Q2 & HY 2020 Results
The Hague, 3 August 2020
Published by: PostNL NV
Prinses Beatrixlaan 23 2595 AK The Hague The Netherlands
Additional information
Additional information is available at www.postnl.nl. This presentation contains inside information within the meaning of article 7(1) of the EU Market Abuse Regulation.
Note that the numbers presented in this presentation (tables and result explanations) may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures due to rounding.
Warning about forward-looking statements:
Some statements in this presentation 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 that 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 apply as of the date of this presentation 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 presentation or to reflect the occurrence of unanticipated events, except as may be required under applicable securities law.
Use of non-GAAP information:
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 a 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 normalised EBIT. Normalised EBIT is derived from the IFRS-based performance measure operating income adjusted for the impact of project costs and incidentals.
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Q2 & HY 2020 Results
Key takeaways Q2 & HY 2020
Business review
Financial overview Q2 & HY 2020 Outlook 2020
Q&A
3
Our mail and parcel deliverers provide a vital service to society
Health and safety for our people and consumers come first
- Proud of our people who made it possible to demonstrate strength of business model under challenging circumstances
- Comprehensive set of measures taken across our business to ensure and safeguard health and safety of our people, partners and customers
- including contact-free delivery, adjustment of processes and additional hygiene measures
- Sick leave levels among staff in Q2 decreased gradually compared to March 2020 peak, now back to pre-Covid-19 level
- Office-basedpeople predominantly working from home; this accelerated roll-out of digital home-office tools
Comprehensive business continuity plan in place since early March
4
Key takeaways Q2 & HY 2020
- Strong performance, driven by volume growth at Parcels
- FY 2020 normalised EBIT expected to be strongly above initially guided €110m - €130m, strong improvement free cash flow
- Normalised EBIT up 38% to €54m in Q2
- Free cash flow Q2 up €86m to €93m
- Scaled up capacity at Parcels within flexible infrastructure by 40% through March and April
- Investments of around €150m (2020-2022) for further expansion Parcels on track
- Realisation of anticipated benefits and synergies of combined mail network ahead of plan
- Progress towards emission-freelast-mile delivery in Benelux in 2030
- Start to replace petrol scooters with electric three-wheel scooters
Strength of business model under challenging circumstances demonstrated
5
Key financials and highlights Q2 2020
PostNL reports strong performance
Revenue | Normalised EBIT | Free cash flow | Outlook normalised EBIT FY 2020 |
Q2 2020 | €789m | €54m | €93m | strongly above |
Q2 2019 | €681m | €39m | €7m | €110m - €130m* |
Highlights Q2 2020
- Strong volume growth at Parcels boosted result
- Almost optimum utilisation of capacity
- Positive price/mix effect
- Significant improvements in operational efficiency
- Combined mail network ahead of plan in realisation of anticipated benefits and synergies
- Additional mail volume decline and favourable price/mix development in Mail in the Netherlands due to Covid-19
- Strong development free cash flow due to working capital management and phasing over quarters
- Normalised EBIT in Q2 2020 includes €(9) million impact, as indicated before, from new labour regulation (mainly in Parcels) and higher non-cash pension expenses (PostNL Other)
- Uncertainties regarding duration and severity of Covid-19 pandemic may impact ability to achieve this result
6
Growing importance of digitalisation
Acceleration of transition to online contacts due to Covid-19
online visitors
PostNL accounts
stamp codes
talks with chatbot Daan
HY 2019HY 2020
199m | 274m | +38% |
(47% via PostNL app) | (57% via PostNL app) |
4.5m 5.5m +22%
308k 520k +69%
340k | 770k | +126% |
Extra investments in digitalisation and innovation
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E-fact: Extra investments in digitalisation
Serve customer needs and improve efficiency
Improve customer journey
- Pilot standard retail location as delivery address
- Meet consumer demand
- More efficient delivery process
8
E-fact: Towards emission-freelast-mile delivery in Benelux
Fully implemented by mid-2021
- 600 professional electric three-wheel scooters to replace all 1,000 petrol scooters by 2021
- Direct contribution to sustainability targets: save 657 tonnes of CO2 annually
- Essential part of next phase 'New Mail Route': longer routes to improve efficiency in our distribution process
9
Q2 & HY 2020 Results
Key takeaways Q2 & HY 2020
Business review
Financial overview Q2 & HY 2020 Outlook 2020
Q&A
10
Parcels: Volume growth boosted normalised EBIT in extraordinary quarter
Revenue | Normalised EBIT | Volume growth | Revenue mix | |||
Spring | Parcels | |||||
Q2 2020 | €516m | €60m | 24.8% | Logistics & other | €516m | Benelux |
Q2 2020 | ||||||
Q2 2019 | €402m | €29m |
Strong revenue growth
- Covid-19crisis resulted in pick-up in e-commerce growth
- Acceleration of transition to online
- More first-time buyers online and share of existing medium and heavy online shoppers increased
- Part of growth related to specific, non-recurring, consumer spending
- Visible across almost all segments and products, especially growth amongst small and mid-sized webshops
- Positive impact yield measures (including improved pricing)
- Very strong revenue growth in Spring (Asia and Europe) related to e-commerce growth
Almost optimum utilisation of capacity
- Scaled up capacity by 40% through March and April
- Significant improvements in operational efficiency mainly due to more equal flow across the week
- Improving business performance at both Logistics and Spring
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Parcels: Better balance between volume and capacity
Investments in capacity around €150m 2020-2022
Significant improvement in yield management and operational efficiency
- Yield management measures including improved pricing
- Better peak balancing of volumes; more equal flow
- Improved hit rate because people working at home more
- Lower drop duplication due to less deliveries 2B
Further investments in infrastructure
- Scaled up capacity by 40% through March and April
- New cross-dock location in Zaltbommel
- Innovative sorting centre for small parcels on track for opening in 2021
- Opening new depots (Belgium and the Netherlands) in 2021
- Additional joint fulfilment centre with bol.com in 2021
• Further expansion of retail network and introduction self service proposition
Drop duplication and hit rate | Weekly volume peak |
Indicative |
Mo | Tu We Th | Fr | Sa | Su | ||
Drop duplication | Hit rate | Normal pattern | Equal flow Q2 2020 | |||
Yield management, operational measures and flexible network support business performance
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Q2 2020
Q2 2019
Mail in the Netherlands: Result impacted by additional volume decline related to Covid-19
Revenue | Normalised EBIT | Net contribution of Sandd | Addressed mail |
in normalised EBIT | volume decline |
€393m €5m €15m 16.2%*
€380m | €17m |
Covid-19 crisis resulted in additional volume decline
- Volume decline 16.2%*, with some recovery visible in June
- Additional substitution due to Covid-19 (around 5%): more greetings cards, but lower direct mail activity
- Limited impact from competition
- Impact of elections in 2019 (1.9%)
Performance marked by additional volume decline, price increases and the combination of mail networks
- Impact annual price increases based on moderate pricing policy
- Some additional costs (high absence level and social distancing / health measures) related to Covid-19
- Realisation of anticipated benefits and synergies of combined mail network ahead of plan: €15 million in Q2
- Sale of PCS and Spotta, and discontinued distribution of unaddressed mail
- Adjusted volume decline (two working days less): 15.0%; starting point for volume decline: 2019 pro forma volume including Sandd volumes
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Combination of mail networks
Keeping mail delivery accessible, reliable and affordable in increasingly digitalising environment
Integrated networks of PostNL and Sandd
Secure sustainable and more
stable mail business
• Consolidation on 22 October 2019 | • Networks fully integrated as of 1 February |
• Physical infrastructure of Sandd closed down: | |
• vehicles sold | |
• mail boxes and other branded equipment | |
removed | |
• buildings no longer in use | |
• Further integration costs in HY2 2020 very limited | |
Related attention points |
- Agreement with union FNV for compensation former Sandd mail deliverers
- Dutch government and PostNL have appealed court decision that annulled earlier approval granted for consolidation
Ahead of plan in delivering anticipated benefits and synergies - run-rate €50m - €60m as of 2022
14
Further implementation cost savings projects in 2020-2021
Former business model
Tu We Th Fr Sa
New mail route
- Optimising sorting and automation processes and delivery routes for 30% step-up in
volume | New mail route |
- Expansion of routes
• | Larger contracts for mail deliverers | |||||||||
• | More e-bikes and other electrical transport resources - implementation started, | |||||||||
Tu We Th Fr Sa | ||||||||||
35 locations to be equipped for electrical transportation resources in 2021 | ||||||||||
- Results pilot lead to adjustments in design
- Overhead reduction in line with earlier plans
- Centralisation locations to align network with declining mail volume
- Some delay due to additional measures taken to apply social distancing guidelines in operations and facilities
- 10 migrations of locations scheduled for 2021
24h delivery non-24h delivery
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Some delay due to measures taken to apply social distancing guidelines in operations and facilities
Outlook FY 2020
- Volume growth at Parcels expected to continue at more moderate pace than in Q2
- Our capacity will be scaled up further to accommodate higher volumes towards the second half of the year
- Higher pace of substitution mail volumes due to Covid-19 expected to slow down
- Successful combination of mail networks
- Some delay in cost savings initiatives
- FY 2020 normalised EBIT expected to be strongly above €110m - €130m
- Strong improvement in free cash flow
- Uncertainties around the global impact of Covid-19 seem to increase
Volume development 2020
HY1 HY2
14.1%
-14.4%
Confidence in ability to deliver very solid FY 2020 performance
16
Q2 & HY 2020 Results
Key takeaways Q2 & HY 2020 Business review
Financial overview Q2 & HY 2020 Outlook 2020
Q&A
17
Parcels: Normalised EBIT up €31m
(in € million)
Normalised EBIT Q2 2019
29
Parcels Benelux
Revenue - volume Revenue - price/mix Organic costs Volume-dependent costs Other costs
Other results
Normalised EBIT Q2 2020
New labour regulation
Normalised EBIT Q2 2020 like-for-like
72 24.8% volume growth in Q2 2020
8 | Yield measures supported by positive mix effects |
(5) | CLA increase, indexation subcontractors and impact of new labour |
regulation | |
(48) | Almost optimum utilisation of capacity and equal flow during the |
week | |
- Combination of efficiency and other costs
14 | Improving business performance Logistics and Spring, driven by |
very strong growth in e-commerce related revenue at Spring | |
60
2 Impact of new labour regulation
62
18
Mail in the Netherlands: Normalised EBIT development impacted by Covid-19
(in € million)
Normalised EBIT Q2 2019
Revenue - volume
Revenue - price/mix
Organic costs
Volume-dependent costs
Other costs
Other results
Normalised EBIT Q2 2020
17
4
21
(4)
(8)
(15)
(10)
5
Mail activities
Volume decline 16.2%*, revenue includes €34m related to consolidation
Moderate pricing policy supported by favourable development price/mix effects
Mainly CLA-related
Including volume-dependent costs related to the addition of volumes from Sandd
Cost savings and efficiency related results, costs related to combination of networks (incl. integration costs of €6m), costs related to Covid-19 , higher IT expenses and restructuring related costs
Impact of sale of PCS and Spotta, discontinuation of unaddressed activities) and result other services (f.e. export)
* Starting point for volume decline: 2019 pro forma volume including Sandd volumes
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Generation of free cash flow in Q2 2020
€86m improvement compared to Q2 2019
(in € million)
Normalised EBIT
Reversal normalisations
Depreciation & amortisation
Capex
Lease payments
Change in working capital
Change in pension and provisions
Interest paid and income tax
Other
Free cash flow
Q2 2019 | Q2 2020 | |||||||
54 | ||||||||
39 | ||||||||
(2) | ||||||||
0 | ||||||||
36 | 41 | |||||||
(15) | (11) | |||||||
(14) | (17) | |||||||
(43) | 28 | |||||||
1 | 8 | |||||||
(2) | (10) | |||||||
0 | ||||||||
8 | ||||||||
93 | ||||||||
7 | ||||||||
Temporary effect, mainly related to Sandd
Continuing strong Q4 2019 performance and phasing effects
Mainly pensions
Final assessment income tax 2019 paid in Q2
Includes €6m proceeds sale of minorities in Q2 2019
Improvement €86m
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Pension developments
Coverage ratio (12-month average) pension fund at 105.7% as at 30 June 2020
(in € million) | 2019 | YE 2020 | HY 2020 |
Provision for pension liabilities | 283 | 278 | |
Pension expense (P&L) | 119 | ~145 | 73 |
Regular pension cash | 111 | ~115 | 53 |
contribution | |||
- Pension expense up ~€25m in 2020 as indicated before, visible in normalised EBIT (€(7)m in Q2 2020)
- Impact on equity mitigated by effect in OCI (€(3)m in Q2 2020, mainly phasing)
- Expected impact on cash contributions is limited
- Actual coverage ratio June 2020 is 102.5%; taking into account resilience of pension fund, no top-up payment obligation is expected
Based on final agreement with pension fund
- Final payment transitional plans capped at €290m (was: €300m)
- Around €85m of this payment will be deferred and paid in 5 instalments in period 2021-2025
- Regular contributions related to transitional plans expected to be €5m less
- Entitlements of employees will not be affected
Agreement with pension fund results in lower cash-out for transitional plans
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Consolidated statement of financial position
Adjusted net debt position end of Q2 2020: €614m
(in € million) | 27 Jun 2020 |
Intangible fixed assets | 353 |
Property, plant and equipment | 398 |
Right-of-use assets | 239 |
Other non-current assets | 99 |
Other current assets | 444 |
Cash | 573 |
Assets classified as held for sale | 70 |
Total assets | 2,176 |
27 Jun 2020 | |
Consolidated equity | 28 |
Non-controlling interests | 2 |
Total equity | 31 |
Pension liabilities | 278 |
Long-term debt | 695 |
Long-term lease liabilities | 189 |
Other non-current liabilities | 28 |
Short-term lease liabilities | 59 |
Other current liabilities | 813 |
Liabilities related to assets classified as held | 82 |
for sale | |
Total equity & liabilities | 2,176 |
- Adjusted net debt is €614m; gross debt (Eurobonds, other debt/receivables), pension liabilities (adjusted for tax impact), lease liabilities (on-balance sheet and off-balance sheet commitments, adjusted for tax impact) and cash position
- Total comprehensive income Q2 2020: €37m (Q2 2019: €(5)m)
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Q2 & HY 2020 Results
Key takeaways Q2 & HY 2020 Business review
Financial overview Q2 & HY 2020 Outlook 2020
Q&A
23
Attention points development normalised EBIT for HY2 2020
Covid-19 impact
- Volume growth Parcels to continue at more moderate pace than in Q2; more fluctuation in flow during week
- Higher pace of substitution mail volumes due to Covid-19 expected to slow down in HY2
- Better price/mix expected, but effect in HY2 not as visible as in HY1
- Limited additional costs due to measures and staff absence
- Some delay in cost savings initiatives
- Lower result anticipated international mail
Other elements in HY2 2020
- Higher pension expense ~€(6)m per quarter in PostNL Other
- New labour regulation ~€(2)m per quarter mainly in Parcels
- Positive contribution from combination of networks and continued substitution in mail; delay in cost savings due to integrated networks
- Discontinuation of non-core activities compared with HY2 2019
Additional remarks
% of normalised EBIT not evenly spread over the quarters
indicative only
2019 | |||
2020 | |||
Q1 | Q2 | Q3 | Q4 |
- Negative contribution of consolidation of Sandd in Q4 2019 (restructuring-related charges and other business effects)
Uncertainties regarding duration and severity of Covid-19 pandemic may impact results
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Outlook for 2020
Visibility for second half of the year remains limited
Initial outlook FY 2020 | Outlook FY 2020 | Outlook FY 2020 trading | Outlook FY 2020 | |||
(in € million) | agreement transitional | |||||
(24 Feb 2020) | update (17 June 2020) | (3 August 2020) | ||||
plans (2 June 2020) | ||||||
Normalised EBIT | 110 | - 130 | 110 | - 130 | strongly above 110 - 130 | strongly above 110 - 130 |
Free cash flow * | (315) | - (285) | (215) | - (185) | better than (215) - (185) | strong improvement |
compared to (215) - (185) | ||||||
- Cash flow before dividend, acquisitions, redemption of bonds/other financing activities; after payment of leases
- FY 2020 normalised EBIT to come in strongly above initial guided range of between €110m and €130m
- Free cash flow for FY 2020 is expected to show strong improvement
- Around €100m related to final agreement on determination and conditions final payment transitional plans
- Further upside is anticipated as improvement in normalised EBIT above initially guided range will convert into cash
- Working capital investments should be lower than anticipated due to strict working capital management, more than offsetting effect from higher revenue; strong performance in HY 2020 includes phasing effects
Confidence in ability to deliver very solid FY performance
25
Q2 & HY 2020 Results
Key takeaways Q2 & HY 2020 Business review
Financial overview Q2 & HY 2020 Outlook 2020
Q&A
26
Q2 & HY 2020 Results
Appendix
- Generation free cash flow HY 2020
- Results by segment Q2 2020
- Results by segment YTD 2020
- Breakdown pension cash contribution and expenses
- Adjusted net debt
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Generation of free cash flow in HY 2020
(in € million)
Normalised EBIT
Reversal normalisations Depreciation & amortisation Capex Lease payments
Change in working capital Change in pension and provisions Interest paid and income tax Other Free cash flow
HY 2019 | HY 2020 | |||||||
69 | ||||||||
69 | ||||||||
(10) | (17) | |||||||
71 | 89 | Increase mainly related to Sandd | ||||||
(25) | (19) | |||||||
(27) | (35) | Temporary effect, mainly related to Sandd | ||||||
(43) | 22 | Continuing strong Q4 2019 performance | ||||||
and some phasing effects | ||||||||
(9) | ||||||||
0 | ||||||||
(47) | (10) | Final assessment income tax 2019 paid in Q2 | ||||||
12 | 9 | |||||||
(1) | Improvement €99m | |||||||
98 | ||||||||
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Results by segment Q2 2020
(in € million) | Revenue | Normalised EBIT | |||
Q2 2019 | Q2 2020 | Q2 2019 | Q2 2020 | ||
Parcels | 402 | 516 | 29 | 60 | |
Mail in the Netherlands | 380 | 393 | 17 | 5 | |
PostNL Other | 19 | 26 | (7) | (11) | |
Intercompany | (120) | (146) | |||
PostNL | 681 | 789 | 39 | 54 | |
Normalised EBIT in Q2 2020 includes €(9) million impact, as indicated before, from new labour regulation (mainly in Parcels) and higher non-cash pension expenses (PostNL Other)
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Results by segment YTD 2020
(in € million) | Revenue | Normalised EBIT | |||
HY 2019 | HY 2020 | HY 2019 | HY 2020 | ||
Parcels | 800 | 930 | 52 | 85 | |
Mail in the Netherlands | 772 | 788 | 33 | 9 | |
PostNL Other | 40 | 51 | (16) | (26) | |
Intercompany | (247) | (279) | |||
PostNL | 1,365 | 1,490 | 69 | 69 | |
Normalised EBIT in HY 2020 includes €(17) million impact, as indicated before, from new labour regulation (mainly in Parcels) and higher non-cash pension expenses (PostNL Other)
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Parcels: normalised EBIT up €33 million
(in € million)
Normalised EBIT HY 2019
Revenue - volume Revenue - price/mix Organic costs Volume-dependent costs Other costs
Other results
52
(53)
(16)
Parcels Benelux
78 14.1% volume growth HY 2020
14 | Yield measures supported by positive mix effects |
(10) | CLA increase, indexation subcontractors and impact of new labour |
regulation | |
Almost optimum utilisation of capacity and equal flow during the | |
week |
Combination of efficiency and other costs
20 | Improving business performance Logistics and Spring, driven by |
very strong growth in e-commerce related revenue at Spring in Q2 | |
Normalised EBIT HY 2020
New labour regulation
Normalised EBIT HY 2020 like-for-like
85
4 Impact of new labour regulation
89
31
Mail in the Netherlands: normalised EBIT development impacted by Covid-19
(in € million)
Normalised EBIT HY 2019
Revenue - volume
Revenue - price/mix
Organic costs
Volume-dependent costs
Other costs
Other results
Normalised EBIT HY 2020
33
17
(9)
(17)
(28)
(17)
9
Mail activities
Volume decline 14.4%*, revenue includes €71m related to consolidation
31 | Moderate pricing policy supported by favourable development |
price/mix effects |
Mainly CLA-related
Including volume-dependent costs related to the addition of volumes from Sandd
Cost savings and other efficiency related results, costs related to combination of networks (mainly one-off integration costs of €23m), restructuring charges, and other
Impact of sale of PCS and Spotta, discontinuation of unaddressed activities) and result other services (f.e. export)
* Starting point for volume decline: 2019 pro forma volume including Sandd volumes
32
Breakdown pension cash contribution and expenses
(in € million) | Q2 2019 | Q2 2020 | ||
Expenses | Cash | Expenses | Cash | |
Business segments | 25 | 27 | 25 | 24 |
IFRS difference | 5 | 12 | ||
PostNL | 30 | 27 | 37 | 24 |
Interest | 2 | 0 | ||
Total | 32 | 38 | ||
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Adjusted net debt
(in € million) | 31 Dec 2019 | 27 Jun 2020 |
Short- and long-term debt | 696 | 695 |
Long-terminterest-bearing assets | (6) | (6) |
Cash and cash equivalents | (480) | (573) |
Net debt | 210 | 116 |
Pension liabilities | 283 | 278 |
Lease liabilities (on balance) | 264 | 249 |
Lease liabilities (off balance) | 51 | 45 |
Deferred tax assets on pension and operational lease liabilities | (72) | (73) |
Adjusted net debt | 736 | 614 |
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PostNL NV published this content on 03 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 August 2020 05:17:11 UTC