QUADIENT S.A. 
H1 2018: GOOD LEVEL OF SALES AND CASHFLOW GENERATION
- 1.2% organic growth[1] in Q2 2018 sales
- H1 2018 sales down -0.4% on an organic basis[2]
- H1 2018 current EBIT margin down at 17.2% [3]of sales
- 18.1% growth in net attributable income to €60 million in H1 2018
- H1 2018 cashflow after CAPEX of €55 million
- Indications for full-year 2018 updated
Paris, September 25, 2018
Neopost, a global leader in digital communications, shipping and mail solutions, today announced its results for first-half 2018 (period ended July 31, 2018) and second-quarter sales. These financial statements were reviewed and approved by the Board of Directors at its meeting on Monday, September 24, 2018.
Geoffrey Godet, Chief Executive Officer of Neopost, commented: "We delivered good organic growth in the second quarter, owing to an improved performance from our Enterprise Digital Solutions division, robust growth in rental revenue from our automated parcel lockers in Japan, and stable revenues for Mail Solutions in North America.
We therefore ended the first six months of the year with sales ahead of expectations. In addition, our continued efforts in developing the Shipping division weighed on our current EBIT margin. We are thus updating our indications for 2018. We now have a slightly better outlook in terms of annual sales, while our expected operating margin has been lowered. Neopost's financials are sound and we continue to generate high cashflow."
INCOME STATEMENT
| € million | H1 2018 | H1 2017 | Change |
| Sales | 528 | 559 | -5.6% |
| Current operating income before acquisition-related expenses | 91 | 101 | -10.2% |
| % of sales | 17.2% | 18.0% | |
| Current operating income | 85 | 95 | -10.1% |
| Net attributable income | 60 | 51 | +18.1% |
| % of sales | 11.4% | 9.1% | |
| Earnings per share[4] | 1.61 | 1.34 | +20.1% |
| Diluted earnings per share | 1.50 | 1.27 | +18.1% |
In H1 2018, the Group achieved sales of €528 million, down -5.6% year-on-year, and down -0.8% excluding currency effects, representing an organic decline of -0.4%.
The Group generated €279 million in sales in the second quarter of 2018, up 1.2% on an organic basis. The Group's return to positive growth is due to the combination of a better performance by the Enterprise Digital Solutions division, sustained growth in sales by Neopost Shipping and a slower pace of decline in sales by SME Solutions.
Current operating income, before acquisition-related expenses, was €91 million in H1 2018. EBIT margin before acquisition-related expenses stood at 17.2% of sales, versus 18.0% in first-half 2017.
Net attributable income was €60 million in first-half 2018, up from €51 million one year earlier. The Group's net margin[5] climbed to 11.4% of sales, from 9.1% in the same period in 2017. Cashflow net of CAPEX totaled €55 million, from €61 million in H1 2017.
SALES BY DIVISION
| € million | H1 2018 | H1 2017 | Change | Change at constant exchange rates | Organic change1 |
| Enterprise Digital Solutions (EDS) | 69 | 69 | -0.4% | +4.7% | +7.4% |
| Neopost Shipping | 31 | 27 | +15.6% | +21.5% | +21.5% |
| SME Solutions | 439 | 473 | -7.2% | -2.5% | -2.5% |
| Eliminations | (11) | (10) | |||
| Total | 528 | 559 | -5.6% | -0.8% | -0.4% |
Enterprise Digital Solutions (EDS)
Enterprise Digital Solutions sales rose 4.7%, excluding currency effects, in first-half 2018. Restated for the scope effects related to the disposal of DMTI Spatial, sales grew 7.4% on an organic basis.
This growth is above Group expectations. Sales in Customer Communications Management grew 10.2% as maintenance and service revenues increased, while the decline in license sales on prior-period high base of comparison (especially Q2) was less sharp than expected.
In line with expectations, organic growth in Data Quality activities was down -2.5%.
Neopost Shipping
Neopost Shipping sales in the first half increased 21.5%, excluding currency effects, mainly due to robust growth in the installed base of Packcity automated parcel lockers in Japan. The installed base reached 3,100 units at end-July 2018, from 2,200 units at end-January 2018 and 600 units at end-July 2017. Today, approximately one hundred parcel lockers are installed a month.
The number of new CVP-500 automated packing systems placed in the first half of the year was the same as in H1 2017.
Software solutions sales declined -6.2%, excluding currency effects.
SME Solutions
SME Solutions sales were down -2.5% in H1 2018 at constant exchange rates.
Mail Solutions sales decreased -3.9%, excluding currency effects. The pace of decline slowed in the second quarter (-2.8%), from the first quarter (-5.0%), reflecting the good level of performance recorded in North America.
Communication & Shipping Solutions sales by the SME Solutions divisions rose 6.0%, excluding currency effects. This growth resulted from a 21.5% (excluding currency effects) increase in digital communications and shipping solutions sales, partially offset by the persistent decline in graphic activities - down -12.0%, excluding currency effects.
Breakdown of sales by activity and revenue type
Sales by activity
| € million | H1 2018 | H1 2017 | Change | Change at constant exchange rates | Organic change1 |
| Mail solutions | 372 | 407 | -8.5% | -3.9% | -3.9% |
| Communication & Shipping Solutions[6] | 156 | 152 | +2.3% | +7.6% | +8.9% |
| Total | 528 | 559 | -5.6% | -0.8% | -0.4% |
Combined, the Group's Communication & Shipping Solutions6 activities today account for 29.5% of total Group sales versus 27.3% at July 31, 2017.
Sales by revenue type
| € million | H1 2018 | H1 2017 | Change | Change at constant exchange rates | Organic change1 |
| Equipment and license sales | 155 | 177 | -12.7% | -7.9% | -7.5% |
| Recurring revenue | 373 | 382 | -2.3% | +2.6% | +2.8% |
| Total | 528 | 559 | -5.6% | -0.8% | -0.4% |
Revenue from equipment and license sales was lower by -7.5% on an organic basis, reflecting the structural decline in the Mail Solutions business, the slowdown in graphic activities and the fall in license sales by the EDS division.
Recurring revenue was up 2.8% on an organic basis, owing to the increase in software maintenance and service revenue and to rental revenue from automated parcel lockers. Recurring revenue continues to increase as a share of Group sales, accounting for 70.7% of the total.
LOWER CURRENT OPERATING MARGIN
EBIT margin by segment
| H1 2018 | H1 2017 | ||||||||||
| € million | EDS | Neopost Shipping | SME Solutions | Innovation[7] | Total | EDS | Neopost Shipping | SME Solutions | Innovation7 | Total | |
| Sales | 69 | 31 | 439 | 0 | 528[8] | 69 | 27 | 473 | 0 | 5598 | |
| Current operating income3 | 7 | (11) | 96 | (1) | 91 | 9 | (7) | 103 | (4) | 101 | |
| Current operating margin3 | 10.1% | (35.7)% | 21.9% | n/a | 17.2% | 12.4% | (25.9)% | 21.8% | n/a | 18.0% | |
Enterprise Digital Solutions had lower year-on-year license sales, which narrowed its EBIT margin3 to 10.1% of sales, from 12.4% in the same period in 2017.
Neopost Shipping's EBIT margin3 reached -35.7% of sales, versus -25.9% one year earlier. Fall in the margin is owing to a decline in sales of software solutions and continued efforts to market and develop new software solutions, CVP packing systems and automated parcel lockers.
The SME Solutions division maintained its EBIT margin3 the same as last year at 21.9% of sales, as it continued to keep operating costs under control.
Outside the three operating divisions, expenditure on innovation in the first half was for new projects to develop mobile and cloud applications. In H1 2017, these expenses concerned the development of digital apps for small businesses to use on a web distribution platform, a project in part transferred to the SME Solutions division as of February 1, 2018.
Group current operating income before acquisition-related expenses came out at €91 million, from €101 million in H1 2017. The current EBIT margin (before acquisition-related expenses) was 17.2% of sales, versus 18.0% one year earlier.
Acquisition-related expenses accounted for €6 million, unchanged from last year.
Current operating income was €85 million in the first half of 2018, versus €95 million one year earlier.
ALMOST STABLE OPERATING INCOME
The Group posted €3 million in structural optimization expenses in H1 2018, €3 million lower than the expense incurred in H1 2017.
Note that in the first-half 2017, the Group had €6 million in non-recurring expenses related to disposals, including DMTI, and the revised earn-out and goodwill on Temando.
After factoring in these non-current items, operating income ended at €82 million at July 31, 2018, practically unchanged from €83 million one year earlier.
NET INCOME
The net cost of debt was down to -€15 million from -€17 million in H1 2017. Debt refinancing in 2017 led to carrying charges and early redemption costs for the credit lines that were redeemed.
The Group also posted exchange gains in first-half 2018 for €1 million.
Net financial loss therefore came to -€14 million in H1 2018, from -€17 million in the same period last year.
The Group's tax rate was 12.5%, versus 26.6% in H1 2017, partially down to the cut in the US tax rate and the recognition of interest on arrears in relation to the cancellation of taxes on dividends[9] in France in the amount of €5 million. Excluding non-recurring items, the tax rate was 23% in first-half 2018, in line with Group expectations.
Net attributable income rose 18.1% to €60 million in the period, from €51 million in H1 2017, giving a net margin of 11.4%, up from 9.1% last year. Diluted earnings per share4 were €1.50 vs. €1.27 in H1 2017.
STRONG CASHFLOW GENERATION MAINTAINED
EBITDA[10] totaled €130 million, from €142 million in first-half 2017.
The change in working capital requirements (-€41 million) was more negative than in the same period last year (-€25 million), mainly due to a time lag between the payment and the collection of approximately €10 million in VAT related to intra-Group transactions. The payment took place in first-half 2018 but this difference will be made up in the second half of 2018 and will not impact full-year 2018. The change in working capital requirements also reflects an increase in inventory and a decrease in trade accounts payable.
Leasing receivables decreased by €29 million, reflecting a 4.0% contraction in the Group's leasing portfolio, excluding currency effects. In comparison, leasing receivables decreased by €26 million in first-half 2017. Leasing and other financing services receivables amounted to €702 million at July 31, 2018, from €711 million at January 31, 2018.
The Group paid €17 million in interest and taxes versus €33 million one year earlier. The difference was due to the €13 million received in French dividend tax repayment and interest on arrears during the first half.
Investments in property, plant and equipment and intangible fixed assets came to €40 million in the period, from €44 million in H1 2017. Factoring a subsidy of €5 million received from the Japanese government during the first half of 2018 for the rollout of Packcity lockers, the Group's investment spend was almost stable year-on-year.
Total cashflow net of CAPEX added up to €55 million, versus €61 million one year earlier.
The Group continued to deleverage, and net debt was again reduced to €653 million at July 31, 2018, from €675 million at January 31, 2018. The net debt/EBITDA ratio was unchanged from H1 2017 at 2.4. Net debt is fully backed by future cashflows expected from the Group's rental and leasing activities.
Equity stood at €1,218 million at July 31, 2018, from €1,169 million at January 31, 2018. As such, gearing came out at 54% of shareholders' equity versus 58% at January 31, 2018.
UPDATED 2018 INDICATIONS
Given the first-half 2018 performance, the Group outlook for sales evolution has improved slightly for full-year 2018. However, Neopost continues to expect an organic decline in annual sales, broken down as:
- Enterprise Digital Solutions: top line now expected at high-single-digit growth from low-single-digit growth previously
- Neopost Shipping: double-digit growth confirmed well below H1 2018 performance;
- SME Solutions: continued slowdown in Mail Solutions at a pace that, based on trends from previous fiscal years, is still expected between -4% to -6%; double-digit growth in Digital communication & Shipping solutions but at a slower pace than in H1; further decline expected in graphic activities.
Group current EBIT margin is now expected at above 17% for full-year 2018, from about 18% previously. This new indication is primarily driven by the EBIT margin for the Neopost Shipping division, which is expected to remain around H1 performance. EBIT margin for the Enterprise Digital Solutions is expected to increase versus H1 and SME Solutions' EBIT margin to achieve a similar performance to H1. Neopost also expects increased efforts in innovation related to new projects, which are not factored into operating profitability for the three divisions.
The Group will continue to generate high operating cashflow. Attention is drawn to:
- The reimbursement of the French tax on dividends plus interest in the amount of €13 million in H1 2018 was a one-off item;
- The time lag issue related to intra-Group VAT transactions that led to a payment of some €10 million in the first half of 2018 has led, in turn, to the collection of the same amount in August 2018.
Webcast of meeting
The Neopost meeting on Wednesday, September 26, 2018, in Paris will be webcast simultaneously at 09:00 Paris time and 08.00 London. The meeting will be held in English and the webcast will be available here: http://www.neopost-group.com/. The recording will be available for one year.
Calendar
Q3 2018 sales will be published on December 3, 2018 after market close. An investor meeting will be held in Paris on January 23, 2019 to present our new strategy.
ABOUT NEOPOST NEOPOST is a global leader in digital communications, logistics and mail solutions. Its mission is to help companies improve the way they manage interactions with their clients and partners. Neopost provides the most advanced solutions for physical mail processing (mailing and folder-inserter systems), digital communication management (Customer Communications Management and Data Quality applications), and supply chain and e-commerce process optimization (from point of sale to delivery, including associated tracking services). With a direct presence in 29 countries and more than 5,800 employees, Neopost reported annual sales of €1.1 billion in 2017. Its products and services are sold in more than 90 countries. Neopost is listed in compartment A of Euronext Paris and belongs to the SBF 120 index. |
For more information, please contact:
| Gaële Le Men, Neopost | DDB Financial |
| Financial and Corporate Communications Director | Isabelle Laurent / Fabrice Baron |
| +33 (0)1 45 36 31 39 | +33 (0)1 53 32 61 51 /+33 (0)1 53 32 61 27 |
| g.le-men@neopost.com / financial-communication@neopost.com | isabelle.laurent@ddbfinancial.fr / fabrice.baron@ddbfinancial.fr |
Or visit our website: www.neopost-group.com
Follow us on: Linkedin @Neopost - Twitter @NeopostGroup - Instagram @neopostgroup
APPENDICES
Glossary
- Enterprise Digital Solutions (EDS): division offering Customer Communications Management and Data Quality solutions for large companies. This division includes GMC Software, Human Inference, and Satori, now grouped under Quadient, and icon Systemhaus.
- Neopost Shipping: division offering management solutions for shipping and delivery; tracking of goods and merchandise for players in e-commerce, distribution and carriers. This division includes ProShip and Temando.
- SME Solutions: division offering Mail Solutions products and services for small and mid-sized enterprises, the Group's long-standing customers. This division also delivers digital, shipping and graphic solutions for the same customer base.
- Mail Solutions: mailing systems, document management systems (folder/inserters for office and mailroom; other mail room equipment) and related services.
- Communication & Shipping Solutions: digital solutions software (customer communications management and data quality software), shipping and graphic solutions.
Q2 2018 sales by division
| € million | Q2 2018 | Q2 2017 | Change | Change at constant exchange rates | Organic change2 |
| EDS | 38 | 37 | +3.4% | +6.1% | +8.1% |
| Neopost Shipping | 18 | 15 | +17.9% | +21.8% | +21.8% |
| SME Solutions | 229 | 236 | -3.1% | -0.7% | -0.7% |
| Eliminations | (6) | (5) | |||
| Total | 279 | 283 | -1.6% | +1.0% | +1.2% |
Q2 2018 sales by business
| € million | Q2 2018 | Q2 2017 | Change | Change at constant exchange rates | Organic change2 | |
| Mail solutions | 192 | 202 | -5.0% | -2.8% | -2.8% | |
| Communication & Shipping Solutions | 87 | 81 | +7.0% | +10.2% | +11.2% | |
| Total | 279 | 283 | -1.6% | +1.0% | +1.2% |
Q2 2018 sales by revenue type
| € million | Q2 2018 | Q2 2017 | Change | Change at constant exchange rates | Organic change2 | |
| Equipment and license sales | 86 | 95 | -9.8% | -7,1% | -6.7% | |
| Recurring revenue | 193 | 188 | +2.6% | +5.0% | +5.2% | |
| Total | 279 | 283 | -1.6% | +1.0% | +1.2% |
Sales by region: Q2 2018 and H1 2018
| € million | Q2 2018 | Q2 2017 | Change | Change at constant exchange rates | Organic change2 | H1 2018 | H1 2017 | Change | Change at constant exchange rates | Organic change1 | |
| North America | 122 | 125 | -2.0% | +2.2% | +2.8% | 231 | 252 | -8.2% | +0.3% | +1.1% | |
| Europe | 135 | 135 | -0.2% | +0.4% | +0.4% | 256 | 263 | -2.7% | -1.8% | -1.8% | |
| Asia-Pacific and others | 22 | 23 | -6.9% | -2.5% | -2.5% | 41 | 44 | -7.6% | -0.5% | -0.5% | |
| Total | 279 | 283 | -1.6% | +1.0% | +1.2% | 528 | 559 | -5.6% | -0.8% | -0.4% |
First-half 2018
Consolidated income statement
| € million | H1 2018 (period ended on July 31, 2018) | H1 2017 (period ended on July 31, 2017) | FY 2017 (period ended on January 31, 2018) | |||
| % | % | % | ||||
| Sales | 528 | 100.0 % | 559 | 100.0% | 1,112 | 100.0% |
| Cost of sales | (128) | (24.3)% | (138) | (24.7)% | (280) | (25.1)% |
| Gross margin | 400 | 75.7% | 421 | 75.3% | 832 | 74.9% |
| R&D expenses | (28) | (5.3)% | (28) | (4.9)% | (57) | (5.1)% |
| Sales expenses | (132) | (25.1)% | (139) | (25.0)% | (280) | (25.1)% |
| Administrative and general expenses | (97) | (18.3)% | (100) | (17.9)% | (195) | (17.6)% |
| Maintenance and other expenses | (52) | (9.8)% | (52) | (9.3)% | (100) | (9.0)% |
| Employee profit-sharing and share-based payments | (0) | (0.0)% | (1) | (0.2)% | 1 | (0.0)% |
| Current operating income before acquisition-related expenses | 91 | 17.2% | 101 | 18.0% | 202 | 18.2% |
| Acquisition-related expenses | (6) | (1.0)% | (6) | (1.0)% | (11) | (1.0)% |
| Current operating income | 85 | 16.2% | 95 | 17.0% | 191 | 17.2% |
| Gains/(losses) on disposals and others | - | - | - | - | 0 | 0.0% |
| Structure optimization expenses | (3) | (0.6)% | (6) | (1.1)% | (13) | (1.2)% |
| Other operating expenses | (0) | (0.0)% | (6) | (1.1)% | (12) | (1.0)% |
| Operating income | 82 | 15.6% | 83 | 14.8% | 166 | 15.0% |
| Financial income/(expense) | (14) | (2.8)% | (17) | (3.0)% | (34) | (3.1)% |
| Income before taxes | 68 | 12.8% | 66 | 11.8% | 132 | 11.9% |
| Income taxes | (9) | (1.6)% | (17) | (3.1)% | (1) | (0.1)% |
| Share of results of associated companies | 1 | 0.2% | 0 | - | 2 | 0.1% |
| Net income | 60 | 11.4% | 49 | 8.7% | 133 | 11.9% |
| Minority interests | 0 | 0.0% | 2 | 0.4% | 1 | 0.1% |
| Net attributable income | 60 | 11.4% | 51 | 9.1% | 134 | 12.0% |
First-half 2018
Simplified consolidated balance sheet
| Assets € million | July 31, 2018 | July 31, 2017 | January 31, 2018 | |
| Goodwill | 1,076 | 1,065 | 1,062 | |
| Intangible fixed assets | 186 | 205 | 191 | |
| Tangible fixed assets | 139 | 128 | 136 | |
| Other non-current financial assets | 73 | 55 | 60 | |
| Leasing receivables | 702 | 733 | 711 | |
| Other non-current receivables | 4 | 2 | 4 | |
| Deferred tax assets | 5 | 23 | 5 | |
| Inventories | 72 | 73 | 66 | |
| Receivables | 205 | 230 | 243 | |
| Other current assets | 100 | 95 | 102 | |
| Current financial instruments | 2 | 3 | 10 | |
| Cash and cash equivalents | 198 | 169 | 193 | |
| TOTAL ASSETS | 2,762 | 2,781 | 2,783 |
| Liabilities € million | July 31, 2018 | July 31, 2017 | January 31, 2018 | |
| Shareholders' equity | 1,218 | 1,136 | 1,169 | |
| Long-term provisions | 28 | 32 | 28 | |
| Non-current financial debt | 816 | 868 | 846 | |
| Other non-current liabilities | 13 | 18 | 14 | |
| Current financial debt | 35 | 16 | 22 | |
| Deferred tax liabilities | 158 | 190 | 156 | |
| Non-current financial instruments | 0 | 0 | 0 | |
| Deferred income | 179 | 186 | 201 | |
| Current financial instruments | 0 | 0 | 0 | |
| Other current liabilities | 315 | 335 | 347 | |
| TOTAL LIABILITIES | 2,762 | 2,781 | 2,783 |
First-half 2018
Simplified cashflow statement
€ million | H1 2018 (period ended on July 31, 2018) | H1 2017 (period ended on July 31, 2017) |
| EBITDA | 130 | 142 |
| Other elements | (6) | (5) |
| Cashflow before net cost of debt and income tax | 124 | 137 |
| Change in the working capital requirement | (41) | (25) |
| Net change in leasing receivables | 29 | 26 |
| Cashflow from operating activities | 112 | 138 |
| Interest and tax paid | (17) | (33) |
| Net cashflow from operating activities | 95 | 105 |
| Capital expenditures | (40) | (44) |
| Net cashflow from investing activities | 55 | 61 |
| Acquisition of shares and granting of loans | (2) | (1) |
| Disposals of assets and other | 1 | 2 |
| Net cashflow after acquisitions and disposals | 54 | 62 |
| Capital increase | - | - |
| Dividends paid | (28) | (28) |
| Change in debt and other | (34) | 52 |
| Net cashflow from financing activities | (62) | 24 |
| Cumulative translation adjustments on cash | 14 | (10) |
| Change in net cash position | 6 | 76 |
1 Second-quarter 2018 sales are compared at constant exchange rates with sales for the same period in 2017, minus €0.7 million for the disposal of DMTI (two months and one week).
[2] First-half 2018 sales are compared at constant exchange rates with sales for the same period in 2017, minus €1.8 million for the disposal of DMTI (five months and one week).
[3] Excluding acquisition-related expenses.
[5] Net margin = Net attributable income/sales.
[6] Including graphic activities
[7] Innovation relates to expenditure to develop a web platform and dedicated SaaS apps for small sized companies in 2017 and the project to develop mobile and cloud apps in 2018.
[8] After elimination for intercompany sales for €11 million in H1 2018 and €10 million in H1 2017.
[9] The dividend tax repayment was booked to the income statement in FY 2017, but not the interest on arrears. The amounts in repayment of tax and interests were received in H1 2018.
[10] EBITDA = current operating income + provisions for depreciation of tangible and intangible fixed assets
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: NEOPOST via Globenewswire
