PostNL: FY2106 results “delivering on promises”

PostNL has reported revenues of €955m for the fourth quarter (Q4) of 2016 and €3,413m for the full financial year – down slightly from the respective 2015 totals of €1,007m and €3,461m. Underlying cash operating income for Q4 2016 was €110m (down from €147m in Q4 2015) and €245m for the full year (compared to €303m in 2015).

Profits for the full 2016 were up from €149m to €280m, but Q4 was down from €101m to €84m.

In terms of sector performance, it was the usual story of falling mail volumes but increased parcel business.

Addressed mail volume declined by 11.0% in Q4 2016, while parcels volume grew by 9%.

Although it is not mentioned in PostNL’s statement on its Q4 performance, the quarter was also notable for bpost’s protracted – but unsuccessful – attempt to buy the company.

Commenting on the Q$ and annual results, Herna Verhagen, CEO of PostNL, said: “With underlying cash operating income of €245m in 2016, we continue to deliver on our promises.

This solid performance, supported by the sale of our stake in TNT Express, resulted in a further improvement in our financial position: we now have a net cash position and our consolidated equity position is at €(79)m, close to achieving a positive position. This emphasises our commitment to prioritising and delivering stakeholder value.

“The robust strong growth trend in Parcels continued this quarter. Volume growth was strong, reaching a new high during our peak season. Our results reflect the impact from the lower milk powder volumes, the working day effect and peak season costs. Mail in the Netherlands delivered results in line with plan, taking into account the volume decline, the impact from our adjusted market approach and the measures announced by the regulator (ACM). The effectiveness of our restructuring plans was again evidenced by another quarter of strong cost savings. This quarter’s performance in International showed a mixed picture.

“The transition in PostNL’s profile from a traditional mail company to an e-commerce logistics company has been underway in the past few years, supported by increasing global e-commerce growth. In the coming years, we expect our Parcels business and cross-border activities to grow faster than earlier estimated.

“This is reflected in our future plans and underpins the acceleration of our transformation going forward and will further improve PostNL’s value proposition. In 2017, we expect our addressed mail volumes to decline by 7 to 9%.

“With €115m of additional cost savings up to and including 2020, in addition to targeted price increases, we remain focussed on delivering sustainable cash flow in Mail in the Netherlands. The accelerated top line growth of our Parcels business will require us to further invest in our Parcels’ infrastructure. This will enable us to continue expanding our service proposition and serving our Benelux customers with the high quality they expect. This will contribute to our position as the leading e-commerce logistics company in the Benelux, creating further profitable growth. At International, our focus is on capturing new business created by global e-commerce growth, using our cross-border operations, and on further strengthening Nexive’s and Postcon’s position. Together, this will result in enhanced cash profitability in our International segment.

“This acceleration is expected to result in a better performance, which is reflected in our increased UCOI ambition for 2020 of between €310m and €380m. In advance of realising the increased cost savings, higher implementation costs will come in, translating into an adjusted UCOI outlook for 2017 to between €220m and €260m.

“Our consolidated equity improved significantly with the sale of our stake in TNT Express, the interest rate sensitivity of our pension obligation limited and the solid results over 2016 realised. In view thereof, we will recommend to our shareholders to approve the reinstatement of our dividend at our AGM on 18 April 2017, with a first payment based on the results of 2016 of €0.12 per share as an election dividend. On the basis of our outlook for 2017, we believe that we will achieve a positive consolidated equity in the course of 2017. This believe and our increased ambition for 2020, made us decide to adjust our dividend policy going forward aimed at paying progressive dividend, supporting our commitment to create long term shareholder value.”