bpost NV/SA

Ladies and gentlemen, hello and welcome to the BPOST Group 4th Quarter 2024 Analyst Call. My name is Ben and I will be your coordinator for today's event. Please note that this conference is being recorded and for the duration of the call, your lines will be in lesson mode only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing Start 1 on your telephone keypad to register your question. If you require assistance at any point, please press Start Zero and you will be connected to an operator. I will now hand you over to your host, Mr. Chris Peters, CEO of BPOS Group. Please go ahead, sir.

Good morning, ladies and gentlemen. Welcome to all of you and thank you for joining us. Today, I will be presenting our fourth quarter and full year 2024 results as CEO of BPOS Group. With me, I have Philippe Darcien, our CFO, as well as Antoine Lebec from Investor Relations. 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. Let's get to the highlights of the full-year result and Philippe will then walk you through our fourth quarter 24 results. On page 3, you can see that BIPO's group delivered results in line with its full-year guidance with total operating income exceeding 4.3 billion or groups adjusted EBIT reached 224.9 million euros representing a margin of 5.2% at the upper end of the 205 to 230 million euros guidance reaffirmed in November with our third quarter results. Our overall performance reflects the strong contribution of Stasi. We are pleased with Stasi's performance over the past five months. delivering approximately 340 million euros in revenues and 41 million euros in EBIT, corresponding to an EBIT margin of 12%, ranking among the highest in the logistics industry. This solid performance aligns with our expectation, despite the seasonally softer start in August. However, When excluding Stasi's strategic contribution and looking at performance on a light-for-light basis, the overall picture is different. Revenues declined approximately 270 million euros, driven mainly by two key factors. A reduction of 50 million in press revenues following the new press contracts that took effect after the end of the press concession on June 30th. And a decline of more than 210 million in radial US revenues impacted by the softer US market environment with lower market volumes and increased competition among 3PL providers. Despite these pressures, domestic parcel volume continued to grow, delivering a solid performance in 2024 with an increase of more than 30 million in revenue. However, this has of course remained insufficient to offset the top line decline. Profitability was also impacted with EBIT declining by approximately 65 million euro year over year. In Belgium, EBIT decreased by 45 million, with 33 million of this decline in the second half of the year, primarily due to the press impact mentioned earlier. And in North America, top-line pressure at radial and landmark was partly offset by radial strong productivity gains, helping to mitigate the impact. Also in these adverse market conditions in the US, we have recently learned of the departure of several customers, some of whom are significant in size and have a material impact on Radial's top line going forward. We therefore had to reflect the departure of these customers in our future growth projections, as well as the challenging market conditions translating into lower sales from existing clients and a more cautious outlook regarding the contribution of future customers. This led us to recognize an impairment of €300 million on Radial US, bringing the book value from €912 million to €612 million. Consequently, our reported Group Net result stands at €-209 million, and based on this, the Board of Directors will recommend to the General Meeting in May not to distribute a dividend this year. Before handing over To flip for the fourth quarter results, I'd like to take a moment to reflect on our key strategic priorities of 2024 and how they shape our transformation journey. 2024 was my first full year in the company, arrived in November 2023. I discovered very quickly a great deal of capabilities and expertise within BO's group. BePost Group and BePost Belgium suffered from an identity crisis. We are international, but not global. We still have a lot of postal products, but we are no longer a postal company. 2024 was about accepting our new identity, integrating its consequences, and from this, building a strategic vision for the future. We built synergies throughout the group and leveraged our capabilities to create a better service offering to all our clients whether they are operational in Europe, North America, or Asia. We no longer pursue big clients with big volumes to simply fill up our warehouses. We still cherish our big clients, but we want to become less vulnerable. That's why we now focus on SMEs, we focus on diversified verticals, and we want to fill our warehouses with multiple clients. We want to create value for our clients. We have a range of capabilities combined. We can create a broad range of solutions, which would be almost impossible for the client to recreate by themselves. In 2024, we laid the foundation for this big shift in 2025. BeBose becomes a digital expert in parcel size logistics operational in two regions, North America and Europe. And what has then changed for the group since then? So what you can see here is that we launched our strategic vision to become this regional digital expert in parcel size logistics. And therefore we have now organized the company around three dedicated business units. that each strengthen the group and also can become really leaders in the respective sectors that they are present. We also leverage the capabilities across the group to make sure that we can bring good solutions to our clients. And we diversify our portfolio with clients in the B2B space. And the Stasi acquisition, as you can see, in the VIX was very successful. We're integrating it today. It's on track and also in terms of the synergy creation, we're fully on track for this. Meanwhile, we have developed a transformation roadmap. We have launched several pilots, meanwhile, and we will be ready to scale some of them. later down the year. And we have, again, engaged in investing in some of our male products so that we can prolong a lifetime going forward. If we then zoom into the different PUs that we have, at the 3PL side, looking at North America, there the focus is that we shift the portfolio to ensure that it's more diversified and less dependent of enterprise clients, of which you also have seen that one of those risks was materialized and led to the impairment. So the strategy is still the same as the one that we discussed last year. We will have an intensified focus to realize that. Don't forget that meanwhile, we also drastically reduce the cost and continue to reduce the cost structure and the efficiency of our operation over there. And we have launched a new offering specifically focused on mid-sized companies, which is called Radial Fast Track, that we are piloting as we speak with our first clients in the US. Meanwhile, as well, synergies between Stasi Americas and Radial have been realized or are on the way of being realized in the coming months. If you look at the European side, the integration between Stasi, Active Ends and Radial Europe is on track, meaning that meanwhile they're already exchanging clients, bringing to those clients the best of capabilities we have into the group and also ensuring that we have a higher fill rate of our different warehouses. If we then zoom into the last mile, then we need to accelerate, of course, from a company which is mainly a postal company in its DNA towards a parcel size logistic operator. And for that, we are now exploring new market segments that could create a new trajectory of growth. So we don't limit ourselves to that. B2C segment, we continue to focus on that, and we continue to focus on Polestop, but we add to that the B2B segment and the C2C segment, and as said before, we launched several pilots in this area which look very promising, and some of them will be scaled in the second half of this year. Also, we extend our out-of-home delivery network. We have already a strong UTO network, but we will increase it also with Parcel machines, automatic parcel machines and lockers so that we can create full convenience, whatever the client need is at that moment. And then we have, of course, as well, evolved the press concession towards a press contract in the distribution model, which is on its full way. And that transformation is also happening today in Flanders. And we're preparing to do the same in the south in the coming years. And also we have modernized some of our mail products, making them more convenient for the client so that we can count on an extension of a lifetime going forward. And at the cross-border side, we have further integrated activities of the other business units into the service offering that we have, so that we have a complete end-to-end service offering. And, of course, we further defend our lanes, meaning that also there we have a higher focus on mid-sized clients, and also we are actively looking at a couple of additional inbound services that we can develop in the coming years. From here, I will then hand over to Philippe, who will lead us through the results.

Thank you, Chris, and good morning to all of you. As you can see on the highlights on page 5, our group operating income for Q4 stood at 1,335,000,000 euros and increased year over year by close to 10%. At constant perimeter, excluding the 240 million consolidation impact of Stasi, our operating income decreased by 8% on 96 million. Many due to ongoing pressures in North America, lower press revenue tied to the new press concession started on July 1st, while on the other end, domestic mail remained resilient with less than 3% decline in revenue, and our domestic parcel revenue moved by more than 7%. Our group adjusted EBIT at 84 million euros with a margin of 6.3%, or at 57.6 million euros, while excluding the 26.4 million EBIT contribution cost us. On the like-for-like basis, this represents a decline of 16.5 million compared to last year. In line with Q3, and as Chris has just explained for the full year, the decline is mainly attributable to price, where the lower revenue has a direct impact on EBIT. And, to a lesser extent, to North America, where our peak management and our property gains helped attenuate the top-line pressures. Before diving into the financial performance of our business unit, You will note on slide 6 that our reported EBIT amounts to a negative €223 million, which mainly reflects the €300 million internal loss on retail, as mentioned by Chris. Let's move now to the details of our three segments. I'm on page 7 with the last mile segment. We see that revenues declined by €24 million to €591 million. In line with Q3, domestic mail recorded close to 28 million declines in revenues, of which 21 million are coming from press, mainly due to the new contracts with the editors following the end of the press concession on June 30th. Excluding press, mail recorded an underlying volume decline of 8.1% for the quarter. with a good resilience in advertising mail thanks to our commercial efforts and contribution of new customers. The decline in mail volume led to a revenue impact of minus 19.2 million euros. Overall, though this was partially offset by a positive price and mixed impact of plus 5.3% or plus 12.6 million euros. As a result, the domestic mail revenue decline was limited to under 3% or roughly minus million year over year. Parcel's bedroom recorded in Q4 an increase of 10.7 million euros in revenue or plus 7.4%. Parcel volume grew by 6.9% year over year, following 8.7% in Q3, and marking a strong uptick compared to the plus 2.9 and plus 2.5% growth in Q1 and Q2 respectively. The strong volume growth was driven by significant contribution of major marketplaces within our customer's portfolio and their strong outperformance relative to overall market growth. This brings our full year 2024 volume growth to plus 5.3% despite ongoing challenging market conditions including negative consumer confidence index in 2024 with further deterioration in the fourth quarter and inflation in Belgium still exceeding 3% and facing continued upward pressure. As our volume grew, growth was mainly driven by large customers, the price mix only improved by plus 0.6% in Q4. Proximity and convenience retail network revenue decreased by €4 million, with lower banking revenues offsetting the indexation of the management contract. and revenues from value-added services remain operationally stable. However, this was offset by the repricing of state service, which is now accounted for within value-added services instead of in other revenue, as in the previous year. This is the last time we will have to represent this restatement, as from now on, next quarter onwards, we'll have again a clear view of the performance without this reclassification impact. Our personalized logistic framework at Dyna remains nearly stable in the quarter, supported in the mix by a recovery of both one-man and two-man delivery. Let's move now to the P&N of Last Mile on page 8. In our inter-segment and other revenue, besides the restatement impact of repricing in this state I just explained, we have on that line some high-tech segment revenue from inbound cross-border volumes handled in the domestic network from the cross-border segment. Altogether, this brings our total operating income down by 3.6% or minus 23 million. On the cost side, our OPEX, including T&A, slightly decreased by 1.9% or 11 million euros, mainly driven by, on one hand, some high salary costs as our cost-post FTE increased by 3.4% year-over-year following the impact of two salary indexations in December 2023 and June 2024, while FTEs slightly decreased despite higher parcels volume, and on the other end, lower cost of sales and lower DAB. To summarize, our adjusted EBIT declined by 11.5 million year-over-year, mainly due to a drop in price revenue, while the residual mint revenue and the solid parcel volume growth could not fully compensate the increased payroll cost driven by inflation. Moving on to 3PL on page 9. 3PL revenues increased by $151 million but declined by $62 million or minus 15% while excluding the $240 million contribution from Mustassi's consolidation in the quarter. In 3PL Europe, a constant parameter, regular and active end sales were up 14.6% year-over-year, continuing the trend of previous quarters. This growth was fueled by customers' onboarding as part of our international expansion efforts and upselling activities targeting existing customers. In 3QL North America, revenue decreased by €69 million. A constant exaggeration, this corresponds to a decrease of 20% in line with previous quarters. as the lower sales from existing customers and the in-year contribution of new customer wins cannot compensate the client churn we announced last year in the context of economical softness and market overcapacity. Let's move to the P&L of 3PL on-site. Excluding Stasi, while the operating income decreased by 14.9%, our operating expenses and DNA decreased by 15.3%. primarily driven by lower variable OPEX in line with Radial US revenue trend and a sustained improvement of Radial US variable contribution margin rate. Our VCM has increased by around 5.5% year-over-year, reaching a record high in peak period and delivering an impact of around $18 million compared to last year. Year-to-date, this corresponds to a cumulative efficiency gain of more than 45 million. These efficiency gains help alleviate the top-line pressures of minus 62 million, and we see that at constant per meter, we manage to protect our adjusted EBIT with a limited EBIT decline of 1.3 million, bringing it down to 20.2 million. In terms of reported EBIT, we see that the 300 million impact related to the implement on regular US brings the bull value from 912 to 612 million euros. Regarding Stasi, the EBIT contribution totaled 26.4 million with a margin of 12.3%, clearly highlighting the strategic importance of the acquisition to the group's performance. Before moving on to our cross-border activities, I would like to take a moment to show you the performance of STACI and Radiant US. On one hand, STACI has only been consolidated within the group for five months, and we want to provide you with more perspective on its full year performance. On the other hand, Radial US has faced top-line pressure over the past two years. We would like to take a step back and put it into perspective, the impact of the protective measures that we have implemented. Let's start with TASI on slide 11. In the first graph, we illustrate three years of random progression from 23 to 25 with a GIGA of approximately 3 to 5%. This is fully in line with our plan, despite a slight slowdown in 24 when Stacey was still focused on its tail process until August, as well as some deceleration during the integration phase of their acquisition in the US, where the growth strategy now seems to be back on track. Looking forward, beyond 25, we anticipate a gradual acceleration in growth, reaching to its full potential in 2027. This will be driven by cross-selling opportunities between Stasi, Retail Europe and Actifence, and also other parts of the group, leveraging the complementary of our P2C e-commerce logistic and P2B offering as well as our geographical footprint. Also in this graph, we see the EBITDA margin under French GAAP 3.516, so excluding the leasing impact. Given Stasi's local accounting framework, this is the only common metric that will allow us to benchmark several years of performance before and after the acquisition by people as we report on the IFRS. we observed that the margin was around 12.5% in 2023. And after a slight decline in 2024, linked to the transition phase I just mentioned, we expect margin improvement towards up to 13% in 2025. To benchmark, this is an in-RFRS framework that we are familiar with. The second graph shows that this local gap APT margin translates into RFRS APT margin of nearly 20% for the five months consolidated in our RFRS account, which outperforms, as Chris mentioned it already, industry margin in logistic industry. In terms of capex intensity, we are around 2% to 2.5% of revenues. And finally, it's also worth noticing that part of the rationale behind this acquisition was to unlock value creation at Radial Europe and Activance by leveraging stasis management expertise and people's competencies in e-commerce logistics. We see strong potential for both growth and profitability in this area as well. Now turning to Radial US on page 12. For several quarters now, we are delivering the same message. We are experiencing revenue pressure and we are working on productivity improvement to mitigate the impact on APTA and EBIT as much as possible. Taking a step back and looking at several years of data, this is exactly what the following graph illustrates. We can see a continuous improvement in IFRS margin, increasing by 9% from 3.1%. Five years ago, to 12.1% in 2024. And despite a 390 million revenue decline, equivalent to 28% over two years, EBITDA has only decreased by $20 million, thanks to a strong focus on cost management and productivity enhancements. As Kay just mentioned, the recent customer departures we have learned recently We put additional pressure on revenues in 2025, and despite our commercial redeployment efforts targeted to mid-sized customers in the diversified port verticals, we will not be able to reverse the trend in the short term. Now, our focus is not on size, but on profitability and resilience of our portfolios. To put this in perspective with the 3PL US market, some industry reports indicate that the market contracted by approximately minus 20 to 25% in 2023. Our case is therefore not an isolated one. Additionally, other sources' project research show a growth towards 2030 with a high single-digit figure. We are therefore convinced that we will emerge from this downturn better equipped, thanks to efficiency improvement and a more robust and rebalanced customer portfolio. Finally, in terms of capex, we see that compared to Stasi, Radial US has a higher capex intensity, around 4-5% of revenue. Over the coming years, we will work towards bringing this down to the range 3-4%. while continuing to refine the profile of our customer portfolio. Moving on now to our cross-border business on page 13. Cross-border Europe revenue rose by 2.4 million or plus 2.4%. This growth was driven by increased volume from China to Belgium, our expansion efforts in Europe, and improving market conditions in the UK. This was nevertheless partially offset by Asian consolidators shifting away from untracked services where we are well positioned. Similar to previous quarters, our top line in North America remains under pressure. Cross-border North America revenue declined by 15.3 million euros, or minus 18%. as Landmark Global reported its eighth consecutive quarter of year-over-year revenue decline and continued to face commercial headwinds. However, this was partially mitigated in the quarter by strong peak volume growth, further boosted by a volume transfer during Canada's post-strike. Overall, our global cross-border operating income increased by €13 million, or 7% year-over-year. As shown on page 14, our OPEX and DNA decreased at the same time by 5.8%, reflecting lower volume-driven transportation costs, reflecting lower North American volume alongside higher volume shipped to Belgium, which has a positive impact in terms of mix. and slightly higher salary costs tied to the ramp-up of our international activities, inflationary pressures to the extent absorption of unexpected peak volume tied to Canada post-strike. Overall, from a profitability standpoint, the 4 million APT decline and year-over-year margin dilution reflects ongoing challenges at landmark US. Moving on to the corporate segment on page 15. Both the external operating income and the next OPEX and DNA remain stable despite higher FTE and inflationary pressures resulting from two salary indexations. I just did a bit, therefore remain stable at around minus 10 million. And let's move to the cash flow on slide 16. The main items to flag here are the following. Cash flow from operating activities before changes in working capital stood at 160 million and increased by 30.57 million versus last year, mainly reflecting higher EPTA generation. Change in working capital and provision stood at plus 96 million. This variation primarily stood from a shift in account receivables due to the termination of the press concession, which was typically settled in the following year and was still recorded on the balance sheet last year. The net cash outflow from investing activities totalled 63 million, which came back reaching 64 million for the quarter. On a full year basis, CapEx amounted to 147 million, aligning with our 150 million guidance. This guidance has been tied up by 30 million from our initial outlook, reflecting the financial discipline amid unfavorable market conditions. This item constitutes the main variation of our free cash flow and at the level of the net cash outflow from financing activities that amount to minus 75 million, an improvement of 126 million year over year, driven by the repayment of our term loan in December last year and higher payment related to lease liabilities in 2024. This brings us to the strategic priorities. Thank you, Filip. As you can see, we faced in the early part of the year a couple of important challenges.