bpost NV/SA

Good day and welcome to BPOS Fourth Quarter 2023 Analyst Call. Today's conference will be hosted by Mr. Chris Peters, CEO, and Mr. Philippe D'Artien, CFO. Throughout today's presentation, all participants will be in listen-only mode. Later, we will conduct a question and answer session. You may press star 1 on your telephone keypad at any time to register for questions. This meeting is being recorded, and at this time, I'd like to hand the call over to Mr. Chris Peters. Please go ahead.

Good morning ladies and gentlemen. Welcome to all of you and thank you for joining us. I'm pleased to present our fourth quarter and full year 2023 results as CEO of BePost Group. With me I have Philippe Darcien, our CFO. We posted the materials on our website this morning. We will walk you through the presentation and will then take your questions. Two questions each would ensure everyone gets a chance to be addressed in the upcoming hour. Let's go to the highlights of the full year results and Philippe will then walk you through our four quarter 23 results. 8.5 million euro. To put things in perspective let's recall our initial EBIT guidance of 240 to 260 million euro announced in February which had to be withdrawn a few months later due to internal compliance reviews and the EBIT guidance of above 240 million that we managed to reinstate at our third quarter 23 results as we had gained more visibility on the impact of the compliance reviews and the repricing of services to the state. Despite the negative financial impact of 10 million euro for the repricing of services of the state in 2022, as well as the financial impacts associated with the compliance reviews, 248.5 million therefore meets both our initial and reinstated guidance. This was not a given from the outset and this is a great achievement of which we can be proud of as a company. Let me share with you the key highlights of the year for each of our businesses units and we'll then get in more details to the fourth quarter results. Our Belgian segment contributed for 183 million euro to the group adjusted EBIT with a margin of 8.1%, well within the guidance range of 7 to 9%. This represents a decrease in EBIT of 15 million compared to last year, including the negative 10 million impact I've just mentioned for the repricing of state services in 2023. Our top-line development was primarily driven by resilient male revenues, where our volume decline of minus 8.4% was offset by a strong positive price mix. fueled by a volume growth of plus 6.3 percent mainly attributed to the success of our commercial hunting plan launched in 2022 and the price mix effect of plus 4.8 percent on the cost side belgium mainly faced the effects of year over year seventh consecutive automatic salary mitigated by some productivity gains and the stabilization FTEs despite higher parcel volumes. In e-logistics Eurasia adjusted EBIT stood at 38 million with a margin of 5.7% above our guidance of 3 to 5%. Our top line growth was driven by the continued expansion momentum at Radial Europe and Active Ed, which witnessed a in 2023, as well as strong cross-border sales from existing and new customers in Asia. OPEX evolved in line with volume development, with part of the higher transport costs benefiting from a favorable mix for volumes with destination Belgium. At eLogistic North America, adjusted EBIT stood at 65 million with a margin of 4.5%, at the low end of our guidance of 4.5%, third quarter 23 results. This was anticipated as our fixed costs average was eroding as revenue pressure was materializing over the Market backdrop and overcapacity in the market led to a 10.7% decrease in top line, excluding foreign exchange impacts. Lower volumes at Radial and Landmark Global, where market conditions have been further compounded by Amazon's insourcing, have nevertheless been mitigated by an effective alignment of resources to demand and or continued focus on productivity resulted in a decrease of 11.3% in OPEX enabling us to preserve our margins in difficult market conditions. Finally, CAPEX ended up at €155 million, below the revised envelope of €180 million, reflecting our financial discipline in a disrupted market environment. In terms of dividend, our results allow us to propose a dividend per share of 13 euro cents gross to the general shareholders meeting. This corresponds to a payout of 40% of the IFRS reported net profits. at the midpoint of the 30 to 50% range foreseen in our dividend policy. I will now hand over to Philippe for the quarterly results and I will then take the floor to share with you my first observations since my arrival at BPOS Group and to walk you through our management priorities.

Thank you, Chris. Good morning to all. We are very pleased to report that thanks to a good execution of the year-end peak and some productivity gains across our business, we delivered a good quarter despite ongoing revenue pressure in North America and a soft market backdrop in Belgium and in Eurasia, and we'll come back to that one. Our group operating income for Q4 stood at €1,217,000,000 and declined year-over-year by 6.5%, mainly due to ongoing pressure in North America, while on the other hand, our domestic mail and parcel activities continue to deliver strong performance and our e-fulfillment activities in Europe and our Asian cross-border sales continue to grow. our group-adjusted EBIT stood at 74.1 million euros with a margin of 6.1%. Operationally, when excluding the negative 2.5 million euros impact for repricing of the state services in the quarter, EBIT remained flat year over year. with productivity gains and price increases offsetting top line pressures and cost inflation, as Chris already alluded to. Before diving into the financial performance of our business, you will note on slide five that while our adjusted EBIT only slightly decreased from 77 to 74 million euros, our adjusted net profit decreased significantly from 83 to 35 million. This decrease is primarily due to a nearly 43 million decrease in financial results, as last year we benefited from a favorable non-cash impact related to IS-19 employees' benefits in line with higher discount rates at that time. Let's now move to the details of Belgium on page 6. At Belgium, we see that revenue increased by 11 million to 581 million euros. Domestic mail recorded an underlying mail volume decline of minus 8.1% for the quarter against a minus 7.5% in Q4 2022. This impacted revenue by 25.1 million euros, yet mitigated by a positive price and mix impact of plus 24.7 million euros, resulting in a stable domestic mail revenue year-over-year. For parcels in Belgium, they recorded in Q4 an increase of 9 million in revenue or plus 6.6%. Parcels volume increased by 3.4% year-over-year. The percentage growth for this quarter was anticipated to be slightly lower than in previous quarter due to the high cons of last year and the phase out of the commercial hunting plant implemented in 2022. However, we also acknowledge that volume development fell below our estimates in December, where we even observed a decline in volume after strong start to the quarter. December months have been rather disappointing from a customer confidence standpoint. We'll come back on that one. It is something which is observable not only in Belgium, but also in Europe and in the US. These trends observed in neighboring countries, as I said. Price mixed at plus 2.2% in Q4, mainly driven by higher price increases. Proximity and convenience retail network revenue increased by 3%, following the indexation of the management contract. Value-added services remained stable. As explained in the previous quarter and as anticipated, intersegment and other revenue comprise a negative 2.5 million euros impact for the repricing of the state services in the particular quarter. We also see on that line the higher intersegment revenue from inbound cross-border volume handled in the domestic network for e-commerce and logistics Asia. Again, Chris alluded to it from the Asian volume destination Belgium that has been delivered in the last quarter. On the cost side, our adjusted OPEX, including depreciation and amortization, increased by 22.5 million, mainly driven by higher salary costs. Again, during the entire year, we had seven 2% increases. for the full year 2024. On one end, the cost per FTE increased by 4% year-over-year, so quarter-quarter, following the impact of the three-salary indexation that occurred since Q4 last year. While on the other end, we continue to maintain our FTE stable despite higher parcel volume, meaning that some productivity gains have been achieved. Bottom line, excluding the repricing impact, our underlying adjusted EBIT only slightly decreased by 2.4 million year over year as inflationary pressures have been successfully mitigated by our top line development and productivity during peak. Moving on to e-logistic Eurasia. Revenue were up 14 million, mainly reflecting a strong growth across border Asia. In e-commerce and logistics, revenue increased by 4 million euros. Remember, we have various businesses with different trajectories. Radial Europe and Activen sales were up 13%, a growth fueled by new customers onboarding in existing sites, as well as international expansion and upscaling from existing customers. We see more and more customers being present in one country, dealing with us or making operation with us in other countries, which is a very positive evolution and a cross-sell of the cross-sell initiative. At Dyna, price indexation only partially mitigated the lower volumes across all business types. Cross-border, revenue increased by 9 million euros or plus 10%. You will recall that in the previous quarter, we reported a decline in revenue of minus 7%, contracting with the growth recorded in the first half of the year. This decline was notably linked to adverse UK market conditions and the consolidation impact of IMX. This quarter, revenue growth mainly reflects on one end the contribution of new customers and a continued growth from recent customer wins. both resulting in strong volume from China to Belgium, and on the other end, the impact of ongoing challenges, conditions in the UK, as already reported in the third quarter. If we move to the P&L, while the top line increased by 8.2%, operating expenses, including depreciation amortization, only increased by 6 million, or 4%. This evolution is mainly explained by higher transport costs in line with higher activities and a favorable mix at cross-border for the volume with destination Belgium and lower salary costs with inflationary pressure offset by some lower FTE and improved automation and productivity. From a profitability standpoint, Asian cross-border volume with data from Belgium contributed to the sequential margin improvement from 3.1% in Q4 last year to around 5% in the previous quarter and up to 7.1% in the last quarter of 2023. Let's move now to our North American e-logistics business. In line with the previous quarter, our top-line North America continued to be impacted by the economic softness, the market overcapacity leading to high degree of competition and pricing pressures, as well as the insourcing of Amazon, which continues to impact landmarks. The operating income of e-commerce and logistics decreased by 19%, or 106 million euros. At constant exchange rate, this corresponds to a decrease of minus 15%. At Radial, the top line decreased by 16% year-over-year, as the lower sales from existing customers and the in-year contribution of new customers win, could not compensate the client churn that we announced at the end of 2022, and we saw further acceleration in 2023. As discussed at our Q2 and Q3 results, and to put the 16% drop US revenue in perspective, we continue to see strong volume pressure in the US parcel market, for instance for FedEx and UPS. At Landmark, besides our general price pressures in the market, this is now the fourth quarter that we continue to record