EANS-News: AUSTRIAN POST H1 2018: PARCEL GROWTH COMPENSATED FOR DECLINE IN THE MAIL BUSINESS
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Mid Year Financial Report
Vienna -
Revenue
- Slight revenue increase in the first half of 2018 of 0.2% to EUR 955.2m
- Parcel growth (+12.1%) compensated for the decline in Mail & Branch Network (-
3.7%)
Earnings
- EBIT up 2.8% to EUR 105.1m
- Earnings per share of EUR 1.12 (-0.5%)
Cash flow and balance sheet
- Higher cash flow due to special payment of BAWAG P.S.K.
- Conservative balance sheet structure with low level of financial liabilities
Outlook 2018 unchanged
- Targeted stability in revenue and earnings
Group revenue of Austrian Post improved by 0.2% in the first half of 2018 to EUR
955.2m. The consistency of prevailing trends was once again demonstrated by
developments in the mail and parcel business. Revenue growth of 12.1% in the
Parcel & Logistics Division compensated for the 3.7% decline in the Mail &
Branch Network Division.
The Mail & Branch Network Division accounted for 72.6% of Austrian Post's
revenue. The decrease in revenue in the first half-year of 2018 was due to the
fundamental decline in addressed letter mail as a consequence of electronic
substitution, as well as lower revenue from addressed and unaddressed
advertising mail compared to the previous year and the structural decline in the
financial services business. In contrast, the Mail Solutions business showed
growth in document logistics and output management. Moreover, the Letter Mail &
Mail Solutions business generated growth as a result of increased international
e-commerce volumes.
The Parcel & Logistics Division generated 27.4% of Group revenue in the
reporting period, continuing its upward trend. The 12.1% increase in revenue was
primarily driven by organic volume growth in Austria. Here Austrian Post is
profiting from dynamic market growth based on the ongoing online shopping trend.
The related competitive intensity and price pressure remain high. "We are
optimistic that we will be able to continue maintaining our strong position in
this highly competitive market thanks to our outstanding delivery quality and a
broad offering of individual customer solutions", says Austrian Post CEO Georg
Pölzl. "On the one hand, we are investing in expanding parcel logistics
capacities in order to be able to handle the steep increase in parcel volumes in
the future. On the other hand, we are promoting innovations to steadily expand
the service offering for the benefit of our customers", he adds. In this
connection, the ground-breaking ceremony for the new parcel centre in Hagenbrunn
north of Vienna took place on July 10, 2018. Medium-term sorting capacity should
be more than doubled to 100,000 parcels per hour. In addition, the company is
steadily pressing ahead with the expansion of its service offering based on
self-service and online solutions to make it increasingly easier and more
convenient to send or receive parcels.
Austrian Post is also being called upon to adapt its service offering in the
mail business to current customer requirements in order to ensure its
sustainable success. Austrian Post expanded its product portfolio effective July
1, 2018 by introducing a new letter mail product within the context of universal
postal services. In line with international trends, the new product and postal
rate model offers the option to choose between time-critical and not time-
critical items and was well received in the first weeks.
Group EBIT rose by 2.8% year-on-year to EUR 105.1m on the basis of good revenue
development combined with strict cost discipline. The solid development in the
first half of 2018 should enable Austrian Post to remain committed to its clear
capital market positioning as a reliable dividend stock. "Reliability and
stability towards our shareholders and other stakeholders of our company are at
the heart of our strategic activities - and we would like to continue along the
path we have taken", adds CEO Georg Pölzl. Accordingly, Austrian Post aims to
achieve a stable development in revenue and operating results for the entire
year 2018 in line with its prior-year performance.
KEY FIGURES
Change
EUR m H1 20171 H1 2018 % EUR m Q2 20171 Q2 2018
Revenue 953.7 955.2 0.2% 1.6 465.0 464.6
Mail & Branch Network 721.4 695.0 -3.7% -26.4 348.8 335.4
Parcel & Logistics 234.4 262.6 12.1% 28.3 117.3 130.4
Corporate/ -2.0 -2.4 -16.9% -0.3 -1.0 -1.2
Consolidation
Other operating 27.7 50.9 83.7% 23.2 13.0 16.3
income
Raw materials,
consumables and -196.3 -206.2 -5.1% -10.0 -96.4 -102.3
services used
Staff costs -514.4 -516.5 -0.4% -2.1 -251.4 -242.5
Other operating -126.7 -137.8 -8.8% -11.2 -64.4 -67.5
expenses
Results from
financial assets -0.8 -1.3 -69.2% -0.5 -0.2 -0.7
accounted for using
the equity method
EBITDA 143.3 144.3 0.7% 1.0 65.6 67.9
Depreciation,
amortisation and -41.1 -39.3 4.5% 1.9 -17.7 -19.5
impairment losses
EBIT 102.2 105.1 2.8% 2.9 47.8 48.4
Mail & Branch Network 145.0 138.7 -4.3% -6.3 71.0 65.1
Parcel & Logistics 19.0 20.4 7.4% 1.4 9.6 9.5
Corporate/ -61.8 -54.1 12.5% 7.7 -32.7 -26.3
Consolidation
Other financial -0.1 3.2 >100% 3.3 0.0 1.5
result
Earnings before tax 102.1 108.2 6.0% 6.2 47.9 49.9
Income tax -25.9 -32.3 -24.9% -6.4 -12.1 -15.8
Profit for the period 76.2 75.9 -0.4% -0.3 35.8 34.1
Earnings per share 1.13 1.12 -0.5% -0.01 0.53 0.50
(EUR)2
Cash flow from 108.9 173.4 59.1% 64.4 47.1 -2.6
operating activities
Investment in
property, plant and -28.0 -67.4 <-100% -39.4 -13.2 -26.4
equipment (CAPEX)
Free cash flow 63.9 104.1 62.8% 40.2 33.7 -30.1
Free cash flow before
acquisitions/ 93.2 134.1 44.0% 41.0 38.0 -16.9
securities and growth
CAPEX3
1 Adjustment of revenue in segment reporting
2 Undiluted earnings per share in relation to 67,552,638 shares
3 Q2 2017, H1 2017: Free cash flow before acquisitions/securities and new
corporate Headquarters
EXCERPTS FROM THE GROUP MANAGEMENT REPORT:
REVENUE DEVELOPMENT IN DETAIL
In the first half of 2018, Group revenue of Austrian Post improved by 0.2% to
EUR 955.2m. The consistency of trends in the mail and parcel businesses was once
again confirmed. Revenue growth of 12.1% in the Parcel & Logistics Division
compensated for the 3.7% revenue decline in the Mail & Branch Network Division.
The Mail & Branch Network Division accounted for 72.6% of Group revenue during
the period under review. The drop in divisional revenue in the first half-year
was the result of the fundamental decrease in addressed letter mail as a result
of electronic substitution, lower direct mail revenue compared to the previous
year and the structurally-related decline in the financial services business.
Growth in Mail Solutions, additional revenue from elections and growth due to on
higher international e-commerce volumes pushed up the revenue. The Parcel &
Logistics Division generated 27.4% of total Group revenue in the reporting
period against the backdrop of an ongoing upward trend. The 12.1% revenue
increase was primarily driven by organic volume growth in Austria.
Revenue of the Mail & Branch Network Division totalled EUR 695.0m in the first
half of 2018. Of this amount, 56.3% can be attributed to the Letter Mail & Mail
Solutions business, whereas Direct Mail accounted for 27.5% of total divisional
revenue. Media Post i.e. the delivery of newspapers and magazines had a share of
9.3%. Branch Services generated 7.0% of the division's revenue. In the first
half of 2018, Letter Mail & Mail Solutions revenue amounted to 391.0m, a drop of
1.3% from the previous year. Second-quarter 2018 revenue was down 0.4% to EUR
188.7m. The downward volume development as a consequence of the substitution of
letters by electronic forms of communication continued. The basic volume
development trend during the period under review was about minus 5% in Austria.
The segment change of the Croatian subsidiary Weber Escal d.o.o. assigned to the
Parcel & Logistics Division since January 1, 2018 as well as the exit from the
mail business in South East and Eastern Europe negatively impacted revenue. In
contrast, new services relating to conventional letter mail transport had the
opposite effect of increasing divisional revenue. Mail Solutions generated
growth of EUR 2.6m mainly in the fields of document logistics and output
management. Moreover, the Letter Mail & Mail Solutions business area reported
additional revenue of EUR 6.4m from increased international e-commerce volumes.
Revenue of the Direct Mail business amounted to EUR 190.9m in the first six
months of 2018, representing a year-on-year decline of 6.0%. Second-quarter 2018
revenue decreased by 6.4%. This decline is related to a 2-3% drop in operating
revenue and a changed product assignment of international mail items. Customers
displayed uncertainty with respect to addressed mail items as a consequence of
the new General Data Protection Regulation. Similarly, the exit from the direct
mail business in South East and Eastern Europe also reduced revenue. Media Post
revenue was down 3.8% to EUR 64.5m in a year-on-year comparison. Revenue in the
second quarter of 2018 decreased by 9.0%. This development is mainly
attributable to the declining subscription business for newspapers and
magazines. Branch Services revenue fell 12.1% in the first half of 2018 to EUR
48.5m. Second-quarter 2018 revenue was down to the same extent by 12.1%. In line
with the agreement concluded with the banking partner BAWAG P.S.K., a step-by-
step dissolution of the partnership is to take place for the most part by the
end of 2019. Revenue generated by consulting services will be continuously
reduced but the offer of counter transactions will remain unchanged.
Total revenue of the Parcel & Logistics Division rose by 12.1% in the first half
of 2018 to EUR 262.6m from EUR 234.4m in the previous year. The segment change
of the Croatian subsidiary Weber Escal d.o.o. effective January 1, 2018
increased the revenue, in light of the fact that the company was still
recognised as part of the Mail & Branch Network Division in the prior-year
period. Adjusted for Weber Escal d.o.o., divisional revenue was up by 9.7%. This
strong growth in the parcel business resulted mainly from the ongoing e-commerce
trend in Austria. Austrian Post has once again benefitted from this market
growth during the reporting period, with national revenue showing double-digit
growth in the first half of 2018. Intense competition still prevails. At the
same time, demand for quality and delivery speed as well as price pressure are
increasing. From a regional perspective, 80.0% of total revenue in the Parcel &
Logistics Division was generated in Austria in the first half-year 2018 and
20.0% by the subsidiaries in South East and Eastern Europe. The business in
Austria showed revenue growth of 11.8% in the first half of 2018. Revenue in the
highly competitive South East and Eastern European region was up 13.3% during
the first six months of 2018, with EUR 5.6m of this increase due to the segment
change of Weber Escal d.o.o., Croatia.
EXPENSE AND EARNINGS DEVELOPMENT
The largest expense items in relation to Austrian Post's Group revenue are staff
costs (54.1%), raw materials, consumables and services used (21.6%) and other
operating expenses (14.4%), which is in contrast to other operating income.
Austrian Post's staff costs amounted to EUR 516.5m in the first half of 2018,
representing a year-on-year increase by 0.4%. The included operational staff
costs of EUR 490.5m were at the prior-year level. Steady efficiency improvements
and structural changes made it possible to compensate for salary increases
mandated by collective wage agreements. In addition to operational staff costs,
staff costs of Austrian Post also include various non-operational costs such as
termination benefits and changes in provisions, which are primarily related to
the specific employment situation of civil servants at Austrian Post. Non-
operational staff costs of EUR 26.0m in the first half of 2018 were somewhat
higher than in the previous year. Provisions in the amount of EUR 21.8m
allocated for the redimensioning of financial services constituted the largest
share of these costs. In contrast, lower expenses for social plan models had the
opposite effect.
Raw materials, consumables and services used were up by 5.1% to EUR 206.2m,
which is primarily related to higher costs for outsourced transport services
required to handle the increase in parcel volumes. Other operating expenses
increased by 8.8% to EUR 137.8m. This increase is mainly due to higher
maintenance, IT and consulting costs. Other operating income amounted to EUR
50.9m in the first half-year 2018, compared to the prior-year level of EUR
27.7m. This includes one-off income of EUR 20.1m representing a lump sum
compensation on the part of the banking partner BAWAG P.S.K. for shortening the
duration of the contractual agreement. The results of the financial assets
accounted for using the equity method include proportional profits for the
period of joint ventures and associated companies and amounted to minus EUR 1.3m
in the first six months of 2018.
Earnings show a stable to slightly positive development. EBITDA at EUR 144.3m
was slightly above the previous year, corresponding to an EBITDA margin of
15.1%. Depreciation, amortisation and impairment losses amounted to EUR 39.3m,
down by EUR 1.9m from the previous year. No impairment losses were recognised
during the reporting period, in contrast to impairment losses of EUR 5.4m
recognised in the first half of 2017. EBIT improved by 2.8% year-on-year to EUR
105.1m, implying an EBIT margin of 11.0%.
The other financial result of EUR 3.2m included a positive contribution of EUR
6.1m from interest on claims related to non-wage costs paid in previous periods.
Income tax rose by EUR 6.4m compared to the first half of 2017 due to higher tax
expenses from previous years. After deducting income tax, the profit for the
period totalled EUR 75.9m, comprising a drop of 0.4% year-on-year. Earnings per
share equalled EUR 1.12.
From a divisional perspective, EBITDA of the Mail & Branch Network Division
totalled EUR 148.5m, a drop of 6.0% from the prior-year period. Divisional EBIT
was down 4.3% to EUR 138.7m. This decline is mainly attributable to the weaker
revenue development. The Parcel & Logistics Division achieved revenue growth
against the backdrop of intense competition and margin pressure and generated an
EBITDA of EUR 25.8m (-4.3%) and EBIT of EUR 20.4m (+7.4%) in the first half of
2018. EBIT of the Corporate Division (incl. Consolidation) improved by 12.5% to
minus EUR 54.1m. The Corporate Division provides non-operational services for
the purpose of managing and controlling at a Corporate Group level. These
services include, among other things, the management of commercial properties
owned by the Group, the provision of IT services, the development of new
business models as well as the administration of the Internal Labour Market of
Austrian Post.
CASH FLOW AND BALANCE SHEET
The cash flow in the first half of 2018 was impacted by various special effects.
A special payment of EUR 107.0m from BAWAG P.S.K. in connection with the
termination of the cooperation agreement with Austrian Post less the financial
services provided at the amount of EUR 20.5m in the reporting period resulted in
a positive special cash flow effect of EUR 86.5m. Higher maintenance CAPEX and
growth CAPEX equalling EUR 67.4m, higher than the prior-year figure of EUR
28.0m, had the opposite effect. Higher payments related to provisions and the
income tax expense also tended to reduce the cash flow. The gross cash flow
totalled EUR 176.2m in the first half-year 2018, compared to EUR 146.3m in the
prior-year period. The cash flow from operating activities amounted to EUR
173.4m in the period under review, up from EUR 108.9m in the previous year. In
the first six months of 2018, the cash flow from investing activities reached a
level of minus EUR 69.3m, compared to the prior-year figure of minus EUR 45.0m.
This increase is due to cash outflows for the acquisition of property, plant and
equipment (CAPEX). The difference is primarily attributable to payments
totalling EUR 29.1 in the current reporting period for investments made as part
of the parcel logistics capacity expansion programme. The free cash flow before
acquisitions/ securities and growth CAPEX totalled EUR 134.1m in the first half-
year 2018, compared to EUR 93.2m in the previous year.
Austrian Post pursues a conservative balance sheet policy and financing
structure. This is demonstrated by the high equity ratio, low financial
liabilities and the solid level of cash and cash equivalents invested at the
lowest possible risk. The equity of the Austrian Post Group amounted to EUR
634.1m as at June 30, 2018, corresponding to an equity ratio of 39.2%. The
analysis of the financial position of the company shows a high level of current
and non-current financial resources to the amount of EUR 334.3m. This includes
cash and cash equivalents of EUR 254.6m and securities of EUR 79.6m. These
financial resources are in contrast to financial liabilities of only EUR 6.8m.
OUTLOOK 2018 UNCHANGED
Developments in the first half-year confirm the forecasts made by Austrian Post
with respect to the projected business development in 2018, and the outlook for
the entire year 2018 remains unchanged.
Volume developments in the letter mail, direct mail and parcel segments are
expected to be in line with trends prevailing in recent quarters. The company
continues to anticipate volume declines of about 5% p. a. in the traditional
letter mail business. Addressed and unaddressed direct mail is under pressure
due to market and sector-specific conditions. Parcel volumes are steadily
rising. Double-digit growth for private customer parcels is expected, driven by
the expansion of online shopping. Austrian Post continues to forecast an ongoing
stable revenue development in the 2018 financial year (2017 revenue: EUR
1,938.9m). Current planning assumptions remain valid. In particular, the decline
in addressed letter mail is a prevailing international trend. A further trend in
Europe is to increase the freedom of choice and enable customers to select among
various delivery speeds for letters and parcels. Effective July 1, 2018,
Austrian Post adapted its service offering correspondingly. The new product and
postal rate model distinguishes between time-critical mail items (e. g.
documents, urgent letters and parcels) and not time-critical items (e. g.
telephone invoices, bank account statements). For example, senders now have
three options for a standard letter weighing 20g (e. g. C5 envelope) as of July
2018. In addition to the PRIO (priority) option for next-day delivery at a rate
of EUR 0.80, ECO (economy) delivery within 2-3 days is offered for EUR 0.70
within the context of the universal service obligation. Furthermore, an ECO
BUSINESS service is available for EUR 0.65 for delivery within 4-5 days outside
the universal postal service framework.
In the branch network, the dissolution of the financial services partnership
with the current banking partner BAWAG P.S.K. is currently under way. Consulting
services will be gradually redimensioned by the end of 2019, whereas the
offering of counter transactions will be maintained. In the medium term, the
financial services business will remain an important part of Austrian Post's
business operations. Talks are being held with other potential financial
services partners. The company aims to generate a 10% growth in the parcel
business. However, as a result of the current market growth, more intense
competition, stronger price pressure and partial delivery by an individual
large-volume customer starting in the fall of 2018 are expected.
With respect to its earnings development, Austrian Post continues to pursue the
goal of generating stable operating earnings in 2018 (2017 EBIT: EUR 207.8m). In
spite of declining volumes, the company anticipates good capacity utilisation of
its mail logistics infrastructure, which is now being used more efficiently
through the joint delivery of letters and parcels. At the same time, Austrian
Post will have to meet the challenges of a redimensioned financial services
business.
Austrian Post will continue making investments in efficient structures and
processes as well as in enhancing the service quality of letters and parcels.
Against the backdrop of ongoing market growth in the private customer parcel
segment, the objective is to expand the company's quality leadership.
Accordingly, Austrian Post is investing in efficient delivery services, and is
successively expanding its offering of options for customers to drop off mail
items. Moreover, hourly sorting capacities are to be doubled in the medium term.
In addition to the ongoing basic investments in the core business of about EUR
60-70m annually, additional growth investments in the field of parcel logistics
are planned for the coming years. The objective is to expand existing sorting
capacities as quickly as possible and invest at least EUR 50m for this purpose
in 2018. In addition, there is a possibility of expanding existing commercial
properties or to acquire new land. As in the past, the operating cash flow
generated by Austrian Post will continue to be used prudently and in a targeted
manner to finance sustainable, future-oriented investments.
Further inquiry note:
Austrian Post
Harald Hagenauer
Head of Investor Relations, Group Auditing & Compliance
Tel.: +43 (0) 57767-30400
harald.hagenauer@post.at
Austrian Post
Ingeborg Gratzer
Head of Press & Internal Communications
Tel.: +43 (0) 57767-32010
ingeborg.gratzer@post.at
end of announcement euro adhoc
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issuer: Österreichische Post AG
Rochusplatz 1
A-1030 Wien
phone: +43 (0)57767-0
FAX:
mail: investor@post.at
WWW: www.post.at
ISIN: AT0000APOST4
indexes: ATX
stockmarkets: Wien
language: English
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