AUSTRIAN POST Q1-3 2020: PARCEL GROWTH OFFSETS DECLINE IN LETTER MAIL AND DIRECT MAIL
2020 impacted by COVID-19 - but improved trends in the third quarter
Improvement in the Letter Mail and Direct Mail business compared to Q2; however, volatility and uncertainty lead to decline above long-term trend
Parcel growth driven by strong online business, increases in Eastern Europe and through full consolidation of Turkish company Aras Kargo
Earnings with COVID-19 effect and start-up costs for bank99
Group revenue Q1-3 2020 up by 2.4 % to EUR 1,497.9m (+7.3 % to EUR 516.0m in Q3 2020)
Good parcel growth (+31.9 %) offsets decline in Letter Mail and Direct Mail (-9.0 %)
Initial revenue contribution of Aras Kargo equalling EUR 23.9m included
Cash flow and balance sheet
EBIT of the logistics business (excl. Retail & Bank Division) Q1-3 2020 of EUR 118.7m (-10.0 %)
Earnings of the Mail Division down by EUR 22.2m (-17.2 %)
Parcel & Logistics Division showed earnings rise of EUR 11.3m (+52.9 %)
Group EBIT Q1-3 2020 down by -37.4 % to EUR 81.4m (+48.5 % to EUR 33.2m in Q3 2020)
Loss of EUR 37.3m in the Retail & Bank Division due to start-up costs for bank99
Operating free cash flow of EUR 94.6m below the prior-year level (-38.3 %)
Increased balance sheet total of EUR 2,427.4m (+18.8 %) due to launch of bank99 and full consolidation of Aras Kargo
Revenue rise in FY 2020 of >3 % (incl. subsidiary Aras Kargo) expected
EBIT of the logistics business (excl. Retail & Bank Division) in FY 2020 of about EUR 170m following full consolidation of Aras Kargo; Group EBIT negatively affected by launch of bank99
Earnings in 2021: Targeted EBIT growth in all divisions
The year 2020 presents major challenges to many companies across the globe, including Austrian Post. In particular, the second quarter of 2020 led to major economic challenges on the back of government-imposed lockdown measures and restrictions. The market conditions have noticeably improved in the third quarter, although the uncertainty and volatility in some segments remained high. The nationwide supply of mail, parcel and financial services was secured, even if this was accompanied by additional costs for logistics and crisis measures. 'We succeeded in maintaining the safety and health of our employees as well as the performance of our company', says CEO Georg Pölzl. 'Regarding the current circumstances, we are satisfied with our third quarter results', Georg Pölzl continues. In the first nine months of 2020, the Group revenue of Austrian Post has increased by 2.4 % to EUR 1,497.9m. Growth in the parcel business, supported by the full consolidation of the Turkish company Aras Kargo, compensated for the decline in the Mail and Retail & Bank Divisions.
Business development of the Mail Division improved after reaching its lowest point in the second quarter. On balance, revenue fell by 9.0 % to EUR 883.3m in the first nine months 2020. Following the lockdown-related loss in Letter Mail and Direct Mail items mostly in April 2020, the volatility and uncertainty have increased in the third quarter, with the volume of addressed mail items remaining below the long-term trend in particular.
The Parcel & Logistics Division reported a revenue increase of 31.9 % to EUR 576.6m in the first nine months of 2020. This is a result of high organic parcel growth, especially under COVID-19 conditions, which is also supported by higher volumes due to the cooperation with Deutsche Post DHL Group since August 2019. The full consolidation of the Turkish company Aras Kargo as at 25 August 2020 has also contributed EUR 23.9m to the good revenue development of the division.
The diverging development in the Mail and Parcel business had a negative effect on earnings due to the high level of fixed costs in the mail business. Earnings of the Mail Division fell by EUR 22m in contrast to the EUR 11m increase in the Parcel & Logistics Division in the first three quarters of 2020. In total, EBIT of the logistics business (excl. Retail & Bank Division) was down by 10.0 % to EUR 118.7m in the first three quarters of 2020.
The launch of bank99 is an important milestone and, thus, also a major special effect financially in the year 2020. The new bank99 has been operating on the market since April 2020 and is developing a focused offering of financial services. The bank has already succeeded in attracting more than 54,000 customers until the end of October 2020 and generated initial financial services revenues. The objective is to expand the financial services business in the upcoming quarterly periods by adding new products and generate positive earnings contributions by 2023. The Retail & Bank Division achieved a negative result of EUR 37.3m due to the start-up costs of bank99 and the impact related to COVID-19. Accordingly, the reported Group EBIT fell from EUR 130.0m in the first three quarters of 2019 to EUR 81.4m in the period under review. EBIT of the third-quarter 2020 improved from EUR 22.3m to EUR 33.2m, whereas negative special effects were included in the previous year. Earnings per share equalled EUR 1.03 in the first three quarters of 2020 compared to EUR 1.48 in the previous year.
The earnings situation of Austrian Post in the full year 2020 will depend on the further development of the COVID-19 pandemic. Assuming that current trends continue over the next few months and wide-ranging business impeding lockdown can be avoided, Group revenue growth is expected to exceed 3 %. The contribution of the Turkish company Aras Kargo is partly responsible for this. In the baseline scenario of avoiding lockdown situations in the retail sector, EBIT of the logistics business (excl. Retail & Bank Division) in 2020 should be around EUR 170m, including the expected positive contribution of the Turkish company Aras Kargo. This is in contrast to other scenarios which could lead to negative earnings effects as a result of regional or industry-specific lockdowns.
Reported Group earnings (EBIT) for the full year 2020 will include a negative contribution of the Retail & Bank Division. The key component of this are costs of the launch of bank99. The earnings position of Austrian Post's new bank should improve year by year and is expected reach the break-even point in 2023.
Austrian Post will continue to intensively pursue investments and measurements that lead to an extension of capacities and to sustainable efficiency enhancement. 'We are determined to effectively handle the expected parcel volumes based on the expansion of our logistics centres and the organisational preparations for the fourth quarter', Georg Pölzl concludes. Targeted investments and measures should contribute to an earnings improvement in all divisions and will therefore increase the Group earnings in 2021.
The entire report is available on the Internet at post.at/ir
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