CTC to decentralise operations, boost efficiency

… CTC-ARI new rising star

Cyprus Trading Corporation Public Ltd., mostly known for its retail and distribution activities, has become a major investor in a number of key sectors. This activity of the organisation has significant weight and it involves its investment in Hermes Airports Ltd, the consortium that has undertaken to build and operate the new airports in Larnaka and Pafos for the next 25 years. As a consequence of its participation in the Airport Consortium, CTC was also granted in partnership with international experts, the retail business as well as the food and beverage business of both airports.

CTC has also significant investment in Ermes Department Stores Public Ltd as well as Woolworth (Cyprus) Properties Public Ltd, which is currently developing the Shacolas Emporium Park due to operate in September 2007. CTC is also an indirect shareholder in the Limni Resorts and GolfCourses plc and the premium land known as Lakkos tou Mikeli located at the entrance to Nicosia from the Limassol motorway just opposite the Shacolas Emporium Park.

As a result of the significance that these investments, Cyprus Trading Corporation Public Co. Ltd (CTC) has decided to restructure and decentralise operations in an attempt to simplify its structure and to boost efficiency.

CTC Managing Director Marios Loucaides told the Financial Mirror in an exclusive interview that the recent agreement whereby CTC and N.K. Shacolas Holdings Ltd sold 45.8% of Christis Dairies Plc at 29c per share to Vivartia S.A. of Greece (Delta) is part of the attempt to reorganise its activities.

“Christis Dairies is mainly a manufacturing unit and did not fit in with the rest of our activities,” said Loucaides, explaining that the proceeds of some CYP 4 mln has been earmarked to reduce debt and be used as additional working capital to fund the growth of the business. The selling of Christis to a strategic investor will also enhance the prospects of Christis Dairies Public Ltd.

While each division is already responsible for its own affairs and has to meet targets and performance levels, the CTC Group is preparing itself for more decentralised operations, with the ultimate objective that from January 1, 2008, every division will be a stand-alone company with its own board, management and balance sheet, but under the umbrella of the parent company.

“This will make it easier to enter into partnership agreements with international powerhouses, while at the same time maintaining the financial, distribution, logistics and promotion synergies at group level”, said Loucaides.

Vast Operations

The CTC Group owns and operates one of the largest distribution/logistics centres and networks in Cyprus, the National Distribution Centre located in Dhali, and has an annual turnover in excess of CYP 100 mln.

Argosy, accounting for over one quarter of sales is the largest importer and distributor of fast moving consumer goods in Cyprus. It represents household brands like Chipita (7 Days, Bake Rolls), Energiser (Energiser, Eveready, Wilkinson Sword), Mars (Mars, Snickers, Pedigree, Whiskas), Kellogg’s, Kraft (Philadelphia, Jacobs, Maxwell House, Toblerone) and Unilever (Flora, Spry, Liptons) to name a few. Most of the premium brands hold one of the top three positions in the market. The National Distribution Centre and the well known brands give Argosy the market clout and scale to achieve bulk and distribution efficiencies and expand the portfolio of products further.

Cassandra, accounting for over one quarter of sales, is the importer and distributor of Phillip Morris tobacco products with a 30% value market share of the cigarette industry.

The Automotive division, accounting for about 20% of sales, deals with Hyundai and Volvo saloon cars, Iveco vans, trucks and Iveco Irisbus buses, CAT heavy machinery and Scania trucks and buses. Volvo saloon cars claims a 2% share of the Cyprus vehicle market, the highest in the EU after Sweden, while CTC wants to lift the market share of Hyundai from the current 1.5% of the mass market to over 6%.

Scandia, accounting for about 10% of group sales leads the home appliances retail sector with a 17% market share and 70% unprompted brand awareness with the widest product range of electric and electronic appliances for home use such as Philips, Whirlpool, Liebherr, Galanz air conditioners and more. It operates out of seven outlets in key locations all over Cyprus.

Domex, accounting for about 4% of group sales, provides sanitary-ware and tiles, Hilti professional tools and Philips lighting products. The CTC Group wants to repeat the success it saw at Scandia, which saw its market share climb from 10% in 2001 to 17% at present as a result of aggressive pricing, re-branding and relocation of retail outlets.

“Scandia is now the market leader and this year is on target to achieve a 15% growth rate. We intend to use a similar strategy to boost the share of Domex from the current 2%”, said Loucaides.

Infotel (Germanos stores), the telephone subsidiary in which CTC has a 51% stake, is the leader in the mobile telephony retail market with a 32% market share through the 26 Germanos outlets. The division, accounting for around 8% of overall group sales, gives the consumer a choice of all service offerings in the Cyprus telephony market from all such service providers. This will offer even faster growth in the service arena, offering better margins.

House of Beauty, the 50-50 venture with MPM, accounts for 4% of total group sales and is the largest importer and distributor of luxury cosmetics and fragrances with leading brands such as Helena Rubinstein, Lancôme, Giorgio Armani, Ralph Lauren, Gucci and Benetton, to name a few.

Investments

CTC has considerable investments in many companies, including Woolworth (Cyprus) Properties Public Ltd. (an associate), Ermes Department Stores Public Ltd. (a subsidiary) and Olympos Investments Ltd (an associate).

The group has land and investment properties and a 11.34% stake in Hermes Airports Ltd. It is involved in the construction, development and management of Larnaka and Pafos Airports for the next 25 years under the BOT method.

Ermes Department Stores Public Ltd is a leading retail high street group which operates a chain of 56 high street retail outlets (including eight department stores), as well as six retail outlets in Greece.

The company holds franchise rights for various well-known brands, such as Debenhams, Next, Adams, Miss Sixty and Peacocks. Debenhams of UK is a shareholder in Ermes Department Stores Public Ltd.

CTC-ARI

By far the most promising recent investment is CTC-ARI Airports Ltd, in which CTC has a direct 20% stake while the combined stake of CTC, Woolworth and Shacolas Holdings is 50% (Aer Rianta International of Ireland holds the remaining 50%). CTC-ARI Airports Ltd has secured the running of the commercial operations of Larnaka and Pafos Airports for the next 25 years.

Operations started in July 2006 and are on target to report CYP 50 mln in annual turnover, while from 2012 when both airports will be operational in their new facilities, annual turnover is seen climbing to CYP 150 mln, based on the experiences of other similar airports. The completion of the new airports is expected to be late–2008 for Pafos and late-2009 for Larnaka.

Loucaides said that in March 2007 all the existing retailing facilities will be refurbished at a cost of CYP 600-700,000 but stressed that the investment is self-sufficient in terms of financing needs. The total investment for all retail facilities is seen at CYP 2-3 mln when the new terminal buildings are constructed, but here as well, no negative impact on cash flow is foreseen.

New areas

CTC is keen to improve operations at all levels, according to Loucaides. Citing an example, he said that starting in January 2007, the CTC field sales force is taking orders and inputting the data through hand-held machines that access central computer systems remotely, cutting the number of visits to the head office and decreasing the delivery time of products, while at the same time increasing cost efficiencies.

“We are cutting costs, increasing productivity and at the same time improving service to our customers through better and faster delivery”, he said.

CTC will also extend its efficient and tested distribution and logistics services to affiliated companies, which will increase group turnover and at the same time help reduce costs.

Cyprus Airports F&B Ltd, of which CTC is a partner, has acquired the food and beverage business at Larnaka and Paphos airports, a development that will also help increase sales and profitability in the years to come.