Bpost Sa Ord

Hello and welcome to the BPOST first quarter 2023 analyst call. My name is George. I'll be a coordinator for today's event. Please note, this conference is being recorded and for the duration of the call, your lines will be in listen only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to answer your question. If you require assistance at any point, please press star zero and you will be connected to an operator. And now it's time to call over to your host, Mr. Philippe Dantien, CEO at Interim, to begin today's conference. Please go ahead, sir.

Thank you very much, George. Good morning, ladies and gentlemen. Welcome. I am pleased to present our first quarter 2023 result as CEO at Interim of BePost Group. Welcome to all of you, and thank you for joining us. With me, I have Kun Alterman, our CFO at Interim, as well as Antoine Lebec from Investors Relations. We posted the materials on our website last night. We will walk you through the presentation and will then take your questions. Two questions each will ensure everyone gets a chance to be addressed in the upcoming hour. Before getting to our first cultural result, I would like to take the time to update you on the events of last week, as well as on the press concession. First, on the preliminary results of the compliance review of the service provided to the Belgian state and the withdrawal last week of our financial guidance for 2023. Following the internal compliance review relating to the ongoing and future first concession, BCOS requested its head of compliance and data protection and head of corporate audit to conduct further internal compliance reviews relating to other tenders and public contracts with federal government. The Board of Directors was informed on the preliminary results of these compliance reviews, which remain ongoing, and which revealed that BPOS groups' margin on certain services provided to the federal states may not be acceptable under applicable laws, and that certain of those services may not have been awarded in accordance with applicable laws. As a result, we saw last week that it led our company to withdraw its full year 2023 financial guidance and pending further legal and financial analysis, preliminary estimates indicate a negative adjusted EBIT impact between 25 to 50 million euros on our guidance in relation to the performance of these services in 2020. We can today indicate that the relevant services in scope will relate to three distinct contracts or concessions, namely, number one, the traffic fines, which consists in handling the financial and administrative processing of the fines for the Federal Public Services of Justice. Second, the cashier function of the Belgian Federal Authority, or the contract with the Federal Public Service of Finance for the so-called 679 bank accounts consisting in the provision and the management of the payment account system and the provision of the payment service to more than 200 public institutions to date. And the contract, the concession of public service for the manufacturing and the delivery of European license plate and associated documents for the Federal Public Service of Mobility and Transport. As you can see on slide three, the total annual value of these services amounted to 104 million in 2022. And while the services relating to the 679 bank account has been provided since 1912, Other contracts are more recent. Each of these contracts or concessions varies by its own characteristics, and again, pending further legal and financial analysis, BPOS is at this stage not able to provide more information on the financial impacts in relation to past revenues. Depending on each contract, these financial impacts would depend on many factors, including, on one hand, if and to which extent there is or was an overcompensation, taking into account the applicable regulatory framework, including notably stated rules, standard processes, costs related to the service, the amount of the margin acceptable under applicable laws, the revenue charge for the relevant services, and the duration of the relevant services. And on the other end, whether or not and which action the competent authorities would take and the outcome thereof. Noting that the Belgian government has indicated that it would audit the compensation paid for the services provided by BPOST. This is today all we could share with you on these matters. And we have done so far, and what we have done so far, we will provide more detailed information as soon as possible. For the sake of clarity, the impact of these preliminary findings of the compliance review are already reflected in our Q1 results as we recognize a bedroom level a revenue impact of minus 6.2 million, which corresponds to one fourth of the low end of the 25 to 50 million impact for 2023. Let me now update you on the press concession and the latest developments since our Q4 presentation two months ago, which you could find on page four. First, as shared with you last time, the Belgian government decided to extend the ongoing concession until the end of 2023. And the submission of this extension to the European Commission for approval on the state aid rules is progressing following the standard process. Second, some of you are wondering whether or not the recent event of last week could have an impact on the ongoing investigation of the Belgian Competition Authority. The ongoing internal compliance review of the services provided to the Belgian state, which are discussed, is a separate process relating to different contracts and different causes. There is no link with the external investigation of the BCA, and we can reaffirm today that subject to further findings on the ongoing BCA investigation, the risk of imposition of a fine is still assessed as possible but not probable. Our view on the probability or the amount of such a potential fine remains unchanged and BPOS has not taken a provision related to these matters. The Belgian government announced on February 1, 2023 its intention to conduct or governmental audit into the compensation for the current price concession in order to determine if there was any potential overcompensation. This audit has not started yet and we did not receive any information regarding the scope of this audit. Any findings and overcompensation could lead among others to a claim for reimbursement of a part of the revenue chart for the services, but we are still at this stage unable to assess the risk associated to these audits. As said earlier, the costs associated to distribution services were reviewed and scrutinized on an ex-ante basis in the context of the European Commission State Aid Review and on an export basis by the Collège des Commissaires as part of the annual approval of our accounts. Regarding our capacity to participate in tendering procedures, we are still of the advice that contracting authorities would consider that BPOST has demonstrated its reliability in the context of this investigation and reviews, and would therefore allow BPOST participate in ongoing and future tendering procedures. Third and last point, what about the future press concessions? The government launched recently a new tender for the period 2024-2028. In line with its initial intention to reduce the annual budget attributed to the concession, the government reduced the envelope down to 125 million and has adapted the tender specification in function of this lower budget. The deadline to submit our offer is early June and an award decision is to be expected before the end of this year. People's is currently assessing the RFP and its requirements and whether an offer can be submitted that is financially sound. BPOS still judges itself when placed to win such a tender process. To conclude on this topic, BPOS has been caught up by some elements of the past and we are taking all necessary measures to get to the bottom of these matters. We will continue to work tirelessly to earn and maintain the trust in BPOST and its employees. I am confident that by continuing to prioritize compliance, we will emerge from this situation stronger and more resilient than ever. In the meantime, and as per our first quarter, we continue to execute on our strategy and to progress on our growth and transformation plan. On page five, I am indeed pleased to report that despite challenging macroeconomic conditions, BIPO's group performed well this quarter, achieving good operational execution and top-line development, with the performance even slightly exceeding the plan. Supported by strong parcels volume and price increases, our group operating income for Q1 stood at 1 billion 49 million euros, an increase by 1% or 10 million, including the negative 6.3 million revenue impact I just mentioned. Excluding this impact, this would have been an increase of plus 1.6% or 17 million. Our group adjusted EBIT stood at 78 million euro with a margin of 7.4% or 84 million before the revenue correction. Unsurprisingly, due to inflationary pressures on cost and macroeconomic trends, EBIT was down year over year. But our continued focus on productivity and cost control has borne fruit, and the decline in operating EBIT remains limited. I would like to hand over to Koun for more details on the financial of this first quarter. Koun, the floor is yours.

Thank you, Philip, and good morning, everyone. On page six, as always, you can find an overview of the key financials for the quarter, both reported and adjusted. Philip already mentioned our group top line in EBIT. Our adjusted net profit amounts to 48.3 million euro, or 53 million before the revenue correction, including some higher financial costs related to IAS 19 employee benefits, and ethics changes and thus non-cash impacts allow me to move directly to the details of belgium on page 7. at belgium when excluding the impact of ubway we see that revenues increased by 20 million to 577 million euros Domestic mail recorded an underlying mail volume decline of 8.8% for the quarter against 5.4% in the first quarter of 2022. This impacted revenues by minus 28 million euro, yet mitigated by positive price and mix impact of plus 25 million euro, as well as 4 million of additional revenues from Albitress, which was acquired on September 30th of last year. Altogether, domestic mail revenues remained nearly stable year over year. Note that the transactional mail revenues were in the first quarter of 2022, still supported by the COVID-19 communications, with an impact of around 5 million euros. This was no longer the case in 2023. In advertising mail, continued market pressures, among others from high paper prices, were in this quarter further reinforced by a customer bankruptcy. Parcel Belgium then recorded an increase of 15 million euro in revenue or plus 13.9%. Parcel volumes increased by 9.1% year over year with a higher growth in March as March last year was marked by the start of the war in Ukraine and Amazon's insourcing was reaching its steady state. The volume trend in this quarter was mainly supported by a successful commercial hunting plan of 2022. It should be noted that this volume growth occurred under persisting unfavorable macro market conditions. In Belgium, online retail sales adjusted for inflation declined by 12 and 16% year over year in January and February respectively. While the consumer confidence index was still positive last year, Before the start of the war in Ukraine, the consumer confidence in Q1 of 2023 remained negative despite a slight improvement since the end of last year. Price mix stood at 4.9% in Q1, mainly driven by price increases. Proximity and convenience retail network revenues increased organically by 3.4 million euros following the indexation of the management contract. In this subsegment, the deconsolidation impact of UBW, as from the month of March, was minus 21.6 million in the quarter. Value-added services increased by 5 million euros, mostly resulting from higher revenue from fine solutions. Let's move to the P&L of Belgium on page 8. In our intersegment and other operating income, you will see the minus 6.25 million impact reflecting the preliminary findings of the ongoing compliance review, as just explained by Philippe. On the cost side, again excluding UBWay, operating expenses increased by 30 million euro year over year, mainly due to persisting inflationary pressures. We have indeed recorded higher payroll costs, with on the one hand more than 11% of salary indexation impact year-over-year, but on the other hand a 2% reduction in FTEs. This reduction of around 480 FTEs year-over-year reflects our continued focus on productivity, but also the higher parts of volumes this year. Besides our payroll costs, OPEX development was also driven by some other inflation-driven cost increases, such as rents and energy costs. Bottom line, excluding the impact of the compliance review, our EBIT decline remains limited as inflationary pressures are successfully mitigated by our top-line development and our efforts on productivity. Moving on to eLogistics Eurasia on page nine. Revenues were up €21 million, reflecting strong growth across the different sub-segments. In e-commerce logistics, revenues increased by €6.7 million. Radial Europe and Activant sales were up plus 19.6% year-over-year. This continued high growth is driven by our existing customers' expansion and by new customers on board. At Dyna, the revenue development reflects lower volumes in DynaLogic's delivery network, offset by price indexations across all Dyna lines, as well as more services or more devices to be repaired at Dynafix. Cross-border revenues increased by €14 million of plus 18.9%. This top-line development is driven by both the consolidation of IMX since July last year and the growth of our Asian sales, where despite softer underlying trends, we continue to see the benefits of some recent customer waves. Let's move to the P&L of Eurasia. Operating expenses increased by 25 million, or 18.5%, mainly explained by higher transport costs in line with growth in fulfillment and cross-border activities, and the integration of IMX. Higher payroll costs from inflation and e-commerce logistics growth, as well as some expansion and strategy-related expenses in this quarter. Looking at our EBIT margin development, with 4.7% in Q1, we see sequential improvement compared to our margins of around 3% in the third and fourth quarters of 2022. Moving on to our North America e-logistics business on page 11. In line with expectations, Our top-line development in North America is currently impacted by the economic softness, the market overcapacity leading to high degree of competition and pricing pressures, as well as Amazon's insourcing impacting landmarks. The operating income of e-commerce logistics slightly decreased by 1.7% or 6 million euro. At constant exchange rate, this would correspond to a decrease of minus 5.8%. At Radial, top line decreased by 4.1% year over year, reflecting two dynamics. On the one hand, we see the contribution of some new customer launches as well as some slightly higher sales from existing customers. But on the other hand, we also have the impact of some terminated contracts as discussed last year already. At Landmark, as anticipated, we recorded lower revenues due to Amazon's insourcing and general price pressures in the market. Moving to the P&L on slide 12. Alongside our total operating income, OPEX and DNA decreased by 5.4%, excluding a fixed impact. Variable OPEX evolved in line with revenue development and were notably supported by continued strong variable labor management and productivity gains, as well as a favorable wage rate impact. In overhead, we reduced FTEs by 2.3% compared to last year. Here as well, thanks to a strong focus on productivity and cost management, we've been able to maintain our EBIT and to protect our margins in challenging market conditions marked by overcapacity and economic softness. Radial continues to improve profits and contributes to the stable EBIT in North America. Moving then to the corporate segment on page 13. External operating income increased by 2 million euro year over year from higher building sales. More importantly though, OPEX and DNA increased by 9.9 million or 9.1% reflecting inflationary pressures, notably on payroll costs with more than 11% of salary indexation, as just discussed also for the Belgium segment. partially offset by a reduction of 5.9% in overhead FTEs as part of our mitigating actions. Then we move to the cash flow on slide 14. The main items to flag here are the following. Cash flow from operating activities before changes in working capital decreased year over year in line with our result development. Change in working capital and provisions increased by 125 million. As explained in the previous quarter, this is notably due to the compensation schedule of the management contract for a net positive impact of 78 million. This includes the final settlement of the 2021 compensation, which was received in Q1 of last year, versus in Q4 of 2022 for the 2022 compensation. But more importantly, the advance payment for the 2023 compensation, which was received in Q1 of this year versus Q4 of last year. Compared to previous year, lower capex and lower peak expenses of the fourth quarter of 2022 also contributed positively to the change in working capital in Q1. And altogether, these impacts were partially offset by the deferral into this quarter of the Q4 2022 payment of the payroll withholding tax for 31 million. As explained already when we discussed the Q4 results, we made use of a measure granted by the Belgian government in the context of the energy crisis. The cash outflow from investing activities amounted to 54 million, mainly driven by our CapEx and including the purchase of two logistics sites for Radial US in line with the CapEx guidance. I now hand back over to Filip.

Thank you, Koen. Before moving to the Q&A, I would like to reaffirm that our operational performance in the first quarter was strong and even slightly above plan. Unfortunately, BPOS is caught up today by some element of the past and had to withdraw its financial guidance for 2023. Please note, however, that from an operational standpoint, the underlying parameters of the initial guidance remain globally intact and we continue to deliver on plan. Visibility on financial impact of the compliance review is at this stage limited but we strive to get a clear and exhaustive view of this financial impact so as to reinstate an updated guidance for 2023 as soon as possible. As illustrated on slide 3, each of the contracts in scope has its own specificities, and the factors under review are also of different natures. The timing of this complex process, which would involve external parties to be posed, therefore remain uncertain. We are conscious of the uncertainty caused by the situation, but be assured that we will update you on these matters if and when appropriate. We are now ready to take your questions. Operator, please open the line.

Most certainly, sir. Ladies and gentlemen, as a reminder, if you have any questions, please press star 1 at this time. First question today will be coming from Paul Keanu. from Bank of America. Please go ahead, sir.

Hi, good morning. Paul Kijanov in place of Muneeba Kayani from Bank of America. Two questions from my side. Can you talk about the current state of competition you're seeing in the market, and is price still the main mechanism that competitors use against you? And then my second question is, in Belgian parcel volumes, there's outperformance versus expectations. driven partly by the hunting plan. Could you describe what contribution came from the hunting plan versus the organic portion of this? Thank you.

Thank you, Paul. So starting perhaps with the first question, the current state of competition. So we need to distinguish across our different businesses, and let me perhaps start with the U.S., where we see indeed that the market is very challenging at this moment. There is in general an overcapacity in the market, with many players having invested during COVID in order to have more capacity. But right now, with the post-COVID normalization further impacted by the difficult macroeconomic conditions, we see that that capacity at the moment is not required. Hence, we see indeed a lot of price pressure in that market. Now, obviously that has an impact on us, but we don't intend to compete just on price. I think that's the same in fact for the US as for Belgium. We want to compete also on the quality of the services, the expertise we bring notably in the US in the verticals in which we are active. And we think that that is still a differentiator despite increased price pressure, which is indeed the reality today. In Belgium, for the moment, we see less of that price pressure. Here the competitive situation is, I would say, pretty much unchanged compared to last year. On your second question, so the partial volumes and how much is coming from the hunting plan versus sort of structural growth in the market. To some extent it's a bit difficult to say based on the Q1 results because Q1, first of all last year, the start of the war in Ukraine with all of the resulting impacts on inflation, on energy prices and so on, it was something which happened sort of middle in the quarter. So it's difficult to make a like for like comparison. But if we look at the growth we see, sort of excluding the new customers we imported as part of the hunting plan, we would estimate the market growth which is in the low single-digit range, which means that the rest, in essence, we expect to come from the commercial hunting plan.

Thank you very much, sir. Our next question is coming from Frank Claassen, calling from De Groove Petercam. Please go ahead.

Yes, good morning, Frank Claassen, De Groove Petercam. Two questions, please. First of all, on the press concession tender, what if you don't win the new tender? What is your, let's say, plan B? What can you do if you don't win that tender? And then secondly, on the labor costs in Belgium, how many steps do you think there's still to go on the inflation correction, automatic inflation compensation? And how much higher could the labor costs be in 23 versus 22? I saw that in Q1 it was up 11%. Will that accelerate in the year or? Yeah, some explanation on that, please. Thank you.

Let's start with the labour cost. The labour cost in Belgium, as you know, the evolution of the labour cost in Belgium is resulting from a law which is applicable since many years, whereby there is an automatic inflation based on indices with baskets of costs and so on and so forth. To the best of our knowledge, this principle is still applicable. Would the government decide to amend it, then we will apply it as well, but it's out of our control. What is the expected increase in 2023? There also we don't have a crystal ball, but at this stage we do not see an increase in 2023 as high as what we have enjoyed in 2022.

So perhaps to add to that, the forecast we would use internally for this is always the one coming from the Federal Planning Bureau. which is accessible whenever you want to take a look at it, which for the moment foresees one additional index jump to come this year towards the end of the year. What it means for our year-over-year comparisons in terms of inflation, where last year we had five indexations over the course of the year, We will see that as we progress through the quarters, the year-over-year impact should decrease, and so the plus 11% is likely the highest we expect it to be, at least based on the current forecast from the Federal Planning Bureau. But you can find all of that information also there, which is exactly what we base ourselves on.

Relating to the press concession, so let me first really state the fact that we are delivering a qualitative service on the current press concession. There has never been debate around that one. There is a new tender which has been extended. Already we have a level of request for proposal with a lot of details. We are participating to this tender, and we have the conviction that we are very well placed to win that tender, and this is the basic assumption under which we are working right now.

Thank you, sir. When I go to declare our KBC securities, please go ahead.

My first question would again be a bit on the parcel volumes because you mentioned excluding the hunting brand that you see like low single digit growth. I think the Amazon growth was 2.5% but there was still about a month of insourcing in there which is quite a strong performance. Are you gaining back some of the volumes from Amazon there or What is the rationale behind this? And following up on this, I would have assumed that the first quarter would be a bit more of a tough quarter, given that January and February we still not had the Ukraine impact. So looking at that, I was just wondering how you see volumes evolve in the next quarter and if the mid-single-digit outlook is not too low, let's say. And then a second question would be, and I fully understand that you, like you mentioned in the press release, that you cannot give a timeline on potential cash outflows regarding the current investigation. But I understand, of course, that there is a government part and, of course, the internal review that you are doing. But what should we expect from the internal compliance review? Is this still something that we can expect in 2023 to be concluded? And the reason that I'm asking this is in terms of potential provisions that might be booked. When could we expect this? And maybe following up on this, how this will translate in potential dividend cuts or if this will already be taken into account for the AGM later this month. So these were my two questions.

I'll start by the second one and Kun will take the first one. When it comes to the investigation, so thanks for understanding that these matters are extremely complex and we are all in on that to try to go to the bottom of it. It's not only one contract, it's three different contracts. You have a lot of laws applicable. So from a legal standpoint, it's extremely complex. So it's really not easy. We really would like to go as far as possible to assess the impact of those, but also we don't want to rush because we also want to, despite the fact that some misconduct happened by some people in the past, We also want to defend the interest of depots and fight for the right thing we could fight for. So we want to build a strong case when it will come to discussing slash, if you allow me, negotiating with the government to come to an agreeable, an amenable solution to it. So it will take time. It's not, would we have to apply uh one number which is uh expected profitability so much percent then it would not require so much time but you know it's exactly it's not the case because contracts are different legal situations are different and there is no one set number on what is an acceptable uh profit for this kind of services when you are in a in a tender then it's the market preference at place When we are not in the kind of tender in a stated rule, it's another rule that is taken into account. And even within that one, the level of risk which is embarked into the contract could also lead to additional margin. So, sorry, my answer was a bit long. But we really want to fight to defend the post to still be able to get the best possible outcome when it comes to negotiating this margin with the Belgian states.

Okay, I'll take the second question Michiel, or actually your first one on sort of the partial volume evolution. So you are right indeed that in terms of comparable the start of the first quarter is a bit tougher than we would expect the rest of the year to be. We also see that when we look at sort of the evolution month per month that March is a month with a more favorable evolution. But at this stage, given that it's one month, it's a bit too early to draw conclusions yet on the remainder of the year. There is another aspect to be taken into account, though, which is that last year, the commercial hunting plan, we have onboarded customers throughout the year, which means that the comparable from that sense will become more difficult as we go through the year. And so those elements combined, and given that we only have one month to compare like for like, for the moment we retain that mid-single-digit outlook with the potential upside that could come, but which will be confirmed, I think, in Q2 when we will be able to communicate more about that.

Okay. Claire, thank you very much for that.

Thank you very much, sir. We'll now move to David Kersen calling from Jefferies. Please go ahead. Your line is open.

Hi. Good morning, everybody. I have two questions. Can you please run us through the calculation, how you get to the $25 million to $50 million impact in relation to the revenues of $104 million? What are the assumptions underlying the $25 million hit, and what do you assume when it will be $50 million? And why can you not calculate a similar impact for the earlier years? And this is all currently only just for 2023. And what should we assume going forward? Sorry, what was that?

We lost you for 10 seconds, I think.

Okay, I'll ask my question again. Why can we not do this for the earlier year and then everything after that we miss?

My question was, can you run us through the calculation how you get to the 25 million to 50 million EBIT impact in 2023 in relation to the revenues of 104 million? And what do you assume to get to 25 million? Because I understand you take now one quarter, one fourth of the 25 million in your Q1 earnings. So how do you get to 25 million? And when will it be 50 million? What is the difference there in what you have assumed? And why can you not make a similar calculation for the earlier years that you had these contracts in place? And then secondly, on the press concessions, what is the reason for the reduced scope of 125 million? Is that Because the earlier compensation of 167 million was seen as too high. And is there a risk that you could have to pay back the difference historically as well? And how will you mitigate for the lower compensation for the press concession? Will you then put the newspapers in the mail delivery rounds? So what are the measures you can take there to offset that effect? Thank you very much.

Thank you for your question. Let me start by the second one. When it comes to the press concession, it's the state who has decided to allocate a lower budget to that topic, to that service. And they did it in a very, I would say, logic and consistent way because they have not copy-pasted the previous standard and just say the maximum allowable budget is reduced. they indeed reduce the budget, but they also adjust the operating way, the modus operandi, or the condition, the technical condition of the RST. So there's been, I would say, balance and logical in the sense that they say, we are ready to dedicate or we want to dedicate less money to the service, but we expect also different type of services from the people who would answer the tender. Of course, we are willing to answer the tender as already said, and I reiterate that I believe and we believe that we would be in a very good position to carry out the tender and to win the tender.

Is it not true that the historical compensation of the press concession is also on the review? So I think historically you received 167 million.

No, no, no, no, no, no. So on this one, as you can also see in our disclosure notes, so we The compensation for the press concession is something which was audited ex ante by the European Commission and is audited ex post every year by the College of Auditors, including the Court of Audit and our internal auditors. At this stage, we have no indication that something would be materially wrong with that calculation leading to an overcompensation issue. That is not on the table at this stage. That said, the Belgian government has announced that they would launch an audit to ensure that there is no overcompensation. But up until today, we have no further details on that audit, so it's very difficult to make any risk assessment on that at this stage. But as I said, it is already audited, both ex ante and ex post. And since many years. Indeed, since many years, correct. Perhaps just also to complement on sort of the how to mitigate question, as Philippe spoke about the change tender, I want to point out that the tender itself, the request for proposal, is out there in the public domain. If you want to, you can have a look at that to also get a sense of the changes which were put into place by the government. Some of them being very technical, let's face it. That's true, fair, yes. But coming back then to your first question, so how did we get to the 25 to 50 million? First, it's important to state that the compliance reviews, they are not finalized yet. So we are at the stage of preliminary results, which means that there is still a lot of uncertainty. But as you will understand, as soon as we are aware of something which could materially impact our guidance, we are forced to disclose it, which is exactly what we've done to communicate transparently to the market. But it also means at this stage we don't have all of the details just yet. So how do we get them to the 25 to 50 million? First, there's three contracts and based on the audit findings so far, those three contracts are very different in terms of what exactly is the issue there in terms of legal framework, in terms of potential margin issues and so on. So we need to distinguish clearly between three contracts and then there is a lot of doubt or things still to be determined on what is the reasonable margin. And as Philippe said, that is also something which we are looking into to make sure that we get to something which is in the best interest of people. So if we take sort of these two parameters, we look at the three contracts, we look at potential outcomes in terms of reasonable margins, you can get a lot of permutations in between those things. But when we do that exercise, based on what we know today, we end up with that range of 25 to 50 million. Where the 50 million is, and just to be transparent on that one, it's saying all of those contracts go down to the margin of 7.5%, which you see circulating also in the newspapers. So that's sort of the way we get to it. Why can we not do this for earlier years? I already explained that there's a lot of uncertainty still even on the impact for 2023. Once you look back, it starts getting even more complex. But honestly, at this stage, we are not able to make any reliable estimate that we can share. And then you also asked, why is it only one fourth of the 25 million in the Q1 results? So this is rather a technical point. Whenever you have uncertainty on these things, IFRS foresees that you book the lower end of the range and you disclose the full range, which is what we've done. So that's why there is a 6.25. It doesn't mean necessarily that that will be the outcome, so you still need to consider the full range.

Okay, understood. Thank you very much, gentlemen.

Thank you very much, sir. When I go to Sumit Mehrotra of the State General, please go ahead.

Thank you. So, a few questions. First, Which specific entity will ultimately assess the overcompensation amount? The Belgian government, are we talking about the European Commission here? And what is the current state of engagement with this right now? Secondly, an update on the CEO selection progress. Thirdly, how much scope do you really see for FT reductions at Belgium or the bulk of this is behind us, of the strong progress? Is there enough goodwill to continue doing this? And lastly, have I understood this correctly that from your very recent comment right now in the call that you do not see the risk of overcompensation on the press concession that is not on the table? Am I right in my understanding? Thank you.

Sumit, thank you for your question. We'll take it maybe starting from the last one to the first. on risk of over compensation exactly as Kun said it. It's a different, totally different situation. There's been ex-ante review by European Commission. Yearly review by the Collège of the Commissaire relating to this contract. nothing major has ever come out from this review. Of course when there was a review there was some time here and there, small stuff, but nothing major has ever happened. Now when it comes to the audit that the government has announced, As I said, the audit has not started. We are not even aware of what is the scope of that. So, as we said, it's very difficult to give you anything more than what Claude has mentioned. When it comes to FTE reduction in Belgium, we want to continue being efficient and apply efficiency measures everywhere possible. It's an ongoing process. We believe that there are still pockets where we could improve. Will it be at the same pace to be seen? But also when we are seeing that the parcel volumes are going up, it's also something that gives us put us in a difficult situation to guarantee that we will reduce accounts. Maybe we will end up in a situation where we don't have to reduce any further because we have the right sizing to absorb the volume. And by the way, it's exactly the same story that we are saying for the US. And we made that point in Q4 last year that if you recall, the volume that we have processed in the US was during the peak time was lower than the year before, but we have adjusted our cost base on the variable, on the fixed cost base, the level of the warehouses, and now we went to an additional layer on SG&A for all the functions in the US. That's exactly the way we want to go on. We are not obsessed by account reduction for the sake of account reduction. We are obsessed by having the most efficient organization in any given time to be able to deliver and to serve our customers. When it comes to CEO selection process, I think, you know, as much as I know, a head hunter has been selected and even yesterday, Audrey, during the press release for Belgium Press, said it's an ongoing process. The willingness of the board was to make sure to have the right profile before starting the hunt and the choice will be made when the right profile for the company will be identified. The last one was which specific entity? There I would recommend you to go to the presentation where you see it's on the page 3 where you see that for every single contract, which are the contracting parties, traffic fine is Department of Justice, 679 is finance department and European license plate is mobility and transport. All of these three are federal entities as opposed to regional entities as you know we have in Belgium.

And then I think, Sumit, you also are specifically on the European Commission. So I think here it's clearly a two-step process with first the entities which Philippe mentioned and then depending on the applicable legal framework, potentially at some point the European Commission will be involved. But it's really a two-step process, this one.

Thank you.

Thank you very much, sir. When I go to Nicholas Mowden from Kippur Shiv, please go ahead, sir.

Hi, good morning. So first question is, I understand that you have an overall head, an overall business volume of some 422 million with the Belgian state in 2022. That has three buckets. First one is the press concession, 170x million there, 104 million now for these three concerned services, leaving a third bucket of also 100x million in business. The question here is whether you see any risk of other findings in that third bucket and whether that one is actually being investigated at all right now. Secondly, I totally understand the complexity of the situation you're in and I appreciate that for good reasons you probably didn't take provisions. You could also take the point of view that a provision can be taken out of conservatism. Are you worried about self-incrimination in case you book a provision early? And also, did I understand correctly that you did not provision for the services impact, the 25 to 50 million yet? And then finally, maybe also one of understanding The press concession is apparently being audited every year, but nobody ever looked into the profitability of the other services. How is that possible? Thank you very much.

Thank you, Nicolas. Let me maybe start with the first one. The breakdown of all the revenues with the Belgian state. Indeed, as you mentioned, there's two buckets which are already clearly identified. There is the press concession for approximately 170 million. There are these three contracts for 104. In the remaining part, you actually still have two things. One is the seventh management contract, which represents around 135 million. And then the remainder, these are standard postal service contracts we have with the federal state. just as we do with any other customer that sends large amounts of letters. So those are the different blocks. In terms of where do we see other risks, I think in the management contract for the moment there is no indication that there would be any issue. For the regular contracts for postal services, these are indeed regular contracts like with any other customer, so again, no indication of any issue there. Then you also asked around the provisions. So here, in fact, we just apply the IFRS rules. So there's no choice on being conservative or not. It's really we apply the rules where in order to take a provision, you need to have more than 50% probability of a cash outflow. That is the case in this instance. However, you also need to be able to have a reliable estimate. And that is the one where at the moment we don't have a reliable estimate. As soon as we do, it will indeed translate into a provision as we will abide by any accounting rules that apply. Just to be clear, for 2023, the 25 to 50 million impact For this one, given that we are able to estimate range, we have included already a part of that in the first quarter results, being that one-fourth of the lower end of the range, with the remainder of the range being disclosed as part of our press release to the market.

And from a methodical standpoint, we have to reimburse the alleged extra profits So first we need to determine it and then you could apply the notification. So the reason why we will be first assessing what is a reasonable profit under the applicable laws. And once again, they are different in the three different contracts. And then when this is being done, then we look how many years do we need to go back. Also noticing that all the contracts are not in application since the same number of years. So it's a second complication. So anyway, we need to answer to the first question before contemplating the second one.

And then Philippe, I think maybe you want to take the last one? Sorry, which one? I forgot. It was on the press concession being audited, but this... Yeah, okay.

The press concession is audited. Why are the other services not specifically audited? It's not up to me to answer that question. We are submitting our financial statements to regular audits from Collège des Commissaires. The Belgian government has never expressed the willingness to review the other one. You could ask them why they have not done it, but it's not up to us to answer to that question. We've always been transparent and cooperative with Belgian authorities when it comes to questions, that one.

Sorry to say. Just to be very clear, so the margins, they show up correctly in any analytical accounting model we have. As Philippe said, in the end, the question of why it is not audited is not up to us to answer, but I could perhaps give an indication in the sense that the two other contracts we have, notably the press concessions and the management contract, they are flagged. as stated cases, hence under more scrutiny than the others which were up until now not flagged as such cases, which could be part of the answer that you're looking for.

Thanks a lot.

And thank you very much. We'll now go to Mark Schwarzenberg of ING. Please go ahead.

Yeah, thanks for taking my questions. First, coming back to parcel volumes, I want to clarify still the numbers that you mentioned in the presentation. So the plus 9.1 is the reported volume goal, but if you then exclude the hunting plan, you mentioned that it is no single-digit goal. However, there's also still the Amazon impact. You mentioned a positive impact, According to me, last year there was still some Amazon volumes in there, so I guess it was still a negative. If you strip out the hunting plants and the low single-digit growth number, does that still include, should I adjust that for the 2.6% impact from Amazon? So do I have to add that on top to get the real underlying growth, so it's more mid-single-digit number?

Is that correct? So I'm not sure I fully heard it, Mark, because the line was not great. But in terms of Amazon impact in the quarter, so there was progressive insourcing by Amazon throughout the quarter last year. If you look at the Amazon volume evolution in the quarter itself, in its totality, it is a positive evolution, which is in fact pretty much in line with the rest of the markets. Stripping it out or not makes very little difference. We end up at the same market evolution of low single digits with then obviously the rest bridging the gap to the total of the plus 9.1 being derived from a commercial hunting plan. I hope it answers the question because I didn't capture it fully to be honest.

Maybe to make it very clear, if you strip out say the hunting plan but also the Amazon, that is basically your real underlying role. I guess then if you had low single digits excluding the hunting pen, if it doesn't make an adjustment for the Amazon insourcing impact that was still in there last year, you probably have a higher growth rate in the line in the coming quarters where you don't have the Amazon impact anymore.

Is that correct? Yes, indeed. At some point Amazon will become part of the like-for-like comparison and thus be part of the market growth, where indeed if March is confirmed, but again we're talking about one month which allows for the moment the like-for-like growth, Indeed, we may end up with a slightly better partial growth than we had originally foreseen. So, yes, that's true.

Yeah, because that partly then explains why March is seeing a more favorable trend maybe than January. Exactly.

But I don't want to put too much stock in one month. It is what it is. It is one month. And so, as I said, we'll come back to that in the second quarter once we have a better visibility on the like-for-like comparison.

Yeah, sure. But this already clarifies a bit what the real trend is. And then, to come back on that one, on the Prescott session, so the budget is lowered from, let's say, I hear the number of 770, and sometimes it is 175. David, I think that is a different number. But it's going down to 125. What would be the impact on your habits for If it would be for a full year in there, what would be the most evidence from lowering it from 175 to 125, given that it requires a different service, therefore potentially also different prospects?

So on this one, first, I won't be able to fully answer the question. Why? Because we are in an ongoing tender process. what I say may inform potential competitors on the offer people would be considering to make, which would not be in the interest of the company. So you'll understand why I cannot disclose any specific impact on this. What I do want to point out though is that, as Philippe said, the RFP itself has been significantly adapted in terms of scope, but also in terms of setup of the entire remuneration mechanism. which means that there are ways to compensate this decrease in subsidy from the state by other means. I'm not able to give you any more detail at this stage, again, as we are in an ongoing public tender process.

I fully understand that, but if I take 7.5% of that gap that you lose as a margin, is that the minimum impact and then whatever?

I'm sorry, but we will not answer that one. We will not disclose anything more on that.

But I do invite you to look up the RFP, which may already answer some of your questions.

Okay, okay. And then maybe lastly... You said we can't give you the impact on the former contracts only for this year or for the other buckets. But what if you would apply that 7.5% margin, which you use now for the $50 million impact, what if you would apply that 7.5% maximum margin on all the years 10 years back and the maximum clawback? Could you then give me a number on what would be the cost?

I think you could do the math yourself, but we are telling you that we are not in a state to associate. So your guess would be as good as anyone else's guess.

Okay. Well, I certainly do that, but I just wanted to get a bit of a number out there that makes sense for everybody. So otherwise, we have 10 numbers. But I'll do the math.

I really think, Mark, on this one, there is a reason why we say we cannot estimate it. It's because it is highly complex. There are many parameters at stake. We are just not able to make a reliable assessment. I think at this stage, in fact, no one is able to make a reliable assessment, to be fully frank with you. So I cannot share any numbers because really I don't have any decent guess. You could, of course, take any type of calculation which would give you an extremely broad range. But we have, to be honest, today, we just don't know yet.

If you want to make the comparison with the PO PAC outside the presentation, we say the fine could go up to 10%. Top line of BPOS, 4 billion. So, potential impact, 400 million. At the end of the day, we concluded that we have not taken any provision. So far, for the reason possible, but not probable. So, it's the same here. If you want to say, okay, maximum 50 times 10, do it, but it's not the avenue that you have taken, so...

Just in the interest of time, I see we are already over time. I think we still have two people that may want to ask questions. So let's limit it to two questions each maximum, please. And let's move to, I don't know who the next one is in the queue.

Yes, sir. Thank you very much. We'll now take questions from Mr. Henk Stotboom of the IDEA. Please go ahead.

Good morning, Philippe, Koen, and Antoine. Good morning, Philippe. Well, two questions, if I may. First one is on the press contract, and I'm not asking any numbers or whatever. I'm curious about the mechanics of the distribution contract. Am I right to assume that on top of the payment you get, the compensation you get from the federal government, there's also a charge that's paid by DPG, Mediahuis and the other publishers. And if so, is there a way that you will lose around 50 million in terms of revenues on the new contract, assuming that you get it, that you can claim back part of that damage from the publishers that you can pass on part of the cost. This is purely hypothetical. I'm not asking you for any numbers or whatever. It's simply about the mechanics of it. That's my first question. The second question relates to, well, there's been a lot of negative publicity on BPost. And a year ago, some of your peers had some problems with subcontractors. Well, I don't need to mention any names or whatever. but immediately you saw a response of clients at bull.com publicly said, listen, we don't want to be associated with malpractices and that sort of thing. Has the negative news flow that happened over the past few weeks, months, has that in any way affected your relationship with clients? Does it lead, are you afraid that it could lead to any commercial damage. And I'm not referring to the government. I'm referring to all the other contracts you have outstanding.

Thanks for the question. I'll quickly respond to the first one because the answer is very short. Your understanding of the mechanics is fully correct. And then I'll pass it on to Philippe to answer the second one.

So, negative publicity, yes, and we can only be sorry that sometimes it's only pointed out or pointing to the best thing and forgetting about the good one. I mean, the fact that we have a strong result for Q1 It's not a coincidence. We had strong results in fourth quarter as well. Our customers are still very happy of the services. So to respond directly to your question, Hank, on the potential impact on commercial, we have not seen it. So I have to admit, I must add so far, but I'm also not hearing that the call centers are full of customers asking to stop the contract and this kind of stuff. It's not the case. It's not the case. Which is more difficult is the economical situation. As Koun mentioned it, it is too, especially in the US where we are in overcapacity. But we have not been able, and it's a question I'm asking myself nearly every day, do we see an impact, a link between the two? The answer is no. This being said, for me, the question, allow me to on the commercial side is one thing, but there is also a very negative impact on our employees. It's not quote-unquote fun to work for a company which is in the press every day only pointing out bad things and mostly driven or generated by a handful of people which is far from the totality of the B2S employee, which are 34,000 around the globe. So for me, if you ask me, I'm more worried of our colleagues than for our customers. Don't get me wrong. Of course, I value very much our customers, and we continue serving them, but there is also a very negative impact on our colleagues.

Okay. Thank you very much.

Thank you, sir. Our last question is coming from Mr. Marco Limite of Barclays. Please go ahead, sir.

Hi, morning. Thanks for taking my questions. Very briefly, as there were questions about the underlying growth in parcels, do you have already a number for volume growth in April, which could clarify what's the underlying like-for-like type of growth? Second question, when should we expect radial North America revenues to grow again, maybe excluding FX? So is there a hunting plan there? And yeah, should we expect revenue growth next year? Thank you.

Happy to take those questions, Marco. First, on April, I'm afraid I need to disappoint you. It's a bit too early to be able to say it. In Belgium, there was a public holiday on Monday, so it means we're at the start of the first working day of the month. We have not yet run all checks to be able to give you a definitive number. What I can say, though, is that preliminary numbers indicate that we will see a continued strong growth on those volumes. but I'm not able to give more detail just yet. As for the US, so yes, we have ambitious commercial targets to compensate for the difficult market circumstances. I think when we gave the outlook as well last time, I explained that we were expecting to see for radio a decrease at the start of the year, but on a full year basis, we were still expecting to see growth. So far that remains our assessment, but we will see based on the commercial success we have in the second quarter whether we can reconfirm that or whether the market situation will make it more difficult to attract those new customers. So the ambition remains to still have growth on a full year basis for Radial North America.

I would like to thank everybody in the call for having taken the time to be with us and for your interesting questions that demonstrate that you really understand the business we are in and our company. As a reminder, BPOS ReLOS, its annual shareholders meeting next Wednesday, May 10th. We, of course, look forward to staying in touch and a further announcement will be made if and when appropriate. Our second quarter research will be released on August 3rd, and we have the pleasure to host this kind of meeting again. Thank you very much for your time. Thank you for my colleague, Koun and Antoine, and have a nice day. Thank you, everyone.

Thank you, gentlemen. Ladies and gentlemen, that was incredibly accomplished. Thank you for your attendance. You may now disconnect.