Austrian Post – Good development in the first half-year 2008

The first half of the 2008 financial year developed very satisfactorily for Austrian Post. The 7.3 pct increase in revenue is not only related to the initial consolidation of the newly-acquired subsidiaries, but also includes organic growth. This development is even more gratifying in the light of the loss of two important mail order customers in the Austrian parcels segment since the beginning of 2008.

The resulting decline in parcels revenue could be more than compensated for. Total Group revenue climbed by 8.8 pct in the second quarter of 2008.

All three divisions made a positive contribution to revenue growth. The Mail Division improved by 8.6pct in the first half of 2008, whereas revenue of the Parcel & Logistics Division was up 7.1pct and the Branch Network Division also registered a gain of 0.2pct. Growth in the Mail Division was related to the initial consolidation of the new subsidiaries as well as to an operational increase. Revenue and earnings of the Parcel & Logistics Division were negatively impacted by the loss of two parcels customers, but the newly-acquired subsidiaries could offset the resulting loss of revenue. In particular, financial services developed favourably in the Branch Network Division. The first half of the 2008 financial year developed very satisfactorily for Austrian Post. The 7.3 pct increase in revenue is not only related to the initial consolidation of the newly-acquired subsidiaries, but also includes organic growth. This development is even more gratifying in the light of the loss of two important mail order customers in the Austrian parcels segment since the beginning of 2008.

The resulting decline in parcels revenue could be more than compensated for. Total Group revenue climbed by 8.8 pct in the second quarter of 2008.

All three divisions made a positive contribution to revenue growth. The Mail Division improved by 8.6pct in the first half of 2008, whereas revenue of the Parcel & Logistics Division was up 7.1pct and the Branch Network Division also registered a gain of 0.2pct. Growth in the Mail Division was related to the initial consolidation of the new subsidiaries as well as to an operational increase. Revenue and earnings of the Parcel & Logistics Division were negatively impacted by the loss of two parcels customers, but the newly-acquired subsidiaries could offset the resulting loss of revenue. In particular, financial services developed favourably in the Branch Network Division.

Besides the 7.3pct increase in revenue, the consolidated income statement of Austrian Post shows a 14.3pct rise in expenses for raw materials, consumables and services used. This development is related to the acquisitions which were carried out, as well as to higher fuel and transport costs.

Outlook for 2008
All in all, Austrian Post expects a slight rise in total revenue for the 2008 financial year. This improvement includes the integration of the newly-acquired subsidiaries. This forecast is based on the assumption of a largely stable development in letter mail and direct mail volumes, an increase in Austrian Post’s international parcels business, as well as a lower volume in the company’s Austrian parcels business due to the loss of two major mail order customers.

Despite these adverse effects on the parcels segment in Austria, Austrian Post expects earnings before interest and tax (EBIT) in 2008 to be just slightly below the level achieved in 2007, and then continually rise in subsequent years.

Accordingly, the EBIT margin will be slightly below 7pct in 2008, and then improve once again to 7pct-8pct in the following years.
Based on a solid cash flow development and balance sheet structure, Austrian Post expects to continue pursuing its attractive dividend policy. It is planned to continually increase the basic dividend on the basis of earnings development, whereas the special dividend depends on future capital requirements.

Performance of divisions

Mail Division
In the first half of 2008, external sales of the Mail Division climbed by 8.6pct compared to the same period of the previous year, increasing to EUR 720.5m. This improvement is chiefly related to the initial consolidation of the Austrian Post subsidiary meiller direct, which was acquired in July 2007, as well as operational revenue growth. In the second quarter, growth in external sales amounted to 9.0pct, largely compensating for the negative volume effect in the first quarter of 2008 (one working day less than in Q1 2007).

External sales of the Letter Mail Business Area declined by 0.9pct in a year-on-year comparison. External sales of the Infomail Business Area (addressed and unaddressed advertising) rose by 27.6pct in the first six months of 2008, to EUR 263.4m. This increase includes the first-time consolidation of the direct marketing services provider meiller direct. The Media Post Business Area raised its half-year revenue by 6.1pct, which is mainly related to the positive development of regional media, but also to the one-off effects of a regional election in Austria.

On balance, EBIT of the Mail Division in the first half of 2008 was up 1.7pct, to EUR 135.7m. EBIT generated by the Mail Division in the second quarter climbed 4.4pct, to EUR 61.6m.

Parcel & Logistics Division
External sales of the Parcel & Logistics Division climbed to EUR 382.5m in the first half of 2008, a rise of 7.1pct. The main contribution to total revenue (84pct of total division sales) was made by the new premium parcel service (parcel delivery within 24 hours to private and business customers, B2C/B2B). In addition to the B2B business in Germany (trans-o-flex), comprising the largest share of Austrian Post’s overall B2B volume, growth in this segment was primarily driven by the expansion of newly-acquired Group companies (Road Parcel, Merland, City Express, DDS, VOP), which did not belong to the scope of consolidation in the comparable period of 2007. Moreover, premium parcels enjoyed popularity on the Austrian B2B and B2C market. In particular, Internet-based companies are increasingly relying on Austrian Post’s quick delivery service.

As expected, revenue decreased in the standard parcels segment in Austria, which comprises 16pct of total division sales, due to the market entry of a German parcel services provider. The redimensioning of parcel logistics initiated at the end of 2007 to increase the profitability of parcels services is proceeding as planned. In the first half of 2008, earnings before interest and tax (EBIT) of the Parcel & Logistics Division amounted to EUR 7.1m, which is related to the loss of two large parcels customers in Austria.

Branch Network Division
External sales of the Branch Network Division increased by 0.2pct in the first half-year 2008 compared to the same period of the previous year, to EUR 94.0m. The decline in mobile telephony sales could be compensated by the growth in financial services, in particular during the second quarter of 2008. The growth measures which were initiated, such as the sales drive focusing on private customers as well as higher interest rates, had a positive effect. These measures were accompanied by the launch of a program featuring targeted sales training to customer consultants, and an improvement in the assortment of products and services offered in the branch network, which in turn led to a rise in customer deposits.

Internal sales of the Branch Network Division decreased due to lower mail volumes handled by the branch network. Austrian Post succeeded in raising earnings before interest and tax (EBIT) of the Branch Network Division to EUR 6.7m in the first six months of 2008, which is primarily attributable to cost discipline and organisational optimisation measures.