La Poste Group results – 1st half 2008
La Poste’s Board of Directors approved the Group’s financial statements at 30 June 2008.
The March 2008 sale of the airline company, Europe Airpost, was the main change in scope during the half. This sale meets the Group’s objective to withdraw from the air transport business to give priority to its portfolio of strategic activities. Group turnover amounted to EUR 10.556 billion.
The Group’s strategy is based on the complementarities of its business, Mail, Parcel-Express, Financial Services and La Poste Retail Brand, which let it diversify its risks. Consequently, the sustained growth in Parcel-Express and Financial Services activities were able to partially offset in the 1st half the larger than forecast impact on the Mail business of the economic slowdown and the increase in fuel and fluid prices.
The Group confirms its goal to continue its development in growing markets in each of its three business sectors. Therefore, in the 2nd half 2008, it will seize all acquisition opportunities likely to fulfil this goal under satisfactory asset conditions while being careful at the level of its debt ratios, which remain high in its current equity level context. La Poste’s Board of Directors approved the Group’s financial statements at 30 June 2008.
The March 2008 sale of the airline company, Europe Airpost, was the main change in scope during the half. This sale meets the Group’s objective to withdraw from the air transport business to give priority to its portfolio of strategic activities. Group turnover amounted to EUR 10.556 billion. On a comparable basis, turnover grew by 2.3pct . The comparable basis neutralises the effect of variations in scope and foreign exchange as well as the variation in the write-back of the home savings plans and accounts provision and the gains on the sale of Euronext securities in 2007.
Mail turnover amounted to EUR 5.864 billion and, in a more difficult business cycle, was down 0.6pct on a constant scope and foreign exchange basis. The underlying drop in mail volumes was amplified this half by major issuers’ accelerated rationalization of mail deliveries and slower growth in admail and services, as mail’s business activity remained closely correlated to the general economic situation. The drop of volume, which has been limited to around -1pct on a yearly basis since 2003, amounted to -2.7pct in the 1st half of 2008. Moreover, industrial mail rates remained stable and the price of stamps only increased slightly by EUR 0.01 on 1st March 2008. In this context, the Mail business sector implemented a specific programme in the spring to strengthen its cost control. In addition, Mail has continued to modernise its production capacity through the “Mail Quality Project” and by renewing its range of products. All of these actions support delivery performance, which has improved again : over the first 6 months of the year, 83.8pct of first class mail was delivered the next day. These are the best results ever obtained, up sharply by 3 points over 2007.
Express recorded turnover of EUR 1.643 billion, a sustained increase of 8.2pct on a constant scope and exchange basis. This satisfactory performance was achieved in spite of the sharp economic slowdown recorded in some European countries, especially Spain 2/3 and Ireland. Growth is driven by cross-border sales, which increased 11pct and now account for 18pct of the total business due to the consolidation of the Group’s presence in practically all European countries. It also benefits from substantial domestic business, especially in Eastern Europe and Germany, as well as Chronopost’s notable turnaround that erased the difficulties encountered at the beginning of 2007 when it reorganised.
With turnover up to 6pct to EUR 685 million, the Parcels sector continues to grow significantly via Coliposte, stimulated by the boom in electronic commerce, which generated approximately 11pct of turnover. Delivery performance on a two days basis for tracked shipment reached 92.4pct in the first 6 months of the year, a gain of 0.8 points over 2007.
La Banque Postale’s Net Banking Income (NBI) as regards the Group reached EUR 2.348 billion, representing important growth of 5pct on a comparable basis. Given the developments in market rates, collection focused primarily on liquid savings products at the expense of sight deposits and life insurance. In this context, La Banque Postale’s performance is the result, in particular, of the continued effort to equip customers and the increase in home loans, which continued to be written at an equal pace to that in 2007. In terms of financial management, the institution was not affected by the strong disturbances observed over the past year in financial markets due to the quality of its assets and its ability to take advantage of rate increases.
La Poste Retail Brand, which groups all postal outlets, recorded a total of EUR 1.38 billion of the Group’s turnover in the 1st half. The Retail Brand, which in addition plays a key role in advising and subscribing financial products and services on behalf of La Banque Postale, marketed 29pct of Coliposte’s business and 18pct of Mail’s business in this half.
The total change in operating expenses, including charges to amortisation, depreciation and provisions, was up 3.3pct on a comparable basis, or equivalent to the inflation rate in France over the last 12 months. In a context of comprehensive cost control, this growth includes the impact of the fuel and fluid price increases, the growth in depreciation related to the accelerated renovation of the property assets and the non-recurring expenses generated by the Group’s major modernisation projects.
Operating profit amounted to EUR 671 million, down by 10.9pct from 2007 on a comparable basis. The operating margin was 6.4pct over the 1st half. The Parcel- Express and Financial Services sectors increased their level of contribution compared to the 1st half of 2007, just like La Poste Retail Brand. These favourable changes do not completely offset the negative impact due to the larger than forecast drop in Mail volumes. Given CNP Assurances’ stable contribution of EUR 107 million, the Group share of net profit amounted to EUR 481 million.
The Group invested internally and externally a total of EUR 465 million vs. EUR 590 million in the 1st half 2007. This drop is explained primarily by the lack of significant external growth operations in the 1st half 2008. The amount of internal investments (EUR 450 million) remains close to the level in the 1st half 2007, reflecting the Group’s continued modernisation efforts in all of its business sectors.
Cash flows from operating activities (EUR 748 million) exceeded the total of all investments, allowing the Group to decrease its net debt by 7.7pct to EUR 5.438 billion at 30 June 2008. The level of equity, at EUR 3.347 billion at 30 June 2008, is stable compared to 31 December 2007. This stability is explained primarily by the payment of the 2007 dividend to the government in June and the decrease in the Group’s share of the fair value of CNP Assurances’ financial assets in view of the markets’ economic trend. Under these conditions, the capital structure ratio (net debt to equity) improved slightly, decreasing from 1.76 at 31 December 2007 to 1.62 at 30 June 2008.
Outlook
The Group’s strategy is based on the complementarities of its business, Mail, Parcel-Express, Financial Services and La Poste Retail Brand, which let it diversify its risks. Consequently, the sustained growth in Parcel-Express and Financial Services activities were able to partially offset in the 1st half the larger than forecast impact on the Mail business of the economic slowdown and the increase in fuel and fluid prices.
The Group confirms its goal to continue its development in growing markets in each of its three business sectors. Therefore, in the 2nd half 2008, it will seize all acquisition opportunities likely to fulfil this goal under satisfactory asset conditions while being careful at the level of its debt ratios, which remain high in its current equity level context.
Regarding the operational outlook for the 2nd half 2008, in the spring the Group implemented measures likely to maintain its ability to reach its 2008 objectives. The annual performance in 2008 will depend on the impact of these measures during the 2nd half as well as the level of economic activity, especially in France.
Finally, in spite of the more difficult economic environment, the Group will continue to improve its quality of services (like it did in the 1st half), consistent with the commitments made in the 2008-2012 Performance and Confidence plan. A services group, La Poste puts into practice its conviction that the quality of services provided to customers is inseparable over the medium-term from a high level of economic performance.
