Earnings Release • May 7, 2019
Earnings Release
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• Expected underlying cash operating income 2019: €170 million - €200 million
Herna Verhagen, CEO of PostNL: "This year, we continue to build on a strong platform for further growth. Step by step we are realising our strategy of becoming the postal and e-commerce logistics company of choice for customers. In Q1 2019, 51% of our revenue came from activities related to e-commerce, evidencing our transition. Underlying cash operating income was broadly in line with last year. We will stay focussed on improving the operational leverage in Parcels and continue to have attention for the realisation of our cost savings plans in Mail in the Netherlands. We confirm our outlook for 2019.
Today, we host our Capital Markets Day 'Focus on our potential'. We will explain how we will further improve the balance between continuing volume growth, profitability and cash flow in Parcels."
| Key figures | |||
|---|---|---|---|
| in € million, except where noted | Q1 2018 | Q1 2019 % Change | |
| Revenue | 674 | 684 | 1 % |
| Operating income | 40 | 22 | -45% |
| Underlying operating income | 41 | 30 | -27% |
| Underlying operating income margin | 6.1% | 4.4% | |
| Changes in pension liabilities | 4 | 4 | |
| Changes in provisions | (13) | (3) | 77% |
| Underlying cash operating income | 32 | 31 | -3% |
| Underlying cash operating income margin | 4.7% | 4.5% | |
| Profit for the period | 14 | 6 | -57% |
| Profit from continuing operations | 23 | 15 | -35% |
| Net cash from/(used in) operating and investing activities | 11 | 4 | -64% |
Note: underlying figures exclude one-offs in Q1 2019 (€9 million in project costs and other and a consolidation effect of €(1) million with discontinued operations) and in Q1 2018 (€1 million).
| 0 | Revenue | Underlying operating income |
Underlying cash operating income |
|||
|---|---|---|---|---|---|---|
| in € million | Q1 2018 | Q1 2019 | Q1 2018 | Q1 2019 | Q1 2018 | Q1 2019 |
| Parcels | 368 | 398 | 23 | 23 | 22 | 22 |
| Mail in the Netherlands | 424 | 392 | 29 | 16 | 17 | 15 |
| PostNL Other | 18 | 21 | (11) | (9) | (7) | (6) |
| Intercompany | (136) | (127) | - | - | - | - |
| PostNL | 674 | 684 | 41 | 30 | 32 | 31 |
Note: underlying figures exclude one-offs
Parcelsreported a volume growth of 16% for the quarter. Domestic 2B and 2C volumes grew strongly, reflecting the trend towards increasing e-commerce.
Revenue at Parcels (excluding Spring) increased by 13% to €345 million (Q1 2018: €306 million). The main driver for this growth was higher volumes, slightly offset by a negative price/mix effect. The Belgian activities continued to report strong growth and PostNL is strengthening its position as logistics service provider in the Benelux. Overall demand for additional services such as evening delivery further increased and revenue from logistics solutions also grew.
This quarter, efficiency gains, such as for example a higher drop duplication, were offset by other costs. Performance was impacted by higher labour costs due to the tight labour market and related costs for training and retention, impact from CLA increases and agreements with our distribution partners. Additional costs were incurred for the optimisation of our transportation network after the expansion of this network by three depots in 2018. This will improve gradually during the year. Finally, IT costs were higher due to further digitisation of our back-office processes. Other performance (mainly logistics solutions)improved slightly.
At Spring, revenue was 9% down to €63 million (Q1 2018: €69 million). Adjusted for FX effects, the decline was 12%. Although the competitive environment is still fierce, bottom-line performance in Spring showed a slight improvement due to tight cost control.
Total revenue at Parcels was up 8% to €398 million (Q1 2018: €368 million) while underlying cash operating income came in at €22 million (Q1 2018: €22 million).
Performance at Mail in the Netherlands was marked by volume decline, price increases, and a negative development in product mix. The cost savings run rate, achieved in the last quarter of 2018, continued.
Addressed mail volumes at Mail in the Netherlands declined by 9.8% in the quarter (9.1% corrected for one working day). This decline was mainly driven by substitution, particularly in single mail, and loss of volumes to competition.
Revenue fell 8% to €392 million (Q1 2018: €424 million) while underlying cash operating income decreased to €15 million (Q1 2018: €17 million). Cost savings and significantly lower cash out related to pensions and provisions were offset by the negative volume/price/mix effect, autonomous cost increases and other factors (e.g. a lower result in export).
PostNL achieved total cost savings of €12 million, in line with expectations. The cost savings plans include several initiatives, such as adjusting the sorting and delivery process, optimisation of the retail network, streamlining of staff and centralisation of locations.
The process towards the intended consolidation of networks in the Dutch postal market is progressing as expected. The first step in the formal process ended with the decision by the Authority for Consumers and Markets that a licence is necessary for an approval of consolidation. PostNL and Sandd have filed a request for such a licence.
When presenting the conclusions of the postal dialogue, the State Secretary underpinned the need for new legislation reflecting the structural decline in the postal market. Following these conclusions, a consultation document with proposed amendments on the Postal Act was recently published. PostNL will carefully review the proposed amendments and will submit its view in due time.
The new CLAs for PostNL and Saturday deliverers will apply retroactively from 1 January 2019 up to and including 31 March 2020. The salary increase of 3% in total will be implemented in three steps. In addition, full-time employees will be paid a one-time compensation of €100 net in January 2020. Agreements have also been reached on pension accrual and sustainable employability.
Revenue at PostNL Other amounted to €21 million (Q1 2018: €18 million). Underlying cash operating income was €(6) million (Q1 2018: €(7) million). Cost savings were offset by increases in other costs and autonomous cost increases.
Pension expense amounted to €30 million (Q1 2018: €31 million) and total cash contributions were €26 million (Q1 2018: €27 million). In Q1 2019, the net actuarial loss on pensions was €6 million. The main pension fund's 12 month average coverage ratio was 115.3%, well above the minimum required funding level of 104.0%. On 30 March 2019, the actual coverage ratio was 113.1%.
The disposal processes for Nexive and Postcon are progressing in accordance with communicated timelines. The result from discontinued operations was €(9) million (Q1 2018: €(9) million) and comprises, among others, a negative business result.
Total equity attributable to equity holders of the parent remained stable at €46 million as at 30 March 2019. The main drivers were net profit of €6 million fully offset by a net actuarial loss on pensions. Net cash from operating and investing activities was €4 million (Q1 2018: €11 million). At the end of Q1 2019, the adjusted net debt position was €621 million, compared with €614 million at the end of 2018.
| Q1 | Q2 | Q3 | Q4 | Total | |
|---|---|---|---|---|---|
| 2018 | 64 | 61 | 65 | 64 | 254 |
| 2019 | 63 | 62 | 65 | 65 | 255 |
| 7 May | Publication of Q1 2019 results |
|---|---|
| Capital Markets Day | |
| 5 August | Publication of Q2 & HY 2019 results |
| 4 November | Publication of Q3 2019 results |
| Final dividend 2018 | |
|---|---|
| 18 April | Ex-dividend date |
| 23 April | Record date |
| 24 April – 8 May, 3.00 pm CET | Election period |
| 10 May | Payment date |
| Interim dividend 2019 | |
| 7 August | Ex-dividend date |
| 8 August | Record date |
| 9 August – 23 August, 3.00 pm CET | Election period |
| 27 August | Payment date |
| Published by | PostNL N.V. Prinses Beatrixlaan 23 2595 AK The Hague The Netherlands T: +31 88 86 86 161 |
|
|---|---|---|
| Investor Relations | Jochem van de Laarschot Director Communications & Investor Relations M: +31 613 86 53 58 E: [email protected] |
Inge Laudy Manager Investor Relations M: +31 610 51 96 70 E: [email protected] |
| Media Relations | Tahira Limon Spokesperson M: +31 610 22 82 81 E: [email protected] |
On 7 May, at 11.30 am CET, the conference call for analysts and investors will start. It can be followed live via an audio webcast on www.postnl.nl.
Additional information is available at www.postnl.nl. This press release contains inside information within the meaning of article 7(1) of the EU Market Abuse Regulation.
Some statements in this press release are 'forward-looking statements'. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. These forward-looking statements involve known and unknown risks, uncertainties and other factors that are outside of our control and impossible to predict and may cause actual results to differ materially from any future results expressed or implied. These forward-looking statements are based on current expectations, estimates, forecasts, analyses and projections about the industries in which we operate and management's beliefs and assumptions about possible future events. You are cautioned not to put undue reliance on these forward-looking statements, which only speak as of the date of this press release and are neither predictions nor guarantees of possible future events or circumstances. We do not undertake any obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as may be required under applicable securities law.
In presenting and discussing the PostNL Group operating results, management uses certain non-GAAP financial measures. These non-GAAP financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used in conjunction with the most directly comparable IFRS measures. Non-GAAP financial measures do not have standardised meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. The main non-GAAP key financial performance indicator is underlying cash operating income. The underlying cash operating performance focuses on the underlying cash earnings performance, which is the basis for the dividend policy. In the analysis of the underlying cash operating performance, adjustments are made for non-recurring and exceptional items as well as adjustments for non-cash costs for pensions and provisions. For pensions, the IFRS-based defined benefit plan pension expenses are replaced by the actual cash contributions for such plans. For the other provisions, the IFRS-based net charges are replaced by the related cash outflows.
The interim financial statements are reported on a year-to-date basis ending 30 March 2019. The information should be read in conjunction with the consolidated 2018 Annual Report of PostNL N.V. as published on 25 February 2019.
The measure of profit and loss and assets and liabilities is based on the Group Accounting Policies, which are compliant with IFRS as endorsed by the European Union. Apart from the changes from the adoption of IFRS 16 Leases per 1 January 2019, all other significant accounting policies applied in these consolidated interim financial statements are consistent with those applied in PostNL's consolidated 2018 Annual Report for the year ended 31 December 2018.
The adoption of the standard impacted the accounting of PostNL's operating leases, mainly related to rent and lease of buildings and transport fleet. PostNL adopted the new standard per 1 January 2019, using the modified retrospective method with the lease assets set equal to the lease liabilities. The comparative figures of Q1 2018 have not been represented.
The impact on the balance sheet per 1 January 2019 is an increase in right-of-use assets and lease liabilities of €132 million within continuing operations. Further, an amount of €37 million was transferred from property, plant and equipment to right-of-use assets relating to finance leases and capitalised leasehold rights and ground rent contracts. The impact on operating income and net profit is non-material, although straight line lease expenses of approximately €12 million have been replaced by depreciation and interest expenses in Q1 2019. The cash flow statement shows a shift from net cash from operating activities to net cash used in financing activities. The assets classified as held for sale and liabilities related to these assets increased by €36 million per 1 January 2019 due to the adoption of IFRS 16.
There are no other IFRS standards, amended standards or IFRIC interpretations taking effect for the first time for the financial year beginning 1 January 2019 that would be expected to have a material impact on the 2019 accounts of the Group.
In line with PostNL's strategy to be the postal and logistics solutions provider in the Benelux, PostNL has decided to divest Nexive and Postcon. In Q3 2018, the classification criteria of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations were met. Accordingly, as of Q3 2018, Nexive and Postcon have been reported as 'held for sale' and the results and cash flows have been reported as 'discontinued operations'. In Q1 2019, the result from discontinued operations of €(9) million includes a negative business result, increased costs of disposal and a consolidation effect with continuing operations. The comparative figures of Q1 2018 have been represented for the change to 'discontinued operations'.
The content of this interim financial report has not been audited or reviewed by an external auditor.
| Represented | ||
|---|---|---|
| in € million | Q1 2018 | Q1 2019 |
| Revenue from contracts with customers | 670 | 680 |
| Other operating revenue | 4 | 4 |
| Total operating revenue | 674 | 684 |
| Other income | 4 | 1 |
| Cost of materials | (18) | (17) |
| Work contracted out and other external expenses | (314) | (315) |
| Salaries, pensions and social security contributions | (252) | (265) |
| Depreciation, amortisation and impairments | (19) | (35) |
| Other operating expenses | (35) | (31) |
| Total operating expenses | (638) | (663) |
| Operating income | 40 | 22 |
| Interest and similar income | 1 | 1 |
| Interest and similar expenses | (9) | (4) |
| Net financial expenses | (8) | (3) |
| Results from investments in JVs/associates | 0 | 0 |
| Profit/(loss) before income taxes | 32 | 19 |
| Income taxes | (9) | (4) |
| Profit/(loss) from continuing operations | 23 | 15 |
| Profit/(loss) from discontinued operations | (9) | (9) |
| Profit for the period | 14 | 6 |
| Attributable to: | ||
| Non-controlling interests | - | - |
| Equity holders of the parent | 14 | 6 |
| Earnings per ordinary share (in € cents) 1 | 3.1 | 1.3 |
| Earnings per diluted ordinary share (in € cents) 2 | 3.1 | 1.3 |
| Earnings from continuing operations per ordinary share (in € cents) 1 | 5.1 | 3.2 |
| Earnings from continuing operations per diluted ordinary share (in € cents) 2 | 5.1 | 3.2 |
| Earnings from discontinued operations per ordinary share (in € cents) 1 | (2.0) | (1.9) |
| Earnings from discontinued operations per diluted ordinary share (in € cents) 2 | (2.0) | (1.9) |
1 Based on an average of 469,199,776 outstanding ordinary shares (2018: 453,530,195).
2 Based on an average of 470,214,566 outstanding diluted ordinary shares (2018: 454,070,420).
The results are impacted by a consolidation effect of eliminated intercompany income/charges between continuing operations and discontinued operations. Excluding this effect, operating income in Q1 2019 amounted to €21 million (Q1 2018: €38 million). Likewise, excluding this effect, profit/(loss) from discontinued operations in Q1 2019 amounted to €(8) million (Q1 2018: €(7) million).
| Represented | ||
|---|---|---|
| in € million | Q1 2018 | Q1 2019 |
| Profit for the period Other comprehensive income that will not be reclassified to the income statement |
14 | 6 |
| Impact pensions, net of tax Other comprehensive income that may be reclassified to the income statement |
9 | (6) |
| Currency translation adjustment, net of tax | 0 | 0 |
| Gains/(losses) on cashflow hedges, net of tax | 1 | (1) |
| Total other comprehensive income for the period | 10 | (7) |
| Total comprehensive income for the period | 24 | (1) |
| Attributable to: | ||
| Non-controlling interests | - | - |
| Equity holders of the parent | 24 | (1) |
| Total comprehensive income attributable to the equity holders of the parent arising from: |
||
| Continuing operations | 33 | 8 |
| Discontinued operations | (9) | (9) |
| Represented | ||
|---|---|---|
| in € million | Q1 2018 | Q1 2019 |
| Profit/(loss) before income taxes | 32 | 19 |
| Adjustments for: | ||
| Depreciation, amortisation and impairments | 19 | 35 |
| Share-based payments | 1 | 1 |
| (Profit)/loss on disposal of assets | (4) | (1) |
| Interest and similar income | (1) | (1) |
| Interest and similar expenses | 9 | 4 |
| Results from investments in JVs/associates | 0 | 0 |
| Investment income | 4 | 2 |
| Pension liabilities | 4 | 4 |
| Other provisions | (11) | (5) |
| Changes in provisions | (7) | (1) |
| Inventory | (1) | 1 |
| Trade accounts receivable | 16 | 44 |
| Other accounts receivable | 16 | (1) |
| Other current assets excluding taxes | 1 | (25) |
| Trade accounts payable | (10) | (3) |
| Other current liabilities excluding short-term financing and taxes | 1 | (16) |
| Changes in working capital | 23 | 0 |
| Cash generated from operations | 72 | 56 |
| Interest paid | (2) | (2) |
| Income taxes received/(paid) | (47) | (43) |
| Net cash (used in)/from operating activities | 23 | 11 |
| Interest received | 1 | 1 |
| Acquisition of subsidiairies (net of cash) | - | (1) |
| Capital expenditure on intangible assets | (5) | (6) |
| Capital expenditure on property, plant and equipment | (12) | (4) |
| Proceeds from sale of property, plant and equipment | 4 | 3 |
| Net cash (used in)/from investing activities | (12) | (7) |
| Repayments of lease liabilities | - | (13) |
| Net cash (used in)/from financing activities | 0 | (13) |
| Total change in cash from continuing operations | 11 | (9) |
| Cash at the beginning of the period | 645 | 269 |
| Cash transfers to discontinued operations | - | (7) |
| Total change in cash from continuing operations | 11 | (9) |
| Total change in cash from discontinued operations | (29) | |
| Cash at the end of the period | 627 | 253 |
| Total change in cash from discontinued operations | (29) | (13) |
| Consolidated statement of financial position | ||
|---|---|---|
| in € million | 31 December 2018 | 30 March 2019 |
| ASSETS | ||
| Non-current assets | ||
| Intangible fixed assets | ||
| Goodwill | 9 7 |
9 7 |
| Other intangible assets | 115 | 112 |
| Total | 212 | 209 |
| Property, plant and equipment | ||
| Land and buildings | 322 | 295 |
| Plant and equipment | 155 | 135 |
| Other | 1 2 |
1 2 |
| Construction in progress | 5 | 9 |
| Total | 494 | 451 |
| Right-of-use assets | 0 | 160 |
| Financial fixed assets | ||
| Investments in joint ventures/associates | 3 | 3 |
| Other loans receivable | 6 | 6 |
| Deferred tax assets | 6 6 |
7 5 |
| Financial assets at fair value through OCI | 1 7 |
1 8 |
| Total | 92 | 102 |
| Total non-current assets | 798 | 922 |
| Current assets | ||
| Inventory | 5 | 4 |
| Trade accounts receivable | 313 | 269 |
| Accounts receivable | 1 2 |
1 3 |
| Income tax receivable | 2 | 3 5 |
| Prepayments and accrued income | 9 9 |
122 |
| Cash and cash equivalents | 269 | 253 |
| Total current assets | 700 | 696 |
| Assets classified as held for sale | 200 | 236 |
| Total assets | 1,698 | 1,854 |
| LIABILITIES AND EQUITY | ||
| Equity | ||
| Equity attributable to the equity holders of the parent | 4 6 |
4 6 |
| Non-controlling interests | 3 | 3 |
| Total | 49 | 49 |
| Non-current liabilities | ||
| Deferred tax liabilities | 3 1 |
3 5 |
| Provisions for pension liabilities | 296 | 309 |
| Other provisions | 1 9 |
1 9 |
| Long-term debt | 398 | 398 |
| Long-term lease liabilities | 2 2 |
102 |
| Accrued liabilities | 4 | 3 |
| Total | 770 | 866 |
| Current liabilities | ||
| Trade accounts payable | 146 | 143 |
| Other provisions | 2 1 |
1 6 |
| Short-term debt | 1 | 4 |
| Short-term lease liabilities | 3 | 4 7 |
| Other current liabilities | 126 | 139 |
| Income tax payable | 3 | 1 |
| Contract liabilities | 8 0 |
6 3 |
| Accrued current liabilities | 378 | 372 |
| Total | 758 | 785 |
| Liabilities related to assets classified as held for sale | 121 | 154 |
| Total equity and liabilities | 1,698 | 1,854 |
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