Posti Group Corporation - Interim report (Q1 and Q3)

Posti’s sales of logistics services resumed growth

POSTI GROUP CORPORATION INTERIM REPORT, JULY 18, 2016 AT 10:03 A.M. (EET)

Posti Group Corporation Interim Report January-June 2016

April–June 2016

  -- The Group’s net sales decreased by 5.0% to EUR 385.9 (406.3) million.
     Comparable net sales declined by 3.1% in April–June.
  -- Net sales decreased by 5.3% in Postal Services, by 1.9% in Parcel and
     Logistics Services, by 18.9% in Itella Russia and by 6.9% in OpusCapita.
     Comparable net sales increased by 3.3% in Parcel and Logistics Services and
     decreased by 5.0% in OpusCapita. Measured in local currency, Itella
     Russia’s net sales increased by 3.4%.
  -- The adjusted operating result improved and was EUR -0.9 (-6.8) million, or
     -0.2% (-1.7%) of net sales.
  -- The adjusted operating result declined to EUR 3.6 (4.8) million in Postal
     Services and to EUR 1.4 (2.1) million in OpusCapita. The adjusted operating
     result improved to EUR -0.6 (-2.1) million in Parcel and Logistics Services
     and to EUR -1.6 (-2.0) million in Itella Russia. The result of Parcel and
     Logistics Services was previously weighed down by restructuring measures
     related to the divestment of the Scandinavian road freight business, which
     have now been completed.
  -- The operating result was weighed down by special items in the amount of EUR
     -4.8 (+34.7) million, with personnel restructuring costs in domestic
     production operations representing the most significant proportion of this
     total. The operating result in the comparison period was boosted by special
     items in the amount of EUR +34.7 million, which included a significant gain
     from the sale of real estate.
  -- The operating result declined and amounted to EUR -5.7 (27.9) million,
     representing -1.5% (6.9%) of net sales.
  -- Mail items covered by the universal service obligation accounted for 3.8%
     of all of Posti’s mail items in April–June.
  -- By parliament’s decision, 49.9% of the ownership of Posti Group Corporation
     will be transferred to a newly established state-owned development company.
     The Finnish State’s holding will remain at 50.1% at a minimum.
  -- On April 25, 2016, OpusCapita acquired the Germany-based software company
     jCatalog Software.
  -- On June 1, 2016, Posti Ltd signed an agreement to acquire Veine Ltd, a
     company that specializes in temperature-regulated logistics. The plan is to
     complete the transaction in August 2016.
  -- Jani Jolkkonen, M.Sc. (Tech.), EMBA, previously Posti’s SVP, Postal
     Services, was appointed Posti’s SVP, ICT and Digitalization, and Turkka
     Kuusisto, M.Sc. (Tech.), was appointed SVP, Postal Services business group,
     with both appointments entering into effect on August 1, 2016. Both
     appointees will also be members of Posti’s Executive Board.

 January–June 2016

  -- The Group’s net sales decreased by 7.8% in January–June and amounted to EUR
     776.5 (842.2) million. Comparable net sales decreased by 4.3%.
  -- Net sales decreased across all business groups: by 4.5% in Postal Services,
     by 9.4% in Parcel and Logistics Services, by 21.5% in Itella Russia and by
     8.0% in OpusCapita. Comparable net sales decreased by 0.6% in Parcel and
     Logistics Services and by 5.1% in OpusCapita. Measured in local currency,
     Itella Russia’s net sales decreased by 4.6%.
  -- The adjusted operating result improved and was EUR 14.0 (13.7) million, or
     1.8% (1.6%) of net sales.
  -- In Postal Services, the adjusted operating result improved to EUR 28.3
     (25.9) million. The adjusted operating result declined to EUR -5.9 (-1.1)
     million in Parcel and Logistics Services, to EUR -3.9 (-2.9) million in
     Itella Russia, and to EUR 3.4 (6.8) million in OpusCapita.
  -- The operating result was weighed down by special items in the amount of EUR
     -15.0 (+34.7) million, with personnel restructuring costs in domestic
     production operations representing the most significant proportion of this
     total. The operating result in the comparison period was boosted by special
     items in the amount of EUR +34.7 million, which included a significant gain
     from the sale of real estate.
  -- The operating result declined and amounted to EUR -1.0 (48.4) million,
     representing -0.1% (5.8%) of net sales.
  -- Cash flow from operating activities declined to EUR 28.2 (33.3) million.
  -- Mail items covered by the universal service obligation accounted for 4.6%
     of all of Posti’s mail items in January–June.
  -- OpusCapita sold its businesses serving the local markets in the Baltic
     countries to BaltCap in January.
  -- Itella Russia acquired the Russian courier company MaxiPost in March.
  -- Kaarina Ståhlberg, LL.M., was appointed as Posti’s VP, Legal Affairs, and a
     member of the Management Board, effective from March 1, 2016.

Posti has changed its terminology for Alternative Performance Measures in
accordance with the new guidelines issued by the European Securities and
Markets Authority (ESMA). “Non-recurring items” has been replaced by “special
items”. “Operating result before non-recurring items” has been replaced by
“adjusted operating result”. The definitions for these performance measures and
for items affecting the comparability of reported figures are provided in the
section “Calculation of key figures” of this interim report and on Posti’s
website at www.posti.com/financials. The change takes effect starting from the
interim report for the second quarter of 2016. 



Key figures of Posti Group                   4–6    4–6     1–6     1–6     1–12
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                                            2016   2015    2016    2015     2015
--------------------------------------------------------------------------------
                                                                                
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Net sales, EUR million                     385.9  406.3   776.5   842.2  1,650.3
--------------------------------------------------------------------------------
Operating result (adjusted), EUR million*   -0.9   -6.8    14.0    13.7     48.7
--------------------------------------------------------------------------------
Operating result (adjusted), %*             -0.2   -1.7     1.8     1.6      2.9
--------------------------------------------------------------------------------
Operating result (EBIT), EUR million        -5.7   27.9    -1.0    48.4     55.9
--------------------------------------------------------------------------------
Operating result (EBIT), %                  -1.5    6.9    -0.1     5.8      3.4
--------------------------------------------------------------------------------
Result before taxes, EUR million            -4.2   22.8    -0.7    44.2     43.3
--------------------------------------------------------------------------------
Result for the period, EUR million          -3.1   17.0     0.3    32.8     36.0
--------------------------------------------------------------------------------
Cash flow from operating activities                        28.2    33.3     81.9
--------------------------------------------------------------------------------
Return on equity (12 months), %                             0.5     4.4      6.1
--------------------------------------------------------------------------------
Return on invested capital (12 months), %                   1.2     5.8      6.3
--------------------------------------------------------------------------------
Equity ratio, %                                            47.9    48.0     47.8
--------------------------------------------------------------------------------
Gearing, %                                                 -4.2     7.9    -10.5
--------------------------------------------------------------------------------
Gross capital expenditure, EUR million      48.6   15.5    59.9    32.0     60.6
--------------------------------------------------------------------------------
Average number of employees                              20,838  22,691   22,219
--------------------------------------------------------------------------------
Dividend, EUR million                                                       18.0
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*) Adjusted = excluding special items                                           
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Heikki Malinen, President and CEO:

“The first half of the year was a satisfactory one for Posti in a difficult
market climate. The Group’s adjusted operating result for April–June improved
to EUR -0.9 million and the adjusted operating result for January–June improved
to EUR 14.0 million in spite of lower net sales across all business groups. 

The economic climate in Finland and its neighboring areas remains weak but, for
the first time in a long while, there are signs of economic recovery. The
Russian economy remains in a recession, which has reduced the demand for Itella
Russia’s logistics services. Nevertheless, measured in local currency, Itella
Russia’s net sales increased by 3.4% in the second quarter. The Russian ruble
appreciated in the first half of the year, but the closing rate at the end of
the second quarter was still down by almost 15% year-on-year. 

For the Parcel and Logistics Services business group, the second quarter was
significant in many ways. Posti signed an agreement with Stockmann on
transferring the logistics operations of Hobby Hall to Posti. Posti also
announced it is expanding to food logistics by acquiring Veine, a company that
specializes in temperature-regulated logistics, and by modernizing online
grocery shopping. There were more good news in Parcel Services as the amount of
parcels delivered by Posti in April–June increased by 4% in Finland and by 30%
in the Baltic countries. The business group’s comparable net sales, excluding
the international freight business, grew and the adjusted operating result
improved. 

Posti renewed mail delivery with the aim of flexibly combining other services
with delivery operations. The goal of the changes is to control the rise of
unit costs in delivery operations, which is caused by declining volumes. The
amount of addressed letter items fell by 7% and newspaper delivery volumes by
8% in January–June. The net sales and adjusted operating result of the Postal
Services business group declined due to the decrease in volume. 

OpusCapita is making a strong investment in new growth businesses. One
important step in this strategy was the acquisition of the Germany-based
software company jCatalog in April. The acquisition supports OpusCapita’s aim
of becoming a leader in the global buyer-supplier ecosystem. The integration of
jCatalog with OpusCapita began immediately. 

Following the amendments to the Postal Act that entered into force in June, the
entire postal market is now open to free competition. According to the amended
Postal Act, Posti’s competitors may freely deliver mail anywhere and at any
time without being subject to universal service obligations. This puts Posti on
very unequal footing with regard to the competition, as Posti will remain
subject to the heavy five-day delivery obligation in spite of the universal
service obligation only applying to less than 5% of Posti’s delivered items
today. With this in mind, we consider it essential that the universal service
obligation is eased in the upcoming renewal of the Postal Act. Easing
regulations concerning universal service allows for better control over the
changes in unit costs. Renewing the regulations will allow Posti to continue to
fulfill its universal service obligation throughout Finland. 

The Finnish Government drew its new ownership steering policies in the spring.
Pursuant to the Parliament’s decision, 49.9% of the ownership of Posti Group
Corporation will be transferred to a newly established development company
tasked with developing the ownership structure of the companies it owns. The
Finnish State’s holding in Posti Group Corporation will remain at 50.1% at a
minimum. The privatizations of national postal services in Europe have shown
that listings have resulted in improved financial performance and service
quality. 

In June, Posti updated its strategic goals aimed at Posti’s renewal and
profitable growth in new services. Posti wants to be the leading provider of
logistics and postal services in Finland. We are making good progress toward
achieving this objective.” 



APPENDICES
Posti Group’s Interim Report in full (PDF)

FURTHER INFORMATION
Heikki Malinen, President and CEO, and Sari Helander, CFO
Tel. +358 20 452 3366 (MediaDesk)

DISTRIBUTION
NASDAQ OMX Helsinki
Key media
www.posti.com/financials

FINANCIAL CALENDAR IN 2016
January–September: October 31, 2016

IMAGES AND LOGOS
www.posti.com/newsroom

Posti Group is your first choice in postal, logistics and e-commerce services.
We manage the flow of commerce and everyday life in nine countries. Our net
sales in 2015 amounted to EUR 1,650 million. We employ approximately 22,000
professionals who serve our customers in Finland under the name Posti and in
other countries under the name Itella. All of our services in Finland are
carbon neutral. www.posti.com.

Attachments:

Posti-Group-Corporation-Interim-Report-Q2-2016.pdf