Report: Austrian Post – 2008 results

Austrian Post reveal that revenue is up 5.4% in their results for 2008. Austrian Post reveal that revenue is up 5.4% in their results for 2008.

Summary:

Revenue up 5.4%, EBIT increase of 4.1%, solid balance sheet, high cash flow, attractive dividend policy. Stability and continuity are the top priorities.

Group revenue up 5.4% in 2008 to EUR 2,441.4m

– Mail: Good development in all areas (revenue +5.7%), organic revenue growth of 1.3%
– Parcel & Logistics: revenue increase of 6.4% in spite of reduced parcel volume in the Austrian B2C business; growth primarily the result of acquisitions
– Branch Network: good development of financial services

The year 2008 posed major challenges to Austrian Post in the light of the increasingly serious international financial crisis, and particularly the loss of the two most important mail order customers in the Austrian parcels business. Despite these negative influences, Austrian Post succeeded in increasing total revenue by 5.4% compared to the previous year, to EUR 2,441.4m. In addition to organic growth (+ EUR 19.0m), this increase is primarily related to the consolidation of new subsidiaries (+ EUR 106.7m).

Revenues of the Mail Division improved during the year under review by 5.7% compared to 2007, featuring good revenue development in all three business areas. Revenue of the Letter Mail Business Area remained almost constant, despite the ongoing trend to electronic substitution, whereas the Infomail Business Area (addressed and unaddressed direct mail items) and the Media Post Business Area posted solid organic growth.

Revenue of the Parcel & Logistics Division increased by 6.4%, to EUR 785.9m. This can be mainly attributed to higher revenues derived from the Premium Parcel service in Austria (parcel delivery within 24 hours) and internationally, as well as growth generated by the newly-acquired subsidiaries.

The 0.1% rise in revenues achieved by the Branch Network Division is due to the good development of financial services.

Performance of divisions:

Mail Division

Year-on-year external sales of the Mail Division rose by 5.7%, to EUR 1,460.0m. The increase primarily resulted from the consolidation of the subsidiary meiller direct, acquired in July 2007, as well as organic growth of about 1.3%.

The Letter Mail Business Area was almost stable, recording a 0.3% decline in revenues. The ongoing electronic substitution of letter mail by electronic media was offset by positive trends in other segments. For example, there was a revenue increase in the public sector due to new opportunities for absentee voting, or the higher mail volumes on the part of Austria’s social insurance companies. Postal volumes from mail order companies also increased as a result of the intensified distribution of catalogues.

In the Infomail Business Area (addressed and unaddressed direct mail items), revenue rose by 16.4%. The rise was primarily the result of the consolidation of the meiller direct companies acquired in 2007, as well as organic growth of 2.9%. The increase in mail volumes applied to both addressed and unaddressed mail items. The Media Post Business Area also recorded a revenue increase (+ 3.6%), mainly related to the good performance of regional media as well as the positive effects of regional and national elections in Austria.

On balance, the Mail Division of Austrian Post generated an EBITDA of EUR 297.1m. In addition to depreciation of EUR 34.6m, the Mail Division recorded an impairment loss on intangible assets totalling EUR 7.6m. The resulting EBIT amounted to EUR 254.5m.

Parcel & Logistics Division

External sales of the Parcel & Logistics Division rose by 6.4% in 2008, to EUR 785.9m, which is mainly due to acquisitions, which contributed EUR 45.8m of total revenue.

Revenues amounted to EUR 659.6m, with the main contribution (84% of total revenues) coming from the Premium Parcel service (parcel delivery within 24 hours to private and business customers), which expanded by 12.6% in 2008. This growth was due to organic growth as well as the acquisition of new companies. The most significant share of revenues, approximately EUR 500m, was achieved by the Austrian Post subsidiary trans-o-flex in Germany, which focuses on pharmaceutical logistics, combined freight and temperature-controlled transport services. Moreover, the network in Western Europe was further expanded based on the acquisition of the Belgian company HSH. South East Europe and Eastern Europe contributed approximately 60m in revenues. In 2008, Austrian Post also acquired 24VIP in Bosnia-Herzegovina.

As expected, the total volume decreased in the Standard Parcels segment in Austria (accounting for some 15% of total division sales), due to the market entry of a competitive parcel services provider. In response, Austrian Post implemented a restructuring process on schedule in 2008, including both a reduction in headcount as well as the number of parcel sorting centres in Austria.

In the 2008 financial year, earnings before interest, tax, depreciation and amortisation (EBITDA) of the Parcel & Logistics Division amounted to EUR 34.8m (2007: EUR 46.5m). The decline was related to the loss of two large mail order parcels customers, the integration costs of the new subsidiaries in the Netherlands and Belgium, as well as higher transport and fuel costs.
The Parcel & Logistics Division recognised impairment losses for goodwill and customer relationships in respect of the acquired subsidiaries of the trans-o-flex Group amounting to EUR 33.4m, leading to a negative EBIT of EUR 25.5m for 2008.

Branch Network Division

External sales of the Branch Network Division rose by 0.1% compared to 2007, to EUR 192.2m. The decline in sales of retail products, in particular mobile telephony sales, was largely compensated by the growth in financial services and other post office products. Despite the current financial market crisis, the Branch Network Division achieved growth in the financial services segment, in particular for standard products. Growth measures such as the sales drive targeting private customers were initiated. Internal sales of the division also improved.

EBITDA as well as earnings before interest and tax (EBIT) of the Branch Network Division could be enhanced through cost discipline and organisational optimisation measures. EBIT improved from EUR 13.6m in 2007 to EUR 14.5m in 2008.

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