bpost SA/NV

Earnings Release • Aug 8, 2016

Second quarter 2016 results

Analyst call

Koen Van Gerven, CEO Koen Beeckmans, CFO

Brussels – August 9, 2016

Investor presentation - Interim financial report 2Q16

Financial Calendar

More on corporate.bpost.be/investors

09.11.2016 (17:45 CET) Quarterly results 3Q16

15.11.2016 Capital Markets Day

05.12.2016 (17:45 CET) Interim dividend 2016 announcement 08.12.2016 Ex-dividend date (interim dividend)

12.12.2016 Payment date of the interim dividend

Disclaimer

This presentation is based on information published by bpost in its Second Quarter 2016 Interim Financial Report, made available on August, 8th 2016 at 5.45pm CET on corporate.bpost.be/investors. This information forms regulated information as defined in the Royal Decree of 14 November 2007. The information in this document may include forwardlooking statements1, which are based on current expectations and projections of management about future events. By their nature, forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other factors 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-looking statements 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 statements contained 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 sell any securities or a solicitation of any offer to purchase any securities.

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

Highlights of 2Q16

Revenues down 1.0%

• Resilient Domestic Mail and excellent Domestic Parcels volumes offset by anticipated lower SGEI compensation

Resilient underlying Domestic Mail volume evolution

• Driven by good performance in the different portfolios

Excellent domestic parcels volumes, continued growth from international parcels

• Domestic: double-digit volume growth driven by e-commerce and C2C; price/mix effect of -3.0% fully mix related
• International: Positive contribution from acquisition strategy, lower volumes from and to China

Cost savings on track

• Costs (excl. exceptionals) down
• Underlying average FTE reduction of 7071 for the quarter

• Ambition for recurring EBITDA and dividend payment at least at the same level as 2015

-3.8% +18.3% + € 1.8m - € 6.6m € 591.9m

Excellent parcels performance combined with resilient domestic mail and costs savings offset the SGEI reduction

€ million

€ +7.7m / +8.8%

Summary of key financials 2Q16

€ million

	Reported
	2Q15	2Q16	% Δ
Total operating income (revenues)	597.6	591.9	-1.0%
Operating expenses	437.9	432.5	-1.2%
EBITDA	159.8	159.4	-0.2%
Margin (%)	26.7%	26.9%
EBIT	138.3	136.8	-1.1%
Margin (%)	23.1%	23.1%
Profit before tax	139.2	130.2	-6.5%
Income tax expense	48.1	42.3
Net profit	91.2	87.9	-3.6%
FCF	(21.3)	(14.6)	-
bpost S.A./N.V. net profit (BGAAP)	83.8	81.4	-2.9%
Net Debt/ (Net cash), at 30 June		(720.3) (729.9)	1.3%

Total operating income (revenues) € million

		2Q15	SGEI	∆	2Q16	% ∆
	Transactional mail	228.8	-	-4.9	223.9	-2.2%
Domestic mail	Advertising mail	61.4	-	-0.6	60.8	-1.0%
	Press	73.8	-2.8	0.6	71.6	0.8%
	Domestic parcels1	39.4	-	5.8	45.2	14.7%
Parcels	International parcels	39.4	-	1.8	41.2	4.5%
	Special logistics	2.5	-	-0.4	2.1	-15.0%
	International mail	42.1	-	-2.1	40.0	-4.9%
Additional sources	Value added services	23.4	-	4.0	27.4	17.1%
of revenues	Banking and financial	51.7	-2.9	-1.1	47.8	-2.0%
	Other	28.2	-2.4	-1.4	24.4	-5.0%
	Corporate	6.9	-	0.7	7.6	9.9%
TOTAL		597.6	-8.1	2.4	591.9	0.4%

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Resilient domestic mail underlying volume trend at -3.8%

Total operating income (revenues), € million

• Transactional Mail: continued e-substitution without notable acceleration.
• Advertising Mail: improved performance of direct mail from focus sectors and strong unaddressed mail trend.
• Press: mainly driven by periodicals.

		Reported					Underlying 1, 2
	FY15	1Q16	2Q16	1H16	FY15	1Q16	2Q16	1H16
Transactional mail	-5.1%	-5.6%	-3.5%	-4.6%	-5.3%	-5.3%	-4.8%	-5.1%
Advertising mail	-6.9%	0.1%	-2.2%	-1.0%	-4.9%	0.1%	-2.2%	-1.0%
Press	-2.8%	-2.6%	-0.3%	-1.2%	-2.8%	-2.6%	-0.3%	-1.2%
Domestic Mail	-5.3%	-4.2%	-3.0%	-3.6%	-5.0%	-4.0%	-3.8%	-3.9%

¹ 2Q16 counted 2 working days more vs. 2Q15.

² FY15 corrected for requalification of advertising mail to administrative mail.

Excellent domestic parcels performance and continued growth in international parcels

Additional sources of revenues mainly driven by good performance in Solutions

• Loss of wholesale business due to price increases to safeguard reasonable profit margins.
• Positive contribution of Solutions mainly driven by telco contract for decoder swap (€ +0.9m), City Depot (€ +0.4m), European License Plate (€ +0.4m), Combo (€ +0.1m) and other VAS (€ +2.3m).
• Phasing element for bpost bank (surplus remuneration) and lower volumes of financial transactions in post offices (ATM and cash payments).
• Lower volumes in philately (€ -0.4m) and retailer products (€ -0.6m; mainly utility company front office and telco offering).

Cost savings on track

Operating expenses excl. depreciation and amortization, € million

• Positive one-off settlement of social charges last year (net negative impact in 2016 € +4.3m) in payroll.
• Strategic corporate project costs (€ +3.6m) in SG&A.
• Positive evolution of provisions (€ -4.6m) and absence of last year's earn-out for Gout (€ -2.0m) in other costs.
• Decrease in transport costs linked to the evolution of international activities, partially offset by lower favourable settlements in previous year's terminal dues (€ +0.5m).
• Average reported FTE reduction of 77 FTE leading to € -1.5m cost savings, underlying FTE reduction is 707 for the quarter.
• Favourable FTE mix of € -4.9m thanks to the recruitment of auxiliary postmen (€ -1.5m) and the reduction of management level FTE (€ -3.3m).
• Positive price effect of € -5.0m explained by the impact of the tax shift and lower lay-off costs.
• Unfavourable evolution of holiday arrears (€ +2.3m) and increase in employee benefit costs (€ +1.6m).
• Mainly increased publicity and advertising costs (€ +1.1m) and maintenance and repairs (€ +1.1m).

Increase in operating FCF mainly driven by results of operating activities

€ million	2Q15	2Q16	Delta
Cash flow from operating activities	-3.3	+12.2	+15.6
Cash flow from investing activities	-17.9	-26.8	-8.9
Operating free cash flow1	-21.3	-14.6	+6.6
Financing activities	-44.2	-47.4	-3.2
Net cash movement	-65.5	-62.0	+3.4
Capex	-12.3	-19.3	-7.0

• Alpha pay-outs: € -6.3m
• Excluding Alpha:
• Results of operating activities: € +11.1m
• Working capital evolution: € +10.7m, mainly due to positive phasing in payment of commissions on banking and insurance products (€ +7.7m) combined with the higher recoverable VAT (€ +3.4m)
• Proceeds sale of buildings: € -1.2m
• Capex: € -7.0m
• Acquisitions and additional payments in 2016 for Apple Express Canada, City Depot & FDM Australia € -11.7m, partially offset by outflows in 2015 for Gout (€ +4.0m) and LGI (€ +7.0m)
• Higher dividend: € -4.0m

Strong balance sheet structure

€ million

Jun 30, 2016 Dec 31, 2015

Jun 30, 2016 Dec 31, 2015

Outlook for 2016¹

Top line

• Underlying Domestic Mail volume decline around 5%²
• Compensation for SGEI: € 26.8m lower than in 2015 excluding inflation and volume impact
• Domestic Parcels: double digit volume growth
• International Parcels: continued growth supported by acquisitions

Costs

• Productivity improvements: low end of 800 to 1,200 FTE/year range excluding impact of Deltamedia integration.
• Strong focus on all cost items and factor cost levers (e.g. abolishment of Saturday compensation, tax shift).

Recurring EBITDA and dividend payment at least at the same level as 2015

FCF

• Gross capex: c. € 80.0m
• Cash generation from operating activities will be negatively impacted by lower compensation and changed payment terms for SGEI (€ -36.8m), the Alpha pay-outs and a settlement on terminal dues with another postal operator.

¹ Outlook 2016 excludes the impact of the acquisition of the Belgian activities of Lagardère Travel Retail

² 3Q16 will count 1 day less (except for stamps which will count the same number of days) and 4Q16 will count 1 day less vs. same quarter of 2015.

Resilient domestic mail combined with excellent performance in parcels and cost savings offset the reduction in SGEI remuneration

€ million

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€ million

	Reported
	1H15	1H16	% Δ
Total operating income (revenues)	1,214.2	1,196.5	-1.5%
Operating expenses	881.7	861.2	-2.3%
EBITDA	332.5	335.3	0.8%
Margin (%)	27.4%	28.0%
EBIT	289.8	290.7	0.3%
Margin (%)	23.9%	24.3%
Profit before tax	288.2	279.5	-3.0%
Income tax expense	100.5	95.7
Net profit	187.7	183.7	-2.1%
FCF	276.8	231.3	-16.4%
bpost S.A./N.V. net profit (BGAAP)	171.1	171.4	0.1%
Net Debt/ (Net cash), at 30 June		(720.3) (729.9)	1.3%

Total operating income (revenues)

€ million

		1H15	SGEI	∆	1H16	% ∆
	Transactional mail	461.4	-	-13.8	447.7	-3.0%
Domestic mail	Advertising mail	126.1	-	-0.2	125.9	-0.2%
	Press	147.7	-4.2	0.9	144.4	0.6%
	Domestic parcels1	78.9	-	9.4	88.3	11.9%
Parcels	International parcels	80.6	-	2.3	82.9	2.8%
	Special logistics	5.0	-	-0.9	4.2	-17.1%
	International mail	87.3	-	-8.0	79.3	-9.2%
Additional sources	Value added services	47.7	-	5.5	53.3	11.6%
of revenues	Banking and financial	103.4	-5.8	-1.3	96.3	-1.2%
	Other	57.6	-5.2	-3.1	49.3	-5.3%
	Corporate	18.3	-	6.6	25.0	36.1%
TOTAL		1,214.2	-15.2	-2.5	1,196.5	-0.2%

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Resilient domestic mail driven by all product portfolios

• Transactional Mail: continued e-substitution without notable acceleration.
• Advertising Mail: good performance of direct mail from focus sectors and strong unaddressed mail.
• Press: mainly driven by periodicals.

	Reported						Underlying 1, 2
	FY15	1Q16	2Q16	1H16	FY15	1Q16	2Q16	1H16
Transactional mail	-5.1%	-5.6%	-3.5%	-4.6%	-5.3%	-5.3%	-4.8%	-5.1%
Advertising mail	-6.9%	0.1%	-2.2%	-1.0%	-4.9%	0.1%	-2.2%	-1.0%
Press	-2.8%	-2.6%	-0.3%	-1.2%	-2.8%	-2.6%	-0.3%	-1.2%
Domestic Mail	-5.3%	-4.2%	-3.0%	-3.6%	-5.0%	-4.0%	-3.8%	-3.9%

• ¹ 1Q16 had the same number of business working days as 1Q15 except for stamps which had 1 working day less in 1Q16 vs. 1Q15. 2Q16 counted 2 working days more vs. 2Q15. 2 FY15 corrected for requalification of advertising mail to administrative mail.

Excellent performance in domestic parcels and continued growth from international

Additional sources of revenues mainly impacted by the loss of wholesale business and partly compensated by good performance in Solutions

• Loss of wholesale business due to price increases to safeguard reasonable profit margins.
• Positive contribution of Solutions mainly driven by telco contract for decoder swap (€ +1.7m), City Depot (+€0.6m), European License Plate (€ +0.7m), Combo (€ +0.1m) and other VAS (€ +2.4m).
• Phasing element for bpost bank (surplus remuneration) and lower remuneration of financial transactions managed on behalf of the Belgian State.
• Lower volumes in philately (€ -0.9m) and retailer products (€ -1.6m; mainly utility company front office and telco offering).

Cost savings on track

Operating expenses excl. depreciation and amortization, € million

• Decrease in transport costs linked to the evolution of international activities, partially offset by lower favourable settlements in previous year's terminal dues (€ +0.6m).
• Average reported FTE reduction of 216 FTE leading to € -6.7m cost savings, underlying FTE reduction is 721
• Favourable FTE mix of € -9.8m thanks to the recruitment of auxiliary postmen (€ -3.7m) and the reduction of management level FTE (€ -5.9m)
• Positive price effect of € -1.9m
• Holiday arrears (€ +1.7m) and increase of the costs of employee benefits (€ +1.7m).
• One-off settlement of social charges (net impact in 2016 € +4.3m)
• Mainly increased other costs related to strategic corporate projects.
• Mainly positive evolution of provisions (€ -5.9m), last year's earn-out for Gout (€ -2.0m) and higher increase of recoverable VAT (€ -3.0m: from 13% in 2014 to 14% in 2015 to 18.79% in 2016).

Lower SGEI compensation, Alpha pay-outs and acquisitions are the key drivers for the lower net cash generation

€ million	1H15	1H16	Delta
Cash flow from operating activities	+303.2	+293.3	-10.0
Cash flow from investing activities	-26.4	-62.0	-35.5
Operating free cash flow	+276.8	+231.3	-45.5
Financing activities	-44.4	-49.5	-5.1
Net cash movement	+232.4	+181.8	-50.6
Capex	-23.7	-31.7	-7.9

• Lower compensation and changed payment terms for SGEI: € -36.8m
• Lower income tax paid in 2016 vs. 2015 relating to previous years: € +21.1m
• Alpha pay-outs: € -18.3m
• Excluding the above:
• Results of operating activities: € +17.1m
• Working capital evolution: € +6.9m, mainly phasing elements
• Proceeds sale of buildings: € +6.1m
• Capex: € -7.9m
• 1H16 acquisitions & earn-outs: € -44.7m (final payment for SPE € -0.2m, FDM Australia € -12.1m, purchase 24.5% additional shares in LGI € -20.7m, City Depot € -0.2m, Apple Express Canada € -11.4m (subject to changes))
• Partially compensated by 1H15 outflows for Gout (€ +4.0m) and LGI (€ +7.0m)
• Dividend to minority interests: € -2.0m and higher dividend: € -4.0m
• ¹ Operating free cash flow = cash flow from operating activities + cash flow from investing activities

Key contacts

Baudouin de Hepcée Director External Communication, Investor Relations & Public Affairs	• Email: baudouin.dehepcee@bpost.be Direct: +32 (0) 2 276 22 28 • • Mobile: +32 (0) 476 49 69 58 • Address: bpost, Centre Monnaie, 1000 Brussels, Belgium
Saskia Dheedene Manager Investor Relations	• Email: saskia.dheedene@bpost.be Direct: +32 (0) 2 276 76 43 • • Mobile: +32 (0) 477 92 23 43 Address: bpost, Centre Monnaie, 1000 Brussels, Belgium •

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