Financial Statements 2017 March 1, 2018 Agenda Highlights of - - PowerPoint PPT Presentation

Posti Group Corporation

Financial Statements 2017

March 1, 2018

Agenda

March 1, 2018 Posti Group Corporation 2

• Highlights of 2017
• October-December 2017
• Year 2017
• Segments
• Mail, Parcel and Logistics Services
• Itella Russia
• OpusCapita
• Strategy

1.3.2018 Posti Group Oyj 3

Highlights of 2017

Posti in figures

Net sales (EUR million) Adjusted EBITDA (EUR million) Adjusted operating result (EUR million) Personnel

• n average

Share of USO deliveries Countries of

• peration

Year 2017 in a nutshell

• Parcel volumes rose to record levels

thanks to strong growth in e-commerce and improved economic climate.

• Posti is expanding its network by installing

up to 1,000 new Smartpost parcel lockers.

• The amount of addressed letters

decreased by 10%.

• Posti’s new strategy has four key goals.
• New two-year collective agreement for the

postal industry entered into force on November.

• The Postal Act reform was approved on

Septemeber and entered into force on 15th

• f September, 2017. It applies to universal

service products (USO).

• Restructuring of OpusCapita continued and

the segment now consists of the Buyer- Supplier Ecosystem business.

March 1, 2018 Posti Group Corporation 4

1 647.0 118.6 42.4 20 316 5.5% 11

• Parcel and Logistics Services exceeded the

Postal Services for the first time in the third quarter.

• On September, the Helsinki Court of Appeal

issued a positive ruling for Posti in a case concerning the compensation of value added taxes.

• Restructuring continued:
• The sale of OpusCapita’s Finance and

Accounting Outsourcing business.

• The acquisition of the personal

assistance business of SOL Henkilöstöpalvelut Oy and HR Hoiva Oy.

• The acquisition of the early morning

delivery operations of Kaakon Viestintä Oy.

• Posti and Solemo Oy established Flexo,

a joint venture.

Operational highlights Other key events

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

Business Environment

• Posti’s business environment is still undergoing a dramatic
• transformation. Digitalization is accelerating the shift from paper

to online communications, which in turn creates opportunities for new services.

• According to the Bank of Finland, economic growth accelerated

and Finnish GDP increased by 3.1%. Domestic demand has remained strong as the employment rate and consumer purchasing power have improved.

• The growth of e-commerce accelerated toward the end of the

review period, which was reflected favorably in Posti’s parcel

• volumes. Posti’s services, especially parcel lockers, match

consumer preferences.

• Competition in delivery of addressed letters has increased. The

Postal Act reform entered into force on 15th of September, 2017.

• The new collective agreement for the mail communications and

logistics industry entered into force on November. Achieving a two-year agreement is very significant for Posti in the current period of major transformation.

• Posti is prepared for changes in the business environment

through a renewed strategy. At the core of the strategy are four main objectives that will see Posti emerge as a winner through this period of transformation: win e-commerce play, keep mail relevant to customers, renew service culture, and securing digitally powered service delivery.

1.3.2018 Posti Group Oyj 5

Posti’s goal is to evolve into a customer-oriented and profitable logistics and postal service company by 2020.

1.3.2018

Parcel services keep growing

October-December and 2017

Posti Group Oyj 6

+18%

B2C parcel volume growth in Finland and in the Baltics 10–12 2017

+36%

The number of parcels going through Posti Parcel Lockers 10–12 2017

+47%

The number of parcels going through Posti Parcel Lockers 2017

+12%

B2C parcel volume growth in Finland and in the Baltics 2017

1.3.2018 Posti Group Oyj 7

8.7 8.9 8.6 10.8 37.0 9.4 9.3 9.5 12.0 40.1

+8% +4% +10% +11% +9% Q1 Q2 Q3 Q4 Year 2016 2017

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

1.3.2018

Letter volumes declined by 10%

Y ear 2017

Source: Posti Posti Group Oyj 8

Volumes of Posti’s 1st and 2nd class letters, rolling 12 months Letter volumes, million units

2016 2017

773 693

0,0 200,0 400,0 600,0 800,0

• 10%

1.3.2018

Freight volumes grew by 8%

Y ear 2017

Posti Group Oyj 9

Freight volumes, million units

2,1 2,3

0,0 0,5 1,0 1,5 2,0 2,5 +8% 2016 2017

Heavy traffic volume on main roads, change, 12 months 2013/01=100

* The reported figure for domestic freight excludes food logistics Source: Finnish Transport Agency

Posti Group Corporation 10 March 1, 2018

October-December 2017

Net sales and adjusted operating result

October-December

March 1, 2018 Posti Group Corporation 11

431 409 376 433 386 389 376 457 414 402 379 452 100 200 300 400 500 Q1 Q2 Q3 Q4

Net sales by quarters, EUR million

2015 2016 2017 456.5 5.4% 452.3

• 0.9%

100 200 300 400 500 600 10-12 2016 10-12 2017

Net Sales EUR million and change, %

43.0 9.4% 40.9 9.0% 10 20 30 40 50 10-12 2016 10-12 2017

Adjusted EBITDA EUR million and %

22.7 5.0% 23.0 5.1% 10 20 30 10-12 2016 10-12 2017

Adjusted operating result EUR million and %

Key figures

October-December

March 1, 2018 Posti Group Corporation 12

10-12 2017 % 10-12 2016 % Net sales, EUR million 452.3 456.5 Adjusted EBITDA, EUR million 40.9 9.0% 43.0 9.4% EBITDA, EUR million 22.9 5.1% 38.6 8.4% Adjusted operating result, EUR million 23.0 5.1% 22.7 5.0% Operating result, EUR million 5.0 1.1% 14.2 3.1% Result before taxes, EUR million 2.3 0.5% 14.7 3.2% Result for the period, EUR million

• 2.1
• 0.5%

10.4 2.3% Gross capital expenditure, EUR million 20.4 23.3

• The Group’s net sales decreased by 0.9%. In

Finland the decrease was 0.2% and in other countries 5.4%.

• Net sales of Parcel and Logistics Services exceeded

those of the Postal Services.

• The growth of adjusted operating result was mainly

due to improved result in Postal, Parcel and Logistics Services.

• A provision of EUR 18.2 million related to warehouse

lease agreements was recognized.

• Parcel volumes kept growing. Christmas season has

a significant impact on the number of deliveries.

• Strongest growth came from B2C parcels (18%).
• Main items covered by the universal service
• bligation accounted for 9.4% of all of Posti’s mail

items.

• Operations under the universal service obligation

amounted to 12.0% of the Group’s net sales.

• The number of working days in October–December

was lower by one day. The number of working days affects the Group’s net sales and result.

March 1, 2018 Posti Group Corporation 13

Year 2017

Net sales and adjusted operating result

Y ear 2017

March 1, 2018 Posti Group Corporation 14

1,607.6

• 2.5%

1,647.0 2.5% 500 1,000 1,500 2,000 1-12 2016 1-12 2017

Net Sales EUR million and change, %

126.7 7.9% 118.6 7.2% 25 50 75 100 125 150 1-12 2016 1-12 2017

Adjusted EBITDA EUR million and %

47.1 2.9% 42.4 2.6% 10 20 30 40 50 1-12 2016 1-12 2017

Adjusted operating result EUR million and %

1,977 1.5% 1,867

• 5.5%

1,649

• 11.7%

1,608

• 2.5%

1,647 2.5% 500 1,000 1,500 2,000 2,500 2013 2014 2015 2016 2017

Net Sales EUR million and change, %

50.5 2.6% 58.6 3.1% 47.6 2.9% 47.1 2.9% 42.4 2.6% 10 20 30 40 50 60 70 2013 2014 2015 2016 2017

Adjusted operating result EUR million and %

Key figures

Y ear 2017

March 1, 2018 Posti Group Corporation 15

1-12 2017 % 1-12 2016 % Net sales, EUR million 1,647.0 1,607.6 Adjusted EBITDA, EUR million 118.6 7.2% 126.7 7.9% EBITDA, EUR million 83.7 5.1% 116.0 7.2% Adjusted operating result, EUR million 42.4 2.6% 47.1 2.9% Operating result, EUR million

• 27.5
• 1.7%

30.7 1.9% Result before taxes, EUR million

• 36.9
• 2.2%

29.5 1.8% Result for the period, EUR million

• 44.3
• 2.7%

23.2 1.4% Cash flow from operating activities, EUR million 96.0 63.1 Return on equity (12 months), %

• 8.0

3.9 Return on invested capital (12 months), %

• 4.5

5.1 Equity ratio, % 48.8 54.9 Gearing, %

• 8.8
• 13.6

Gross capital expenditure, EUR million 73.3 100.4

• The Group’s net sales grew by 2.5%. In Finland

the growth was 2.4% and in other countries 3.0%.

• International operations acocunted for 14.5% of

net sales, remaining on the same level as in 2016.

• Net sales of the Parcel and Logistics Services

exceeded those of the Postal Services in the third quarter.

• The combined parcel volume of Finland and the

Baltic countries increased by 9%, with 12% of this growth coming from B2C parcels.

• Special items weighed down the result, i.e.

provisions related to warehouses in Russia and the impairment of OpusCapita’s goodwill.

• Mail items covered by the universal service
• bligation amounted for 5.5% of all of Posti’s

mail items.

• Operations under the universal service obligation

amounted to 8.3% of the Group’s net sales.

• The number of working days in 2017 was lower

than in the previous year by two days. The number of working days affects the Group’s net sales and result.

March 1, 2018 Posti Group Corporation 16

Mail, Parcel and Logistics Services 89% Itella Russia 7% OpusCapita 4%

External net sales by segment

60.4 42.4

• 3.5
• 7.9
• 6.5

Mail, Parcel and Logistics Services Itella Russia OpusCapita Other

• perations

Posti Group

Adjusted operating result by segment 1-12 2017, EUR million

Segments

4.2%*

• 12.3%*

2.6%* * percent of net sales

• 2.9%*

• The net sales of Mail and Marketing Services decreased. The decline in volumes was compensated for by changes in pricing. The net sales of

parcel services grew, particularly due to growth in consumer parcels.

• A new record was made in the daily volume of parcels in December. In addition to the boost provided by the improved growth of the Finnish

economy, growth in parcel volumes was particularly expedited by record consumer sales during the Christmas season and Black Friday campaigns.

• The number of parcels going through Posti Parcel Lockers grew by 36%. At the end of December, Posti had a total of 533 Posti Parcel
• Lockers. Posti responded to the demands of the Christmas season by introducing temporary pickup points for the first time. In the warehouse

business fill rates improved.

• The increase of EBITDA was attributable to the growth and improved profitability of the parcel and logistics business.

Mail, Parcel and Logistics Services

October-December

March 1, 2018 Posti Group Corporation 17

EUR million 10-12 2017 % of Net sales 10-12 2016 % of Net sales Net sales 403.2 401.4 Net sales change, % 0.5% 5.2% Adjusted EBITDA 38.1 9.5% 35.3 8.8% EBITDA 37.9 9.4% 34.9 8.7% Adjusted operating result 27.3 6.8% 22.6 5.6% Operating result 27.1 6.7% 20.1 5.0%

218 195

50 100 150 200 250 10-12 2016 10-12 2017

Volumes, million pcs

2 4 6 8 10 12 14

0.55 0.59

0,0 0,2 0,4 0,6 Addressed letters Parcels Domestic freight*

• 10%

+11% +8% 0.6 0.4 0.2 0.0

* The reported figure for domestic freight excludes food logistics

12.0 10.8

Net sales of Mail and Marketing Services, Press Services, Parcel Services and Logistics Services

October–December

March 1, 2018 Posti Group Corporation 18

EUR million

184.9 44.8 78.8 95.3 181.2 43.3 83.9 97.6 MAIL AND MARKETING SERVICES PRESS SERVICES PARCEL SERVICES LOGISTICS SERVICES

10-12 2016 10-12 2017

• 3.5%
• 2.0%

+6.4% +2.5%

0,0 1,0 2,0 3,0 10 20 30 40 50

Mail, Parcel and Logistics Services

Y ear 2017

March 1, 2018 Posti Group Corporation 19

• Net Sales of Parcel and Logistics Services exceeded those of the Postal Services.
• The net sales of Mail, Parcel and Logistics Services increased to EUR 1,448.7 million. The net sales of Mail and Marketing Services
• decreased. The net sales of parcel services grew, particularly due to growth in consumer parcels.
• The weaker result of traditional postal operations was compensated for by the improved net sales and profitability of parcel and logistics

services.

• The total amount of parcels delivered by Posti in Finland and the Baltic countries was 40 (37) million parcels. In the Baltic countries,

parcel volumes increased by 25%. The number of parcels going through Posti Parcel Lockers grew by 47%. The net sales of domestic freight increased and warehouse fill rates improved.

EUR million 1-12 2017 % of Net sales 1-12 2016 % of Net sales Net sales 1,448.7 1,416.0 Net sales change, % 2.3%

• 2.2%

Adjusted EBITDA 106.3 7.3% 109.0 7.7% EBITDA 102.2 7.1% 93.4 6.6% Adjusted operating result 60.4 4.2% 61.9 4.4% Operating result 49.3 3.4% 42.5 3.0%

773 693

200 400 600 800 1000 2016 2017

Volumes, million pcs

Addressed letters Parcels Domestic freight

• 10%

+8% +9%

* The reported figure for domestic freight excludes food logistics

37.0 40.1 2.1 2.3

Net sales of Mail and Marketing Services, Press Services, Parcel Services and Logistics Services

Y ear 2017

March 1, 2018 Posti Group Corporation 20

EUR million

651,9 171,4 276,7 322,6 630,2 166,9 287,5 373,4 MAIL AND MARKETING SERVICES PRESS SERVICES PARCEL SERVICES LOGISTICS SERVICES

2016 2017

• 3.3%
• 2.6%

+3.9% +15.8%

Itella Russia

October-December

March 1, 2018 Posti Group Corporation 21

• Euro-denominated net sales increased due to improved economic climate as well as higher volumes among the existing customers in the

warehousing business and in air and sea freight.

• Profitability continued to be weighed down by currency-denominated leases. To support the focusing of operations, it was decided that leased

warehouses would be closed at two locations. As a result of this decision, a provision of EUR 18.2 million was recognized.

• The average fill rate for warehouses was 89.7% (76.0%) in Moscow and 74.4% (83.9%) in other regions. The changes in the fill rates of

warehouses were mainly due to the closure of warehouses.

EUR million 10-12 2017 % of Net sales 10-12 2016 % of Net sales Net sales 33.0 31.5 Net sales change, % 4.7% 2.6% Adjusted EBITDA 1.6 5.0% 2.3 7.4% EBITDA

• 16.2
• 49.0%

1.6 4.9% Adjusted operating result

• 0.1
• 0.3%

0.6 1.8% Operating result

• 17.9
• 54.3%
• 0.2
• 0.7%

Itella Russia

Y ear 2017

March 1, 2018 Posti Group Corporation 22

• Euro-denominated net sales were favorably affected by changes in the ruble exchange rate as well as the growth of the transport business,

which was compensated for by the decline in the capacity of the warehousing business. The Russian ruble depreciated by 7.9% compared to the previous year.

• The adjusted EBITDA improved due to the optimization of warehouse capacity. EBITDA declined due to a provision recognized for loss-making

agreements (EUR 18.2 million).

• Warehouse capacity was optimized by closing down one of Moscow’s large warehouses and three warehouses on other regions.
• The average fill rate for warehouses showed a year-on-year increase in Moscow and a decrease in other regions. The average fill rate was

84.2% (77.4%) in Moscow and 74.4% (85.9%) in other regions. The changes in fill rates are mainly due to closing down warehouses.

EUR million 1-12 2017 % of Net sales 1-12 2016 % of Net sales Net sales 119.1 104.6 Net sales change, % 13.8%

• 12.0%

Adjusted EBITDA 3.7 3.1% 2.6 2.5% EBITDA

• 14.4
• 12.0%

3.9 3.7% Adjusted operating result

• 3.5
• 2.9%
• 4.0
• 3.8%

Operating result

• 21.5
• 18.1%
• 2.7
• 2.6%

Warehouse fill rates

92% 86% 83% 77% 89% 86% 77% 80% 75% 77% 87% 85% 90% 89% 69% 76% 81% 84% 85% 90% 86% 89% 85% 82% 77% 74% 67% 82% 50% 60% 70% 80% 90% 100% Moscow Other areas

OpusCapita

October-December

March 1, 2018 Posti Group Corporation 23

• The comparable volume of OpusCapita’s electronic transactions grew by 37% year-on-year.
• OpusCapita’s new organizational structure became effective in the fourth quarter.
• Project revenue recognition in the Professional Services function being lower than in the comparison period was a factor in the decline in

net sales. Net sales were divided equally between Finland (50.8%) and other countries (49.2%).

• The decline in adjusted EBITDA was attributable to significant changes, particularly in the product development and product organization,

as well as substantial investments in sales and marketing.

EUR million 10-12 2017 % of Net sales 10-12 2016 % of Net sales Net sales 17.4 17.6 Net sales change, %

• 1.4%

21.4% Adjusted EBITDA

• 1.0
• 6.0%

0.6 3.4% EBITDA

• 2.1
• 11.8%

0.6 3.4% Adjusted operating result

• 2.3
• 13.1%
• 0.6
• 3.2%

Operating result

• 3.3
• 18.9%
• 0.9
• 5.0%

40,7 55,9

10 20 30 40 50 60 10-12 2016 10-12 2017

Electronic transactions, million pcs

+37%

OpusCapita

Y ear 2017

March 1, 2018 Posti Group Corporation 24

• The comparable volume of OpusCapita’s electronic transactions grew by 31% compared to the previous year.
• OpusCapita’s net sales increased to EUR 64.7 million. A little over half of the net sales came from Finland.
• The decline in adjusted EBITDA was attributable to significant changes, particularly in the product development and product organization, as

well as substantial investments in sales and marketing.

• Special items had a negative effect on the result amounting to EUR 27.9 million, of which EUR 26.9 million impairment of goodwill was

recorded in connection with OpusCapita’s restructuring and refocusing of its operations.

• Impairment of goodwill amounting to

EUR million 1-12 2017 % of Net sales 1-12 2016 % of Net sales Net sales 64.7 62.0 Net sales change, % 4.4% 10.4% Adjusted EBITDA

• 2.6
• 4.0%

3.1 5.1% EBITDA

• 3.6
• 5.6%

2.1 3.4% Adjusted operating result

• 7.9
• 12.3%
• 1.2
• 1.9%

Operating result

• 35.9
• 55.4%
• 2.5
• 4.0%

237,6 313,8

50 100 150 200 250 300 350 2016 2017 +31%

Electronic transactions, million pcs

Cash flow

March 1, 2018 Posti Group Corporation 25

• The consolidated cash flow from operating activities increased being

EUR 96.0 million before capital expenditure.

• Investments according to the statement of cash flow amounted to EUR

77.0 million.

• Investments were made in relatively small acquisitions during the year.

During the financial year, Posti began the construction of 26,000 m² freight terminal in Vantaa. The Group also invested in information systems, the transport fleet and production projects.

• At the end of the year, liquid funds totaled EUR 123.7 million, and

undrawn committed credit facilities amounted to EUR 210.0 million.

• The Group signed two new long-term loan agreements for EUR 60

million each.

• The EUR 100 million bond issued in 2011 was paid off in its entirety on

December 8th. 2017 2016 Result for the period

• 44.3

23.2 Cash flow from operating activities before financial items and taxes 104.4 88.7 Cash flow from operating activities 96.0 63.1 Cash flow from investing activities

• 20.4

76.7 Cash flow from financing activities

• 70.9
• 188.6

Change in cash and cash equivalents 4.7

• 48.9

Cash and cash equivalents at the end of the review period 86.0 82.0

• 49
• 46
• 40

77

• 20

81 93 82 63 96

• 100
• 50

50 100 150 2013 2014 2015 2016 2017 Cash flow from operating activities, EUR million Cash flow from investing activities, EUR million

Dividend development 2010-2017

March 1, 2018 Posti Group Corporation 26

EUR million 4.4 6.8 18.0 25.0 27.0 35.0 13.0 10 20 30 40 50 60 70 2010 2011 2012 2013 2014 2015 2016 2017*

Dividend pay-out from financial year’s result

* Proposal from BoD of Posti Group Corporation

extra dividend dividend based on financial year’s result

March 1, 2018 Posti Group Corporation 27

Outlook

March 1, 2018 Posti Group Corporation 28

Outlook

Net sales

• The euro-denominated

net sales in 2018, excluding possible acquisitions and divestments, are expected to remain on par with 2017.

• 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
• perating result,

excluding possible acquisitions and divestments, is expected to remain on par with 2017 or decrease slightly. Capital expenditure

• Capital expenditure,

excluding possible acquisitions, is expected to remain on par with 2017. 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.

Thank you!