Bpost Sa Unsp/Adr

Hello and welcome to the BPOS first quarter 2021 analyst call. My name is Judy and I'll be your coordinator for today's event. Please note that this call is being recorded and for the duration of the call, your lines will be in listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing stall one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand you over to your host, Mr. Dirk Thiers, BPOS CEO, to begin today's conference. Thank you.

Good morning, ladies and gentlemen. I'm pleased to present you the first quarter 2021 results as CEO at Interim of the BPOS Group. Welcome to all of you. and thank you for joining us. With me, I have Leen Gernard, our CFO, as well as Antoine Lebec from Investor Relations. We posted the materials on our website last night. We will walk you through the presentation and we'll then take your questions. Practically, we propose to limit the questions per person to two questions to assure everyone in the call gets the chance to be addressed in the upcoming hour. As to the highlights of the first quarter, we realized a strong start to the year, driven by continued growth in parcels and e-commerce logistics on both sides of the Atlantic, and a lower-than-expected mail volume decline in Belgium. Our group operating income at 1 billion 19.9 increased by 9.1 percent compared to last year's pre-COVID-19 first quarter, while the group adjusted EBIT at 115.5 million euro increased by 39.9 million euro with a margin of 11.3 percent. During this first quarter, as mail and retail The underlying mail volume decline at minus 7.8% has benefited from a softer comparable base in March 2020, mainly in advertising mail. These mail volumes combined with a positive price and mixed impact led to a better than expected mail profitability in the first quarter. In addition, high parcel volumes could be handled through the mail network for Palo, Eurasia. And as a result, the adjusted EBIT increased by 5.5 million to 70.6 million euro, with a margin of 13.9%. At the same time, we continue to benefit from thriving e-commerce volumes in Belgium, in Europe, and in the US, as well as from positive operational leverage in parcels and e-commerce logistics. At SPALO Eurasia, adjusted EBIT at 37.3 million euro has more than doubled, and the margin of 13% was driven by the elevated proportion of parcel volumes that could be handled through the mail network. In Belgium, BPOST has seen a growth of 54.1% in parcels B2X volumes year over year. At SPALO North America, The adjusted EBIT was positive for the fourth quarter in a row at €8.2 million, with a margin of 2.9% EBIT increase by €15.7 million versus last year, fully driven by growth in operating income and operating leverage at the radial. Above expectations, the group adjusted EBIT, therefore, showed an increase of 39.9 million euro compared to the same period last year. And this thanks to our three business units, which have contributed positively to the group adjusted EBIT as illustrated on the bridge on page four. Also note that effective as of March 27, the Belgian government imposed a national lockdown to attempt to curb a spike in coronavirus cases. This included the closure of non-essential stores available by appointment only and stores reopened on April 26th. To conclude on the highlights, on the back of these strong first quarter results and based on current assumptions of normalization for COVID-19 volumes for the rest of the year, BPOST raises its initial guidance for 2021 and now expects the Group Adjusted EBIT to be above €310 million. I will come back on this later in the presentation, together with our management priorities. I would now like to hand over to Leen for more details on the financials.

Thank you, Dirk. I'm now on page five, showing an overview of the key financials for the quarter, both reported and adjusted. As usual, more details on revenue and EBIT developments following the breakdown per business unit. And here on this slide, I just highlight some finance technical explanations. So as always, the EBIT was adjusted for non-cash amortization charges on intangible assets, that were recognized following the purchase price allocation of various acquired subsidiaries. These charges also positively impact the reported income tax, and that effect has been adjusted here as well. This quarter, no other adjustments. Net financial results of minus 2.5 million euro improved by 1.8 versus the first quarter of 2020, and it is mainly due to a favorable impact of foreign exchange results. Income tax expense increased by €6.1 million, mainly due to the higher profit before tax. The reported effective tax rate for the quarter amounted to 26.6%. As a result, adjusted net profit was up by €30.8 million to €83 million. Adjusted free cash flow at €160 million decreased compared to the same period last year as expected, mainly from the variance in change in working capital, and I will come back on the cash flow elements later in this presentation. Net debt, it decreased by €231.6 million compared to March last year, supported by the free cash flow generation of the quarter, and of course also the absence of dividend payments in Q2 and Q4 of last year. The capex for this quarter stood at €19.6 million, and was mainly spent on increased capacity for e-commerce and parcels activities. Let's now have a look at the contribution of the different operating segments into the group results. Mail and retail generated 61% of the group-adjusted EBIT. Paolo Eurasia was a second contributor at 32%, and Parcels and Logistics North America contributed for 7%. The PALOs together representing this 39% compared to the first quarter last year where it still stood at 12% of the group adjusted EBIT. These figures continue to prove that our business transformation is on the right track towards sustainable EBIT growth. Then we move to page 7 and we dive in meal and retail with the revenue, external revenue to start with. The Excel revenues declined by €10.8 million to €446.9 million, impacted by a €3.4 million revenue loss from domestic mail, of which €3.1 million relates to transactional mail. In addition, a decline of €8.2 million in proximity and convenience retail networks. Starting with domestic mail, it recorded an underlying mail volume decline of minus 7.8% for the quarter, which has impacted revenues by 21.5 million euro and was almost offset by the net improvement in price and in mix amounting to 19 million euro. Thereof, transactional mail noted an underlying volume decline of minus 9.6% compared to minus 8.8% in the first quarter of 2020. slightly supported by some COVID-19 communication in March 2021. Nevertheless, the volume decline remained impacted by the known structural trends of e-substitution and digitization. In advertising mail, a bit more particular, there was an underlying volume decrease of minus 5.4% for the quarter. That quarter can be broken down in two distinct phases. Year-to-date February 2021, underlying volume decline amounted to minus 22.4% against the tough comparable base of minus 3.9% from pre-COVID-19 months in 2020. And in the month of March, the underlying volume increased to 41.1% compared to minus 39.4% in March last year. Since last year was impacted by the ban on promotions and non-essential retail closure during the lockdown that was imposed in March 2020. Then the press volumes, they decreased on an underlying basis by minus 1%, and there we benefit from a good performance from the periodicals. Proximity and convenience retail network revenues, they declined by 8.2 million euro, and there we see still the impact of COVID-19 on the footfall in UBWay retail stores, especially in the travel location, and from lower banking and finance revenues from the low interest rate environment, as well as less ATM transactions. Then last but not least, value-added services, up slightly by €0.7 million, driven by higher revenues from fine solutions, which were negatively impacted during the lockdown of March last year. Looking then at the EBIT of mail and retail on slide 8, adjusted EBIT amounted to €70.6 million with a margin of 13.9%. This is a net increase of €5.5 million compared to the first quarter of 2020, explained by, first, high parcel volumes handled through the mail network, for which intersegment operating income is cross-charged to Pali Eurasia. Second, the impact of domestic mail we just talked about. It has contributed to the increase in total revenues of €6.8 million. And thirdly, operating costs, including the adjusted DNA, which remain nearly stable. Indeed, the operating expense is only slightly increased by €1.3 million as a result of a couple of factors. We do see higher payroll and interim costs, which are driven by the headcount from higher parcel volume And also we see price impact amongst others, salary indexation of April 2020. In this quarter, we still see that difference. So merit increases and the phasing of holidays together with higher costs for fleets and a lower recoverable amount in VAT. But on the other hand, these increases was compensated by the favorable FTE wage mix, a decrease of material costs from UBV retail and increased sorting activities of which the costs are cross-charged to Parler Eurasia, driven by growth in parcel volume handled through the mail operation. Let's have a look at parcels and logistics Eurasia. In the external revenue, we recorded a growth of €73.4 million. The positive revenue development across all the sub-segments was mainly driven by driving e-commerce both domestically and abroad. Parcels Bene, they recorded an increase of 41 million euro or 39.2%. This was driven by growth in our parcels B2X activities and the strong quarter at Dynalogic. Parcels B2X volumes and revenues respectively increased by 54% and 51%, indicating a negative price mix effect of minus 3%, which was fully driven by mix effect. E-commerce logistics revenues, they increased by 3.8 million euro, which represents an increase of 9.6%. That comes from a strong organic growth at active end from existing customers and a positive impact of the lockdown and closure of non-essential retail shops in the Netherlands since December last year. And also Radio Europe growth, driven by the UK. The new fulfillment site in Poland, which opened in the third quarter of 2020, and a third site opened in Germany in February 2021. The combined revenues of Active Hands and Radio Europe, they grew about 34% year over year. At the same time, the year over year revenue development, sorry, at Lane Mencken and Dynafix, they did dilute the revenue growth percentage of the sub-segments. Notably, due to lower repairs of electronic devices and mobiles, since simply people are less moving around in this COVID-19 environment. Then the cross-border revenues, they increased by 28.6 million euro, 43% up. This revenue development was driven by Asian parcel volumes, while in the first quarter 2020, the COVID-19, it reduced the air freight capacity, and we had a closure of international borders that had a negative impact In addition, we have continued growth in UK businesses, driven by new customers and higher custom services in light of the crisis. This revenue development was partly offset by the declining cross-border postal business, where growth in inbound parcels could not compensate the decline in both inbound and outbound meal volumes. On the next slide, we see what that gives us to adjusted ABA. It increased for power Eurasia by 20.4 million Euro more than doubling to reach 37.3 million Euro with a margin of 13%. This was driven, of course, by the top line evolution that I just talked about, partly upset by higher volume linked variable costs across all the business lines. And then the higher intersegment operating expenses that were charged by meal and retail. that is driven by strong parcels volumes that could be handled through the integrated meal network with benefits of scale. Just to give you an idea, during the first quarter, on its peak, BPOST handled up to 493,000 parcels a day, which compares to the daily peak volume of 670,000 parcels of the fourth quarter 2020. Volumes of this first quarter were within our current optimal capacity range and could be covered to a higher extent in our existing rounds. Whereas with volumes exceeding that optimal capacity range, like we've seen in the fourth quarter last year, second waves, extra rounds have to be organized and subcontractors have to be hired. This explains the steep EBIT margin development of Palo Eurasia in this first quarter. I'm now on slide 11, with our North American parcels and logistics business. The operating income of e-commerce logistics grew by 25.5 million euro, up 10.7%, but actually that represents a growth of 20.4% if we consider a constant exchange rate. This growth was fully driven by robust and profitable e-commerce fulfillment growth, with Radial North America recording a continued high growth of 25.6% from existing customers, as well as growth from new clients that we launched in 2020. This was only to a small extent offset by churn. Our activities at Landmark, Apple Express, and FDM also recorded strong volumes from existing clients and new customers, fueled by e-commerce development year over year. International mail, same story here, it saw a decline of minus 4.3 million euro in external revenues year over year, driven by lower volumes in the business mail segment, partially compensated by higher domestic parcel revenues. Overall, external revenues were up by 21.2 million euro for the business unit to reach 281 million euro. On slide 12, you can see that Power North America adjusted EBIT was up by 15.7 million euro and came in positive at 8.2 million with a margin of 2.9%. As mentioned earlier, this is the fourth consecutive quarter since Q2 last year that we have reached a positive adjusted EBIT at Power North America. The sharp EBIT upper lift in the first quarter was driven by strong top-line performance in e-commerce logistics and by operating leverage at Radio US. Moving to the corporate segment on page 13, very short, external operating income increased by €1.6 million, driven by higher building sales. Net operating expenses, they increased by €3.2 million, mainly driven by a phasing impact related to long-term employee benefits. This led to an adjusted EBIT decrease of €1.7 million year over year to minus €0.6 million for the quarter. Then let's have a look at the cash flow. We are discussing here the reported free cash flow in the quarter. It was €147.4 million, which is a decrease of €46.8 million versus the first quarter of 2020. The cash flow from operating activities, it stood at €157 million. This is a €46.6 million decline year over year, which can mainly be split between, first, an increase of €27.4 million in the cash flow from operating activities, so before the change in working capital and provisions, at €165 million. That is mainly driven by higher EBITDA generation, and that's despite our choice to make a higher tax prepayment in the first quarter. The second element is a negative variance of 73.9 million euro in the change in working capital and provisions evolution to minus 8 million euro. This can be explained on the one hand, of course, by 39.3 million euro lower cash outflow relating to the collected proceeds due to radio customers, Remember that that due-to effect we excluded from the adjusted free cash flow like I presented at the beginning of the presentation. This outflow was more than offset by working capital evolution excluding those due-tos being 109.6 million lower than last year. This is primarily and mainly explained by what we told you about last year, the expected unwinding of extended payment terms as set up with some suppliers at the beginning of the pandemic for about 59 million euro. Secondly, this year we have a different payment schedule of SDI and for an amount of 80.5 million euro that last year we did receive also in January and that this year we will receive in July. So the latter has no impact on the full year cash flow. This was partially offset by increased collections in line with high sales peak in the fourth quarter of 2020. Then the cash flow from investing activities at minus 9.7 million euro remained broadly in line year on year. The capital expenditures there stood at 19.6 million euro. A great majority of first quarter 2021 CAPEX is directly invested in e-commerce and parcels activities. and was mainly spent on an increased capacity for e-commerce on customer implementations at Radio US, additional sites for active events, parcels B2X sorting equipment, and sustainable initiatives for e-fleet infrastructure for the last mile delivery in Belgium. The cash flow from financing activities, it's negative with a big amount, 193.5 million euros, and it was €166 million lower than the first quarter 2020, as it was decided not to roll over the maturing commercial paper in 2021. All in all, the net cash flow decreased compared to the same period last year by €213.7 million. The net debt decreased by €106.9 million compared to year-end 2020, and now amounts €399 million. I will now hand over to Dirk for the outlook of the year.

Thank you, Elaine. And as mentioned during this presentation, we can indeed summarize that we had a strong start of the year. Therefore, in light of these quarterly results and based on our current assumptions of normalization for COVID-19 volumes for the rest of the year, BPOST raises its outlook for the current year 2021. We now expect our group total operating income to increase by a low to mid single digit percentage. Our group adjusted EBIT to be above 310 million euro, whereas initially the income was expected to grow by a low single digit percentage and the EBIT to be in the range of 265 to 295 million euro. For mail and retail, we now expect the total operating income evolution to result from a combination of an expected mail volume decline of up to minus 8% compared to minus 9, minus 11% decline in our initial guidance, as well as an approved mail price increase of plus 6% and an expected post-COVID-19 recovery in value-added services. Revenues from proximity and retail are now expected to only slightly recover as from Q4 this year. Adjusted EBIT margin is expected to range between 7% and 9% compared to the initial range of 6% to 8%. For parcels and logistics Europe and Asia, we now anticipate a high single-digit percentage growth in total operating income with parcels and e-commerce logistics volume growth expected to normalize from elevated COVID-19 growth rates observed in 2020. We were initially anticipating a mid-single-digit percentage growth. Operating expenses will still include investments to grow only commerce logistics in Europe on which I will elaborate later. Adjusted EBIT margin is expected to range between 9 and 11%, slightly above the initial guidance of 8 to 10%. For parcels and logistics North America, the outlook remains unchanged. Our activities in North America are expected to grow at the operating income level by a mid to high single-digit percentage, driven by radial existing customers growth and new clients launches foreseen in summer, normalized for 2020 COVID-19 spikes. Adjusted EBIT margin is still expected to be between 4% and 5%. The growth CapEx envelope of 200 to 220 million euro for the group remains unchanged. and will be geared towards our strategy to grow only commerce logistics. The dividend relate to the results of the year 2021 will be in the range of 30 to 50% of IFRS net profit and will be payable in May 2020 after the general shareholders meetings in accordance with the new dividend policy as announced in December last year. Before Taking your questions, I would like to walk you through our management priorities that we set for 2021, as well as update you on our governance. I'm since a few weeks acting Chief Executive Officer of BPOST. My first priority was to make a clear diagnostic of what happened in Q4 2020, to establish key learning, and to set clear focus on key management priorities. These priorities are not dependent or waiting for the onboarding of the new CEO. We know the trajectory and we act now. I have five priorities. First, the preparation of the end of year peak is a top priority. Volume growth in parcels should translate into earnings growth. We already demonstrated by the Q1 figures that we understand the optimal point of the last mile delivery network and the right combination of volume growth and profit growth. It means that we determine successfully the current optimal point to generate profits and the potential B post has to deliver. This can only be done through meticulous planning and execution. Therefore, we started to plan Q4 2021 now. We are adopting measures to improve margin and capacity against last year end of year peak performance. For instance, increasing parcel capacity of the mail delivery network combined with budgeted investments in additional capacity, all as included in our updated guidance. A second priority is a relentless focus on cost in mail and retail Belgium, given the decline in mail volume. We are preparing structural initiatives, including the alternative distribution model and the new operating model. The alternating distribution model, or IDM, offers the opportunity to generate structural cost savings by better adapting our delivery model to actual client expectations. Capturing those gains will be done gradually and in the context of a constructive social dialogue, leveraging the distribution office reorganization process. The alternating distribution model will gradually evolve into a new and dynamic distribution model operational only in the medium term. This model will recognize the different delivery and experience requirements of our products similar to what already has been done in other regions. The base assumption is that we will design a model that responds more to customer needs for non-priority products next to a very dynamic parcel delivery network that may include specific mail products. While this project is at the early stage of planification, we are not waiting to onboard the new CEO to prepare the design and roadmap for deployment. All these initiatives focus on profitability to ensure the long-term sustainable future of mail and retail Belgium. A third priority is to prepare structural initiatives to improve performance and profitability. We aim in the medium term to reduce overhead and issue costs in line with the industry benchmark. It will be done through finding structural saving opportunities and embedding within our overhead functions as lean philosophy for simplification and elimination of wastes. Our Omnicommerce logistics in Europe and North America are doing exceptionally well. We are well focused on further growing the business on both sides of the Atlantic and are excited by this great opportunity. Through Radial Europe and Active Hands, we will further expand e-commerce logistics in Europe through a dedicated scale-up effort. We will progress Radial US with a continued focus on operations efficiency to further improve the bottom line and also to grow the business. Finally, our active portfolio management strategy is designed to divest non-core assets or non-performing assets so as to allocate capital to the booming e-commerce logistics markets and to invest further in the big opportunity of e-commerce logistics. As in the past, And as you have seen, we will continue to evaluate divesting subsidiaries whose activities are not aligned with BPOST's vision in order to generate additional financial flexibility within BPOST and invest in activities aligned with BPOST's ambition in omnicommerce logistics. To sum up, We are very focused on reducing operating costs in mail and retail and overhead costs while charging the growth in only commerce logistics. I'm convinced that these management priorities for 2021, which we plan and execute meticulously, will accelerate BPOS transformation and deliver results. You will note that the guidance about 3.20 million has been increased in light of the strong first quarter results and based on current assumptions of normalization for COVID-19 volumes for the rest of the year. However, it is too early at this stage to provide you with a further revised outlook, and I will not do so. But we will come back to you in the next quarters on the results of the planning and the execution of the management priorities I just mentioned. Let me now update you on our corporate governance. The new governance of the board of directors was announced yesterday. The board now includes new independent directors, a new board chair, and a new state director. The shareholders meeting on May 12th is expected to confirm the new composition of the board. The board has been strengthened by adding international business executive experience and knowledge, experience and skills in transforming businesses, innovation and people management. I'm also pleased to confirm the professional process of hiring the new CEO is accelerating with the assistance of Korn Ferry. The boat is afloat. We know the trajectory and are acting now on management priorities, even while waiting for the new captain who we expect to onboard during the summer. We are now ready to take your questions. Operator, thank you for opening the lines.

As a reminder, if you would like to ask a question or make a contribution on today's call, please press stall 1 on your telephone keypad. To withdraw your question, please press star two. You will be advised when you can ask your question. Again, it is star one on your telephone keypad to ask a question. The first question in the queue is coming from the line of David Kirsten from Jefferies. You're unmuted and may now go ahead.

Good morning, everybody. Two questions, please. First of all, on your change in mail volume guidance, What gives you confidence to make such a big change so early in the year to up to 8% versus 9% to 11% previously? After I understand that the advertising mill in March came in a lot better than expected, but it also seems to be relatively volatile. Did you see similar trends in advertising mill in April despite Belgium being in lockdown for most of that month? And then the second question. is related to the parcels business. You indicated that there's an elevated proportion of parcels handled through the integrated network. Can you elaborate how much of that, what that proportion currently is, and whether that will revert back to normal, and how does it impact profitability in mail and retail, as well as in parcel and logistics Europe and Asia, where EBIT margins almost double to 13%. Thanks very much.

Thank you, David. So first your question on the male volumes that we included in our outlook and why we decided to, like you said, already increase. I think based on the first quarter volumes, we indeed saw that they're more resilient than we actually anticipated ourselves. So we now think that an underlying domestic male volume decline up to minus eight is indeed a better number than the previous nine to 11%. the mail pricing impact remains unchanged. We see continuous good results in admin mail, thanks to extra volumes that we've seen coming in. Main impact from domestic mail. Daily mail is anticipated to remain in line with the initial outlook. And it's indeed advertising mail. The direct mail here today is slightly behind, but the initial outlook target is there retained. And for press, we have an improved trend of Q1, what is taken into account, with higher periodical volumes thanks to more people being at home. And that change in percentage captures the performance of Q1 and those expectations. Looking indeed at your question on mail in the month of April, indeed in the month of April and in the second quarter, and each quarter will be different, but mail indeed profits from an easier comparative base And that's especially the case in advertising, like we have seen in the month of March.

And there was no impact from the lockdown in Belgium during most of April?

Like I said, what we have seen in the month of March indeed gives some indication. The big difference is in advertising, especially last year with a full lockdown, we hardly could do any advertising. And that's definitely something that we will see comparing year-over-year. As to parcels, indeed a very important question, and I think Dirk also pointed out that it's really one of our priorities to look into that very closely. So your question was, how does it work exactly both from meal as from retail? Like I indicated while I was speaking, we've seen that the volumes of the first quarter the current optimal capacity range, and that we could cover them to a higher extent in the existing rounds. David, you have to imagine that the meal, despite that the meal volume decline is quite contained in the first quarter, but it's going down. So that means that our meal men, on the one hand, they get more capacity because they have less meal to carry with them. On the other hand, carrying parcels is a different kind of business. And they can carry parcels with them. And we have seen indeed that there is a certain optimum that they can carry with them and that we can use, let's say, the plant of mail operations to the maximum. In the fourth quarter, the volumes were sky high and it was impossible to carry those volumes with them, especially because advertising mail was then also quite sustained. So there was actually no room in the mailbag of the mailman to have those extra parcels to that extent. In this first quarter, we have indeed seen that despite a very nice growth, we remain between that optimum. Like I said, in the fourth quarter last year, to give you an idea, the peak volume was 670K. Now it was 493K. So somewhere in between, there's a tipping point in which we have to install extra costs. So what is the benefit of mail operations if they can use their plans better? It can cost charge more costs, so that's good for their profitability. And on the other hand, for palurasia, it's extremely important. The more that we can push within the joint delivery network avoids, indeed, that we have to have a lot of scale of costs for extra rounds, hiring transportation and subcontractors. So there, I think you clearly see how the EBIT margin of the quarter has been supported by that.

Yeah. So it's beneficial for both divisions. in terms of profitability.

Yes. And that's a very good point, David. I think that we look at it from a Belgian perspective. Indeed, the mailman is carrying both parcels and mail. And the more they can carry parcels, the better it is for the Belgian organization, whether it's mail or parcels. So that's a very important point.

OK, great. Thank you very much.

Thank you, David, for your question. The next question in the queue is coming from the line of Samit Mehosra from Society General. You're unmuted. I'm going to go ahead.

Thank you. Two simple ones for me. Why do you think that Palo, Eurasia, I mean, what prevents the top-line guidance from being even better, say, a low double-digit growth for this year? uh secondly uh i'm noticing on slide nine could you please give them give us some details on the mix aspect of palo eurasia why is the mix negative as we imagine that the parcels are getting heavier and you could get more weight for parcels better pricing so why is what is behind the weaker mix here thank you

Okay, I'll take the last question first. So the negative mix, very important, and I think you all know that, but just to confirm the point, this was the last quarter comparing with the non-COVID period. So that means that the growth that we see in parcels, we keep on seeing it in particular with our biggest customers who have, of course, different kind of conditions. So they have another kind of pricing, and that's why I said it's mainly the mix because we see the growth in our biggest contracts, and that is depressing on the mix. In addition to that, next to the pure parcels which are delivered at home, we also have some special products. Let me point out, for instance, the instructions of license plates. Those products have a lower price, and also there we have seen a pickup in the quarter, and that's also having a negative impact. So the point we really want to stress is it's not in pricing towards customers. There we have a strict policy. It's all in the mix. Then your first question, why don't we have a higher guidance for powder Eurasia? You may recall that in the first outlook we said mid-single-digit percentage growth in total operating income, and now we move that to a high single-digit percentage growth So we did include a pickup. In the first quarter, again, we're comparing a COVID-19 period with a non-COVID-19 period. So we profit there from easier comps, as to speak, when you look into parcels growth. So that will even out. We have some kind of assumptions how that will move forward on the parcels parts. Next to that, and not to forget, is that in parcels and logistics Eurasia, we do not report only on B2X. We also report in e-commerce, and we also report across the border. So it's a mixed bag, not only representing parcels.

Thank you.

You're welcome.

Thank you so much for your question. And the next question in the queue is coming from the line of Lotte Timmermans from OdoBHF. Dottie, you're unmuted, and we'll now go ahead.

Good morning. Good to hear measures are implemented to focus on earnings more in line with growth compared to Q4. If I understood correctly, one of the biggest bottlenecks was the resources. Could you give me some more color on how you would hire additional resources during the year peak, or would this be due to optimizing the meal network and other routes? We do flexible employees, contractors, et cetera. Then my second question is on your guidance and actually linking this to potential divestments and exit portfolio management, as you stated. I noticed that within the guidance on retail, the statement on proximity and convenience retail was removed. So there's no statement on this subdivision for 2021 anymore. Could you give some more call on this and how this potentially be linked to active portfolio management as also mentioned in the press? Thanks.

Just you are talking extremely fast. We didn't get your first questions. I also think you asked more than one. So could you perhaps talk a bit more slow and repeat your question and stick to two? Thank you.

Okay, of course. So should I repeat the first question? Yes, please. Okay, the first question was on the partial, the early growth focus and the partial growth focus. You mentioned in the precedence. Could you give some more color on this, how you would hire additional resources? Because I think that was the biggest bottleneck in Q4. Will this be additional fixed employees, flexible employees or contractors? Or will this maybe be achieved through the mill route optimization? So that was my first question. Okay.

So I understand. One on end of year peak and one on portfolio management. And Dirk will answer them both.

Thank you for your questions. And let me first say a few words on active portfolio management. Strategy is also defining what you do not do on a continuous, what you do not do. BPOS group is committed towards active portfolio management where non-core assets could be identified and considered for disposal. So on a continuous basis, we are looking at our subsidiaries, our businesses and activities, and we assess whether or not they fit with our strategy, whether they deliver EBIT and cash, and how much capex they require and the return on that investment. Going through a portfolio exercise allows management to free up some time, attention and financial resources and thus to better support and focus on our business transformation. We invest in growth markets and our core activities and for BPOST as we know that is e-commerce logistics. We therefore believe from a strategic perspective, we seek to allocate and use our active portfolio management strategy to further allocate capital in e-commerce logistics rather than in other non-core segments. As to your second or first question, We learned and we made a clear diagnostic of what happened last year in the end of year peak performance. So we know that we have to translate volume growth into earnings growth and we need to plan meticulously and execute in operations. What we learned in this quarter is that we understand better the optimal point of the last mile delivery network and the right combination of volume growth and profit growth. And I think this will require meticulous planning and execution, and that's why we started to plan today to be ready for the year of end speak in 2021.

Thank you so much for your question. And the next question in the queue is coming from the line of Mark Swartzenberg from ING. Mark, you're unmuted. Emma, now go ahead.

Yeah, thank you very much. Good morning, everybody. Two questions from my side. First of all, on the parcel volumes, can you share a bit of a a bit more color or guidance going into Q2. Did you already see what the volumes, for example, volume growth was in April? Because we had the extended lockdown from the 27th of March to the 26th of April. Last year, we obviously also had the full lockdown. How do those volumes this April compare to last year? And how should we think about it going forward in Q2 a bit with the comps versus last year? And the second question is related to mill and retail. There was some tailwind obviously I think from the vaccination mill in Q1 but how should we see that develop in Q2 because then you probably have about three months that letters will be sent to all Belgian inhabitants or at least the ones that need to be vaccinated. Can you give a bit of appeal for what the tailwind from vaccination mill is or mill and retail. That's it. Thank you.

Okay. So, Mark, on the parcels volume and especially what you asked for some color on April, this is what we can disclose. I think very important, and you said it yourself, but I want to stress it. Last year, we had a full lockdown. Everything was closed in Belgium. now we indeed have a a lockdown but it's a light version so people can still make appointments can still go to shops and it's only 26 days so in the full quarter it will be all in all it will remain a difficult to compare what we have seen uh indeed in the in the month of april is that there was a kind of support thanks to the light lockdown that we experienced for 26 days only and that volumes are there approximately at par. What will that say going forward? It will depend, each quarter will be different. We will have to look comparing with hard lockdown or are we comparing with a soft lockdown And that will always make the difference, of course. But I think for April, that's already what we can point out. For meal and retail on the vaccination meal, actually, we discussed it amongst ourselves before this call. We had a slight support indeed in the month of March coming from that. I'm not overly optimistic about it because we experienced here in Belgium If you have an email number, which we just have known, the invitations are sent for vaccination via mail, and the rest indeed is sent via the mail on paper, just to say it. So we will have to see what that will give going forward. All in all, and that's also why we increased our guidance for the full year on mail, we do expect that the second quarter we profit from easier comps, Do remind that mix will also be impacted. It will be more advertising mail that we will see. But so far, indeed, in the month of March, we've seen there that we profit from easier comps.

So the vaccination mail, you took into account some tailwind from that in your outlook for this year? And you also took into account that April, in terms of parcel volumes, was at par with 20, or did that number came in too late for the outlook to already be included?

Well, apart from the outlook, we do make some assumptions. So based on the forecast, we already took some assumptions there, which are in line with what I said on April. So I think our outlook was based on assumptions.

Okay. Thank you very much.

Thank you. Thank you, Mark. And the next question in the queue is coming from the line of Marco Limit from Barclays. Marco, you're unmuted. I'm going to now go ahead.

Hi, morning. Thanks for the presentation. I've got one question on the balance sheet. So clearly on your slides, you mentioned that your cap expense in Q1 was quite low, so probably that sort of affected the net debt position. But I was wondering if you think that, you know, there is space in the future for sort of increasing your return to shareholder, given that you have got payout guidance at the moment of 30 to 50%, but I think that your net debt position net debt EBITDA position will be quite below the two times. So, you know, probably your payout policy review in December could be, it was probably, you know, quite conservative. And just a second question. My line broke up, so I didn't get the parcel number, the parcel growth number you disclosed for April. So if you could repeat, that would be great. Thank you very much.

Yeah, so the last one is at par for the month of April, so comparing to same period 2020. So that's a short answer. And then on your first question, I can confirm what you say. Our balance sheet at the end of the first quarter is quite comfortable. Our debt-to-ABDR ratio is far below 2. That's absolutely right. The CAPEX spend indeed is low, and we did not change our guidance on that. So we do plan to invest 200 to 220 million, and I think we will do a serious catch-up already in the second quarter on that one. So indeed, that will change, of course, also our debt position and our balance sheet as such. Is there room in increasing the dividend? Marco, we have... a big journey ahead of us. I think this quarter again confirms that we're on the right track, that we're firing from all cylinders, and that indeed also the Paolos are contributing. Still, if we want to compensate on the longer term for what we're gaining in mail, the parcel and logistics, they will have to continue to grow. So that's why we decided at the end of last year to change our capital allocation, and with that, our dividend policy. So adopting that one in the short term is not on the agenda. As you know, we do have a range between 30% and 50%, and it's up to the board's recommendation and the shareholders' meeting to decide what of that range we will apply, and we can vary in that one.

Thank you.

You're welcome.

Thank you, Marco, for your question. And the next question in the queue is coming from the line of Hank Slapboom from the IDEA. Hank, you're on.

Good morning. Thanks for taking my questions, and thanks for the condensed presentation, which I think saves us a lot of time in these busy times. I've got two questions. One is on the newspaper contracts. Have there been any developments lately from the side of the EC? And I understood earlier this week from an article in Tate that there were some moving parts in Belgium's strategy as well, although in the opposition parties, but perhaps you can shed some light on that. And secondly... I believe Lotte already touched upon the YubiWay write-off or the YubiWay news flow that hit the newspapers earlier this quarter. There was a big discussion during the fourth quarter earnings call on this issue. I've been looking at the annual report of 2017, and I'm a bit puzzled about the amount that you charged last year for this retail unit, for the retail activities. Was it purely UP way, or did it involve the ongoing businesses in the retail segment as well? Perhaps you can shed some light on that, Len. Thank you.

Well, I would like to first respond to your question on the press tender. And probably you're referring to an article relating to a parliamentary discussion from the opposition. And of course, BPOST is not to comment on a debate in parliament. What we do now is that we are currently handling the press concession and press contract after having answered a tender from the Belgian government and that this contract is ongoing until the end of 2022. BPOST is well equipped to handle this mission that fits perfectly in our role as public service provider and we're meeting the service level agreements in that respect. You probably also have noted that the Minister of Economy in charge of this file within the government defended his proposal to relaunch a call for tender for the period after 2022 towards the press. And this procedure is underway and I believe that BPOST is qualified to deliver on the quality of services that are expected in this respect.

Just for all clarity here, has the whole thing been cleared by the European Commission yet? Because I understood, and perhaps that is a mistake from my side, that it is still being reviewed by the European Commission.

That's correct. And as you know, the Belgian government has decided early 2020 in favor of the extension for the period of two years, 2021 and 2022. And this procedure and the notification typically takes time. From my experience, it takes up to two years. And that procedure is ongoing, but it is based on the previous notification that we made because I think since a number of years we have been notifying. I've been with the company since 2003 and we have been notifying compensation we receive for the execution of public service contracts so far. Okay, thank you.

And then the question on impairments. Let me start with saying it's irrespective of whether an asset is under consideration to be sold or not, BPOST has to perform annually an impairment test of all its various activities. And like we discussed indeed at that point in time, sorry, driven by COVID-19 impacts of the reduced footfall in travel environments, partial closure of press shops during the lockdowns, the impairment test did lead to an impairment of goodwill on the intangible assets of UBWay Group, because we purchased ubway group and indeed that consists of uh retail and also uh press so in total uh if i recall well it was 49 a million that we uh impaired and that was both on goodwill and on intangible assets okay i'll i'll follow up with investor relations about that but thanks very much uh name that clarifies a lot okay you're welcome

Thank you, Henk, for your question. And the final question in the queue is coming from the line of Andre Mulder from Kepler. Andre, you're unmuted, and now go ahead.

Okay, thank you. One question, but two parts on that. On your strategic priorities with the arrival of Ms. Hanar, should we expect an update of the ESG targets of the company? And, indeed, related to that, In your search of a new CEO, you already said you have a number of priorities. I can imagine that the new CEO has his own views on those strategic priorities. Will he get room to change those strategic priorities? It now seems that they're sort of concrete rather than there is any possibility to change that adapting to his view.

Well, thank you for these questions. And as you have seen from our announcement yesterday, we will propose to the shareholders meeting next week a new board with a set of complementary knowledge, experience, and skills. We have added the business executive experience, for example, with Shulnoten. We have had financial experience with Sonia Routiers. We have more innovation and digital experience in public services with Moshim El-Gabri. And I think from the chair who graduated from Solvay and Columbia University, we get more international experience, including in business transformation, operational efficiency, and also advising on... corporate social responsibility and stakeholder management matters. On the second question, I think what I would say is that BPOST is on course. It knows the strategy and in that respect the management priorities and performance targets fit in that strategy and are clearly defined. The onboarding of Indeed CEO will take place in Q3, and that is led by a professional process by the Remuneration Nomination Committee in Korn Ferry, and we will make an announcement in the third quarter.

Normally with the new CEO, the strategy follows that. Now it's a bit of the other way around. Don't you expect that there will be then any problems on finding a new CEO if he has no room to make any changes to those strategic priorities?

I understand your question, but the strategy of BPOST has been consistent over the past years. The strategy of BPOST is evolving into a group whereby we develop national activities in e-commerce logistics in Europe and North America. Secondly, the strategy of BPOST that exists for a number of years is further building on the mail distribution network, transforming it gradually into a parcel operating network. And third, we are also focused on executing the public service mission that are granted by the Belgian state. These strategic orientations have been clearly defined for the past number of years. And I think the management priorities are continue to work towards executing this strategy.

OK. Thank you.

I'm excited to see one question. Is that correct? The question has been removed from the queue, so there are no further questions in the queue.

Well. If there are no further questions, I would like to thank everybody in the call for having taken the time to be with us and for your excellent questions. We will hear some of you back at the conferences. We're going to attend in May and June. And for those we are not going to meet, let's take the appointment for the second quarter results, which is going to be in August. And I would say, stay all safe. Thank you so much.

Thank you all. Thank you, everyone, for joining us on today's call. You may now disconnect your handsets. Please stay connected.