Bpost Sa Ord

25 analyst conference call. On today's call, we have Mr. Philip Durkin, CFO, and Mr. Chris Peters, CEO. Please note, this call is being recorded and for the duration of the call, your line will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand over to your host, Mr. Chris Peters, CEO, to begin today's conference. Please go ahead, sir.

Good morning, ladies and gentlemen. Welcome to all of you, and thank you for joining us. We don't only have Philippe and myself, but also Antoine Lebec, head of investor relations in the room, and Philippe and myself will walk you through our first quarter 2025 results. We posted the materials on our website this morning. We will walk you through the presentation and we'll then take your questions. As always, two questions each would ensure everyone gets the chance to be addressed in the upcoming hour. Philippe, over to you for the financials. I'll then come back with an update on some of our key strategic priorities for 2025.

Thank you, Chris, and good morning to all. As you can see on the highlights on page 3, our group operating income for Q1 stood at €1,119,000,000 and increased year-over-year by close to 13%. At constant perimeter, meaning excluding the €199,000,000 consolidation impact of Stasi, our operating income decreased by 7% or 73 million, mainly driven by the following factors. Number one, persistent headwinds in North America following contract termination announced in 2025, 2024, and the loss of enterprise customer earlier this year as flagged in our 2025 outlook. Second, lower price revenue driven by the new price contract that came into effect in July last year in 24, combined with continuous structural volume decline in domestic mail. And third, unlike in the previous quarters, this was not mitigated by growth in domestic parcel revenue, which were adversely impacted by volume loss during the strike in February. Our group adjusted EBIT came in at 41.6 million euro, with a margin of 3.7%, or 28.4 million when excluding the 13.1 million contribution of Stasi. On a life-for-life basis, this reflects on a year-on-year decline of minus 41.3 million euros. Beyond the 6 million euro impact for the strike, this decline is primarily driven by press, with lower revenue have significant impact on EBIT and North America, where ongoing productivity gains are not sufficient to fully offset top-line pressures. We'll come back in the section of 3PL, but we already want to emphasize that Stasi performance is fully in line at the end of the first quarter with our expectation and our guidance 2025 that we shared in February with you. In the first quarter, its EIFRS EBIT contribution was negatively affected by 5.1 million euros front-loaded IFRIC 21 booking, whereas on the local accounting standard, this annual impact is spread evenly over the 12 months of the year. Since the impact is fully booked in the first quarter, the margin over the next three quarters will compensate for it, and on a full year basis, this effect will be fully neutralized. More broadly, at BPOST level, the results we are presenting today are in line with our expectations. and Chris will come back on that one. Before diving into the financial performance of our business unit, you will note on slide four that our financial results decreased by 28 million, mainly due to four factors, higher interest expense, resulting from the 1 billion increase in debt following the acquisition of Stasi in 2024, lower interest income driven by lower money market rates, and lower cash balance following the acquisition of Stasi. higher lease-related interest expense, and some non-cash FX impact. Let's move now to the details of the three segments. And on page 5, with last mile segment, we see that revenue declined by 34 million to 545 million. In line with Q3 and Q4 last year, domestic mail recorded around 28 million decline in revenue, of which 19 comes from the press alone. mainly due to the new contract with the editors following the end of the press concession in June 2024. Excluding press, mail recorded an underlying volume decline of 8% for the quarter. This decline in mail volume led to a revenue impact of $19.1 million, though was partially offset by a positive press and mix impact of plus 3.9% or $9.7 million. As a result, the domestic mail revenue decline was limited to minus 4% or €10 million year over year. Our passage revenue remained stable year over year, reflecting a volume decline of 2.1% and a positive price-mix effect of 2.2%. Let's dig into the different sub-components. On the volume side, The decline was driven by volume lost and shifted to the competition during the two-week strike of the month of February that affected our national sorting and delivery operations. This resulted in a volume drop of minus 12% in the month of February alone, which contrasts with an average volume growth of plus 2.5% in the month of January and March. As for the price mix, it stood at 2.2%. This was also negatively impacted by the strike as we faced customer claims and contractual penalties related to the non-quality and service disruptions. Excluding the strike, the average price mix was closer to 3.9% like we saw it in January and in March. Revenue from other activities including retail, value-added services, and personal logistics declined by 5 million euros year-over-year, mainly due to lower banking revenue and repricing of state services, while Dynagroup remained nearly stable. Let's move to the P&L on page 6. Our total operating income decreased by more than 33 million, or 5.5%. On the cost side, our OPEX, including depreciation and amortization, only slightly declined by 0.5% or 2.5 million. This reflects higher salary costs per FTE with a 2.7 year-over-year increase driven by salary indexation in June 2021. However, this was offset by unpaid absence as well as lower FT and interest during the strike period and lower cost of sales. Beyond the drop in price revenue, the 31 million year-on-year decline in adjusted EBIT also includes approximately 6 million of direct strike impact. This mainly reflects commercial losses in partial volume, but also in May, the contractual penalties, and to a lesser extent, payroll costs, as just mentioned. Let's move to the segment 3PL on page 7. 3PL revenue increased by 165 million overall, but declined by 32 million, or minus 12%, while excluding the 197 million contribution from Stasi consolidation in the quarter. Stasi revenues reached 197 million euros, up 2.4% year-on-year, fully in line with the seasonality anticipated in our full-year outlook. In 3PL Europe, at constant perimeter, radial and accident sales were up 12% year-over-year, continuing the trend of previous quarters. This growth was fueled by customer onboarding as part of our international expansion efforts and upscaling activities targeting existing customers. In 3PL North America, revenue decreased by 37 million euros. A constant exchange rate is correspond to a decrease of 90%, resulting from revenue churn from contract termination announced in 24 and early 2025. Lower sales from existing customers, which offset the contribution from new customer launches in 2025. Let's move to the P&L of 3PL on slide 8. Excluding Stasi, while the total operating income decreased by 12%, our operating expense and DNA decreased by 9%. Primarily driven by lower variable OPEX in line with Radial's revenue trend and a sustained improvement in Radial US variable contribution margin. Our VCM has increased by around 3% year over year and is currently at its highest level ever. At constant perimeter, our adjusted EBIT is down 7 million year over year, from 1 million last year to minus 6 this year, mainly reflecting radius US slightly negative EBIT due to its current limited ability to absorb fixed costs, mainly relating to real estate footprint. Regarding Stacey, the EBIT contribution came at 13.1 million, with a margin of 6.6%. This is in line with the quarterly seasonality, leading to a full year guidance of 10-12%. Operationally and in local GAAP, the performance is according to plan. In IFRS DOE, this softer EBIT and EBIT margin in Q1 reflect the annual front-loaded IFRS impact of 5.1 million. When adjusting the 3.8 million of this impact attributable to the period April to December, the EBIT margin is slightly below 9%. Moving on to cross-border on page 9. Cross-border revenue decreased by 4 million or minus 4.4%. During the quarter, we observed a more modest growth in volumes from China to Belgium due to mixed client trends. Combined with our ongoing expansion in Europe, this was not sufficient to offset the adverse market conditions in the UK market. As in the previous quarters, our top line in North America remains under pressure. Cross-border North America revenue declined by 4 million, or 6%, as Landmark Global continues to face volume headwinds while the broader tariff environment is delaying new business opportunities. Overall, our global cross-border operating income decreased by 8 million or 5% year-over-year. As shown on page 10, our OPEX and DNA decreased at the same time by 4.7%, driven by by lower volume transportation costs, reflecting lower North American and UK volume, alongside with improved transport rates. Overall, despite top-line decline, our margin remains broadly intact. From an EBIT perspective, the 2 million decrease reflects ongoing pressure at landmark in the US. Moving on to corporate segment on page 11. Adjusted EBIT declined by 2 million to minus 12 million euros, maybe driven by higher net OPEX after internal invoicing and DNA. These were largely the result of higher FTEs and inflationary pressure following the two salary indexations I've mentioned earlier. Then let's move to the cash flow statement on slide 12. The main items to flag here are the following. Press rule from operating activities before change in working capital stood on 131 million and decreased by 25 million versus last year, mainly reflecting higher corporate tax repayment last year. Change in working cap and provision amounted to plus 45 million. The minus 71 million variance is primarily due to the termination of the price concession in June last year. As a reminder, the compensation under that previous price concession was typically prepaid in advance, while price revenues are now invoiced according to normal billing cycles under the new price contract with the editors. The net cash outflow from investing activities totaled 26 million, driven by our capex for international e-commerce logistics, parcels lockers, and capacity expansion, and our domestic fleet. This item constitutes the main variation in our free cash flow. The net cash outflow from financing activities amounted to minus 15 million, many reflecting higher list IEP-related payments, result of the scope effect of deposition of Stasi in August last year. Chris is bringing us now to the outlook for 2025 and the strategic priorities.

Thank you, Philippe. As you know, we presented our guidance at the end of February, just two months ago. The results Philippe just shared are brought year EBIT guidance. This is despite the direct strike impacts incurred in Q1, which at the time of our initial guidance could not yet be quantified and were therefore excluded at that moment. While several market developments have occurred since then, the current trajectory supports maintaining our EBIT guidance of 150 to 180 million with recent trends indicating reduced risk of landing at the lower end of this range. That said, We remain cautious and continued vigilance is required. This guidance does not factor in any potential future commercial impact stemming from the February strike, neither the potential impacts of evolving trade tariffs and policies driving macroeconomic uncertainty and limiting visibility. This being said, we of course have already a visibility of the risks coming from the trade wars and also the opportunities that we see. First of all, at the risk side, we see a reduced consumption, especially in Canada, where you see the lower consumer confidence and also a growing national sentiment or an anti-US sentiment, better said. You see also the disruption of certain trade lanes where you see that due to the introduction of tariffs and duties, and the end of the minimus exemptions, that trade flows are diminishing. And also you see that there is a delay in supply chain strategies as the consequence of the uncertainty, so decisions are delayed. On the other hand, for a company like BPOS Group, there is a number of opportunities also following out of this situation. First of all, we have, of course, trade lanes and also have robust customer clearance capabilities. We see that already that certain trade lanes in Canada have been redirected and that we can benefit from that. And also we are working on a diversified service offering. Certain clients are of course revisiting their potential supply chain strategies and we could be also partner for them in those new strategies. If we then zoom in on the strategic initiatives, In the previous discussion, we went through the 22 initiatives that we have. I'm not going to go through them each one by one. However, that being said, I think there is a lot of things moving and good news on most of those ones. If we first zoom in on the 3PL business, the new organization structure in Europe is in place. It means that Stasi Active and Radial Europe are managed as one. And so there's a lot of synergies coming out of that, both at the commercial upside, so revenue upside, as at the side of the dust synergies that we have. We also have this morning announced a leadership change. Thomas Mortier has announced that he will... and then continue as a consultant towards the company. You will remain invested in the company, but that also, that transition helps us to prepare for the future and we will stepwise make sure that we prepare for that future. At US side, good news on FastTrack. FastTrack is accelerating faster than FastTrack would even announce, meaning that we already onboarded five new clients on that with really very good metrics. So we have a number of cases consumer with our fulfillment service. And also you see that this is accelerating the portfolio diversification strategy that we have developed for the U.S. If we then zoom in on Belgium, we're beginning last mile. As of 1st of May, I took the helm of the Belgian organization to help accelerate the transformation about obituaries, secure delivery, label-free and pack-free delivery pilot in the C2C segment. Our locker strategy is in full acceleration. These days we install six lockers a day in Belgium. And also at the level of the social dialogue, you see that the intensity of conversations is increasing. The level of action, except for the ones against the government, is strongly reducing, which helps us, of course, to drive the hardly needed transformation of the organization in Belgium. Next to that, I still have to mention to you that we announced end of February that we will have a capital markets day on June 3rd to present in more detail our strategy and financial in Brussels and will also be accessible online. The save the date and pre-registration link have already been shared. You can find all relevant information in the dedicated section of our investor website. Further details and final agenda will be communicated shortly. And now we're ready to take your questions. Again, two questions each, please, so that everyone gets a chance to be addressed during the session. Operator, please open the lines.

Thank you very much. Ladies and gentlemen, as a reminder, if you'd like to ask a question or contribute on today's call, please press star 1 now on the telephone keypad. And to redraw your question, hit star 2. Please also ensure your line remains unmuted locally. You will be advised when to ask your question. The first question comes from the line of Frank Claessens calling from the Grove Petercam. Please go ahead.

Yes, good morning. My two questions. First of all, on radial, that's minus 19% in Q1, quite steep decline. Can you elaborate what you are doing on the cost side there to, let's say, mitigate the negative revenue impact? And then secondly, on the parcel volumes in Benelux, in Benne, Let's say without the strike months of February, it was 2.5% growth in January and March. If I'm not mistaken, your four-year guidance is mid to high single-digit volume growth. So, yeah, is that still applicable? And what could drive the assumed growth acceleration in the rest of the year in partials? Thank you.

I can take the first question and maybe you can take the second question. So on the radial side, indeed, we have announced at the February meeting the impairment as a consequence of the loss of an enterprise-sized client. We have immediately afterwards reduced our staff with 144 FTEs. That was an immediate cost reduction. so in the overhead side to adjust our cost structure to that reality. So the only element that was remaining was the leasing cost that we had into it, which of course is something that we cannot reduce in that very short term. But if you look at all the other costs, more or less we can follow the revenues of our clients quite quickly in the U.S. context.

On the parcel side, you're absolutely right, Frank. We guided mid to high single digit for the full year. In Q1, we have been affected by the strike, which is the direct impact of the strike. But there is also an indirect impact of the strike. It's now getting to the customers to tell them that they have to join B-Post. as a reliable operator, what we are. There are some concerns raised, rightly so, by the way, by customers saying, okay, but what guarantees me that in the future will not happen again? And all the questions that we are addressing right now with all our customers is to develop a robust contingency plan in case of strike. And I think this will come in the coming months, will help restoring the confidence of the customers that, If we would be facing strikes in the coming quarters, by the way, it's also important to notice, as Chris mentioned it, that there are some people's strikes, there is some anti-government strikes that affect us both. We would be able to better react. So this slows down a bit the commercial development. Also in the context where the market is not growing as what we expected, and we see it in Belgium, but it's also observed by some of our colleagues on different European markets. So the market growth is sluggish. The consumer confidence is again in bad territories. So that's the reason why we do not believe that we will be able to catch up what we had announced, and I think will be a low end of the range rather than the high end of the range.

Okay, that's clear. Thank you.

Ladies and gentlemen, we currently have no questions coming through, so as a final reminder, if you'd like to ask a question, please press star 1 now on your telephone keypad. The next question comes from the line of Stefano Colin from ABN AMRO-ODO. Please go ahead.

Yes, good morning. Happy that my hand was raised. I forgot to do that. Two questions actually related to the strikes. One is the volumes that you lost. How much of that is structural and how much of that can you, let's say, gain back going forward? And then as a follow-up question, again on the strike, with respect to being prepared or better prepared, like you mentioned, in the case of future strikes, what does that exactly mean? I know it will be difficult to quantify, but I cannot imagine a strike not having a negative effect on your volumes. Thank you.

Philippe, you take the first one. I will take the second one this time.

Yes. On strike, there is really the short-term impact and the potentially mid- to long-term impact. What we can see is that, especially for the big customers, they have came back. They are just after the strike. Of course, there was intense discussion with them, but they came back. They are there. And as long as we could demonstrate resilience and quality in the coming months and quarters, we have no reason to believe that they will not be sticky. With the comment, and Chris will address it right after, about the resilience in case of future strikes. When it comes to the rest of the portfolio, which is a mix of small to mid-sized customers, It has been rather resilient, and most of them stayed with us. We have to admit that some of them have left us for the competition. And the small one, you know, they don't have a really dual-carrier strategy because when you are sending 10 or 20 parcels per day, it's very difficult to have a dual-carrier strategy like the big customers because there they could spread their volume over multiple carriers. Those ones that have left... We will try to regain them, but it might take a bit of time to regain their trust. But it's only a fraction of the portfolio.

Yeah, okay. On the business continuity plans, in our discussion with several of the clients, we had that question, how would we react and how can we make our plans more resilient in case of a strike? There has been plans developed on multiple levels. First of all, of course, very good progress over the last couple of months with our social partners in the understanding that we, of course, respect the right for strike that they have, which is a legal right that they have. But there's a way how they strike that can harm or less harm the company. And I think that we made good progress. Not yet there, but I think that we made big steps together. what we have in those plans, but each of those clients have a specific approach of what would happen in case that we would have a sorting center or a transport blockage, which are the two most important, let's say, blockages that could, let's say, have impact on a broader client range or a broader end client range. And for all of these, dependent on the scenario, we are now developing alternative backups. those clients, which is key for them, of course, in the way how they will distribute the volumes, as Philippe said before. And so there we made important progress. We're still also in discussion with those clients, and most of them are, of course, the large volume clients in the first place where we're working on. And I think that what they see that we're doing now is giving them the confidence that we have increased our resilience and our reliability going forward.

Thank you. If I may sneak in one last question, which is related to your APM proposition. If I remember correctly, the Key4 results, you mentioned that you had about 1.3 thousand, so 1,300 lockers, with the intention to double the amount of lockers and triple the capacity. Is that still in place for this year? And by the way, how big are they? I don't know if you can tell me, let's say, the average locker according to your size of the APMs.

Yes, so we continue to put those lockers in place. I think that we have a very successful program focused on the areas of most client traction towards those lockers. brokers installed a day, which is the speed at which we are as we speak. So we had a start in the year at four or five per day, and we ramped it up now to six per day that we installed, six per working day that we are installing. And we have a pipeline of permits and approvals or agreements with partners that we can install them so that we don't see any major hiccup coming in the coming months to install them. We still have to work a little bit of technology for the ones that have no direct power connection. So that is one that we have delayed a little bit, but we have so many, let's say, permits already that we can actually advance a couple of those ones that have a power connection. So that is a little bit of a change that you see in that. So we keep the pace of six per working day that we install. And I think that the good news there is that Compared to the figures that we had initially on the speed that the utilization of those workers would be, it's much higher than what we expected. So in less than two months, we see that we reached the utilization rates that we actually expected to have actually over the course of eight to nine months. So we see that speeding up and the use of those capabilities is much faster than we anticipated. And to your question on the size, I think that we're on average size today. It depends a little bit because you know that we also focus on B2B going forward with larger doors. But on average, we are around 100 doors per installation.

Perfect. Thank you.

The next question comes from the line of Mark Schwarzerberg calling from ING. Please go ahead.

Yeah, good morning. Thank you for taking my questions. The first one is on Radial US. So Q1, obviously already well flagged that it will be a double digit down. Now with the pipeline of onboarding of new clients and still a bit of the aftermath of the client churn and the large enterprise client, what would you expect in the next quarters in terms of trend? Would we see something like a low double-digit decline in Q2 and then moving to mid-single-digit and a blessing Q4? Is that a bit, the pattern, can you give a bit more color maybe there? And then my, yeah, sorry, yeah, let's take the bottom one. It's easier.

Okay, so maybe on your question, I will ask Antoine to come back on the have them with me. But what I can say is that on the fast track introduction, you know that on a trade fair in Las Vegas, what was it, early April, we introduced the new product and the launch of the product. And what we see today is actually that we, in conversion, are or year target today. So the new approach is really a good success and we also see in the pipeline of clients asking for depending on the state's clear proposal or detailed information on how they could work, that pipeline is well filled today. So that would mean that compared to the initial forecast that we have, that we will be to some extent overbalanced in new onboarding of fast track clients more than we will see on enterprise clients. before at the relationship of, what was it, 50-50 more or less that we expected. And I think that it will be an overbalance to fast track clients going forward. When we will be fully compensated for the loss of the enterprise client earlier this year, I think it's more to the Q3 level that we will have. Even later. Or Q4 that we will have that. So we onboarded and we are delivering on sizable clients, four of them are more in the 5 to 7 million ACP range. One is substantially above that, so is one which is clearly a couple of tens of millions. You need to have like onboarded and delivered three times the volume that we have onboarded by now. So give us the time to make that happen. But overall, the trend is better than expected on the fast track side. Enterprise level will remain more or less with uncertainty. Everybody knows in the U.S. market where consumer confidence has gone down a little bit. So to be seen a little bit what happens at the enterprise side.

If you allow me to add one element, even if it's included in the word fast track, meaning that we could onboard fast, typically with the enterprise customers, we were not onboarding them or starting the operation After the summer, we were really stopping because there was a preparation for the peak. Now with the fast track, we're really ready to onboard them very close to the peak season. Operations were telling us that it's so easy to onboard that even two or three weeks prior to the peak season, we could onboard them. So if you compare the track or the speed at which we used to onboard customers in the previous years, providing we have the contract, of course. It adds some, I would say, easily a quarter, an additional quarter in terms of time frame to onboard these customers to already contribute to the current 2025 top line.

Okay. That's very elaborate. Thank you. And then maybe on tariff impact. You had on the slide a few risks, a few opportunities, but Is there any direct impact you're already seeing or potentially might be seeing from potentially some of your apparel clients that have all of a sudden less inflow from Asia lines or, of course, they make their stuff maybe in Asia, shipping them to the U.S., maybe they're now stuck in containers somewhere. Do you see any impact, whether it's front-loading ahead of terrorists or on hold because the terrorists are coming? Do you see anything there?

No, at this point of time, we don't see it within the radial operation. We have many discussions with clients. Many clients are considering a number of alternative options, but also everybody is waiting before they make a decision. We see the same for additional fulfillment activities that people seem to avoid, cross-border activities. So you see a number of these things that are evaluated by clients, but most that we have seen over the last few weeks. Because the fact for some of our... Sorry?

No, no, go ahead. I will come back afterwards.

Yeah, are they building down, say, their inventory levels that you see that are fulfillment?

No, we don't see anything of that today. I think that today most people are in preparation mode, but also... will happen but are not yet in execution mode.

So what I wanted to add is that on part of our customer portfolio there is indeed a lot of stuff coming from China but from others the impact of the tariffs on their cost of sale is rather limited. So some of the customers, typically when it's high-end type of product, the impact would be minimal, and our customers could decide to partially or totally absorb that impact on their P&L while redirecting their supply chain that will definitely take time. So it's not as black or white. It's really dependent on industry to industry, and also in our portfolio, we have... we are exposed to multiple types of customers and industries.

Okay, okay. Then a very small one to finish off. I saw, I think, the question is that you also had some lower pay for absence. I guess that's then that you don't pay when they're on strike or so, is it? Or should I read that?

Exactly. When they are covered by their unions, they are paid by the unions and not paid by us.

Okay, that's what it is. Okay, clear. Thanks very much. That's it from my side.

Thank you. Thank you. We currently have no questions in the queue, so as a final reminder, the very final reminder, if you would like to ask a question, please press star 1 now. Well. There are no further questions, so I will hand it back to Chris to conclude today's conference.

Yes, we would like to thank everybody in the call for having taken the time to be with us and for your interesting questions. As a reminder, BPOS will hold its annual shareholder meeting next Wednesday, and our second quarter results will be released on August 8th. In the meantime, we look forward to staying in touch and welcoming you at our Capital Markets Day on June 3rd. Thank you very much, and have a nice day.

Thank you. Thank you. Thank you for joining today's call. You may now disconnect. Here we are now back into the speaker room.