investor presentation - bpost/media/files/b/bpost/presentations/2019… · investor presentation...

May - June 2019

Investor presentationFirst quarter 2019

2

Investor presentation first quarter 2019

Financial CalendarHighlights & guidance

New Business Unit structure – 41Q19 Highlights – 5Outlook 2019 – 6

bpost at a glance

Investment rationale – 8Dividend policy – 9Overview – 10Transformation – 11Vision & strategy – 12 & 13Management – 14Sustainability – 15Mail & Retail – 16-24Parcels & Logistics Eurasia – 25-32Parcels & Logistics N. America – 33-39

Current trading 1Q19

EBIT bridge – 41Key financials – 42Results by segment – 43Mail & Retail – 44 & 45Parcels & Logistics Eur & Asia – 46 & 47Parcels & Logistics N. America – 48 & 49Corporate – 50Cash flow – 51Balance sheet – 52

Additional Info

IFRS16 – 54-56Relationship with State – 57USO & SGEI – 58European mail market – 59Key contacts – 60

Contents

1 as defined among others under the U.S. Private Securities Litigation Reform Act of 1995

DisclaimerThis presentation is based on information published by bpost in its First Quarter 2019 Interim Financial Report, made available on May, 2nd 2019 at 5.45pm CET, and in its 2018 AnnualReport and Capital Markets Day presentation of June, 21st 2018 both available on corporate.bpost.be/investors. This information forms regulated information as defined in the RoyalDecree of 14 November 2007. The information in this document may include forward-looking statements1, which are based on current expectations and projections of managementabout future events. By their nature, forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and otherfactors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of the Company. Such factors may cause actual results,performance or developments to differ materially from those expressed or implied by such forward-looking statements. Accordingly, no assurance is given that such forward-lookingstatements will prove to have been correct. They speak only as at the date of the Presentation and the Company undertakes no obligation to update these forward-looking statementscontained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements. This material is not intended as and does not constitute an offer to sellany securities or a solicitation of any offer to purchase any securities.

More on corporate.bpost.be/investors

02.05.2019(17:45 CET)Quarterly results 1Q19

08.05.2019Ordinary General Meeting of Shareholders

13.05.2019Ex-dividend date

15.05.2019Dividend payment date

07.08.2019 (17:45 CET)Quarterly results 2Q19

Highlights 1Q19Guidance 2019

4

New business unit structure - Reminder

New business unit structure

5

Highlights of 1Q19

1Q19

Mail & Retail• Total operating income at € 527.5m (-1.8%) driven by vigorous mail volume decline• Underlying mail volume decline at -9.2% mainly driven by Transactional and Press• Normalized EBIT mainly impacted by mail volume decline and wage drift

Parcels & Logistics Europe & Asia• Total operating income at € 196.8m (+8.0%) driven by Parcel BeNe up 11.1%• Parcel BeNe volume growth at +16.9% driven by e-commerce• Solid normalized EBIT margin improvement with volume growth only partly offset by

higher costs

Group normalized EBIT € 95.8m10.6% EBIT margin

1Q19 in line with expectations, on track for 2019 outlook

Parcels & Logistics North America• As anticipated, total operating income at € 228.5m (-5.2%) mainly impacted by

Radial customer churn and repricing• Normalized EBIT mainly impacted by client churn & repricing in line with

expectations

€ 92.6m17.6% EBIT margin

€ 18.0m9.1% EBIT margin

€ -7.8m-3.4% EBIT margin

Group operating income € 906.8m

6Outlook FY19

Parcels & Logistics North America

Group

Dividend

Mail & Retail

• Low single digit % decline in Mail & Retail total operating income• Underlying Domestic Mail volume decline up to -7%• Average price increase of +4.4% in Domestic Mail• % EBIT margin between 11-13%

Parcels & Logistics Europe & Asia

• High single digit % growth in Parcels & Logistics Europe & Asia total operating income of which mid-teens for Parcels Belgium-Netherlands (BeNe)

• % EBIT margin between 6%-8%

• Low single digit % decline in Parcels & Logistics North America total operating income mainly explained by the FY impact of the 2018 client churn and repricing at Radial. On track for 2022 guidance as presented at the CMD.

• Break-even at EBIT level

• Stable total operating income incl. proceeds from building sales• Normalized EBIT above € 300m1

• Gross capex around € 150m

• At least 85% of 2019 BGAAP net profit of bpost SA/NV

Outlook for 2019

1 Corporate EBIT is expected to be break-even

bpost at a glance

8

bpost offers a strong investment rationale

bpost at a glance

We develop sustainable activities in the high growth e-commerce logistics & parcelsbusiness in our Be-Ne home market and key geographies in Europe and North America

We continue to transform the mail and proximity business in the home market to sustainsolid cashflows

Multiple levers for transformation of the legacy business: natural attrition, alternative delivery model, stable and predictable regulation, network optimization,…

Experienced management team with embedded financial discipline and a strong business transformation track record

High growth in e-commerce logistics & parcels: aspired sizeable share of revenues by 2022

A solid balance sheet with single 'A' credit rating

bpost aims at being a responsible company, delivering a sustainable dividend to its shareholders

What?

How?

9

We create value for shareholders

bpost at a glance

Dividend Policy

Annual dividend of at least 85% of BGAAP net profit (unconsolidated)

Interim in December of financial year based on 10-month results

Final in May of year following financial year

Constrained by the net results of a given year + distributable reserves

Distributable reserves built gradually as from 2013, primarily to safeguard the dividend level in case of exceptional costs (€ 173m end 2018)

0.93 1.04 1.05 1.06 1.06 1.06

0.200.22 0.25 0.25

20172013 2014

0.24

20162015

0.25*

2018

1.131.311.26 1.29 1.31 1.31

Final gross DPS (€)Interim gross DPS (€)

91%Pay-out ratio 85% 90% 85% 90% 100%

* Proposed final gross dividend per share to be approved by General Meeting of May 8, 2019

10

A diversified mail operator with a footprint in e-commerce logistics

bpost at a glance

2018 figures (normalized)1 51% Mail & Retail, 20% Parcels & Logistics Europe & Asia, 29% Parcels & Logistics North America and 1% Corporate revenue

€ 3,850.2m1

revenues

€ 571.1m14.8%EBITDA

€ 424.3m11.0%EBIT

€ 290.4mnet profit

36,109average # FTE & interims

Mail & Retail

€ 1,952m51%

Transactional mail € 772m 20%

Parcels & Logistics

North America€ 1,105m

29%

Parcels & Logistics Europe &

Asia€ 757m

20%

Advertising mail € 244m 6%

Press € 354m 9%

E-commerce logistics € 1,018m 26%

International mail € 87m 2%

Cross-border € 290m 8%

Parcels BeNe € 346m 9%

Revenues % of total

E-commerce logistics € 121m 3%

Proximity and convenience retail network € 476m 12%

Value added services € 105m 3%

11

Continuous improvement is in our DNA. We have a proven transformation track record

bpost at a glance

2004• Building of new

sorting centres• Transformation of

the network

2003Start of continuous optimization of delivery rounds

2009Implemen-tation of new distribution structure with reduced number of buildings

2011-2020Strategic ‘Vision 2020’ program in mail service operations to further increase efficiency

2003New management

& start of the transformation

period

2006CVC and Danish Post enter into the capital

for 50%-1 share (split 50/50),

government holds 50%+1 share

2008Danish Post

sells its stake to CVC

2013IPO in June at € 14.5/share

CVC sells 30% in IPO and remaining 20% in December

Tra

nsf

orm

atio

n j

ou

rney

Key

eve

nts

Normalized1

EBIT

1 Normalized figures are not audited

2007Automated roundsorting and mail sequencing

2017LaunchNew Brussels X sortingfacility

12

Long-term Vision

bpost at a glance

Beyond mail, be an efficient global e-commerce logistics player anchored in Belgium”

Efficient provider

of mail universal, retail & public services

EBIT

Progressive profit generation

Sizeable share of revenues generated in parcels & logistics

13

bpost will deliver on 3 strategic aspirations…

bpost at a glance

Mail services to citizens and State remain core and will continue to generate profit with a more adapted distribution model

1 Drive profitable growth in parcels in BeNe and further develop e-commerce logistics in Europe

2

CASH GENERATION& DIVIDENDS

3 Optimize Radial to deliver on the investment thesis in the promising North American e-commercemarket

14

… supported by an experienced management team with responsibilities down to the bottom-line

bpost at a glance

Mark MichielsCHRO

Nico CoolsCIO

Dirk TirezCLO

Pierre WinandCEO Parcels & Logistics North America

Luc CloetCEO Parcels & Logistics Europe & Asia

Henri de RomréeCEO Mail & Retail

Leen GeirnaerdtCFO (as from May 20, 2019)

Koen Van GervenGroup CEO

15

Sustainability is at the heart of our activities

bpost at a glance

Selected awards and recognition

First Sustainable Loan in Belgium

3-pillar CSR strategy linked to United Nations

Peoplewe care

about our employees and engage

them

Proximitywe are close

to the society

Planetwe strive to reduce our impact on

the environment

Shared Value

Creation

• Employee health & safety• Employee training and

talent development• Ethics & diversity• Social dialogue

• Green fleet• Green buildings• Waste management

• To our community• To our suppliers• To our customers

through our services

• Continuity of our business

• Employee satisfaction and engagement

• Customer satisfaction

€ 300m revolving credit facility with pricing mechanism linked to the sustainability score of bpost• Financing needs aligned with bpost’s sustainability

and CSR ambitions• bpost being recognized by its stakeholders as a

highly responsible company

• IPC EMMS Scorecard 2018 (sector index): #1 (Sixth Year)

• EcoVadis (clients index): Gold rating• Ethibel Indexes: reconfirmed as a constituent of the

Ethibel Sustainability Index (ESI) Excellence Europe since 19/03/2018

• Sustainalytics: score 79% (2/133)• MSCI: Score A• ISS: Quality Score: 2 = Low Risk

IPC Environmental Ranking

1st

16

Mail & Retail at a glance

bpost at a glance –Mail & Retail

772

1,952

244

354

476

105

Transactional mail

Advertising mail

Press1

Proximity and convenience retail network2

Value added services3

Total

Sub-segments

~7.7m letters handled daily

Servicing 5.6m letter boxes

5 industrial sorting centers

Key facts & figuresRevenue2018, €m

~2.3k points of presence in Belgium

~19.0k operational FTEs

1 Includes Ubiway press distribution revenue (AMP) 2 Includes Banking & Financial, Retail & Other MRS and Ubiway convenience distribution 3 Value Added Services (the part attributed to the previous MRS operating segment)

17

Key value drivers for the Mail & Retail business


To From Key value drivers

>50% over 2018-20221

18-45% over 2014-2017

Share of mail volume decline compensated through price increase

Successful extension / renewal

Three contracts until end 2020; compensation contractually set

Renegotiation/retendering of future 6th

Management contract and press concessions

Flexible, differentiated offering (prior vs. non-prior)

Fixed D+1 based model (everywhere, everyday)

Evolution of operating model (mail collect and distribution)

Up to ~-9% by 2022-5.8% in 2018Speed of mail volume decline

1 70% in 2018

18

Domestic mail volume decline expected to progressively accelerate from -5.8% in 2018 up to ~9% in 2022


-5.0%-4.2% -4.4%-5.8%-5.0% -5.8%

-9.2%

Key drivers

• E-substitutionat large corporates and Belgian State

• Intensifying competition in advertising media

• Shift to digital for newspapers & magazines

• Renewal of press concessions

• Service level elasticity

-5.9%-8.1%

-3.7%-5.3%-5.0% -5.7%

-9.8%

2013 2014 2015 2016 2017 2018

1.5%

-4.9%

-9.1%

-3.0% -3.0%

-7.6%-7.2%

-3.0% -3.7%-2.8%-2.8% -2.8% -3.8%

-8.7%

1Q191

Underlying change in domestic mail volume

Transactional mail

Advertising mail

Press

Progressively up to -9% with the alternative operating model

2019-22

1 As of 1Q19 Transactional Mail excludes outbound and Press includes Ubiway press distribution

19

Regulatory aspects


• Collection, sorting, transport and distribution of postal items up to 2kg and single piece postal packages up to 10kg

• Collect and deliver 5x per week• Cover full territory of Belgium for collection and delivery of items belonging to universal service

• Apply uniform tariffs and an identical service across the territory

Designated provider of the Universal Service Obligation until end 20231

4 key contracts with the Belgian State

Postal law of 10 February 2018 provides stable & predictable mail pricing framework

• Management contract for the provision of the USO (2019-2023)• 6th Management Contract (2016-2020) : for the provision of certain SGEIs, i.e. maintenance of

retail network, cash at counter, cash payment of pensions at home

• 2 press concessions (2016-2020) : (1) for distribution of periodicals and (2) for distribution of newspapers

• Single piece mail & USO parcels falling within “small user basket” are subject to a price cap• Price cap2 = inflation - (volume evolution + cost reduction factor x efficiency gains sharing factor)

• Volume and operational discounts allowed for other USO products (bulk)

• Price increases done in practice on a yearly basis: +4.4% on average in 2019 on all domestic mail items

1 Refer to slide 58 for more details2 Exact formula: Price cap = health index April n-1/ health index April n-2 * (1 – [expected volume decline/(expected volume decline +1)] – 2.8%*33% ) – 1

20

New Postal Law provides stable and predictable regulatory framework to increase prices in context of accelerating mail volume decline


Illustrative example assuming 2% inflation and -6% average volume decline:

[V/(V+1)] with V as the expected negative volume trend on the Small User

Basket

Fixed by the law at 0.9% (i.e., 1/3 of 2.8%

efficiency gains target)

Ratio of the health index as measured in April of the n-1 and n-2 years

Calculation logic

Correlation to price cap

Larger mail volume decline results in larger allowed price increase

Constant and fixed by lawHigher inflation results in larger allowed price

increase

DescriptionCompensation for mail

volume declineMechanism to share 1/3 of the efficiency gains target

with consumers

Compensation for inflation

Drivers of the price cap formula

Inflation Volume decline Efficiency gains

102%Price cap1: 7.6% 106.4% 0.9%

1 Detailed formula: Price cap = (1 + inflation) * ( 1 - [V/(V+1)] – 0.9% ) – 1 ,giving for the above example the following calculation (1+2%) * (1 – [-6%/(-6%+1)] – 0.9%) - 1 = 7.6%

x

Effective as of February 10, 2018

21

Price increase and mix effects expected to compensate >50% of mail volume decline over 2018-22


57 6067 68 71

42

2720 21

13

2018-22116152013 14 17

Domestic mail volume Domestic mail price/mix

Volume and price/mix impact on revenue€m

72% 45% 18%30% 31% >50%

Building on the New Postal Law for price regulated products

Price increase on small user basket rejected by regulator

x% Share of volume effect compensated by price/mix

Key drivers

• Acceleratingdomestic mail volume decline up to -9% by 2022

• New price cap mechanism of Postal Law defining max price increase for small user basket, and guiding price increase for non-price capped products

• Price increase partly offset by shift to less expensive mail products

1 2018 was at 70%

22

Management has developed an extended set of cost control options


Examples of cost control options

FTE Unit cost

Distribution

Collect & Transport

Industrial Mail Centers

Operating model

• Further optimize FTE mix

• Introduce new generation of Georoute and time potential management

• Simplify process for selected transactions

• Enhance customer experience and productivity through digital (e.g., consumer preferences)

• Align number of red boxes to mail volume decline

• Stop collect on Saturday and increase flexibility of pick-up, delivery and dispatch timing constraints

• Optimize mail sorting centers footprint• Pursue continuous improvement

• Evolve towards a differentiated offering and alternative operating model• Take measures to address absenteeism

23

bpost evolves towards a differentiated offering to accommodate changing customer needs


Within D+3

Differentiated offering as of Jan 1st 2019 Operating model evolution

D+1 Mail

Newspapers

• Same day delivery

• Adjusted “day certain” distribution frequency: in a given street, mail will be distributed on selective days of the week

• D+1 delivery will remain available as a separate product (“Prior”)

Parcels

• D+1 offering No change

Available to consumers who need D+1 delivery

Service level agreement (SLA) “within 3 days”

Acceptance for D+3-41

Optimizing drop density

2004 2018 2022 2022

~70~55

<50

~70

Current model: everywhere, everyday

Alternative:D+3 combined

with D+1

Share of houses receiving mail on any given day, %

Individuals

~92%Professionals

94%

1 Based on a bpost study with 1,000 households & 500 businesses (< 200FTE) interviewed in February 2015

24

Operational FTE evolution1

Average FTEs and interims, ‘000

Labor cost will benefit from decrease of mail related FTEs and optimized employee mix


Operational FTE mix evolution1

Age pyramid1

Operational headcount per age, 31/12/18

1 bpost SA/NV scope, excluding retail network

2013 1714 18

15-20%

15 16

Allocated tomail

Allocated toparcels

19.8 19.0 18.5 18.6 18.6 19.0

80-85%

51% 47% 43% 39% 35%

25% 28% 32% 37% 41%

19% 19% 18% 18% 17%

16

Other 7%7%

Contractual

5%

172014

6%

15

7%

18

Auxiliarypostman

Civil servant

0-39 50+40-49

7,702

5,451

6,965

Pay-scale contractualsNon pay-scale contractuals

Civil servants

Natural attrition

Average natural attrition is expected to range from 1,200 to 1,300 FTEs/yearover 2019-22

Contractual ~95

Auxiliarypostman ~74

Civil servant 100

Average cost per contract type1

Indexed

25

Parcels & Logistics Europe and Asia at a glance

bpost at a glance –PaLo Eurasia

Sub-segments Key facts & figuresRevenuePro forma 2018, €m

Parcels BeNe (last-mile)1

E-commerce logistics2

Cross-border (incl. int’l mail & parcels)

Total

Parcel hubs with dedicated parcel rounds in BE where enough density

+417k parcels per peak day in BeNe

3 sorting location (New Brussels X, AX, CX)

• Last-mile activities in Belgium and the Netherlands

• Total of ~62m parcels in 2018

• Fulfilment & transport activities in Europe (incl. Radial EU)

• Majority of cross-border volume is inbound mail and parcels for Europe and Asia

346

757

290

121

1 Includes a.o. domestic parcels excluding inbound flow, as well as DynaLogic, DynaSure, Citydepot, Eurosprinters, De Buren and Parcify2 Includes a.o. Radial Europe, Dynafix, NL & PL fulfilment, Leen Menken, Bubble post and Active Ants

26

Key value drivers for Parcels & Logistics Europe and Asia


Parcels BeNe (last-mile)

Sub-segments To From Key value drivers

Cross-border

Natural business evolution

Developing international parcel flows driven by e-commerce activity

• Develop international cross-border parcels, also across continents

• Ability to maintain international mail volume

E-commerce logistics

E-commerce logistics in PL, NL & BE and “DynaFix”

Higher scale & skills, ability to leverage Radial capabilities

• Ability to organically capture market growth of ~10% p.a. (vs. insourcing, pan-European players)

Focus on Belgium (sales force, contracts, DHL partnership)

BeNe-wide approach• BeNe-wide offering addressing customer requirements

Volume growth rate of 20-30% with price/ mix effect up to -6% over 2016-2018

Double-digit volume growth rate

Parcel hubs where enough density

Parcel hubs where enough density

• Optimized last-mile operations based on parcels characteristics (e.g., size) and in line with delivery requirements

• Ability to capture profitable growth in a competitive environment

27

Four strategic initiatives for parcels BeNe


Convenience& Cost

leadership

Differentiate pricing policy

IntegratedBeNe offering

Attract key foreign

e-commerce players

4strategicinitiatives

• Convenience expressedthrough Net Promoter Score KPI

• Dedicated parcel hubs

• Sorting capacity• Fulfilment

infrastructure • Transport

optimization• Digital excellence

• Tactical pricing initiatives

• Partnerships with e-commerce players

• E2E service offering (“gateway to Europe”)

• Dedicated, specialized sales force • Integrated commercial offers• Partnership with DHL Parcels

28

We have an established position in the Belgian B2C/C2C parcels market


Unique selling proposition

Offer best last mile and broadest delivery options, supported by acquisitions and partnerships:

• Home delivery 7/7 & evening delivery, including high-end deliveries (2-man)

• ~2,300 pick-up & drop-off points (incl. ~830 open access Kariboo! points)

• 186 parcel lockers in Belgium

• Click & Collect

• Non-exclusive partnerships with DPDHL for B2C parcel delivery into Belgium (from Germany/France & Benelux)

CAGR 2017-20, %

~15%

~5%

B2C

C2C

0-4%B2B

B2C

C2CB2B

2017 parcel market1

100% = € 1,285m

1 Source: Effigy

2017 bpost domestic parcels revenue€ 224m

29

New partnership with DHL Parcels NL will allow to cover the full BeNe region and to capture important cross-border flows


Competitive offering

• Very competitive & dynamic region with many large players such as PostNL, DHL, DPD, FedEx

Large NL-based e-commerce players

• Looking for a BeNe wide offering with regards to last mile

• Benchmarking prices on a BeNe level

Purchasing behavior

• NL is the most important import country to BE (~20% of import flows)

• BE consumers mainly buy from NL players such as Bol.com and Coolblue

Launched in June 2018

30

The parcels operating model will be continuously optimized


Increase sorting capacity

Optimize distribution cost using drop density of mail rounds

Build dedicated parcel infrastructure to match customer requirements

• Increase sorting capacity to cope with increasing volume (optimizing sorting footprint mail & parcels)

• Use technology (e.g. address recognition)

• Maximize letterbox-sized and non-letterbox-sized parcels in mail rounds (~40% of the parcels)

• Cost advantage due to higher drop density leading to lower unit costs

• Nationwide network of Parcel hubs to accommodate distribution of ~60% of parcels (that are not in mail rounds)

• Parcel hubs where enough density, with ramp up in line with parcels growth

• Benefit for customer proximity and special services e.g. late-in services, “large scale” evening distribution or same day distribution

31

Additional parcels sorting capacity will be gradually built


2018 2022

Base Capacity, K Parcels / day

Description

Parcel sorting capability footprint1

• Centralized sorting capacity mainly in NBX. Additional capacity in AX & CX.

• Additional parcel sorting machines in existing centers (LX, GX, AX, CX) to increase capacity

• Build on DHL capacities

The selected scenario to gradually add capacity to all sorting centers offers several advantages such as

• Use freed space from letters

• Minimize transportation costs

Ax

Cx

NBx Gx

Lx

+

Ax

Cx

NBx

1 Parcel sorting capabilities of Parcify, Eurosprinters, Citydepot & Kariboo not shown on the map

~400

~600 + DHL

32

Supported by acquisitions, bpost has initial assets in Europe along the entire value chain of e-commerce logistics


Realtime technology

3

2

1

Fulfilment

4

Customer care

Order

Delivery

• Phone, email, social media & chat support

• Advanced analytics

• Ordermanagement

• Paymentservices, tax services and fraud prevention

• Order reception in warehouses in the proximity of clients

• Preparation for shipment

• Hybrid transport network for high-end and urgent delivery

• Last mile delivery

Poland

Germany

UK

TheNetherlands

Belgium

Cold chain facility Fulfilment sites Personalized logistics

~€ 128m 2018 revenue 9 fulfilment centers / facilities1

>800 employees5 countries

1 Including Leen Menken and Active Ants, excluding bpost sorting centers

E-commerce logistics operations in Europe E-commerce logistics offering

33

Parcels & Logistics North America at a glance

bpost at a glance –PaLo North America

Total

E-commerce logistics1

Interna-tional Mail2

Growth engine for bpost, to be a leading e-commerce logisticsplayer in US with ~$ 100m-$ 120m EBITDA potential

Grow with cross-border commerce

One of the last international mail providers to deliver profit through infrastructure optimization

US e-commerce logisticsprovider fulfilling 72m parcels p.a. with provenclient base, IT infrastructure and capabilities along theE2E value chain

Capabilities to support mid-sized e-tailers to expand cross-border and last mile distribution in Canada and Australia

International mail solutions and catalogue fulfilment through US companies

Sub-segments ObjectiveRevenue2018, €m

1,105

87

1,0181

1 Radial North America, Landmark Global, Apple Express and FDM2 MSI, Imex, Mail Inc.

34

bpost has a global footprint through Landmark Global and a nation-wide coverage in the US through Radial


Strategic locations in

13countries

35

Acquisition of US-based on 16 November 2017


Key data• Sales 2018: € 888m

Normalized EBITDA 2018: € 25.7m (2.9% margin)8,600 FTEs

• 24 fulfillment centers globally (of which 2 in Europe included in the business unit PaLo Eurasia)

• 100% acquisition of the shares• Enterprise Value: $ 820m• Financed through a € 650m 8-year bond issue

carrying a coupon of 1.25% (issued 4 July 2018)

• Sales CAGR 2019-2022: +7 to 9% p.a.• EBITDA 2022e: $ 100-120m (high single digit margin)• Capex: maintenance capex of $ 25-30m + growth

capex for capacity expansion & automation

Financial indicators for Radial North America

Acquisition rationaleOur growth

• Integrated e-commerce logistics provides access to a larger and more attractive profit pool

• Radial as growth engine and key profit contributor

Presence in the US and Europe

• Strengthen US position building on presence with Landmark Global

• Scale bpost’s e-commerce logistics capabilities in the Benelux and Europe

Strong growth of e-commerce

• e-commerce is growing rapidly with US being an attractive and advanced space (+16% p.a. growth of online retail over 2004-2022e)

• Transatlantic e-commerce is growing at >25% p.a. with 20% of European parcels coming from the US

Knowledge and experience

• Knowledge and experience of the e-commerce logistics chain increase exponentially with the acquisition of an experienced player

36

Radial North America offers multiple services across the entire e-commerce logistics value chain


10%

Tech

nol

ogy

Op

erat

ion

s

Radial North America assets

Processing global payments, maximizing successful authorization and reconciling tax districts and global duties 99.1% approval rate vs. 97.1% industry average 2.1% manual review rate vs. 25% industry average

Payment, Tax, and Fraud Prevention

Omnichannel Technology2

22,000Stores with fulfilment26,000

Dropship suppliers

Optimizing efficiency of order management, ship-from-store and in-store pick up Ability to handle complex orders < 10 weeks to deployment vs. competition 1-2

years Scalability of technology

Warehousing & Fulfilment

22Fulfilment sites in

North America

Adapting warehouse management and parcels preparation to e-commerce with pragmatic automation 80%+ orders shipped day 0 ~100% US coverage Experience of scaling up to ~20k peak capacity

3,400+Seats across 5 sitesCustomer Care

Having a single view of customer’s history and profile combined with leading self-service tech #1 Email & Chat and #2 Phone

(StellaService ranks) Advanced data analytics

Description and key strengths

Freight Management

100%asset light

Managing a large network of carriers for a seamless customer experience Rates 5-15% cheaper than in-sourcing for mid-

sized players Clients reached in 2.4 days on avg

1

3

5

4

Revenues share%

-

-

Fraud Zero software

72%

18%

37

Radial North America market dynamics and competitive landscape


Independent e-commerce logistics providers

Online revenue e-tailers, US Addressable e-commerce logistics sector

$ 20m

$ 2,000m

$ 540bn1 expected US online retail revenue in 2018

Radial’s target audience ($ 20m – 2bn revenues)• Mid-market

segment ($ 20-200m online revenue)

• Enterprise segment ($ 200-600m)

• Some selected key accounts ($ 600m-$ 2bn)

$ 27-37bnaddressable e-commerce logistics

Radial’s target audience e-commerce revenue $ 150-155bn

~$ 540bn total US online Retaile-commerce

1 Source: Forrester Data, Online Retail Forecast, 2018

38

Positive commercial development at Radial and financial results in line with expectations


Commercially heading in the right direction

• We observe that the new customer-focused approach launched early 2018 starts to bear fruits with progressive NPS improvement during the year. Customers gave a very positive peak feedback.

• After the poor renewal performance of 2017 and 1Q18, positive contract renewal cycle for existing clients, as from 2Q18.

• New contracts signed have a TCV of $ 217m, which is above target and above the previous 2 years ($ 150m in 2016 and 2017).

• Good start to 2019 with high TCV signed in 1Q19 and pipeline looking solid for the rest of the year.

FY18 results in line with expectations

• Good peak management, with productivity gains partly offset by higher costs related to maintaining a sufficient labor pool within a tight US labor market.

Results impacted, as expected, by:

• Churn (mostly in Fulfilment & Transport), with revenue growth from new and existing customers (also impacted by some repricing) not compensating revenue loss from clients terminating with Radial.

• Webstore business phase-out, impacting FY18 EBITDA by $ -21.2m.

39

Radial action plan will result in $ 80-100m potential EBITDA improvement by 2022


50Grow & Retain

2018

10-20Productivity

Supportingfunctions

and IT20-30

2022e 100-120

+80-100

1

2

3

• Fuel top-line growth via new leads, increased conversion rate and optimized pricing

• Increase satisfaction and retain clients by installing true client philosophy (e.g. pursue renewals, improve client qualification, …)

• Continue to implement productivity improvement programs, e.g.‒ Lean warehousing metrics ‒ Improved allocation of clients to distribution centers based on client

specifics

• Implement identified improvement levers in support functions(e.g. IT, medical costs, …)

$ million

41

6.5

112.3

-13.2

EBIT 1Q18

Mail & Retail PaLo Eurasia

-8.0

PaLo N. America

-1.9

Corporate

95.8

EBIT 1Q19

-16.5

1Q19 EBIT in line with expectations. Mail volume decline, Radial customer churn & repricing and wage drift drive YoY variance.

1Q19

Normalized, € million

42

IFRS161Q18 1Q19 1Q18 1Q19 % Δ impact

Total operating income 916.5 906.8 916.5 906.8 -1.1%Operating expenses 773.3 755.7 773.3 755.7 -2.3% 25.5EBITDA 143.2 151.1 143.2 151.1 5.5% 25.5Depreciation & Amortization 37.2 60.7 30.9 55.3 79.2% (24.2)EBIT 106.0 90.4 112.3 95.8 -14.7% 1.3Margin (%) 11.6% 10.0% 12.3% 10.6%Financial result (2.9) (7.5) (2.9) (7.5) (2.0)Profit before tax 99.4 81.5 105.7 86.9 -17.8% (0.7)Income tax expense 35.6 31.3 36.1 31.8 0.2Net profit 63.7 50.2 69.6 55.1 -20.7% (0.5)FCF 151.3 186.1 171.0 195.4 14.2% 24.7bpost S.A./N.V. net profit (BGAAP) 72.3 60.1 72.3 60.1 -16.7%Net Debt at 31 March 145.7 613.1 145.7 613.1 425.5

Average # FTEs and interims 34,830 33,966 34,830 33,966

Reported Normalized1

Key financials 1Q19

1Q19

€ million

Amortization of intangibles

recognized during PPA is normalized, leading to increase in EBIT (€ +5.4m)

and income tax expense (€ +0.5m)

Normalized FCF excludes the cash Radial receives on

behalf of its customers for

performing billing services

1 Normalized figures are not audited

43

Results by segment 1Q19

1Q19


PaLo PaLoM&R Eurasia N. Am. Corp Eliminations Group

External operating income 486.5 191.7 227.2 1.5 - 906.8Intersegment operating income 41.1 5.1 1.4 84.7 (132.3) -Total operating income 527.5 196.8 228.5 86.2 (132.3) 906.8Operating expenses 414.1 174.8 222.7 76.4 (132.3) 755.7EBITDA 113.4 22.0 5.9 9.8 151.1Depreciation & Amortization 20.8 4.1 13.7 16.7 55.3EBIT 92.6 18.0 (7.8) (7.0) 95.8Margin (%) 17.6% 9.1% -3.4% -8.1% 10.6%

44

Higher than anticipated volume decline across the board has negatively impacted operating income

1Q19 – M&R

M&R external operating income, € million

Transactional

1Q18

-4.3

-2.5Advertising

-0.8Press

-2.9Proximity andconvenience

retail network

-0.2Value addedservices

1Q19

497.2

486.5

-10.7

• Decline in banking & finance and bpost retail partly compensated by higher Ubiway Retail revenues.

• Higher revenue from traffic fines management offset by lower revenue from document management and e-ID services due to phase out of current e-ID cards.

Domestic Mail operating income decline at € -7.6m:i.e. € -1.4m 1 working day less, € -28.8m volume (-9.2% underlying volume decline), € +22.6m price/mix.• Transactional Mail: -9.8% underlying volume decline driven

by an increased push towards digital mainly in banking, telco and utilities sectors; higher acceptance of e-documents at the receivers’ side and to some extent volume losses at SMEs driven by digitization.

• Advertising Mail: -7.6% underlying volume decline; growth from smaller accounts and growth in unaddressed more than offset by lower volumes from large customers.

• Press: -8.7% underlying volume decline driven by e-substitution and rationalization mainly in periodicals.

45

M&R EBIT impacted by mail volume decline and wage drift

1Q19 – M&R

Key takeaways 1Q19

• Total operating income decline of € -9.4m primarily driven by domestic mail volume decline, only partly compensated by price tailwind (3 months of SUB price increase in 1Q19 vs. 1 month in 1Q18).

• IFRS 16 impact of € +10.8m on operating expenses and € -10.2m on D&A.

• Normalized EBIT decline (€ -13.2m) resulting from lower total operating income (€ -9.4m) and higher opex incl. D&A (€ -3.8m), mainly driven by increased depreciation and amortization (€ -2.1m excluding impact of IFRS 16) and higher payroll & interim resulting from the 2019-20 CLA and salary indexation, only partly compensated by less interims and a favorable evolution of the FTE mix.

1 As of 1Q19 Transactional Mail excludes outbound and Press includes Ubiway press distribution: 1Q18 operating income is restated, but not all comparable KPIs for 1Q18 are available


1Q18 1Q19 % ΔExternal operating income 497.2 486.5 -2.2%

Transactional 199.6 195.4 -2.1%Advertising 63.4 60.9 -4.0%Press 88.7 87.9 -0.9%Proximity and convenience retail network 119.9 117.0 -2.5%Value added services 25.5 25.3 -0.8%

Intersegment operating income 39.7 41.1 3.4%Total operating income 536.9 527.5 -1.8%Operating expenses 422.6 414.1 -2.0%EBITDA 114.3 113.4 -0.8%Depreciation & Amortization 8.5 20.8EBIT 105.8 92.6 -12.5%Margin (%) 19.7% 17.6%

Capex 5.1 3.6Average # FTEs and interims 21,767 21,882

Additional KPIs1

Underlying Mail volume decline - -9.2%Transactional - -9.8%Advertising - -7.6%Press - -8.7%

46

Continued solid organic BeNe & cross-border parcels volume growth

1Q19 – PaLo Eurasia

8.7Parcels BeNe

E-commercelogistics

1Q18

2.7

2.8Cross-border

1Q19

177.5

191.7

+14.2

PaLo Eurasia external operating income, € million

• Reported volume growth of +16.9% (former DomesticParcels and DynaLogic volumes) driven by e-commercewhile partly offset by declining C2C sales.

• Price increases more than offset by mix effect leading to anegative price/mix.

• Driven by Active Ants1 partly offset by revenue decline atDynaFix.

• Driven by higher parcels revenues from the UK partly offsetby lower parcels revenue from Asia and Rest of Europe.

1 Active Ants included in FY18 as of 1 April 2018 for 10 months, with 4 months in 4Q18.

47

Solid EBIT margin improvement with volume growth only partly offset by higher costs

1Q19 – PaLo Eurasia

Key takeaways 1Q19

• Total operating income increase of € +14.5m primarily driven by Parcels BeNe (€ +8.7m) including positive revenue development at DynaLogic.


• Normalized EBIT increase (€ +6.5m) resulting from higher total operating income (€ +14.5m) partially offset by higher opex incl. D&A (€ -8.0m) driven by the parcels volume growth, higher transport costs and the integration of Active Ants for 3 months (not included in 1Q18).

1 As of 1Q19 Parcels BeNe volumes include DynaLogic & former Domestic Parcel volumes. This does not cover the entire Parcels BeNe operating income line. 1Q18 operating income is restated, but not all comparable KPIs for 1Q18 are available.


1Q18 1Q19 % ΔExternal operating income 177.5 191.7 8.0%

Parcels BeNe 78.7 87.4 11.1%E-commerce logistics 28.1 30.8 9.7%Cross-border 70.7 73.5 4.0%

Intersegment operating income 4.8 5.1 5.4%Total operating income 182.3 196.8 8.0%Operating expenses 168.9 174.8 3.5%EBITDA 13.4 22.0 64.5%Depreciation & Amortization 2.0 4.1EBIT 11.4 18.0 57.2%Margin (%) 6.3% 9.1%


Additional KPIs1

Parcels volume growth 16.9%

48

Parcels & Logistics North America impacted by fall-out of FY18 customer churn and repricing at Radial

1Q19 – PaLo N. Am.

PaLo North America external operating income, € million

1Q18

-16.1E-commercelogistics

3.3Internationalmail

1Q19 227.2

240.0

-12.8

• Revenues decline within Radial North America mainly driven by a continued impact of FY18 client churn and repricing, partly compensated by a solid increase within the cross-border parcels activity, fuelled by customer expansion and new services.

• Mainly driven by IMEX and M.A.I.L. Inc due to timing of the acquisitions in 1Q18.

49

EBIT mainly impacted by client churn & repricing in line with expectations

1Q19 – PaLo N. Am.

Key takeaways 1Q19

• Total operating income decline of € -12.6m (incl. FX effect of € +16.7m) mainly driven by customer churn and repricing at Radial, as anticipated.

• Very strong TCV signed in 1Q19 at Radial with pipeline looking strong for the rest of the year.


• Excluding FX, total opex decrease (incl. D&A) driven by lower fixed costs, mainly payroll and medical expenses; better productivity in fulfilment and reduced fraud chargebacks in PT&F.

• Normalized EBIT decline (€ -8.0m) driven by variable margin decline at Radial following client exits and repricing, more than offsetting cost savings. Cross-border growing at lower margins.


1Q18 1Q19 % ΔExternal operating income 240.0 227.2 -5.3%

E-commerce logistics 220.6 204.5 -7.3%International mail 19.4 22.7 17.0%

Intersegment operating income 1.2 1.4 14.4%Total operating income 241.2 228.5 -5.2%Operating expenses 231.8 222.7 -3.9%EBITDA 9.4 5.9 -37.4%Depreciation & Amortization 9.1 13.7 49.4%EBIT 0.2 (7.8)Margin (%) 0.1% -3.4%


Additional KPIsRadial North America revenue, $m 225.7 187.2Radial North America EBITDA, $m 5.9 -1.9Radial North America EBIT, $m -4.6 -15.2

50

Corporate

1Q19 - Corporate

Key takeaways 1Q19


• Normalized EBIT decline (€ -1.9m) driven by the unfavorable evolution of some provisions and local, real estate & other taxes compared to last year.


1Q18 1Q19 % ΔExternal operating income 1.8 1.5 -19.6%Intersegment operating income 92.7 84.7 -8.6%Total operating income 94.6 86.2 -8.8%Operating expenses 88.5 76.4 -13.6%EBITDA 6.1 9.8 60.0%Depreciation & Amortization 11.2 16.7 49.3%EBIT (5.1) (7.0) -36.4%Margin (%) -5.4% -8.1%


51

Positive evolution of FCF1 supported by lower outflows related to M&A activities and IFRS 16 initial application

1Q19

CF from operating activities (€ -27.7m) impacted by the transfer of operating leases to financing activities due to IFRS 16 (€ +24.7m)• CF from operating activities before changes in working capital: € -21.9m in line

with EBITDA evolution excl. IFRS 16 impact (€ -17.6m)• Collected cash due to Radial’s clients: € +10.5m• Working capital evolution: € -41.0m, primarily driven by unfavourable working

capital evolution at Radial

CF from investing activities, mainly:• M&A: € +63.9m, due to LY cash outflows• Capex: € -1.2m

CF from financing activities, mainly:• Commercial papers: € -14.8m• Cash outflows related to operating lease liabilities: € -24.7m, as a consequence of

IFRS 16 application

1 Operating free cash flow = cash flow from operating activities + cash flow from investing activities

REPORTED - € million 1Q18 1Q19excl IFRS 16

IFRS 16 1Q19 Delta

Cash flow from operating activities +229.9 +177.5 +24.7 +202.2 -27.7Cash flow from investing activities -78.6 -16.1 -16.1 +62.5Operating free cash flow +151.3 +161.4 +24.7 +186.1 +34.8Financing activities -3.9 -19.4 -24.7 -44.2 -40.2Net cash movement +147.4 +141.9 +0.0 +141.9 -5.4

Capex -14.4 -15.7 -15.7 -1.2

52

Strong balance sheet structure

1Q19

€ million

723.2

558.9

680.1

830.3

Dec 31, 2018

1,583.0

Trade & otherreceivablesInventories

251.270.7

Investments inassociates

36.9

84.5

35.3

246.5

1,990.4

March 31, 2019

Cash, cashequivalents

& investmentsecurities

Other assets

PPE & intangibleassets

3,345.1

3,745.9

702.3 766.0

308.4 307.3

37.539.3

1,024.8

1,197.81,270.3

Interest-bearingloans & borrowings

Dec 31, 2018

March 31, 2019

1,437.3

3,745.9

Provisions

Trade & otherpayables and

derivativeinstruments

Employee benefits

Total equity

3,345.1

Assets Equity and liabilities

IFRS 16 impacts : • Total assets (PPE) as of 31st March 2019 have increased by € 423.1m compared to 31st Dec. 2018 related to IFRS 16. • Total liabilities as of 31st March 2019 (interest-bearing loans & borrowings) have increased by € 425.5m compared to 31st Dec. 2018 related to IFRS 16. • Balance sheet of 31st December 2018 is not restated for IFRS 16 impact.

Rating and capital allocation

• S&P assigned credit rating of ‘A’ to bpost on June 20th, 2018 based on a stand-alone credit profile of BBB

• bpost successfully issued a € 650m 8-year bond on July 4th, 2018 with a coupon of 1.25%

• bpost seeks to maintain credit metrics compatible with a solid intrinsic investment grade

• Dividends remain the primary use of capital allocation as the plan assumes no further acquisitions

Additional info

54

IFRS 16: Main impacts 1Q19

IFRS16

Group M&R PaLoEurasia

PaLo N. Am. Corporate

Operating expenses +25.5 +10.8 +2.1 +6.1 +6.6

EBITDA +25.5 +10.8 +2.1 +6.1 +6.6

D&A -24.2 -10.2 -1.9 -5.7 -6.3

EBIT +1.3 +0.5 +0.1 +0.3 +0.3

Net financial costs -2.0 -0.6 -0.2 -1.0 -0.2

CF from operating activities

+24.7

CF from financing activities

-24.7

Net debt +425.5

€ million

55

IFRS 16: Main impacts 2019

IFRS16

IFRS 16 impact on 2019

Operating expenses ~-104 Decrease as rent & rental expenses to be recognized as depreciation and interest costs

EBITDA ~+104 Increase due to lower rent & rental costs

D&A ~+100 Increase due to new depreciation of right-of-use assets

EBIT ~+4 Marginal increase due to opex and depreciation impacts

Net financial costs ~+8 Increase due to interest expense from unwinding of the discount of the lease liability

CF from operating activities ~+104 Leasing-related cash outflows transferred to CF from financing activities

CF from financing activities ~-104 Leasing-related cash outflows transferred from CF from operating activities

Assets & Liabilities ~418

in € million

56

IFRS 16: Main impacts 2019 per business unit

IFRS16

M&R

Parcels & Logistics Europe &

Asia

Parcels & Logistics

North America

Corporate Group

Operating expenses ~-45 ~-10 ~-21 ~-27 ~-104

EBITDA ~+45 ~+10 ~+21 ~+27 ~+104

D&A ~+43 ~+10 ~+20 ~+27 ~+100

EBIT ~+2 ~0 ~+1 ~0 ~+4

in € million

57

bpost’s long term relationship with the Belgian State

Belgian State

State as a long term shareholderBelgian State has 51% sharesbpost’s board is composed of 5 board members1 and CEO appointed by the Belgian State and 6 independent directors

Belgian State supports a regular dividend policy

bpost provides SGEIs2 on behalf of the State2016-20202 press distribution contracts (newspapers & periodicals)

Sixth management contract for other SGEIs

Contractual amounts (excl. inflation3, volume impact & sharing of efficiency gains) of € 261.0m in 2016 (actual amount: € 264.9m), € 260.8m in 2017 (actual amount: € 270.0m), € 257.6m in 2018 (actual amount: € 271.4m), € 252.6m in 2019 and € 245.6m in 2020

State as important customerState is a key commercial client to bpost

Several other agreements in place with the State, such as European license plates (won by bpost through tender)

1 Since the Ordinary General Meeting of Shareholders of May 9, 2018 there are only 3 State appointed board members (incl. CEO). The Belgian State requested bpost to postpone the appointment of three directors to be nominated by the Belgian State to the Ordinary General Meeting of shareholders of May 8, 2019.

2 SGEI stands for Services of General Economic Interest cfr. slide 193 All amounts need to be adjusted for inflation on a cumulated yearly basis

Shareholder

Belgian State

Free float

# shares

102,075,649

97,925,295

PressRetailFinancial services

58

Management contracts and press concessions will be (re)negotiated in the timing of the plan

USO & SGEI

Scope

€271* state compensation in 2018

Universal Service Obligation (USO)

State compensation possible in case of USO being financial burden

• Collect, sort, transport, & distribute letter mail up to 2kg, parcels up to 10kg, and parcels up to 20kg from other EU member states

• 1 access point per municipality

• Collect and deliver 5x/week• Full territory of Belgium• USO pricing constraints• Provide adequate

information on USO products and services

• Quality control obligation (95% of prior mail/parcels D+1, 97% D+2)

6th Management Contract

Services not typically associated with mail operators (SGEI), e.g.,• Retail network• Cash at Counter• Election mail (distribution)• Cash payment of pensions

at home

• Also part of SGEIs• Newspaper early delivery

6x/week • Periodical delivery

5x/week• Quality control obligation

of max 7 complaints per 10k deliveries

• ~3,000 FTEs

Timing • End of 2023, renewable by consecutive terms of 5 years

• Complementary management contract granted by the State

• End of 2020• Notified and validated by

European Commission under State Aid rules

• End of 2020• Notified and validated by

European Commission under State Aid rules

Press concessions

* Amount including inflation, volume variance and sharing of efficiency gains

59

A relatively resilient mail market vs. other European operators

European mail market

2008-18 CAGR for addressed mail volumesas reported by major incumbent European postal operators, percent

AU

UK

DE

CH

NL

DK

IT

EU

FR

BE

SW

Addressed mail volume per capita 2018 operator level*

1

11

3

8

7

6

10

5

2

4

SOURCE: Company information; Annual reports; Investor presentations; IPC; Eurostat

Note: definition of addressed mail may differ by operator1 Includes addressed mail2 Includes addressed mail3 Includes addressed mail4 Includes addressed mail

5 Includes mail communication and dialogue marketing6 Includes addressed mail7 Includes addressed mail (publishers services excl.)8 Includes addressed mail excluding press9 Includes all domestic mail

DK

SW

IT

FR

AU

CH

NL

DE

BE

UK

EU

3

8

4

5

6

7

11

10

1

2

10 Includes inland addressed mail11 Includes letter mail and addressed direct mail / media post

* Excludes domestic competitors

225

200

197

184

164

146

144

125

106

50

46

-2,1%

-4,7%

-5,1%

-5,1%

-5,9%

-9,2%

-9,3%

-13,1%

-4,0%

-3,4%

-3,4%

(1) 2017 data (2) 2008-17 data

(1)

(1) (2)

(2)

60

Key contacts

Saskia Dheedene

Head of Investor Relations

• Email: [email protected]• Direct: +32 (0) 2 276 76 43• Mobile: +32 (0) 477 92 23 43• Address: bpost, Centre Monnaie, 1000 Brussels, Belgium

Stéphanie Voisin

Manager Investor Relations

• Email: [email protected]• Direct: +32 (0) 2 276 21 97 • Mobile: +32 (0) 478 48 58 71• Address: bpost, Centre Monnaie, 1000 Brussels, Belgium

investor presentation - bpost/media/files/b/bpost/presentations/2019… · investor presentation...

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