Posti Group Corporation Interim Report Q2/2016 July 18, 2016 - - PowerPoint PPT Presentation

Posti Group Corporation Interim Report Q2/2016

July 18, 2016

Contents

• April-June 2016
• January-June 2016
• Business groups
• Postal Services
• Parcel and Logistics Services
• Itella Russia
• OpusCapita
• Current topics
• Appendices

Posti Group July 18, 2016 2

Posti Group 3 July 18, 2016

Growth in parcel and freight volumes

• The first half of the year was a satisfactory one for Posti in a difficult market climate. The

adjusted operating result improved both in April–June and in January–June in spite of lower net sales across all business groups.

• Volumes of parcel and domestic road freight grew.
• OpusCapita acquired the Germany-based software company jCatalog Software.
• Posti signed an agreement to acquire a logistics company Veine.
• Posti renewed its mail delivery with the aim of flexibly combining other services with delivery
• perations. The goal of the changes is to control the rise of unit costs in delivery operations.
• Following the amendments to the Postal Act, the entire postal market is now open to free

competition.

• Posti’s universal service obligation will be discontinued for domestic parcels, but it will remain in

effect for international parcels sent from Finland, weighing no more than 10kg.

• 49.9% of the ownership of Posti Group Corporation will be transferred to a newly established

development company. The Finnish State’s holding in Posti Group Corporation will remain at 50.1% at a minimum.

• Posti specified the company’s strategic goals. The main strategic goals remain unchanged and

Posti will continue on the path of renewal and growth.

Posti Group

17.0 17.3

5 10 15 20 H1-2015 H2-2016 +2%

Milion units

OpusCapita’s electronic transactions Parcels Addressed letters

Volumes January-June 2016

Million units

4

Million units 418 388

100 200 300 400 500 H1-2015 H1-2016

• 7%

85.5 101.8

20 40 60 80 100 120 H1-2015 H1-2016 +19%

Domestic freight

Million units 1.11 1.16

0,25 0,5 0,75 1 1,25 H1-2015 H1-2016 +4%

July 18, 2016

Q2: +5% Q2: +9%

Heavy traffic volumes are growing after declining for 47 months

Posti Group 5

Source: Finnish Transport Agency

July 18, 2016 Change 12 months The development in main roads, heavy traffic

April-June

Posti Group 6 July 18, 2016

Key events

April-June

Posti Group

• Comparable net sales grew by 3.3% in Parcel and

Logistics Services.

• There were 3 more working days in Q2/2016

compared to Q2/2015.

• Domestic freight volumes grew by 9%, parcel

volumes by 5%.

• Itella Russia’s net sales increased by 3.4%
• Adjusted operating result improved in Parcel and

Logistics Services and in Itella Russia.

• OpusCapita acquired the Germany-based software

company jCatalog Software.

• The Group’s net sales decreased by 5.0%.
• Adjusted operating result improved in Postal

Services and in OpusCapita.

• Net sales declined in Russia because of the

weakening of the ruble.

• The operating result was weighed down by special

items with personnel restructuring costs in domestic production operations representing the most significant proportion of this total.

+ –

7 July 18, 2016

406.3 385.9

• 12.0%
• 5.0%
• 15,0 %
• 10,0 %
• 5,0 %

0,0 % 100 200 300 400 500 Q2 2015 Q2 2016

NET SALES

MEUR Growth-%

• 6.8
• 0.9
• 1.7%
• 0.2%
• 3,0 %
• 2,0 %
• 1,0 %

0,0 %

• 10
• 5

Q2 2015 Q2 2016

OPERATING RESULT, adjusted

MEUR EBIT-% 0.0%

• 5.0%
• 10.0%
• 15.0%

0.0%

• 1.0%
• 2.0%
• 3.0%

Key figures

April-June 2016

• The Group’s net sales decreased by

5.0%. Comparable net sales declined by 3.1%.

• Net sales decreased by 5.3% in Postal

Services, by 1.9% in Parcel and Logistics Services, by 18.9% in Itella Russia and by 6.9% in OpusCapita.

• The adjusted operating result improved

and was EUR -0.9 (-6.8) million.

• The operating result was weighed down

by special items in the amount of EUR - 4.8 (+34.7) million, with personnel restructuring costs in domestic production operations representing the most significant proportion of this total.

• The operating result declined and

amounted to EUR -5.7 (27.9) million

• Mail items covered by the universal

service obligation accounted for 3.8% of all of Posti’s mail items.

4-6/ 2016 4-6/ 2015 Net sales, EUR million 385.9 406.3 Adjusted operating result, EUR million*

• 0.9
• 6.8

Adjusted operating result, %*

• 0.2
• 1.7

Operating result (EBIT), EUR million

• 5.7

27.9 Operating result (EBIT), %

• 1.5

6.9 Result before taxes, EUR million

• 4.2

22.8 Result for the period, EUR million

• 3.1

17.0 Gross capital expenditure, EUR million 48.6 15.5

8 Posti Group July 18, 2016

* excluding special items

Change in costs*

Q2/2015 => Q2/2016

Posti Group 9 July 18, 2016

* excluding special items

January-June 2016

10 Posti Group July 18, 2016

Posti Group

• Adjusted operating result was at the previous

year’s level.

• Adjusted operating result improved in Postal

Services.

• OpusCapita sold its businesses serving the local

markets in the Baltic countries to BaltCap in January.

• Itella Russia acquired the Russian courier company

MaxiPost in March.

• The Group’s net sales decreased.
• Net sales decreased in all business groups.
• Adjusted operating result declined in Parcel and

Logistics Services, Itella Russia and OpusCapita.

• The operating result was weighed down by special

items in the amount of EUR -15.0 (+34.7) million, with personnel restructuring costs in domestic production operations representing the most significant proportion of this total.

• The operating result declined.

+ –

11

Key events

January-June

July 18, 2016

842.2 776.5

• 9.6%
• 7.8%
• 15,0 %
• 10,0 %
• 5,0 %

0,0 % 200 400 600 800 1000 1-6 2015 1-6 2016

NET SALES

MEUR Growth-% 13.7 14.0 1.6% 1.8% 0,0 % 2,0 % 4,0 % 6,0 % 5 10 15 1-6 2015 1-6 2016

OPERATING RESULT, adjusted

MEUR EBIT-% 0.0%

• 5.0%
• 10.0%
• 15.0%

6.0% 4.0% 2.0% 0.0%

• The Group’s net sales decreased by 7.8%.

Comparable net sales decreased by 4.3%.

• Net sales decreased by 4.5% in Postal

Services, by 9.4% in Parcel and Logistics Services, by 21.5% in Itella Russia and by 8.0% in OpusCapita.

• The adjusted operating result improved and

was EUR 14.0 (13.7) million.

• The adjusted operating result improved in

Postal Services and declined in Parcel and Logistics Services, in Itella Russia and in OpusCapita.

• The operating result was weighed down by

special items in the amount of EUR -15.0 (+34.7) million, with personnel restructuring costs in domestic production operations representing the most significant proportion of this total.

• The operating result declined and amounted

to EUR -1.0 (48.4) million.

• Investments increased. Capital expenditure

amounted to EUR 56.4 million. The Group invested in acquisitions, information systems, the transport fleet, production projects during the quarter.

1-6/2016 1-6/2015 Net sales, EUR million 776.5 842.2 Adjusted operating result, EUR million* 14.0 13.7 Adjusted operating result, %* 1.8 1.6 Operating result, EUR million

• 1.0

48.4 Operating result, %

• 0.1

5.8 Result before taxes, EUR million

• 0.7

44.2 Result for the period, EUR million 0.3 32.8 Return on equity (12 months), % 0.5 4.4 Return on invested capital (12 months), % 1.2 5.8 Equity ratio 47.9 48.0 Gearing, %

• 4.2

7.9 Gross capital expenditure, EUR million 59.9 32.0

12

Key figures

January-June 2016

Posti Group July 18, 2016

Change in costs*

1-6/2015 => 1-6/2016

Posti Group 13 July 18, 2016

* excluding special items

Employees

Number of employees in Finland and other countries

• At the end of June, the

number of employees stood at 21,905. The average number of personnel in January-June was 20,838.

• Of all employees 17,374

worked in Finland.

• The Group’s personnel

expenses decreased by 5.0% year-on-year. Without restructuring costs, personnel expenses decreased by 7.2%.

• As of June 30, 2016, a total of

2,132 employees have applied for the Uusi polku (New path) program, and 1,566 have been accepted.

5 000 10 000 15 000 20 000 25 000 30 000

2012 2013 2014 2015 Jan 30, 2016 Other countries Finland Posti Group 14 July 18, 2016

Employees by business group

Postal Services Parcel and Logistics Services Itella Russia OpusCapita Operations Other functions

Business groups

Posti Group 15 July 18, 2016

Postal Services

Posti Group

4-6/2016 4-6/2015 Change-% 1-6/2016 1-6/2015 Change-% Net sales 168.1 177.6

• 5.3%

356.8 373.4

• 4.5%

Adjusted operating result * 3.6 4.8

• 26.3%

28.3 25.9 9.6% Operating result 3.6 4.8

• 26.3%

28.3 26.0 8.8% Adjusted operating result, % * 2.1% 2.7% 7.9% 6.9% Operating result, % 2.1% 2.7% 7.9% 7.0%

April-June

• Net sales declined by 5.3%.
• The adjusted operating result declined to EUR

3.6 (4.8) million. Cost adaptation measures have not fully compensated for the decline in the volume of domestic delivery products. No special items were recognized during the period. January-June

• Net sales declined by 4.5% due to a decline in the

domestic delivery product volume.

• The adjusted operating result improved to EUR 28.3

(25.9) million. The result was boosted by improvements in operational efficiency, the increases in postage fees that took effect at the beginning of 2016, as well as higher delivery volumes related to Easter and Valentine’s Day.

• Operating result was EUR 28.3 (26.0) million.

16 July 18, 2016

* excluding special items

Postal Services

Posti Group 17

219 200

50 100 150 200 250 H1-2015 H1-2016

• 2%

139 128

50 100 150 H1-2015 H1-2016

• 8%

Magazines Newspapers Addressed letter

April-June

• Posti revised delivery routes and extended mail

delivery towards the evening.

• Tuesday mail delivery will be renewed starting

from January 2017.

• Posti will combine the 1st and 2nd letter classes

starting from the beginning of 2017.

• Interest in the home services launched by Posti in

the spring, particularly the lawn mowing service, exceeded expectations. January-June

• In cash services offered to consumers, Posti

adopted the pricing model used commonly in Europe, in which all domestic and foreign letter items have their own fees. There were also price increases in other cash-paid postal services.

• The number of Netposti users increased by 8%

year-on-year and stood at 663,000 at the end of June.

Million units 418 388

100 200 300 400 500 H1-2015 H1-2016

• 7%

July 18, 2016

Parcel and Logistics Services

Posti Group 18

4-6/2016 4-6/2015 Change-% 1-6/2016 1-6/2015 Change-% Net sales 146.0 148.8

• 1.9%

281.4 310.6

• 9.4%

Adjusted operating result *

• 0.6
• 2.1
• 5.9
• 1.1
• Operating result

0.0

• 13.7
• 5.7
• 14.7
• Adjusted operating

result, % *

• 0.4%
• 1.4%
• 2.1%
• 0.3%

Operating result, % 0.0%

• 9.2%
• 2.0%
• 4.7%

April-June

• Net sales decreased by 1.9%. Comparable net sales

grew by 3.3%.

• Warehousing business, parcel services and domestic

road freight grew.

• The adjusted operating result improved. The result

was favorably affected by improved operational efficiency resulting from the divestment of international freight operations.

• The operating result improved clearly.

January-June

• Net sales decreased by 9.4%. Comparable net sales

decreased by 0.6%.

• The adjusted operating result declined. The result was

weighed down by the low warehouse fill rate early in the year, investments in information systems in production

• perations, and start-up costs arising from new

customer relationships. Further factors that had a negative effect on the result included tighter competition in the parcel business and a negative change in the fuel surcharge.

• The operating result improved.

July 18, 2016

* excluding special items

Parcel and Logistics Services

Posti Group 19

April-June

• Parcel volumes grew by 5%.
• Domestic freight volumes grew by 9%.
• The logistics operations of Hobby Hall were transferred

to Posti. Posti signed an agreement to acquire the entire share capital of Veine Ltd.

• The Finnish Communications Regulatory Authority

decided that Posti’s universal service obligation will be discontinued for domestic parcels starting from October 31, 2016, but it will remain in effect for international parcels sent from Finland, weighing no more than 10kg. January-June

• The amount of parcels delivered grew by 2%. The

number of parcels going through Posti’s parcel points grew by 26% year-on-year.

• Domestic freight volumes grew by 4%.
• The fill rate for warehouses in Finland was 78% (71%) at

the end of June.

• Posti had 1,413 service points, of which 480 parcel

points in Finland at the end of June.

8,1 8,6

6 7 8 9 10 Q2-2015 Q2-2016 +5%

Milion units

Domestic freight Parcels

Million units

0,57 0,62

0,25 0,5 0,75 Q2-2015 Q2-2016 +9%

17,0 17,3

5 10 15 20 H1-2015 H1-2016 +2%

Million units

Domestic freight Parcels

Million units

1,11 1,16

0,25 0,5 0,75 1 1,25 H1-2015 H1-2016 +4%

July 18, 2016

Itella Russia

Posti Group 20

4-6/2016 4-6/2015 Change-% 1-6/2016 1-6/2015 Change-% Net sales 25.2 31.1

• 18.9%

46.2 58.8

• 21.5%

Adjusted operating result *

• 1.6
• 2.0
• 3.9
• 2.9
• Operating result
• 1.6
• 2.2
• 1.8
• 3.2
• Adjusted operating

result, % *

• 6.2%
• 6.5%
• 8.5%
• 4.9%

Operating result, %

• 6.3%
• 7.0%
• 4.0%
• 5.4%

July 18, 2016

* excluding special items April-June

• In local currency, net sales turned to an increase of

3.4%. Net sales were favorably affected by higher demand for air, sea and road freight as well as the transport business. The new business brought in by the MaxiPost acquisition also contributed to the

• increase. Warehouse processing volumes also began

to grow.

• Euro-denominated net sales decreased by 18.9%.

The decrease in net sales was attributable to the depreciation of the ruble.

• Adjusted operating result and operating result

improved. January-June

• In local currency, net sales decreased by 4.6%. Net

sales were negatively affected by the weak economic climate and GDP decline and the weak demand for logistics services due to lower customer volumes.

• Euro-denominated net sales decreased by 21.5%. The

decrease in net sales was attributable to the depreciation of the ruble.

• The Russian ruble declined by 14.7%.
• The business group’s adjusted operating result declined.

The weaker result was attributable to lower net sales. The operating result improved.

Itella Russia

Posti Group 21

Warehouse fill rates June 30, 2016

April-June

• The demand for air, sea and road freight and

transportation services grew.

• New business brought in by the MaxiPost

acquisition.

• The handling volumes in the warehouses began

to grow. January-June

• The steepest decline was seen in the demand for

warehousing services. Handling volumes began to grow.

• The demand for air, sea and road freight grew.
• The fill rate of all warehouses was at 82% in the

end of June. The warehouse fill rate in Moscow warehouses improved slightly and was at 80%. The warehouse fill rate in other areas’ warehouses declined and was at 89%.

91% 94% 89% 85% 86% 93% 92% 86% 83% 77% 89% 86% 77% 80% 65% 71% 71% 79% 81% 76% 69% 76% 81% 84% 85% 90% 86% 89%

40% 50% 60% 70% 80% 90% 100%

3-2013 6-2013 9-2013 12-2013 3-2014 6-2014 9-2014 12-2014 3-2015 6-2015 9-2015 12-2015 3-2016 6-2016

Moscow Other areas July 18, 2016

OpusCapita

Posti Group 22

4-6/2016 4-6/2015 Change-% 1-6/2016 1-6/2015 Change-% Net sales 60.8 65.2

• 6.9%

122.1 132.7

• 8.0%

Adjusted operating result * 1.4 2.1

• 34.0%

3.4 6.8

• 50.2%

Operating result 0.9 2.0

• 55.0%
• 0.6

5.9

• Adjusted operating

result, % * 2.3% 3.3% 2.8% 5.2% Operating result, % 1.5% 3.1%

• 0.5%

4.5% April- June

• Net sales decreased by 6.9%. Comparable net sales

decreased by 5.0%. Net sales decreased due to declining traditional mail delivery volumes and the accelerating shift from paper to online communications.

• The adjusted operating result declined due to the

decrease in traditional print volume, the divestment of the businesses serving the local markets in the Baltic countries and investments in the new strategy.

• Operating result declined.

January-June

• OpusCapita’s net sales decreased by 8.0%. Comparable

net sales decreased by 5.1%.

• 60% of the net sales comes from Finland, while the

remaining 40% comes from other countries.

• The adjusted operating result declined due to the

decrease in traditional print volumes, the divestment of the businesses serving the local markets in the Baltic countries and investments in the new strategy.

• Operating result declined.

July 18, 2016

* excluding special items

OpusCapita

Posti Group 23

April-June

• Electronic transaction volumes saw strong

growth, with a comparable increase of 23%.

• The volumes of iPost products fell by 12%.
• OpusCapita acquired the Germany-based

software company jCatalog Software. jCatalog’s net sales in 2015 amounted to approximately EUR 10 million. January-June

• The comparable increase in the electronic

transaction volume was 19%.

• The volumes of iPost products fell by 11%.
• OpusCapita sold its business operations in Estonia,

Latvia, and Lithuania, which served the local markets in the Baltic countries. The transaction did not include the service centers and centers of expertise related to OpusCapita’s global business that are located in the Baltic countries. Electronic transactions

Million units

85.5 101.8

20 40 60 80 100 120 H1-2015 H1-2016 +19%

July 18, 2016

Posti Group 24 July 18, 2016

Outlook for 2016

• The Group’s business is characterized by seasonality. Net sales and operating profit

in the business groups 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.

• Comparable net sales in euros for 2016 are expected to decrease compared to 2015.
• The Group’s adjusted operating result is expected to remain on par with the previous

year.

• There is continued uncertainty related to the development prospects of the result

achieved in Russia.

• The operating result for 2016 will continue to include significant special items.
• The development of exchange rates, especially the ruble exchange rate, may affect

the Group’s net sales, result and balance sheet.

• Capital expenditure is expected to increase from 2015.

Appendices

Posti Group 25 July 18, 2016

• Adjusted operating result percentage exceeds 5%
• Gearing does not exceed 35%
• Return on invested capital is at least 10%
• More than 10% of the Group’s net sales will come from new business areas in 2018

Financial Targets

Posti Group

23.5 21.1 17.2

• 10.5
• 4.2
• 15
• 10
• 5

5 10 15 20 25 30

2012 2013 2014 2015 H1-2016

4.7 1.3 1.0 6.3 1.2 2 4 6 8

2012 2013 2014 2015 H1-2016

% %

Return on invested capital Gearing

2.7 2.6 2.7 2.9 1.8 1 2 3 4

2012 2013 2014 2015 H1-2016

Adjusted operating result, %

% 26 July 18, 2016

Group cost structure

January-June 2016

Posti Group

Indirect costs, EUR million

27 July 18, 2016 209 197

50 100 150 200 250 2015 2016

• 6%

Balance sheet

Posti Group

EUR million

28 July 18, 2016

186 204 458 406 194 104 509 567 1,347 1,280 Q2/2015 Q2/2016

ASSETS

Goodwill Tangible assets Other non-current assets Current assets 628 598 48.0% 47.9% Q2/2015 Q2/2016

EQUITY AND EQUITY RATIO

Equity Equity ratio (%)

Cash flow

Posti Group

1-6 2016 1-6 2015 2015 Result for the period 0.3 32.8 36.0 Cash flow from operating activities before financial items and taxes 42.5 34.3 92.4 Cash flow from operating activities 28.2 33.3 81.9 Cash flow from investing activities

• 25.0
• 34.3
• 40.4

Cash flow from financing activities

• 24.9
• 5.6
• 8.0

Change in cash and cash equivalents

• 21.7
• 6.6

33.4 Cash and cash equivalents at the end of the review period 109.2 93.8 130.1

• Cash flow from operating activities before capital

expenditure was EUR 28.2 million.

• Capital expenditure amounted to EUR 56.4 million.

The Group invested in acquisitions, information systems, the transport fleet, production projects during the quarter.

• Proceeds from divestments totaled EUR 9.0 million.

The most significant divestment was OpusCapita’s sale of its businesses serving the local markets in the Baltic countries.

• At the end of the reporting period, liquid assets

totaled EUR 224.8 million, and undrawn committed credit facilities amounted to EUR 150.0 million.

29 July 18, 2016 119 81 93 82 28

• 123
• 49
• 46
• 40
• 25
• 150
• 100
• 50

50 100 150 2012 2013 2014 2015 1-6/2016 Cash flow from investing activities, EUR million Cash flow from operating activities, EUR million

Net debt and the maturity structure of loans

Maturity structure of loans and financing arrangements, EUR million

Posti Group

Net debt and gearing

30 July 18, 2016

161 139 99

• 64
• 25

23.5% 21.1% 17.2%

• 10.5%
• 4.2%
• 20%
• 10%

0% 10% 20% 30%

• 100
• 50

50 100 150 200 2012 2013 2014 2015 Q2/2016 Net debt, EUR million Gearing (%) 150 100

150

20 40 60 80 100 120 140 160 2016 2017 2018 2019 2020 Bonds Unused credit limits

Result announcements in 2016

Q1: April 29, 2016 at 10:00 am Q2: July 18, 2016 at 10:00 am Q3: October 31, 2016 at 10:00 am

Posti Group 31 July 18, 2016