Posti’s Q1/2018: Parcel growth continues

Posti Group Corporation Interim Report Q1/2018

Financial highlights

• The Group’s net sales decreased by 1.5% to EUR 407.5 (413.8) million.
• The Group’s adjusted EBITDA declined to EUR 28.3 (35.5) million, 6.9% (8.6%).
• The Group’s EBITDA declined to EUR 28.5 (30.0) million, 7.0% (7.3%).
• The adjusted operating result declined to EUR 11.5 (15.5) million, or 2.8% (3.8%) of net sales.
• The operating result declined and amounted to EUR -18.5 (10.0) million, representing -4.5% (2.4%) of net sales.
• Net debt to adjusted EBITDA was 0.1x (-0.5x).
• The updated Group’s Outlook for 2018 is as follows: Net sales in 2018 are expected to remain on a par with 2017 or decrease slightly. The Group’s adjusted operating result is expected to remain on a par with 2017 or decrease slightly. Capital expenditure, excluding acquisitions and disposals, is expected decrease slightly.
• The previous Outlook was as follows: The euro-denominated net sales in 2018, excluding possible acquisitions and divestments, are expected to remain on a par with 2017. The Group’s adjusted operating result, excluding possible acquisitions and divestments, is expected to remain on a par with 2017 or decrease slightly. Capital expenditure, excluding possible acquisitions, is expected to remain on a par with 2017.

Operational highlights

• The combined parcel volume of Finland and the Baltic countries increased by 10%, with 21% of this growth coming from consumer (B2C) parcels. Measured in waybills and excluding food logistics, Posti’s domestic freight grew by 5%. The number of addressed letters decreased by 10% in Finland.
• Universal service obligation was 4.0% (4.5%) of all Posti’s delivery volumes.
• As a result of management evaluation OpusCapita’s business plan, including the execution schedule and required investments to implement the plan and the risk-premium of the discount rate, an impairment loss on goodwill of EUR 30.0 million was recognized in the first quarter of the year.  
• The number of working days was 63 (64). Easter took place earlier in 2018 than last year, thus reducing the number of working days during the first quarter. The number of working days affects the Group’s net sales and result, having an impact on both year-on-year comparisons and comparisons between consecutive quarters.  
• In March 2018, the Supreme Court did not grant leave to appeal in litigation concerning the value added tax on postal services requested by the claimants. This means that the decision given in September 2017 by the Court of Appeal of Helsinki to overrule the complaint as requested by Posti and to compensate the legal expenses of Posti remains final.
• Posti initiated its first sourcing procedure on the five-day delivery of universal service letters in areas not covered by an early-morning newspaper delivery.The amended Postal Act, entering into force at the beginning of July 2018, requires Posti to arrange the tendering procedure.
• Posti Group Corporation's Annual General Meeting was held in Helsinki on March 27, 2018. The Annual General Meeting decided to distribute a dividend of EUR 27 million based on the result in 2017 and an extra dividend of EUR 13 million. The dividend distribution totals EUR 40 million. It was decided that the Board of Directors be composed of nine members: Markku Pohjola (chair), Suvi-Anne Siimes (vice chair), Eero Hautaniemi, Petri Järvinen, Frank Marthaler, Pertti Miettinen, Marja Pokela, Per Sjödell and Arja Talma.

Heikki Malinen, President and CEO

"The transformation of the postal service continued in the first quarter, as the market further shifted towards parcels and logistics. Due to the increasing impact of digitalization, the number of addressed letters delivered by Posti decreased by 10 percent, compared to the previous year. Easter mail volumes, however, remained at the previous year’s level. At the same time, consumers are purchasing physical products from webshops in ever greater numbers, which increased Posti’s parcel volumes by 10 percent. We are encouraged by the strong growth of B2C parcel.

Posti’s net sales in January-March decreased slightly and the adjusted operating result was EUR 11.5 million, representing 2.8 percent of net sales. Mail, Parcel, and Logistics Services revenue grew 0.7 percent, driven by parcels and logistics, and the adjusted operating result decreased by EUR 3.7 million.

Operational cost increases, part of which we do not expect to continue, were not sufficiently mitigated through efficiency improvements. Wage increases originating from collective bargaining and a challenging flu season required the utilization of additional labor. Posti has set clear savings targets for the year 2018 and will continue to actively pursue methods to improve efficiency and savings. In 2017, Posti achieved net savings of EUR 35 million.

Itella Russia's net sales in local currency grew by 8.8 percent, compared to the previous year and the adjusted operating profit slightly improved. Posti’s goal is to continue improving operational efficiency and profitability in core areas, i.e., contract logistics and transportation. However, the recent geopolitical turmoil and fluctuations in markets and currency may affect our business during 2018.

The OpusCapita segment has undertaken an extensive transformation over the last few years, with its core now within the Buyer-Supplier Ecosystem (BES) business, which offers global solutions for sourcing, payment and cash management. OpusCapita is now well positioned to digitalize and automate customers’ core financial processes in this market.

To ensure competitiveness and growth, Posti will continue to pursue its updated strategy, focusing heavily on its core businesses: mail, parcel and logistics services. Posti’s main goals are to win e-commerce, keep mail relevant to customers, develop digital services and to renew its service culture, Posti Orange. Posti Orange focuses on building a strong sense of community among employees and on delivering a first-rate customer service.

For Posti, the growth of e-commerce offers growth potential in parcels and logistics services. Finland is still behind European countries in terms of online shopping and parcels per capita. Online retail sales are forecasted to grow around 10 percent in Finland. 

Posti is well positioned to benefit from the growth opportunities with its fast, high-quality service and an extensive delivery network as part of the international DHL alliance. Posti’s domestic parcel locker network is one of the largest in Europe and the target is to open 1,000 new units by 2019. This coming autumn, Posti will launch a same-day parcel delivery service, six days a week in the Helsinki metropolitan area. Posti will also enhance its logistic service capacity by opening the new K3 freight terminal in Vantaa this coming summer."

APPENDICES

Posti Group’s Interim Report in full (PDF)

FINANCIAL CALENDAR IN 2018
January–June: Wednesday, July 25, at 9:00 a.m.
January–September: Wednesday, October 24, at 9:00 a.m.

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