Posti Group Corporation Half-year report · that won the competitive tendering process have carried...

Posti Group Corporation

Half-year reportJuly 25, 2018

25.7.2018

Posti Group Corporation1

Agenda

25.7.2018


• Highlights of January-June 2018

• April-June 2018

• January-June 2018

• Segments

• Mail, Parcel and Logistics Services

• Itella Russia

• OpusCapita

• Financial targets

• Outlook 2018

Highlights of January-June 2018

25.7.2018


Posti in figures 2018

Net sales

(EUR million)

Adjusted EBITDA

(EUR million)

Adjusted operating

result (EUR million)

Personnel

on average, FTE

Share of USO

deliveries

January-June 2018 in a nutshell

• The parcel volume of Finland and the Baltic countries increased by 12%, with 22% growth in consumer

(B2C) parcels. The number of addressed letters decreased by 8% in Finland.

• Measured in waybills and excluding food logistics, Posti’s domestic freight grew by 6%.

• Mail items covered by the universal service obligation amounted for 4.0% of all Posti´s delivery volumes.

• Posti has completed its first sourcing procedure based on the Postal Act on the five-day delivery of

universal service letters in areas not covered by an early-morning newspaper delivery. The companies

that won the competitive tendering process have carried out deliveries for Posti before.

• In May, Posti Group Corporation signed a new EUR 150 million syndicated revolving credit facility which

replaced the previous EUR 150 million facility. The new facility has a maturity of five years with an option

to extend with two years.

• During the first half year, Itella Russia divested its MaxiPost courier business, and Posti its Scandinavian

Debt Collection business.

25.7.2018


807.0

51.1

17.5

17,066

4.0%

Operational highlights

The Group’s adjusted operating result is expected to remain on par with 2017 or decrease slightly.

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2014 2015 2016 2017 2018

BKT:n volyymimuutos edellisen vuoden vastaavasta neljänneksestä, työpäiväkorjattu (%)

Raskaan liikenteen määrä, viimeiset 12 kk verrattuna edelliseen 12 kk:n jaksoon

Business Environment

• According to the Bank of Finland forecast

published in June, GDP growth will

accelerate to 2.9% in 2018, finally reaching

its level of 2008 preceding the financial crisis.

• Both domestic demand and growing exports

will boost overall demand.

• Transport volumes in heavy traffic continues

to increase in Finnish main roads.

• According to the Bank of Finland, Russian

GDP is forecasted to grow by 2 percent this

year.

• The Russian economic growth will remain

relatively slow, as there are no prospects for

reforms in economic income formation to

support growth.

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Heavy traffic volumes, 12 months change, %

GDP volume change from the previous year's corresponding quarter

Source: Finnish Transport Agency, Statistics Finland

25.7.2018

Parcel services keep growing


+13%

Parcel volume growth in

Finland and in the Baltics

4–6 2018

+34%

The number of parcels going

through Posti Parcel Lockers

4–6 2018

+22%

B2C parcel volume growth in


4–6 2018

+36%

The number of parcels going

through Posti Parcel Lockers

1–6 2018

+12%

Parcel volume growth in


1–6 2018

+22%

B2C parcel volume growth in


1–6 2018

25.7.2018


9.4 9.3 9.5

12.0

18.7

10.4 10.5

20.9

+10% +13% +12%

Q1 Q2 Q3 Q4 Q1-Q2

2017 2018

Parcel volumes (million units) in Finland and the Baltics combined

1.111.18

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Domestic freight*

+6%

349322

0

100

200

300

400

Addressed letters

1-6 2017 1-6 2018

-8%

25.7.2018

Letter volumes declined by 8%, freight volumes grew by 6%


Source: Posti

1-6 2017 1-6 2018 1-6 2017 1-6 2018

* The reported figure for domestic freight excludes food

logistics

Freight volumes, million unitsLetter volumes, million units

April-June 2018

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Net sales and adjusted operating resultApril-June 2018

25.7.2018


386 389 376

457414 402 379

452408 399

0

100

200

300

400

500

Q1 Q2 Q3 Q4

Net sales by quarters, EUR million

2016 2017 2018

402.33.4%

399.5-0.7%

0

100

200

300

400

500

4-6 2017 4-6 2018

Net SalesEUR million and change, %

19.84.9%

22.85.7%

0

5

10

15

20

25

4-6 2017 4-6 2018

Adjusted EBITDAEUR million and %

0.30.1%

6.11.5%

0

2

4

6

8

4-6 2017 4-6 2018

Adjusted operating resultEUR million and %

-7.6-1.9%

2.30.6%

-15

-10

-5

0

5

4-6 2017 4-6 2018

Operating resultEUR million and %

Key figures

25.7.2018


• The Group’s net sales decreased by 0.7%. Net

sales grew by 2.0% in Finland and declined by

15.6% in other countries.

• The decline in international operations’ net sales

was mainly related to the divestment of

OpusCapita’s Finance and Accounting

Outsourcing and related subsidiaries in Q3/2017.

• The increase in the adjusted EBITDA was

attributable mainly to the better result of Mail,

Parcel and Logistics Services and Itella Russia.

• The adjusted operating result increased to EUR

6.1 million and the operating result to EUR 2.3

million.

• In May, Posti Group Corporation signed a new

EUR 150 million syndicated revolving credit

facility which replaced the previous EUR 150

million facility.

4-6 2018 % 4-6 2017 %

Net sales, EUR million 399.5 402.3

Adjusted EBITDA, EUR million 22.8 5.7% 19.8 4.9%

EBITDA, EUR million 19.0 4.8% 12.8 3.2%

Adjusted operating result, EUR million 6.1 1.5% 0.3 0.1%

Operating result, EUR million 2.3 0.6% -7.6 -1.9%

Result for the period, EUR million 1.0 0.3% -13.0 -3.2%

Gross capital expenditure, EUR million 21.8 11.9

Personnel on average, FTE 17,221 18,588

January-June 2018

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Net salesJanuary-June 2018

25.7.2018


1,867-5.5% 1,649

-11.7%1,608-2.5%

1,6472.5%

807-1.1%

0

500

1,000

1,500

2,000

2014 2015 2016 2017 1-6 2018


816.15.3%

807.0-1.1%

0

200

400

600

800

1,000

1-6 2017 1-6 2018


Operating resultJanuary-June 2018

25.7.2018


58.63.1% 47.6

2.9%47.12.9%

42.42.6%

17.52.2%

0

10

20

30

40

50

60

70

2014 2015 2016 2017 1-6 2018


55.36.8%

51.16.3%

0

10

20

30

40

50

60

1-6 2017 1-6 2018

Adjusted EBITDAEUR million and %

15.81.9%

17.52.2%

0

5

10

15

20

1-6 2017 1-6 2018


2.50.3%

-16.3-2.0%

-30

-20

-10

0

10

1-6 2017 1-6 2018

Operating resultEUR million and %

Key figures

25.7.2018


• The Group’s net sales decreased by 1.1%. Net

sales increased 1.9% in Mail, Parcel and

Logistics Services but decreased 9.1% in Itella

Russia mainly driven by currency exchange rates.

• Net sales grew by 1.1% in Finland and declined

by 13.8% in other countries. The decline in

international operations’ net sales was mainly

related to the divestment of OpusCapita’s

Finance and Accounting Outsourcing and related

subsidiaries in Q3/2017.

• The adjusted operating result increased to EUR

17.5 million.

• As a result of management evaluation

OpusCapita’s business plan, including the

execution schedule and required investments to

implement the plan and the risk-premium of the

discount rate, an impairment loss on goodwill of

EUR 30.0 million was recognized in the first

quarter of the year.

1-6 2018 % 1-6 2017 %

Net sales, EUR million 807.0 816.1

Adjusted EBITDA, EUR million 51.1 6.3% 55.3 6.8%

EBITDA, EUR million 47.5 5.9% 42.9 5.3%

Adjusted operating result, EUR million 17.5 2.2% 15.8 1.9%

Operating result, EUR million -16.3 -2.0% 2.5 0.3%

Result for the period, EUR million -20.3 -2.5% -7.0 -0.9%

Return on equity (12 months), % -12.0 3.0

Return on capital employed (12 months) -9.8 6.6

Net debt, EUR million -10.3 -19.6

Net debt / Adjusted EBITDA -0.1x -0.2x

Adjusted free cash flow, EUR million 8.4 3.6

Gross capital expenditure, EUR million 37.2 36.3

Personnel on average, FTE 17,066 18,323

25.7.2018


Mail, Parcel and Logistics Services

90%

Itella Russia6%

OpusCapita4%

External net sales by segment

26.2

17.5

0.0

-3.8

-4.8

Mail, Parceland Logistics

Services

Itella Russia OpusCapita Otheroperations

Posti Group

Adjusted operating result by segment1-6 2018, EUR million

Segments

3.6%* -12.1%*

2.2%*

* percent of net sales

0.0%*

• The Mail and Marketing Services net sales were at the previous year`s level, driven by slower than expected economy letter volume decline

due to seasonal reasons and pricing and product mix changes. The prices of Posti’s cash letter services changed on May 4, 2018.

• The Press revenue was supported by the acquisition at the end of May 2017.

• Strong volume growth, especially in B2C, continued to drive parcel net sales growth. However, the net sales growth was below volume

growth due to product mix changes, the average price, and a decrease of small items that are not included in volumes.

• Logistics net sales grew by 5.2%. Warehouse fill rate was at a good level.

• The adjusted EBITDA increased to 5.7%. The result improvement was driven by increased sale in Mail and Marketing Services.

• Special items improved the operating result for the second quarter by EUR 0.4 million. The special items include EUR 0.9 million gain on the

divestment of debt collection business in Sweden which was completed in June.

Mail, Parcel and Logistics ServicesApril-June: record high parcel volumes

25.7.2018


EUR million 4-6 2018% of

Net sales4-6 2017

% of

Net sales

Net sales 361.8 350.7

Net sales change, % 3.2% 2.7%

Adjusted EBITDA 20.7 5.7% 19.4 5.5%

EBITDA 21.1 5.8% 17.9 5.1%

Adjusted operating result 10.2 2.8% 7.7 2.2%

Operating result 10.6 2.9% 6.1 1.7%

* The reported figure for domestic freight excludes food

logistics

161152

0

50

100

150

200

Addressed letters

4-6 2017 4-6 2018

-5%

9.3

10.5

0

2

4

6

8

10

12

Parcels

+13%

0.580.63

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Domestic freight*

+7%

Volumes, million pcs

Net sales of Mail and Marketing Services, Press Services,

Parcel Services and Logistics ServicesApril-June 2018

25.7.2018


EUR million

150,6

41,4

68,1

92,7

152,4

41,7

71,6

97,6

MAIL AND MARKETING SERVICES

PRESS SERVICES PARCEL SERVICES LOGISTICS SERVICES

4-6 2017 4-6 2018

+0.9%+1.2%+5.2% +5.2%

• The Mail and Marketing Services net sales were at the previous year level, driven by pricing and product mix changes.

• The Press revenue was supported by the acquisition at the end of May 2017.

• Strong volume growth, especially in B2C continued to drive parcel net sales growth. However, the net sales growth was below volume growth due to

product mix changes, the average price, and a decrease of small items that are not included in volumes.

• Logistics net sales grew by 3.5%. Warehouse fill rates also improved.

• The adjusted EBITDA declined to 6.5%. The result decrease was driven by increased employee costs driven by the collective labor agreement and lower

margins in logistics. In addition, the Q1 results included approximately EUR 3 million for items that are not expected to continue. The business mix

continued to move towards parcel and logistics. EBITDA increased to EUR 48.1 million supported by gains of sales and less restructuring costs.

• Special items improved the operating result by EUR 0.8 million. The special items include EUR 2.0 million gain on the divestment of debt collection

business in Scandinavia.

Mail, Parcel and Logistics ServicesJanuary-June: Net sales in moderate growth despite of mail volume decline

25.7.2018

Posti Group Corporation19 * The reported figure for domestic freight excludes food

logistics


Net sales1-6 2017

% of

Net sales

Net sales 728.1 714.6



EBITDA 48.1 6.6% 47.9 6.7%

Adjusted operating result 26.2 3.6% 27.4 3.8%

Operating result 27.0 3.7% 24.3 3.4%

349322

0

100

200

300

400

Addressed letters

1-6 2017 1-6 2018

-8%

18.720.9

0

5

10

15

20

25

Parcels

+12%

1.111.18

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Domestic freight*

+6%

Volumes, million pcs

Net sales of Mail and Marketing Services, Press Services,

Parcel Services and Logistics ServicesJanuary-June 2018

25.7.2018


EUR million

315,0

83,0

137,1

183,7

313,9

83,8

143,4

190,2

MAIL AND MARKETING SERVICES

PRESS SERVICES PARCEL SERVICES LOGISTICS SERVICES

1-6 2017 1-6 2018

+0.9%-0.3%+4.6% +3.5%

Itella RussiaApril-June: net sales at the previous year’s level

25.7.2018


• Itella Russia’s net sales measured in local currency was flat at 0.1%. Reported euro-denominated net sales decreased by 15.1% to EUR

24.8 million due to currency translation effects. The transport business growth was double-digit and Contract Logistics exhibited a stable

development versus last year. The divestment of Maxipost during Q2 impacted negatively on net sales.

• The adjusted operating result improved to EUR 0.6 million. The improvement in the result was driven by capacity optimization in

warehousing as well as profitable growth in transport.

• The average fill rate for warehouses in Moscow was 86%, while in other regions it was 69%.

• On April 24, 2018, Itella Russia divested its MaxiPost courier business to the Moscow-based Strategic Business Alliance. According to its

strategy, Itella Russia focuses on its core businesses, contract logistics and transportation.


Net sales4-6 2017

% of

Net sales

Net sales 24.8 29.2

Net sales change, % -15.1% 15.9%


EBITDA 2.0 8.1% 0.1 0.2%

Adjusted operating result 0.6 2.3% -1.7 -5.9%

Operating result 0.5 2.1% -1.8 -6.2%

Itella RussiaJanuary-June: Itella Russia turned profitable first time since 2014

25.7.2018


• Itella Russia’s net sales measured in local currency grew by 4.3%. Reported euro-denominated net sales decreased by 9.1% to 51.6 million

euros due to currency translation effects. The growth in net sales (measured in local currency) was attributable to higher volumes in the

warehouses and transport, as well as to the stabilization in the economy.

• The adjusted EBITDA increased to 6.0%. Itella Russia continues to implement measures to improve its EBITDA.

• The adjusted operating result improved and was EUR 0.0 million. The improvement in the result was driven by a release of provisions,

higher efficiency and an increase in handling and transport volumes.

• The average fill rate for warehouses in Moscow was 85%, while in other regions it was 73%.

• The operating result was EUR 0.6 million.

Warehouse fill rates at the end of the period

92%86%

83%

77%

89%

86%

77%80%

75% 75%

87%

85%

90%

89%

86% 86%

69%

76%

81% 84%

85%

90%

86%89%

85%82%

77%74%

67%

82%

75%

69%

50%

60%

70%

80%

90%

100%

Moscow Other areas


Net sales1-6 2017

% of

Net sales

Net sales 51.6 56.7



EBITDA 3.9 7.5% 1.0 1.7%

Adjusted operating result 0.0 0.0% -2.7 -4.8%

Operating result 0.6 1.1% -2.8 -4.9%

OpusCapitaApril-June: OpusCapita started a restructuring program

25.7.2018


• OpusCapita net sales grew by 0.7%.

• Adjusted EBITDA increased to EUR -1.0 million due to saving actions.

• EBITDA declined to EUR -1.7 million. EBITDA was burdened by a EUR 0.6 million restructuring program related special item.

• The adjusted operating result improved to EUR -2.1 million, -13.0%.

• OpusCapita announced a restructuring program on May 3, 2018, to strengthen the company´s finances. The aim is to refocus

OpusCapita´s internal resources to support continued investments in product development and further enhancement of the customer

experience. As a part of the restructuring program, OpusCapita finalized cooperation negotiations in several of its operating countries.


Net sales4-6 2017

% of

Net sales

Net sales 16.2 16.1


Adjusted EBITDA -1.0 -6.3% -1.3 -7.8%

EBITDA -1.7 -10.2% -1.3 -7.8%

Adjusted operating result -2.1 -13.0% -2.6 -16.3%

Operating result -2.7 -16.8% -2.6 -16.3%

OpusCapitaJanuary-June: improvement in the adjusted operating result

25.7.2018


• OpusCapita net sales declined by 1.3%. The net sales declined in paper based transaction products as well as in Professional Services

project deliveries. SaaS conversion continued successfully especially in the Cash Management product line.

• Adjusted EBITDA declined to EUR -2.0 million. EBITDA declined to EUR -2.8 million due to restructuring related special items.

• The adjusted operating result improved to EUR -3.8 million.

• The operating result declined to EUR -34.7 million. As a result of management evaluation OpusCapita’s business plan, including the

execution schedule and required investments to implement the plan and the risk-premium of the discount rate, an impairment loss on

goodwill of EUR 30.0 million was recognized in the first quarter of the year.


Net sales1-6 2017

% of

Net sales

Net sales 31.7 32.1


Adjusted EBITDA -2.0 -6.2% -1.9 -6.0%

EBITDA -2.8 -8.9% -1.9 -6.0%

Adjusted operating result -3.8 -12.1% -4.7 -14.5%

Operating result -34.7 -109.4% -4.7 -14.5%

Financial targets

25.7.2018


Dividend policy and long term financial targets

Dividend policy

In May the Board of Directors has adopted a dividend policy pursuant to which the Company targets to pay

out a continuously increasing ordinary dividend.

Financial targets

Posti’s Board of Directors has also set in May the following long-term financial targets for Posti’s operations:

• Adjusted operating result percentage of 4 percent;

• Net debt / Adjusted EBITDA less than 2.0x

• Strict management of free cash flow

25.7.2018


Outlook 2018

25.7.2018


25.7.2018


Outlook 2018

Net sales

• The net sales in 2018 are

expected to remain on a

par with 2017 or

decrease slightly.

• The development of

exchange rates,

especially the ruble

exchange rate, may affect

the Group’s net sales,

result and balance sheet.

Operating result

• The Group’s adjusted

operating result is

expected to remain on a

par with 2017 or

decrease slightly.

Capital expenditure

• Capital expenditure,

excluding acquisitions

and disposals, is

expected to decrease

slightly.

The Group’s business is

characterized by seasonality.

Net sales and operating profit

in the segments are not

accrued evenly over the year.

In postal services and

consumer parcels, the first

and fourth quarters are

typically strong, while the

second and third quarters are

weaker.

• Outlook for 2018 has not been changed.

Thank you!

25.7.2018


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