bpost SA/NV — Investor Presentation 2020

Dec 8, 2020

Your trusted guide to connect in a changing world

Strategy update & capital allocation

Jean-Paul Van Avermaet, CEO Leen Geirnaerdt, CFO

8 December 2020

A new reality is crystallizing…

Digitization further accelerates mail volume decline while stimulating e-commerce adoption

¹ based on the outlook issued on March 17, 2020 excluding impacts from COVID-19

Global e-commerce market expected to reach € 500bn+ by 2024

Source: Capital IQ, McKinsey, Deutsche Bank, Internal knowledge

… requiring a further acceleration of our business mix shift

Parcels and Logistics growth will counteract the decline of Mail & Retail over time

Mail is under pressure…

• Mail volume decline is structural and irreversible driven by continued e-substitution and higher acceptance on the receiver's side
• The decline is accelerating with the pace of decline being the biggest uncertainty

… compensated by growth in Parcels & Logistics

Parcels

• Attractive growth driven by e-commerce penetration
• Competitive industry
• E-commerce logistics
• Growing demand
• Higher value proposition
• Turnaround in the US ongoing
• Infant market in Europe

COVID-19 revealed in 2Q & 3Q20 what an acceleration of the business transformation might look like: promising, but still needing additional initiatives for future EBIT growth

Your trusted guide to connect in a changing world

We, the engaged employees of bpost group, take care of relations and transactions in an evolving physical and digital world. We build on our knowledge of society, customers and technologies. We create sustainable value for our worldwide customers and shareholders

Customer centric

We continue turning Radial into a leading omni-commerce service provider with healthy financial performance

Omni-commerce service offering

Delivers a seamless, unified brand experience by connecting digital & physical channels, stores, devices & suppliers

Omnichannel Technology Customer Care Services Payments & Fraud Protection

Offers friction-free customer experiences, by maximizing order conversions while indemnifying fraud & risk

Fulfillment Services

Global fulfillment capacity to flex & scale on demand

Supply Chain Services

Faster delivery at scale, to delight customers while protecting margins

Cultivate, engage and serve customers to nurture the most important part of the business

To succeed, PaLo NA will implement the following 5 initiatives

Transform the functional organization into a client centric one	• Enhanced organization model around client accounts • Cross-functional, agile account team to: (1) proactively & efficiently resolve issues in a coordinated way, (2) improve client's ease of navigation and interface and (3) generate business insights for the client
Target the emerging brands segment to optimize available fulfillment space	Radial currently has pockets of open space across its network that could fit "small" brands size profile • • Radial drives a sales & marketing approach to compete on this segment through a standardized Value Proposition
Scale-up Radial Order Management for the benefit of all entities of the group	• Radial is now working on a go-to-market strategy for ROM building on: − Flexibility to support and scale based on evolving market conditions & customer behaviors − Cross selling ROM to existing Radial clients using other services − Leveraging clients references for building brand recognition
Further modernize and automate operations with Robotics	• Productivity gains of +10% possible across certain process paths reducing Radial's cycle time • Automation reduces risk exposure and cost linked to overall hiring needs • Scalable tech will help Radial to be flexible and well positioned to capture peaks in coming years
Leverage synergies between the entities of PaLo NA and further right size SG&A	• Integrate Landmark for all Radial clients as service offering Streamline systems • • Implement labor management systems for fulfillment and increase automation in billing process

E-commerce logistics in Europe has 2 complementary engines of growth

Type of clients	E-tailers & click-and-mortar (omnichannel)	Pure e-tailers
Size of clients	Medium/large	Small/medium
Level of automation	Adapted per customer	High (AutoStore + automated packaging)
Level of customization	High, product and price tailored by client	Very low
Current locations	UK, Germany, the Netherlands, Italy and Poland (6 sites)	the Netherlands (2 sites)
Ambitions	Grow mainly organically in the countries where we are already present or in countries marked by flexible & low-cost labour and easy access to Germany, complemented by targeted bolt-on M&A	Grow organically by opening 2 new sites per year in other European countries outside NL to reach 8 international sites by 2026. A new site will open in Germany and Belgium in 2021

PaLo Eurasia

E-commerce logistics NA & EU have a joint vision for 2026 and kicked off several concrete workstreams

Organizational structure and governance facilitates decisionmaking and implementation

Converging view Radial fulfilment model with streamlined operations and KPIs

Improved and aligned technology to support cross-border development

Ambitions Joint workstreams

Joint Client Development

• Bi-directional references and opportunities
• Knowledge sharing on geographies and prospects
• Shared marketing strategy and scale

Commercial Effectiveness Support

• Align Sales Ops: Standard Practices, Cadences & Metrics
• Benchmark numbers and KPI's for NA and EU
• Commercial Systems (e.g., SalesForce)

Fulfilment & Carrier Mgmt methodologies

• Best Practices scaling, automation, workforce
• Leverage relationships with global carriers (e.g., DHL, FedEx, UPS)
• Knowledge sharing about smaller brands operations (e.g., Active Ants)

technology Technology Development

• ROM as Global OMS platform
• Aligned WMS & TMS strategy
• Sharing expertise in other tech domains (e.g., PTF)

VISION 2026 Grow omnicommerce revenues and EBIT, with a substantial part in

PaLo N. Am. & Eurasia

Omni-commerce partner in Belgium

We want to offer the best customer experience in business for receivers and for senders

For receivers For senders

We further adapt our parcel delivery to their preferences, and make interactions with bpost frictionless:

• − Offer additional receiver preference options
• − Improve delivery timeslot logic and communication
• − Use gamification tactics in receiver & postmen apps to boost usage & quality
• − Offer option to chat with a human if our chatbot cannot help
• − Sign & pay for deliveries via mybpost app
• − Optimized and aligned experience through all our channels and customer touchpoints

Build an integrated digital environment where SME senders can manage all interactions with bpost, e.g.

• − Digital onboarding flow for a frictionless 'early lifetime' experience
• − Improved tooling for label creation and business track & trace

Interact with large senders' systems & processes to align bpost's and sender's customer journeys to avoid overlap in a.o. receiver communication & support

Offer efficient & empathic support channels to minimize senders' need to put effort in asking bpost for help with problems

For C senders, offer integrated and optimized customer journey through all our channels (retail, app, web, callcenter …)

Parcels BeNe – PaLo Eurasia

bpost will support Belgian SME's to embrace e-commerce and increase their online business

The Belgian e-commerce space is dominated by large international web shops. Only ~1/3 of parcels is sent by Belgian companies

To help Belgian companies to increase their online business, we build on the recently launched "Every Business Online" offer, so it evolves to a suite of solutions:

• Offer advice and solutions for doing e-commerce beyond logistics:
  • − Consultative & community approach to increase customer's expertise
  • − Offer (partner) ecosystem of e-commerce tools with a.o. marketing & operational solutions
• Offer an efficient, scalable & reliable first mile solution via pick-up and PUDO
• Offer fulfilment solutions (start Active Ants BE in 2021)
• Ensure a qualitative parcel delivery with a frictionless customer journey

Parcels BeNe – PaLo Eurasia

New & innovative experience

A fundamental mind shift for our company

Historically at bpost, Radial or other entities, the prime focus was on making products and services for our B2C customers/senders

Strengthen our position towards the generations Y, Z and Alpha who think mobile, convenience and compare

Ideas and creativity to find new services that will allow us to outperform competition

Digital transformation strategy build on knowing better the residential customers

With the new digital world, the focus is shifting from a senders perspective to a receivers perspective, to even better serve the sender

This will result in an attractive value proposition towards our business customers

We want to create exciting customer experiences to increase NPS scores through four innovative tracks

Tracks How

Build global digital knowledge on our customers be it senders or receivers

Make digital the first interaction medium with our customers in Belgium

Technology is inherent part of the day-to-day operational activities and guarantees the right to play for all entities

New digital business lines and opportunities to complement our omni-commerce revenue streams

• By collecting and grouping all fulfillment, cross-border and last mile data we will be able to have superior insights on our customers
• By servicing our customers via a global customer engagement center where digital is the first interaction channel, we will offer a complete end-to-end service
• bpost should become the only company in Belgium that has more than 5 million customers identified digitally and mobile on the Belgian bpost app
• All our mail products have a digital component
• A bpost innovation center supported by an agile way of working offers the opportunity to involve all our employees in innovation and our customers in the design of new products and services
• Digital twins and Flow control towers will give real-time information on the performance of our factories and provide supply chain solutions for our fulfilment business
• Different solutions are being investigated

What will this bring us?Digital revenues and EBIT within the M&R business unit, as an alternative to declining mail EBIT

M&R

Zoom on Innovation in omni-commerce

Further modernize and automate operations with Robotics, reducing dependency and cost for labour acquisition & retention

Context & ambitions

• Growing demand and industry shortage in reliable warehouse labour, accelerated under COVID-19, will continue to drive increased labour need and costs
• Cost of integration and implementation of robotics technologies in fulfilment decreasing as more providers and solutions enter market and drive efficiencies
• Productivity gains of 10%+ possible across certain process paths reducing Radial's cycle time
• Automation reduces risk exposure and cost linked to overall hiring needs to both bpost group and our clients
• Scalable tech will help bpost group be flexible and well positioned to capture clients' forecasted demand peaks in coming years

How

Technology capex focused on Innovation driven Initiatives to return sustainable productivity increases and labour expense savings over time

• Current pilot with robots integrating with humans in the picking process to significantly increase picking UPH
• UI enhancements: handheld scanning devices
• Robotic kitting: establishment of robotic pods that provide automated kitting for clients with specific product characteristics.
• Packaging profile accuracy: enhancement of weight and measure devises

PaLo N. Am. & Eurasia

Number driven to invest in future

A further review of the operating model in Belgium is required to align operations with expected market evolutions

Drivers		2020-2021	2022-2023 onwards
	Accelerated mail volume decline •	Alternating Distribution Model	Delta
Volumes	• Strong increase of parcels volume	Successful "big bang" nationwide roll out mid-March 2020	What Re-invent the Mail & Parcels supply chain
Profitability	• Increase parcels margin • Protect mail profitability	Delayed launch of gradual mail round reorganization process	in Belgium based on expected market evolution, combining agility, cost and service quality How • Taking into account our social
Market demand	• More flexibility asked by consumers • Broader range of goods ordered online • Increasing EOY peaks	Full savings expected by end 2023 Volume changes linked to COVID-19 are taken into account	responsibility as one of the largest employers in Belgium • Bearing in mind evolving customer needs (sender & receiver) • Responding to sustainability and other market trends
Market trends	• Sustainability: carbon neutral delivery Urban low emission zones • • Congestion/mobility challenges		Goal • Maximize EBIT • Minimize capex • Increase asset utilization

We drive value creation in Mail

Position Mail in the digital world

• We will position Mail in the digital world with projects as such:
  • − My Mail: Keep alive the "Mail Moment"
  • − e-Registered: Be ready to launch a Digital Solution when needed
  • − Digital Stamp: Maximize efficiency in operational processes
  • − Digital Channels: Play the "paper/digital" complementarity in a hybrid Media approach
• Become the first trustworthy data player in Belgium respecting GDPR
• Launch new solutions in the Public Sector

Implement Sales & Marketing Performance Program

• Commercial Dynamic: organize regular Top to Top meetings with each of our top customers and plan systematic interactions with the others
• New Value Proposition: build a new Sales story and visit advertisers with powerful (and tangible/real) examples of campaigns
• Organization:
  • − Rework segmentation/customers target list focusing on maximum growth potential customers.
  • − Reinforce and train the sales teams
• Performance Management: new dashboard approach to drive sales performance

Apply price increases in Transactional mail,

while trying to slow down the volume trend by building a Preference Management Platform for the receiver and push for "split billing"

M&R

Project One targets group-wide overhead efficiency

Context

• The intent is to self-finance our business transformation
• As bpost group is transforming from a traditional mail company into an omni-commerce player that competes against other 3PL players, cost consciousness becomes more than ever important to embed in every layer of our organization
• We need to build new ways of doing things and abandon old ones that have lost their value

Ambition

Reduce the cost/revenue ratio with ONE percent every year through a focus on value driven spending as part of our DNA

How

• Simplify E2E-processes make bpost group a simpler and future proof organization by inspecting and adapting end to end processes and encouraging cross-BU cooperation
• Cost clearing / Hygienic cost revision re-focus the available resources where possible to support the business transformation
• Promote inter-mobility focus on re-orientation to jobs with the highest added value thereby limiting external recruitment

Earth & people friendly

Our 3-pillar CSR strategy is linked to the UN

We are firmly committed to further step up our efforts

We are conducting a materiality assessment and developing a sustainability roadmap

We are creating a "city blueprint" in order to become the preferred operator for sustainable B2C city delivery

Phase 1

Define blueprint (2020 – 2021) in Mechelen

• Expand PuDo network
• Delivery by Electrical Vehicles
• Route optimization & (un)loading tests
• Test new sorting concepts
• Cargo bike & other alternative vehicle testing
• Analyse receiver behaviour & iterate on experience
• Tailor experience to needs of city and receiver
• Measure & validate sustainability impact (CO2, NPS, … )
• Co-create new services with local commerce (P2P, point to point …)
• Partner with top senders to validate new service concepts (Circular models …)
• Lobby cities to mirror concept

Parcels BeNe – PaLo Eurasia

Phase 2

City by city rollout (2021 – 2025)

Roll-out the emission-free last mile model to other Belgian cities

Enable bpost positioning as the preferred city operator in dense urban areas

Cohesion in society

Create new neighbourhood and proximity services

• Building on its strengths retail offices can become more than "just" a post office, in a "leave-no-one-behind" societal approach offering services such as:
  • − Identification and authentication of people, something for which the post office is perfectly equipped, with visual and e-ID based processes
  • − Postal employees can serve as advisors and grant access to pooled devices (scan, print, ...)
  • − With 42% of the population being "digital immigrant" at best in Belgium, the coming years will still see a generation relying on physical interactions. Next to an advisory role, the post office can remain the physical alternative
  • − Basic banking services remain available at post offices, in a context where banks are increasingly leaving rural areas
  • − In rural places where there is no commercial or other presence left, post offices can become the local one stop shop offering food, impulse, press and other products
• The western society is marked by a rapidly aging population, where people want to live at home as long as possible. To enable this, many services and products will have to be delivered at home 24/7
  • − We want to investigate how we could leverage our unique distribution network and create added value services
  • − We could even play a role as coordinating platform to together with other partners manage and execute required daily services

What will this bring us?Solutions revenues and EBIT within the M&R business unit, as an alternative to declining mail EBIT

M&R

Sustainable services to public authorities to contribute to social cohesion in Belgian society

Contract	Current scope	Timing	Future
6th Management Contract (MC)	• Retail network (1,300 postal service points of which at least 650 post offices) • Cash at Counter • Election mail (distribution) • Cash payment of pensions at home	• Runs until end of 2020 • Currently talks on a 1-year extension • Notified and validated by European Commission under State Aid rules	bpost proposal: a 7th SGEI MC incl. modernization & adjustments Basic banking services could be • strengthened in the network of post offices • New innovative public services could be added to support isolated, vulnerable or digitally-disadvantaged citizens
Press concessions	• Also part of SGEIs • Newspaper early delivery 6x/week • Periodical delivery 5x/week • Quality control obligation of maximum 7 complaints per 10k deliveries	• Runs until end of 2022 as a 2- year extension was granted by the State in Dec-19 at the financial conditions prevailing in 2020 • Notification procedure to European Commission of the 2- year extension is ongoing	The future of the concessions must be defined by the new government

• In 2018, the government approved the alternating distribution model enabling bpost to reduce costs
• The new Postal Law (2018) and the new USO Management Contract (2019-2023) foresee a "toolbox" in order to lighten the USO – over time – to avoid the USO becoming a financial burden, for which the State would have to compensate bpost
• Delta was launched in September aiming at defining, agreeing and implementing a new operational model in Belgium

Together inclusive @ life-learning

Be an inclusive organization, offering life-learning experiences

and re-skill bpost employees

Develop a human capital and diversity plan at group level

Set up One group, One team, One spirit, One bpost group culture that lives throughout all companies in bpost group

bpost academy launches an ambitious dual learning program

Scale up dual learning program for training 18 to 25-year-old inactive jobseekers to become bpost mailmen/women and sorting center staff

Phase 1 has been launched Phase 2

bpost academy

Provide reskilling opportunities for internal staff at and outside of bpost, as a responsible employer

Demand-led training for adjacent sectors facing skills shortages

What will this bring us?

Be an important contributor to social cohesion

Be an inclusive organization, offering life-learning experiences

Create sustainable longterm profitability

Number driven to invest in future

Our business transformation will require time and investments

Different businesses with opposing dynamics are at different stages of their cycle with the inflection point being unpredictable as to exact timing…

… they therefore require different levels of investments in the course of the business transformation

Our financial ambition is to seek to more than compensate the EBIT loss from our declining mail business in the trajectory 2021- 2026, and gear for adjusted EBIT growth of bpost group. Going forward, we will give yearly financial guidance rather than long-term group EBIT targets since our business transformation is partly dependent on exogenous factors which are unpredictable in timing.

bpost group has to operate with a refreshed capital allocation policy to meet all stakeholders' expectations throughout the business transformation

Belgian Citizens	Guarantee sustainability of the USO to the Belgian citizens •
Customers	• Enhance further e-commerce development in both last mile delivery as in E-commerce logistics • Offer access to a more diversified international offering
Employees	• Secure long-term employment • Offer an attractive and socially responsible place to work • Increase job opportunities in Belgium & abroad
Belgian State	• Strive to provide high quality USO without financial burden to the State, as well as high quality public services • Secure long-term employment for a diversified workforce as one of Belgium's largest employers • Distribute dividend in accordance with the dividend policy to contribute to the annual budget
Shareholders	• Offer a sustainable and solid investment proposition through: − Durable long-term value creation − Sustainable dividends in accordance with the dividend policy
Debtholders	• Demonstrate a disciplined approach to balance sheet management • Guarantee interest/coupon payments and reimbursement of the principal

The capital allocation should enable our business transformation

To ultimately deliver durable shareholder value while being sustainable from a cash flow perspective and strive for investment grade

¹ Financial discipline is reflected in our striving for an investment grade rating, based on internal cash generation

We remain committed to rewarding shareholders in a sustainable way, while we invest to position the company for growth

IPO dividend policy until 2019

Minimum of 85% of BGAAP net profit of the mother company bpost SA/NV (unconsolidated)

¹ Exceptional deviation from the dividend policy due to COVID-19 to strengthen balance sheet & cash reserves for the long-term. Gross DPS on FY19 results was limited to the interim dividend paid in Dec-19 of € 0.62

Updated dividend policy

Dividend pay-out ratio between 30-50% of IFRS net profit:

• Sustainable in the long run as it offers flexibility and headroom to manoeuvre through the business transformation
• Timing of the annual dividend payment will be in the month of May after the Annual Shareholders Meeting

The new dividend policy offers a sustainable and solid investment proposition

Aligned with bpost group vision & strategy	• Allows flexibility and offers headroom for investments in our growth businesses as defined in our company strategy • Supports the business transformation from a declining postal operator into an E-commerce logistics provider tilted towards long-term growth, thereby ensuring long-term value creation • Commits to annual cash returns during the business transformation while offering participation in the upside thereafter
Linked to bpost group performance	• Linked to bpost group performance (instead of the former BGAAP net profit policy) • Sustainable over the long-term from a cash flow perspective
Supports sound balance sheet management	• Allows to maintain a strong balance sheet, striving for an investment grade credit rating Allows for an appropriate level of distributable reserves •

All investments are tested against additional cash returns to shareholders

• Increased rigour on all capex

• Projects prioritised in line with strategic intents and targeted return
• Optimising balance between growth and maintenance capex
• Suite of metrics to ensure a balanced appraisal

• Projects must attain a minimum return surpassing bpost's WACC by at least 2% while limiting the payback period
• Investments reviewed periodically to monitor progress

Rigorous project governance process

Consistent and thorough application of return metrics

We accelerate our transformation into an omni-commerce group close to society, while remaining an efficient mail provider in Belgium

Enhance customer centricity within the whole bpost group including a top-notch customer experience

Invest in growth of European omnicommerce logistics business, partner with major brands & support Belgium as a country

Create One Group, One Team, One Spirit, One bpost group

Set and reach Ambitious Financial Targets by creating Added Value and keeping costs under control

Continue the turnaround of PALO NA into a financially healthy business that supports the bpost group financial targets & exchanges best practices

Become the preferred employer within our business segments

Transformation of the last mile Belgian mail business into last mile distribution business with Mail, Parcels, Press, Home Services

Prepare bpost group for the digital

world, develop new business opportunities and enhance

innovation

Transform the Belgian retail network in a commercial network serving partners & society

Become a sustainable champion in our business segments

Continue and enhance our societal role in Belgium

Questions