Strong growth in e-commerce drives PostNL 2017 results

Strong growth in e-commerce drives PostNL 2017 results

PostNL has reported that “strong growth in e-commerce” supported its performance in 2017, with annual revenues up to €3,495m from €3,413m in the previous year.

Revenue for the fourth quarter (Q4) of 2017 was €980m – up from €955m in Q4 2016. Revenue contribution from e-commerce related activities increased from 33% to 38%.

FY2017 profit was up from €135m to €148m. Profit for the fourth quarter was €59m, down from €84m in Q4 2016.

In a statement issued today (26 February), Herna Verhagen, CEO of PostNL, said: “The primary business trends we’ve seen in the first three quarters of 2017 were also visible in the final quarter. The performance in Parcels was again robust, with record-breaking volumes during peak season, and reflects the impact of organising extra capacity. In Mail in the Netherlands volume decline was high due to intensifying competition, which is being supported by regulation. Cost savings, price increases, and some positive incidentals were insufficient to offset the effect from the declining volumes. In International, we continued to see a delay in recovery, particularly because of fierce competition.

“This resulted in underlying cash operating income of €225m in 2017, in line with our expectations. Driven by our performance we ended the year with a positive equity position of €34m, another milestone that proves our solid financial position. We will propose our shareholders to approve a dividend of €0.23 per share over 2017.

“We reconfirm our strategy to unlock value through accelerating our transformation. That already 38% of our revenue is related to e-commerce per year-end 2017, exemplifies that our transformation is accelerating fast. This comes with challenges and opportunities.

“The continuously fast-growing e-commerce market requires us to speed up and increase our investments in the capacity of our Parcels’ infrastructure, both in the Netherlands and in Belgium. To solidify our position as the leading e-commerce logistics company in the Benelux, we will also further develop our service propositions, for example in growth markets like food and health. These additional investments will flatten our short term results, but are expected to contribute to further profitable growth thereafter.

“At International, our focus is on improvement of our cash profitability by capturing new business created by global e-commerce growth by using our cross-border activities. In Italy, our focus remains on the further roll-out of Nexive’s parcel activities and strengthening our position in mail. The aim of Postcon is to strengthen its position by adding more volumes while at the same time improving performance by the implementation of several business improvement initiatives.

“We remain focussed on delivering a sustainable cash flow in Mail in the Netherlands by continuing our strategy of compensating volume decline with cost savings and targeted price increases. However, the regulatory developments are increasingly impacting Mail in the Netherlands both operationally and financially. The new access regulation enables postal operators to make use of the PostNL network at regulated tariffs and conditions that are not available to customers. Upon experiencing the first months of the significant market power (SMP) decision in practice, we must conclude that the expected impact of the ACM measures is even higher than originally estimated: between €50m and €70m, fully visible in 2020. This is particularly caused by a larger than expected volume loss to other postal operators. As a result of this effect of regulation, we expect the decline of our addressed mail volumes to increase to between 10% to 12% in 2018. To absorb the impact from volume decline partly, we have identified €40m of additional cost savings, particularly in overhead. We expect these savings to become visible towards 2021.

“The combination of the fundamentally changing and shrinking Dutch postal market and the regulatory environment will ultimately harm the sustainability of postal delivery and the service, reliability and accessibility of the postal network in the Netherlands. To facilitate an orderly and rational adjustment to declining volumes regulation must be amended as soon as possible and consolidation of postal market players is inevitable.

“The above requires us to adjust our UCOI ambition for 2020 to between €230m and €300m. For 2018, the UCOI outlook is between €160m and €200m. Our aim to pay progressive dividend remains unchanged.

“I am confident that we will continue to find a good balance between adjusting our mail operations in the challenging Dutch postal market and expanding our footprint as an e-commerce solutions provider, creating long-term value for all our stakeholders, including our shareholders.”

Pim Berendsen.

Meanwhile, PostNL has also announced today its Supervisory Board intends to appoint Pim Berendsen as new the CFO on 18 April for a period of four years after discussion at the 2018 Annual General Meeting of Shareholders on 17 April. PostNL added that the Central Works Council supports the contemplated appointment.

Berendsen is currently member of the Executive Committee of PostNL, responsible for International, M&A and growth. He joined PostNL in 2000 after a career as international tax advisor at Arthur Andersen.

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About The Author

Ian Taylor

Ian Taylor is the Editor of Triangle’s Mail & Express Review Magazine and the www.postandparcel.info portal. Ian has been a business journalist for almost 30 years, editing and writing for a wide range of magazines and newspapers with a particular focus on the transport and logistics industries.

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