying its operational locations, seeking more suitable regions, i.e. those with a greater supply of qualified labor. Some important migrations that had been occurring since early 2010 were concluded in 2Q11, most notably to the new site in Recife, thereby reducing certain migration-related costs, mainly in regard to new hirings, training andtemporary operational overlap. The company also introduced initiatives to streamline the customer service’s traffic planning, systems and processes for important operations, thereby substantially improving productivity and quality indicators. For example, the number of calls answered per agent increased, reflecting the more efficient use of call center operators. These initiatives positively impacted the Company’s operating margins at the beginning of 2Q11, in relation to the previous quarter. The higher volume of operations in the second quarter also improved the productivity indicators for the majority of operations through the more efficient use of capacity. June’s productivity figures were the best of the year to date, underlining the recovery.
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On the other hand, the increases in salaries, charges and benefits which occurred throughout the first half have not yet been offset by a corresponding increase in revenue from certain important operations, given that negotiations over contractual price adjustments have not yet been completed.
Also this quarter, the Company began to implement new service procedures for an important client through a new contract model designed to improve productivity by ensuring Contax’s greater involvement in the client’s systems and processes. Under this new model, the Company is encouraged to invest in and further improve its customer service processes, increasing their quality and efficiency, in order to benefit from the increase in productivity. As a result, revenue from these operations will be based on the size of the client customer base, and no longer on speaking time or the number of calls to the contact center (contact rate). This change considerably increases the Company’s opportunities for capturing value, given that any process and system improvements that structurally reduce the average customer service time and/or contact rate will result in cost reductions, a good deal of which will be absorbed by Contax. On the other hand, any eventual increase in customer service times and contact rates due to factors outside Contax’s control, could result in one-off cost hikes due to the temporary increase in capacity to meet the unexpected higher volume.
In 2Q11, there were temporary increases in the contact rate for certain operations under this new model, which forced Contax to hire new operators at the beginning of the period and reduce their number at the end, thereby impacting personnel costs at the beginning of the quarter, due to the larger volume, and at the end, due to non-recurring rescission costs. This effect of growth and subsequent reduction primarily impacted the first two months of the quarter, while in the last month, the EBITDA margin registered the highest level of the year.
Although this new model had a non-recurring negative impact on 2Q11, it will be extremely important in the future by increasing the Company’s capacity to add even more value to its services. It increases reach because, in addition to handling customer service, it manages processes in the contact center as well as on its clients’ internal processes, sharing the definition of customer service strategy with the clients, as well as all the technology to make the strategy viable.
6
Financial Performance |
Quarterly Data | 2Q11 vs. 1Q11 | 2Q11 vs. 2Q10 | |||
(R$ Thousand) | 2Q11 | 1Q11 | 2Q10 | Δ % | Δ % |
Net Revenues | 711,419 | 624,548 | 584,740 | 13.9% | 21.7% |
Cost of Services Rendered | (601,983) | (518,884) | (472,659) | 16.0% | 27.4% |
Personnel | (496,235) | (427,091) | (384,918) | 16.2% | 28.9% |
Third-party | (72,007) | (61,619) | (60,664) | 16.9% | 18.7% |
Rent and Insurance | (27,942) | (25,468) | (22,604) | 9.7% | 23.6% |
Other | (5,799) | (4,706) | (4,473) | 23.2% | 29.7% |
SG&A | (56,908) | (49,468) | (34,305) | 15.0% | 65.9% |
Other Oper. Expenses, net | (5,809) | (8,664) | (6,451) | -33.0% | -10.0% |
EBITDA | 46,719 | 47,532 | 71,325 | -1.7% | -34.5% |
Deprec. & Amort. | (32,969) | (30,965) | (30,093) | 6.5% | 9.6% |
EBIT | 13,750 | 16,567 | 41,232 | -17.0% | -66.7% |
Financ. Res., net | (6,684) | 1,018 | 450 | n.m. | n.m. |
Other Fin. Inc. & Exp., net | 481 | 454 | 34 | 6.1% | 1,321.8% |
Income before inc.tax | 7,547 | 18,038 | 41,717 | -58.2% | -81.9% |
Inc. Tax & Social Contr. | (2,198) | (7,578) | (15,175) | -71.0% | -85.5% |
Non-controlling Shareholders Interest | (302) | (190) | (40) | 58.7% | 658.7% |
Net Income | 5,047 | 10,270 | 26,502 | -50.9% | -81.0% |
n.m. not measured | |||||
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Half-Year Data | 6M11 vs. 6M10 | ||
(R$ Thousand) | 6M11 | 6M10 | Δ % |
Net Revenues | 1,335,967 | 1,141,387 | 17.0% |
Cost of Services Rendered | (1,120,867) | (923,368) | 21.4% |
Personnel | (923,326) | (752,084) | 22.8% |
Third-party | (133,626) | (117,134) | 14.1% |
Rent and Insurance | (53,410) | (46,137) | 15.8% |
Other | (10,506) | (8,013) | 31.1% |
SG&A | (106,376) | (69,722) | 52.6% |
Other Oper. Expenses, net | (14,473) | (12,468) | 16.1% |
EBITDA | 94,251 | 135,829 | -30.6% |
Deprec. & Amort. | (63,934) | (59,197) | 8.0% |
EBIT | 30,317 | 76,633 | -60.4% |
Financ. Res., net | (5,666) | 504 | n.m. |
Other Fin. Inc. & Exp., net | 935 | 34 | 2,661.8% |
Income before inc.tax | 25,584 | 77,170 | -66.8% |
Inc. Tax & Social Contr. | (9,776) | (27,045) | -63.9% |
Non-controlling Shareholders Interest | (492) | (137) | 258.5% |
Net Income | 15,317 | 49,988 | -69.4% |
n.m. not measured | |||
Net Operating Revenue (NOR)
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NOR totaledR$711.4 millionin2Q11,21.7% up on2Q10, orR$126.7 million in absolute terms, chiefly due to: i) the increased volume of operations with existing clients (R$30.6 million); ii) contractual price adjustments (R$9.5 million), partially reflecting the cost increases; iii) new business in several segments including telecommunications, finance, government, healthcare, media, industry and services (R$8.3 million); and iv) incorporation of Allus’s international operational revenue of R$51.4 million; and v) R$26.9 million in revenue from the trade marketing segment (Ability).
In comparison with1Q11, the13.9%, orR$86.9 million, increase was chiefly due to the incorporation of Allus’s international operating revenue and the higher volume of operations with existing clients on the core business in Brazil.
In product terms,customer service continued to account for the majority of NOR, with61.4% of the total, 2.0.p.p. downyear-on-year and virtually flat over1Q11.Telemarketing / retentionaccounted for19.3%of NOR, 1.8 p.p. up on2Q10 and 0.2 p.p. down onthe previous quarter, whiledebt collection accounted for10.2%, 3.8 p.p. down on thesame period last yearand 0.8 p.p. less than the1Q11. Thetrade marketing segment (Ability) accounted for3.8% of NOR in2Q11, 0.2 p.p. down on1Q11.
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Costs and Expenses
Quarterly Data | 2Q11 vs. 1Q11 | 2Q11 vs. 2Q10 | |||
Costs and Expenses (R$ Thousand) | 2Q11 | 1Q11 | 2Q10 | Δ % | Δ % |
Net Operating Revenue (NOR) | 711,419 | 624,548 | 584,740 | 13.9% | 21.7% |
Total Costs and Expenses | (664,700) | (577,016) | (513,415) | 15.2% | 29.5% |
% of NOR | 93.4% | 92.4% | 87.8% | 1.0 p.p. | 5.6 p.p. |
Cost of Services Rendered | (601,983) | (518,884) | (472,659) | 16.0% | 27.4% |
% of NOR | 84.6% | 83.1% | 80.8% | 1.5 p.p. | 3.8 p.p. |
Personnel | (496,235) | (427,091) | (384,918) | 16.2% | 28.9% |
Third-party | (72,007) | (61,619) | (60,664) | 16.9% | 18.7% |
Rent and Insurance | (27,942) | (25,468) | (22,604) | 9.7% | 23.6% |
Others | (5,799) | (4,706) | (4,473) | 23.2% | 29.7% |
SG&A | (56,908) | (49,468) | (34,305) | 15.0% | 65.9% |
% of NOR | 8.0% | 7.9% | 5.9% | 0.1 p.p. | 2.1 p.p. |
Other Oper. Expenses, net | (5,809) | (8,664) | (6,451) | -33.0% | -10.0% |
% of NOR | 0.8% | 1.4% | 1.1% | -0.6 p.p. | -0.3 p.p. |
n.m. not measured |
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Half-Year Data | 6M11 vs. 6M10 | ||
Costs and Expenses (R$ Thousand) | 6M11 | 6M10 | Δ % |
Net Operating Revenue (NOR) | 1,335,967 | 1,141,387 | 17.0% |
Total Costs and Expenses | (1,241,716) | (1,005,558) | 23.5% |
% of NOR | 92.9% | 88.1% | 4.8 p.p. |
Cost of Services Rendered | (1,120,867) | (923,368) | 21.4% |
% of NOR | 83.9% | 80.9% | 3.0 p.p. |
Personnel | (923,326) | (752,084) | 22.8% |
Third-party | (133,626) | (117,134) | 14.1% |
Rent and Insurance | (53,410) | (46,137) | 15.8% |
Others | (10,506) | (8,013) | 31.1% |
SG&A | (106,376) | (69,722) | 52.6% |
% of NOR | 8.0% | 6.1% | 1.9 p.p. |
Other Oper. Expenses, net | (14,473) | (12,468) | 16.1% |
% of NOR | 1.1% | 1.1% | 0.0 p.p. |
n.m. not measured |
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Costs and expensestotaledR$664.7 million inthe second quarter of 2011,29.5% upyear-on-year and15.2% more than in1Q11. As a percentage of NOR, costs and expenses increased by 5.6 p.p. and 1.0 p.p. year-on-year and quarter-on-quarter respectively. This growth was primarily due to the following factors: i) increases in salaries, charges and benefits throughout 1Q11, not yet offset by increased revenue; ii) non-recurring personnel costs due to changes in the contract with one important client, which came into effect in 2Q11. As a result, the personnel line was doubly impacted, firstly from the increase in call volume at the beginning of the quarter, necessitating a greater number of operators and consequently pushing up personnel costs (hiring, training and salaries), and secondly, at the end of the period, when call volume returned to normal and operators had to be laid off, generating rescission costs; and iii) a further increase in personnel costs due to higher operator turnover and absenteeism, especially in São Paulo when compared to the 2Q10.
A more detailed breakdown of the Company’s costs and expenses follows below.
Cost of Services Rendered
2Q11 versus 2Q10
The Cost of Services Rendered totaledR$602.0 million in2Q11,27.4%orR$129.3 million up year-on-year. As a percentage of NOR, this item increased by 3.8 p.p., from 80.8% in 2Q10, to 84.6%.
· Personnel: increase ofR$111.3 million, or28.9%, basically reflecting: i) the increase in the workforce due to the higher volume of services rendered (R$32.9 million), which was not fully offset by a corresponding increase in revenue, due to a change in the contract with an important client, which would now be subject to a fixed charge per member of its customer base, as explained previously; ii) an increase in salaries, charges and benefits (R$21.5 million); iii) reduced productivity, especially due to higher turnover and absenteeism in certain locations (R$6.7 million); iv) the incorporation of the trade marketing (Ability) segment (R$17.7 million), acquired in the second half of 2010; and v) the incorporation of Allus’s personnel costs totaling R$32.5 million.
· Third-party Services: growth ofR$11.3 million, or18.7%, essentially due to the increase in infrastructure maintenance and facilities-related services (electricity, security, cleaning and building maintenance) and in specialized business-support services.
· Rent and Insurance:increase ofR$5.3 million, or23.6%, reflecting the leasing of new sites, the expansion of existing sites, contractual adjustments in the last 12 months and the incorporation of Allus’s rent and insurance costs.
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2Q11 versus 1Q11
The Cost of Services Rendered increased byR$83.1 million, or16.0%, between1Q11and2Q11.As a percentage of NOR, this item increased by 1.5 p.p., from 83.1% in 1Q11, to 84.6%.
· Personnel: growth ofR$69.1 million, or16.2%, basically reflecting i) the expansion of the workforce due to the higher volume of operations and the incorporation of Allus’s personnel costs (R$57.0 million), which was not fully offset by a corresponding increase in revenue, due to a change in the contract with an important client, which would now be subject to a fixed charge per member of its customer base, as explained previously; and ii) higher salaries, benefits and charges (R$12.1 million).
· Third-party Services: increase ofR$10.4 million, or16.9%, mainly due to the increase in the amount of infrastructure maintenance and facilities-related services (electricity, security, cleaning and building maintenance).
· Rent and Insurance: increase ofR$2.5 million, or9.7%, chiefly reflecting certain contractual adjustments and the incorporation of Allus’s costs.
Selling, General and Administrative Expenses
2Q11 versus 2Q10
SG&A Expenses closed2Q11 atR$56.9 million,65.9%, orR$22.6 million, up on2Q10, essentially due to the incorporation of new business support expenses (trade marketing, Argentina and Allus) related to personnel, infrastructure and facilities and a non-recurring upturn in expenses from specialized third-party services in order to support the recently announced Company acquisitions.
2Q11 versus 1Q11
Second-quarter SG&A expenses climbed byR$7.4 million, or15.0%, over1Q11, mainly due to the incorporation of Allus’s expenses related to personnel, infrastructure and facilities and a non-recurring upturn in expenses with specialized third-party services, in order to support the recently announced acquisitions.
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Other Operating Revenue and Expenses
Other Operating Revenue and Expenses totaledR$5.8 million in2Q11,R$0.6 million down on2Q10 andR$2.9 million less than in1Q11, mainly due to a reduction in labor contingencies, reflecting the improved management of labor litigation, either through the elimination of causes for future litigation or due to the successful outcome of existing lawsuits
EBITDA1
In general terms,2Q11 EBITDA continued to be affected by increases in salaries, charges and benefits throughout the first half that werenot yet offset by increased revenue, given that contractual price adjustments with certain clients had not yet been concluded or fall due in subsequent quarters. In addition, the compensation model for certain customer service operations was changed to a fixed monthly charge per member of the client’s customer base. This resulted in a non-recurring margin loss since the increase in personnel costs was not offset by higher revenue.
On the other hand, there was a substantial improvement over 1Q11 in regard to operational productivity through the more efficient use of operators hours and a reduction in average turnover and absenteeism, especially in June. The latter factor was also impacted by the Company’s greater presence in regions with a more favorable job market.
1EBITDA is net income before tax, net financial expenses, expenses with depreciation and amortization and non-operating income and expenses. EBITDA is not recognized under IRFS, does not represent cash flow in the periods presented, should notbe considered an alternative to net income and is not an indicator of performance. EBITDA is presented and used by Contax to measure its own performance. Contax believes that certain investors and financial analysts use EBITDA as an indicator of its operating performance.
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Second-quarter EBITDA totaledR$46.7 million,34.5% down on2Q10 and virtually equal to the1Q11 figure, accompanied by anEBITDA margin of6.6%, 5.6 p.p. down year-on-year and 1.0 p.p. less than the previous quarter.
The variations in the EBITDA margin are explained in more detail below.
In comparison with 2Q10, the EBITDA margin narrowed from 12.2% to 6.6%, the 5.6 p.p. reduction being chiefly due to:
· Loss of 2.6 p.p. due to the readjustment of salaries and benefits, partially offset by contractual price adjustments throughout 2010 and the first half of 2011;
· Loss of 1.9 p.p. due to the non-recurring increase in call volume for certain operations under the new contractual model**. This forced Contax to increase the number of operators, especially at the beginning of the quarter, which was not offset by higher revenue, and reduce the number at the end of the period when call levels fell, doubly impacting personnel costs, both at the beginning of the period, due to higher volume, and at the end, due to non-recurring rescission costs;
· Loss of 0.8 p.p. from the reduction in productivity, mainly due to increased personnel costs caused by higher staff turnover and absenteeism in locations with heightened economic activity;
· Gain of 0.2 p.p. from new business fronts, especially Allus’s international operations, in particular the Colombian operation which recorded an excellent performance;
· Loss of 0.5 p.p. from other costs and expenses, mainly driven by non-recurring expenses with the recently announced Company acquisitions.
* Net Adjustments: the net effect on EBITDA margin of the contractual price increases and the increases in direct costs (salaries, etc.).
** For further details, see the Operating Performance section.
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The 2Q11 EBITDA margin narrowed by 1.0 p.p. over 1Q11, from 7.6% to 6.6%, mainly due to:
· Loss of 1.9 p.p. due to the non-recurring increase in call volume for certain operations under the new contractual model**. This forced Contax to increase the number of operators, especially at the beginning of the quarter, which was not offset by higher revenue, and reduce the number at the end of the period when call levels fell, doubly impacting personnel costs, both at the beginning of the period, due to higher volume, and at the end, due to non-recurring rescission costs;
· Loss of 0.2 p.p. due to the readjustment of salaries and benefits, partially offset by contractual price adjustments.
· Gain of 1.3 p.p. from improved productivity, chiefly due to the positive results from the initiatives to confront the more buoyant job market, which are already becoming apparent through improved turnover and absenteeism indicators in important operations, the more efficient use of operators’ time and performance, and the reduction in costs related to the migration of operations to the Northeast;
· Gain of 0.4 p.p. from new business fronts, especially Allus’s international operations, in particular the Colombian operation which recorded an excellent performance;
· Loss of 0.6 p.p. from other costs and expenses, mainly driven by non-recurring expenses with the recently announced Company acquisitions.
* Net Adjustments: the net effect on EBITDA margin of the contractual price increases and the increases in direct costs (salaries, etc.).
** For further details, see the Operating Performance section.1515
15
Depreciation and Amortization
Depreciation and Amortization came to R$33.0 million in2Q11,9.6%, orR$2.9 million, up on2Q10, reflecting investments in the last 12 months to support business growth, as well as the absorption of depreciation associated with the new business operations. In comparison with1Q11, depreciation moved up byR$2.0 million or6.5%, mainly due to the effects of the Allus acquisition.
Net Financial Result
In2Q11, theNet Financial Result was negative byR$6.7 million,R$7.1 million down on2Q10, basically reflecting the increase in interest expenses due to the greater volume of debt with the BNDES and BNB and the reduced cash position.
In comparison with1Q11, theNet Financial Result fell byR$7.7 million,due to reduced returns on financial investments, as there was less cash available for investment, and the increase in interest expenses due to the greater volume of debt with the BNDES.
Net Income
In2Q11, Contax postedNet Income ofR$ 5.0 million,R$21.5 million down on2Q10, mainly due to the R$24.6 million reduction in EBITDA detailed above, the R$2.9 million upturn in depreciation and the R$7.1 million decline in the financial result, partially offset by the R$13.0 million reduction in income and social contribution taxes.
In comparison with1Q11,Net Income fell byR$5.2 million or50.9%, basically due to reduction in the financial result.
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Net Cash / (Debt)2
Cash and cash equivalents closed2Q11 atR$308.5 million,R$179.0 million, or36.7%, down on1Q11, mainly due to the disbursement of R$241.7 million as the cash-down installment for the acquisition of Allus, cash expenditure of R$31.2 million on the investment program and net cash outflow of R$18.2 million from financing activities, partially offset by operating cash flow of R$98.2 million.
Gross debt totaledR$488.6 million in June2011,R$36.3 million, or8.0%, up on the previous quarter, mainly reflecting the incorporation of Allus’s debt.
Net Debt closed the quarter atR$180.1 million, R$215.3 millionup on the end of1Q11 for the same reasons mentioned above.
Quarterly Data |
|
|
| 2T11 vs. 1T11 | 2T11 vs. 2T10 |
Net Cash/(Debt) Reconciliation | 2Q11 | 1Q11 | 2Q10 | Δ% | Δ% |
(+) Cash and equivalents | 235,159 | 416,057 | 345,843 | -43.5% | -32.0% |
(+) Financial Investments | 73,325 | 71,472 | 46,513 | 2.6% | 57.6% |
(-) Loans & financing | (488,588) | (452,333) | (266,467) | 8.0% | 83.4% |
Net Cash/(Debt) | (180,103) | 35,196 | 125,889 | n.m. | n.m. |
n.m. not measured |
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|
|
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Investments (CAPEX)
Contax investedR$280.4 million in2Q11, 86.2% of which allocated to the acquisition of Allus. Most of the remainder went to business growth, especially the expansion of the sites in Bahia and Pernambuco.
Investments |
|
| 3Q10 vs. 2Q10 | 3Q10 vs. 3Q09 | 6M11 vs. 6M10 | |||
(R$ Thousand) | 3Q10 | 2Q10 | 3Q09 | 6M11 | 6M10 | Δ % | Δ % |
|
Growth Revenue | 25,117 | 13,067 | 24,262 | 38,184 | 41,780 | 92.2% | 3.5% | -8.6% |
Reinvestments | 12,202 | 5,568 | 7,917 | 17,770 | 11,732 | 119.1% | 54.1% | 51.5% |
Investments on acquired assets | 241,719 | - | - | 241,719 | - | n.m. | n.m. | n.m. |
Others | 1,400 | 78 | 1,304 | 1,478 | 1,630 | 1,696.0% | 7.4% | -9.3% |
Total Investment | 280,438 | 18,713 | 33,483 | 299,151 | 55,142 | 1,398.6% | 737.5% | 442.5% |
n.m. not measured | ||||||||
2Net Cash/(Debt) is calculated by subtracting the balances of "loans and financing" and "leasing” from cash and financial investments. Net Cash/(Debt) is not recognized under IFRS, does not represent cash flow in the periods presented, should not be considered an alternative to cash and cash equivalents and is not an indicator of performance. Net Cash/(Debt) is presented and used by Contax to measure its own performance. Contax believes that certain investors and financial analysts use Net Cash/(Debt) as an indicator of its operating and financial performance.
17
ATTACHMENTS |
1) Consolidated Income Statement for the Period
Income Statement | 2Q11 vs. 1Q11 | 2Q11 vs. 2Q10 | |||
(R$ Thousand) | 2Q11 | 1Q11 | 2Q10 | Δ % | Δ % |
Net Revenues | 711,419 | 624,548 | 584,740 | 13.9% | 21.7% |
Cost of Services Rendered | (631,924) | (547,396) | (503,546) | 15.4% | 25.5% |
Gross Profit | 79,495 | 77,152 | 81,194 | 3.0% | -2.1% |
Operating Revenue (Expenses) | (71,948) | (59,114) | (39,477) | 21.7% | 82.3% |
Selling Expenses | (8,537) | (8,438) | (4,844) | 1.2% | 76.2% |
G&A Expenses | (51,400) | (43,483) | (28,666) | 18.2% | 79.3% |
Financial Results | (6,684) | 1,018 | 450 | n.m. | n.m. |
Financial Revenues | 9,086 | 11,122 | 7,902 | -18.3% | 15.0% |
Financial Expenses | (15,770) | (10,105) | (7,452) | 56.1% | 111.6% |
Other Operating Revenues | 5,985 | 4,308 | 3,010 | 38.9% | 98.8% |
Other Operating Expenses | (11,312) | (12,518) | (9,427) | -9.6% | 20.0% |
Operating Profit | 7,547 | 18,038 | 41,717 | -58.2% | -81.9% |
Income Before Taxes | 7,547 | 18,038 | 41,717 | -58.2% | -81.9% |
Income tax and Social Contribution Provision | (1,882) | (6,985) | (17,550) | -73.1% | -89.3% |
Deferred Income Taxes | (316) | (593) | 2,375 | -46.6% | n.m. |
Non-controlling Shareholders Interest | (302) | (190) | (40) | 58.7% | 658.7% |
Net Income (loss) | 5,047 | 10,270 | 26,502 | -50.9% | -81.0% |
Number of Shares Excluding Treasury (in '000) | 59,419 | 59,419 | 59,688 | 0.0% | -0.5% |
EPS (R$) | 0.08 | 0.17 | 0.44 | -50.9% | -80.9% |
* n.m. not measured. | |||||
18
Income Statement | 6M11 vs. 6M10 | ||
(R$ Thousand) | 6M11 | 6M10 | Δ % |
Net Revenues | 1,335,967 | 1,141,387 | 17.0% |
Cost of Services Rendered | (1,179,320) | (977,483) | 20.6% |
Gross Profit | 156,647 | 163,904 | -4.4% |
Operating Revenue (Expenses) | (131,063) | (86,734) | 51.1% |
Selling Expenses | (16,975) | (12,332) | 37.7% |
G&A Expenses | (94,882) | (62,472) | 51.9% |
Financial Results | (5,668) | 504 | n.m. |
Financial Revenues | 20,208 | 13,997 | 44.4% |
Financial Expenses | (25,875) | (13,493) | 91.8% |
Other Operating Revenues | 10,292 | 5,927 | 73.6% |
Other Operating Expenses | (23,830) | (18,361) | 29.8% |
Operating Profit | 25,585 | 77,171 | -66.8% |
Income Before Taxes | 25,584 | 77,170 | -66.8% |
Income tax and Social Contribution Provision | (8,867) | (28,822) | -69.2% |
Deferred Income Taxes | (909) | 1,777 | n.m. |
Non-controlling Shareholders Interest | (492) | (137) | 258.5% |
Net Income (loss) | 15,317 | 49,988 | -69.4% |
Number of Shares Excluding Treasury (in '000) | 59,419 | 59,688 | -0.5% |
EPS (R$) | 0.26 | 0.84 | -69.2% |
* n.m. not measured. | |||
19
2) Consolidated Balance Sheet
Balance Sheet (R$ Thousand) | |||
Assets | 06/30/2011 | 03/31/2011 | 06/30/2010 |
Total Assets | 1,640,481 | 1,450,731 | 1,142,124 |
Current Assets | 523,830 | 682,994 | 546,929 |
Cash and equivalents | 235,159 | 416,057 | 345,843 |
Restricted cash | 4,163 | - | - |
Credits (Clients) | 241,071 | 226,822 | 140,921 |
Deferred and Recoverable Taxes | 11,026 | 13,144 | 33,739 |
Prepaid expenses | 32,411 | 26,971 | 26,426 |
Non-current Assets | 1,116,651 | 767,737 | 595,195 |
Long-term Assets | 310,577 | 254,029 | 166,248 |
Judicial deposits | 113,392 | 102,187 | 74,206 |
Cash Investments | 73,325 | 71,472 | 46,513 |
Restricted cash | 26,073 | 2,087 | - |
Deferred and Recoverable Taxes | 87,569 | 66,206 | 33,673 |
Credits Receivable | 9,893 | 9,392 | 10,022 |
Others assets | 325 | 2,685 | 1,834 |
Fixed Assets | 806,074 | 513,708 | 428,947 |
Goodwill on Investiments | 211,059 | 49,081 | - |
Plant, property and equipament | 448,441 | 401,162 | 354,893 |
Intangible Assets | 146,574 | 63,465 | 74,054 |
Liabilities | 06/30/2011 | 03/31/2011 | 06/30/2010 |
Total Liabilities | 1,640,481 | 1,450,731 | 1,142,124 |
Current Liabilities | 704,121 | 506,705 | 440,392 |
Short-term loans & financing | 126,127 | 84,178 | 62,881 |
Suppliers | 79,154 | 59,062 | 57,440 |
Wages and benefits | 302,021 | 250,150 | 246,846 |
Taxes payable | 37,193 | 33,211 | 50,392 |
Dividends payable | 103,737 | 28,954 | 3,218 |
Contigent consideration | 4,163 | - | - |
Others | 51,726 | 51,150 | 19,615 |
Long-term Liabilities | 566,224 | 511,445 | 305,455 |
Long-term loans & financing | 362,461 | 368,155 | 203,586 |
Provisions | 101,845 | 96,558 | 74,855 |
Contigent consideration | 76,153 | 45,685 | - |
Deferred Taxes | 24,825 | - | - |
Others | 940 | 1,047 | 27,014 |
Minority Interest | 2,492 | 2,190 | 1,583 |
Shareholders' Equity | 367,644 | 430,391 | 394,694 |
Capital Stock | 223,873 | 223,873 | 223,873 |
Capital reserves | 16,799 | 14,526 | 13,406 |
Equity valuation adjustments | 3,962 | -202 | - |
Revenue reserves | 118,329 | 118,329 | 109,831 |
Stock in Treasury | (10,636) | (10,636) | (2,404) |
Accrued Income | 15,317 | 84,501 | 49,988 |
20
3) Accrued and Consolidated Cash Flow
Cash Flow (R$ Thousand) | 6/30/2011 | 6/30/2010 |
Net Cash from Operating Activities | 88,078 | 123,142 |
Net Cash Flow Generated in Operating Activities | 108,961 | 132,782 |
Net Income | 15,317 | 49,988 |
Depreciation and Amortization | 63,934 | 59,196 |
Accrued Interest Expenses | 17,985 | 9,406 |
Monetary Variation (Active) Passive, net | (2,699) | (815) |
Contingencies and Other Provisions | 9,953 | 16,336 |
Instrument Sheet for Share-based Compensation | 3,070 | 345 |
Deferred income tax and social contribution tax | 909 | (1,777) |
Non-controlling interest | 492 | 137 |
(Gains (Losses) from the Sale of Fixed Assets | - | (34) |
(Increase) Decrease in Assets and Liabilities | (20,883) | (9,640) |
Increase (Decrease) in Accounts Receivable | 4,095 | (12,435) |
Increase (Decrease) in Prepaid Expenses | 2,919 | (2,930) |
Increase (Decrease) in Deferred Taxes | (4,449) | 10,395 |
Increase (Decrease) in Other Assets | (2,415) | (4,846) |
Increase/ (Decrease) in Payroll and Related Charges | 44,419 | 49,028 |
Increase/(Decrease) in Suppliers | (28,975) | (19,593) |
Increase/(Decrease) in Taxes Payable | (19,136) | (18,583) |
Increase/ (Decrease) in Other Liabilities | 827 | (1,395) |
Interest Paid and Financial Debt | (18,168) | (9,281) |
Other | - | - |
Interest Paid on Financial Debt | - | - |
Net Cash used in Investing Activities | (300,348) | (95,612) |
Investment Acquisition | (194,824) | - |
Non-current Financial Investment | - | (19,924) |
Restricted Cash | (28,223) | - |
Acquisition of Fixed Assets | (60,800) | (55,266) |
Judicial Deposits | (16,501) | (20,499) |
Sale of Fixed Assets | - | 77 |
Net Cash used in Financing Activities | 59,626 | (39,540) |
Financing Obtained | 99,902 | 53,702 |
Financing Payments | (36,264) | - |
Leasing Payments | (4,513) | (5,974) |
Dividend Payments | (8) | (88,972) |
Sale of Shares | - | (9,282) |
Repurchase of Shares | 509 | 10,986 |
Increase (Reduction) in Cash and Cash Equivalents | (152,644) | (12,010) |
Cash and Cash Equivalents – Beginning of Period | 387,803 | 357,853 |
Cash and Cash Equivalents – End of Period | 235,159 | 345,843 |
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4) EBITDA Reconciliation
Quarterly Data | 2Q11 vs. 1Q11 | 2Q11 vs. 2Q10 | |||
EBITDA Reconciliation | 2Q11 | 1Q11 | 2Q10 | Δ % | Δ % |
Net Income | 5,047 | 10,270 | 26,502 | -50.9% | -81.0% |
(-) Non-controlling Shareholders Interest | 302 | 190 | 40 | 58.7% | 658.7% |
(+) Income Tax & Social Contr. | 2,198 | 7,578 | 15,175 | -71.0% | -85.5% |
Operating Income | 7,547 | 18,038 | 41,717 | -58.2% | -81.9% |
(-) Other Exp. & Rev. | (481) | (454) | (34) | 6.1% | 1,321.8% |
(+) Financial Expenses | 15,770 | 10,105 | 7,452 | 56.1% | 111.6% |
(-) Financial Revenues | (9,086) | (11,122) | (7,902) | -18.3% | 15.0% |
(+) Depreciation and Amortization | 32,969 | 30,965 | 30,093 | 6.5% | 9.6% |
EBITDA | 46,719 | 47,532 | 71,325 | -1.7% | -34.5% |
n.m. not measured |
|
|
|
|
|
Half-Year Data | 6M11 vs. 6M10 | ||
EBITDA Reconciliation | 6M11 | 6M10 | Δ % |
Net Income | 15,317 | 49,988 | -69.4% |
(-) Non-controlling Shareholders Interest | 492 | 137 | 258.5% |
(+) Income Tax & Social Contr. | 9,777 | 27,045 | -63.9% |
Operating Income | 25,585 | 77,170 | -66.8% |
(-) Other Exp. & Rev. | (935) | (34) | 2,661.8% |
(+) Financial Expenses | 25,875 | 13,493 | 91.8% |
(-) Financial Revenues | (20,209) | (13,997) | 44.4% |
(+) Depreciation and Amortization | 63,934 | 59,197 | 8.0% |
EBITDA | 94,251 | 135,829 | -30.6% |
n.m. not measured |
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22
Disclaimer |
The information contained in this document relating to the business prospects, estimates of operating and financial results, and growth prospects of Contax are merely projections and as such are based exclusively on Management’s expectations concerning the future of the business. These forward-looking statements depend materially on changes in market conditions, the performance of the Brazilian economy and the industry and international markets and are therefore subject to change without prior notice.
23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 03, 2011
CONTAX PARTICIPAÇÕES S.A. | ||
| By: | /S/ Marco Norci Schroeder | |
Name: Marco Norci Schroeder Title: Chief Financial and Investor Relations Officer | ||
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.