La Poste Group: budget 2008 and ambitions 2012

La Poste Board of Directors convened today under the chairmanship of Jean-Paul Bailly, examined the expected consolidated figures for 2007, and approved the 2008 budget, the pluriannual business plan 2008-2010, and the Group's financial ambitions for 2012.

In 2007, La Poste should achieve the target operating margin – operating profit over revenues – set for the financial year at 5.8pct , as against 4.6pct in 2006 (IFRS pro forma). It should also meet its net profit target of EUR 850 million. La Poste should also make internal investments of around EUR 1.2 billion in 2007, marginally higher than the EUR 1,136 million of 2006, continuing the drive to modernisation in each of its divisions. External growth operations are directly dependent on market opportunities and are likely to be more moderate in 2007 (EUR 110 million as against EUR 550 million in 2006, essentially involving the international build-up of the Express business. Given a satisfactory operating performance and well controlled capital expenditure, the Group should be able to significantly improve its debt ratios from 2006 going forward into 2007, achieving by year-end a ratio of net debt to operating profit of 3.2 and a ratio of net debt to equity of 1.7.

In 2008, turnover is forecast to rise by 2.9 pct excluding changes in provisions for épargne logement (Home Ownership Savings Plans and Accounts). Mail business revenues should grow by around 1pct , including, as in previous years, slight erosion in volume. The Parcels and Express division should achieve organic growth of more than 6pct. Finally La Banque Postale expects an increase in net banking income of around 4pct.

La Poste Group will implement a programme of internal capital expenditure and investment worth EUR 1.3 billion in 2008. As in 2007, the Mail Quality Project will be implemented at a fast pace, involving the start up of 8 new Industrial Mail Centers. Furthermore, La Poste expects in 2008 to renovate several hundred post offices, having upgraded some 1,900 such in the last thirty months.

This capital expenditure will directly contribute to the continuous improvement of the quality of customer service. 82.4pct of first class letters were delivered on the next day after posting basis in the first ten months of 2007, a 0.8 point improvement compared to 2006.

The Group will also provide the resources in 2008 for new opportunities for acquisition in each of its divisions, subject to there being no adverse effect on balanced finances.

The 2008 budget includes the reform in the funding of pensions of public service employees working at La Poste as defined at the end of 2006 and implemented in 2007, given the European Commission's approval of the reform in October 2007.

In the light of its business and cost control targets, the La Poste Group aims at a 6.1pct operating margin in 2008. The expected further improvement in profitability in 2008 should enable the group to generate the resources to coping with the essential investments to modernisation.

2008 is the first year of the three year 2008-2010 business plan, which is the Group's response to two key commitments:
-Continuous improvement in operational performance so as to bring the levels of operating margin up to those of the leading European postal service groups ;
-Revamp its balance sheet, with a view to recovering the financial solidity to continue advancing in all divisions

Committing to and achieving these targets will enable the group to meet the ambitious financial goals it has set for 2012:
-operating margin to rise to 8.5pct in 2012;
-progressively improving the ratio of net debt to operating profit, setting the goal of 2 for the year 2012;
-targeting a debt to equity ratio of less than 1.

At this stage, these indicators are reliant on the assumption of a stable regulatory environment.

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