bpost NV/SA

Ladies and gentlemen, hello and welcome to the BPOST Group third quarter 2025 analyst conference call. On today's call, we have Mr. Philippe Darcien, CFO. 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 pound key 5 on your telephone keypad to register your question. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. I will now hand over to your host, Mr. Philippe Darcien, CFO, to begin today's conference. Please go ahead, sir.

Thank you very much. Good morning, ladies and gentlemen. Welcome to all of you, and thank you for joining us. I'm pleased to present you our third quarter result as CFO for the BPOS group. Chris, our CEO, could not make it today, and I have with me Antoine Lebec from Investors Relation. We posted the materials on our website this morning. We will walk you through the presentation, and then we'll take your questions. As always, two questions each. We'll ensure everyone gets a chance to be addressed in the upcoming hour. I'll start with the quarterly financial, then move on our financial outlook and provide an update on our key transformation initiative for 2025. As you can see on the highlights on page 3, our group operating income for the third quarter amount to 1 billion 30 million euros, remaining broadly stable year on year and almost at constant scope as FACI has already contributed for two months in the same period last year. As usual, the summer quarters show some seasonal softness, but beyond this, we saw a mix of different factors. At Radial US, we continue to see the expected impact for the 2024 contract termination, but even more this time, the materialization effect of those announced earlier this year. As a reminder, these are the same ones that led us to take an impairment at the beginning of the year. Altogether, those elements more than offset the extra months of Stasi contribution in the quarter. At the same time, we continue to see good volume growth in Asian cross-border activities. And while in Belgium the domestic mail volumes declined, this was partially compensated by a decent volume growth in parcels. Our group adjusted EBIT came at minus 3 million euros, representing a year-on-year decrease of 16.3 million, mainly driven by radial US, where despite sustained margin action, the revenue shortfall due to the anticipated churn and seasonal softness did not allow full absorption of fixed costs in the quarter. More broadly, at BPOS group level, the results we are presenting today are in line with our expectations, and we reconfirm our EBIT outlook at around €180 million for the year 2025. On slide four, you will note that the 14 million decline in net profits mirrors the EBIT evolution, as in the same period last year, the acquisition debt was already unbalanced, and the financial result remained broadly stable. Let's move now to the details of our three segments. I'm on page five with Benny Last Mile segment. We see that the revenue declined by 9 million, amounting to 512 million euros. Domestic mail recorded around 16 million decline in revenue, of which 10 million stem from transactional and advertising mails, and 6 million from press. Excluding press, mail volume contracted by 9.4% in the quarter compared to only 6.7% last year, which had benefited from the election uplift in September 2024. The decline in mail volume had a negative effect. revenue impact of around 20 million euros, of which was partially compensated by half through a positive price and mixed effect of 4.7 or roughly 10 million euros. As a result, domestic mail revenues were down by 4.6% or minus 10% year over year. On parcels, revenue increased by 4 million or 3.2% year on year, reflecting a volume growth of 2.8% and a slightly positive price mix effect of 0.5% in this quarter. On the volume side, the reported 2.8% actually correspond to an average growth of 4.4% per working day. Over the past months, this momentum has been mainly supported by the outperformance of marketplace, notably boosted by sales events and continued strength in the apparel segment. Let's move to the P&L of last mile on page 6. Including some higher intersegment revenues from inbound cross-border volumes handled in the domestic network, our total operating income was slightly down by 1.4%, or minus 8 million euros. at the same time on the cost side our opex including dna remain broadly stable and mainly reflects two effects lower ft is resulting from lower volume and efficiency gain notably from the reorganization of our distribution rounds and retail offices which are progressing in line with plan And on the other end, high salary cost per FTE, around up to 2% year over year, following the March 25 salary indexation. In contrast with the first half of the year, when EBIT had contracted sharply by almost 64 million year on year, mainly due to the end of the press concession in June 24, we see that despite structural male decline, Parcel growth and initial effects of our organization are helping to attenuate EBIT erosion. Moving on to 3PL on page 7. 3PL revenues were broadly stable overall as two offsetting events came into play. First effect, 3PL Europe, where revenue increased by 62 million, we benefited from one additional month of Stasi revenue in the quarter, along with continued commercial expansion of retail and active events in Europe. That said, sales from existing customers, or the famous sense of sale, remain soft and even negative in certain geographies during the quarter. As a side note, since we are one year after the acquisition of Stasi, there will be no further consolidation impact going forward. And as we are now advancing in the integration of Stasi, Radial Europe and ActiveFence, we are really starting to operate as one single business unit, as explained at our Capital Market Day in June. Our P&Ls being increasingly managed together, this means that from now on, we will only report on 3PL Europe as one single business and gradually phase out standalone reporting from individual entities. Second effect, in 3PL North America, revenue decreased by 15 million euros. At constant exchange rate, this corresponds to a decrease of 24%. Mainly driven by revenue churn from contract announced in 2024, and even more so from those announced early 2025, partially offset by in-year contribution of new customers, around 60% of which are radial fast-track customers, as represented to you at our Capital Market Day. While we are seeing positive and encouraging signs on that front, And I'll come back to that in a moment. We are still feeling the impact as expected of the churn. But we continue to execute our self-development plan, and we are confident that these efforts will pay off, but it needs a bit of patience. Let's move on to the P&L of 3PL on slide 8. With this, the total operating income slightly increased by 1.1%, while our operating expense and DNA increased by 4.8%. Primarily driven by, in Europe, static consolidation impact and one-off reorganization costs, including site closures and relocation of customers. To further accelerate 3PL Europe integration and cost structure optimization. And in North America, lower variable OPEX in line with the revenue development at Radial US and sustained variable contribution margin close to record high level. The EBIT evolution at Radial US is certainly one of the key highlights of this quarter performance and also the main reason for the gap versus market expectation. Despite one additional month of static contribution, the minus 30 million EBIT decline in 3PL from plus 1.7 million last year indeed clearly reflects the situation at Radial US. After three consecutive years of contraction, reviews are now about 45% below their peak level in Q3 2022. And in this quarter, the combined effect of churn and seasonal softness limited our ability to fully absorb fixed costs, despite strong VCM discipline and tight cost control. Ironically, we are now at a point where revenue has reached their lowest level ever, and yet our VCM margin stands at an all-time high. Looking ahead, the solution lies in top-line recovery, and on that front, we are executing our plan and making good progress. Moving on to cross-border on page 9. Cross-border euro revenue increased by €11 million, or plus 14% year over year. This growth was driven by strong volume increase from Asia across all major destinations, notably Belgium, fueled by large Chinese platforms and the US. Across borders of North America, Landmark Global continues to face the broader tariff environment that is weighing on existing business and delaying new opportunities. However, this was offset by strong domestic volume in Canada, resulting in an overall plus 1.4% revenue increase for North America, including a 6% negative FX impact. Overall, our cross-border operating income increased by roughly 12 million or 8.7%. As shown on page 10, our OPEX and DNA increased at the same time by 9.6%, mainly reflecting higher transportation costs linked to the volume growth I just mentioned. EBIT slightly increased to above 17 million with a margin of 11.5%, reflecting a slight delusion from commercial products. Moving on to corporate segment on page 11. Adjusted EBIT improved by 1 million to minus 9 million, as cost containment measures across spend categories helped offset higher payroll driven by more empties and March 25 salary indexation. Then we move to the cash flow on slide 12. The net cash outflow for the quarter amounts to minus 16 million, representing an improvement of 275 million year on year, mainly reflecting the acquisition of Stasi last year, which was partially funded in cash for a bit less than 300 million. Besides that, the remaining items to flag are the followings. Cash flow from operating activities before change in working cap stood at 71 million and decreased by 7 million year over year, mainly reflecting higher corporate tax payment. Change in working capital and provision amounted to 17 million. The plus 16 million variance is primarily explained by the settlement of some terminal dues and some client balances. The net cash outflow from investing activities totaled $28 million, driven by our capex for international e-commerce logistics, parcels lockers, and capacity expansion. Also, our domestic fleet was considered into this $28 million. These items constitute the main valuation in our free cash flow. The net cash outflow for financing activities amounted to minus $0.06 million and mainly consisted of lease liabilities outflows while we had on top of the acquisition debt last year. This brings us now to the outlook and our strategic priorities of 2025. Outlook 2025. We presented our group EBIT outlook of the range 150 to 180 million back in February, and during the Q2 result in August, we indicated that we were targeting the upper end of the range. With a year-to-date EBIT of 97 million euros, The results we are presenting today are broadly in line with our plan, now allowing us to confirm our full-year outlook at around 180 million euros. This implies achieving an EBIT of around 80 to 85 million in Q4, compared with 80 million in the same quarter last year. Sorry, compared to 84 million last year, which we are cautiously optimistic about. Based on current assumption and expectation, we believe this is achievable, particularly thanks to our preparation and readiness for an efficient peak execution across the group. In North America, we validated client volume capacity plan. We are secure to hiring over 4,100 seasonal workers to ensure full site coverage and put peak incentive plans in place. In Benelast Mine, beyond the usual measures, we have implemented additional productivity initiatives, including tracking performance at each distribution offices and sites, and setting up a national tool to further optimize interim and reinforcement of the planning. Of course, we remain vigilant amid challenging market conditions, notably as volume development and the phasing out of end-of-year peak volumes in Belgium and internationally remain uncertain and partially beyond our control. To wrap up on our outlook, we are also updating our CAPEX guidance with a download revision from 180 to 140 million. This reflects our disciplined approach to spending in Belgium and in the US and a strategic facing towards 2026. Overall, we remain focused on prioritization and value creation, ensuring that every euro invested is where it has the highest impact in the group. Finally, as we usually do, I take a few minutes to walk you through the progress we've made on our transformation plan for the last months. As part of our Reshape 2029 journey, we present it to you as a Capital Market Day. So when it comes to the update on the strategic initiative, Bepoz continues to accelerate its transformation, shifting firmly toward becoming an international logistic and parcel operator. Let me walk you through the tangible progress we've made across our segment. I start with Benelas Mile. Following two successful pilot phases, we launched our nine delivery service on October 15. as new B2B service consisting in a nine-time delivery solution targeted at technicians and field workers that helps eliminate detours from two central depots and save up to one and an hour and a half per day for these technicians and field workers. In practice, parcels are collected by people until 6 p.m. on working days, sorted overnight and then delivered before 7 a.m. to selected parcel lockers of our network across Flanders, Brussels and Wallonia. The service is exclusively available for B2B shipment, internal deliveries or business-to-business exchanges requiring high level of reliability. Meanwhile, still in Belgium, our BB box network of parcel lockers continue to expand strongly. We have now around 2,000 active units with 800 more contracted. Most of them located in prime location and high traffic venues like supermarkets. As announced recently with Lidl, we target to have 240 lockers by the end of this year, which represents nearly 10% of the targeted APM capacity. We currently install up to 12 new lockers per day, and by the end of this year, we intend to have 2,500 lockers installed in Belgium. On our future operating model, one of the pillars is bulk rounds, consisting in dedicated parcels rounds in bulk, serving pickup and drop-off points, including lockers. Here as well, after a successful pilot phase, this model is now fully operational across all sorting centers, servicing 26 distribution offices and handling over 12,000 parcels a day. Before end 2025, we will extend to 29 offices with a capacity close to 21,000 parcels a day. This bulk model is set to become a cornerstone of our 2026 peak strategy capable of managing nearly half of the out-of-home volumes. Let's shift to 3PL Europe. We are entering into a new chapter in leadership with Rainer Kiefer taking over as CFO of 3PL Europe and Stasi Americas as of January 2026. Succeeding Thomas Mortier, who announced earlier this year his intention to step down at the end of the year and will move into a part-time advisory role starting January 2026. Heiner brings extensive experience from DSV and DB Shankar with a strong track record in transformation and scaling across Europe. This appointment reflects our ambition to accelerate the transformation of the 3PL business, strengthen our European footprint, and drive value creation across the full spectrum of contract logistics, fulfillment, and omni-channel solutions. With Toma supporting this transition and Heiner taking the helm, we are confident that the business is well positioned to execute the next phase of our growth strategy. In parallel, the integration of Stasi remains firmly on track. As cost synergies start to materialize in the second half of the year, we expect to over-deliver on our 2025 synergy targets. And the 2026 targets are already secured, fully in line with what we presented to you at the Capital Market Day. And in 3PL US, our radial fast track rollout is ahead of our plan. 16 customers are already live, and two more are set to launch in the fourth quarter 2025, each contributing an average ACV between $4 and $5 million. The in-year revenue from FastTrack is already exceeding internal targets, providing strong momentum in the U.S. and validating the scalable potential of the model. As Chris mentioned it last time, there's still a lot of work ahead of us, and the first results are not always immediately visible in the P&L. This is notably the case this quarter in the U.S., That said, we are confident that we are on the right track and focused on doing the right things to deliver sustainable results. We are now ready to take your questions. Again, two questions each will allow every one of you to be addressed in the upcoming hour. Operator, please open the line for questions.

Ladies and gentlemen, as a reminder, if you'd like to ask a question or contribute on today's call, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. Please also ensure your line remains unmuted locally. You will be advised when to ask your question. The next question comes from Frank Klassen from DeGroof Petercam. Please go ahead. Yes, good morning, gentlemen. Good morning.