Dutch postal group PostNL will continue to expand parcel services this year and shortly decide on the future of its German mail subsidiary after presenting “solid” results for the final quarter of 2015 and the year as a whole.
The company is also set for a financial boost this year with the agreed sale of its 14.6% stake in TNT Express to FedEx. This stake was valued at €626 million as of December 31, 2015, an increase of €181 million compared to one year earlier due to the rise in the TNT share price.
In Q4, 2015, PostNL revenues increased by 1% to €1,007 million, operating profits dropped 17% to €150 million, although underlying operating profits improved 5% to €156 million, and underlying cash operating income was up 21% to €147 million.
Similarly, for 2015 as a whole, revenue was flat at €3,461 million, operating profit declined by 15% to €340 million, while underlying operating profit weakened by 7% to €358 million but underlying cash operating income increased by 6% to €303 million. Net profit fell to €149 million, impacted by exit costs and the management buy-out in the United Kingdom, from €226 million in 2014.
CEO Herna Verhagen commented: “Overall, 2015 was another solid year for PostNL and we continued to deliver on the promises we made. We proved our ability to adapt our organisation to the changing environment. Full year underlying cash operating income came in at €303 million, slightly above the midpoint of our prior guidance. This strong performance contributed to the increase of our adjusted net cash, the improvement of our net debt and the strengthening of our equity position. We remain committed to restoring the dividend as early as possible.”
The largest division, Mail in the Netherlands, saw revenues drop by 4.1% to €1,961 million last year as addressed mail volume declined by 11.2%. Cost savings of €85 million were achieved. Underlying cash operating profits dropped to €204 million, leaving the margin at 10.4%.
The expanding Parcels business increased revenues by 7.3% to €917 million in 2015 as volumes grew by 9.6% to 156 million items, including a 13.9% rise in the peak fourth quarter. Domestic parcels increased from 123 million to 130 million while international parcels rose from 19 million to 26 million. The division’s underlying cash operating profit improved slightly to €101 million, which was an 11% margin.
The move to a ‘sustainable’ delivery model, with a mix of employees and contractors, is “well on track”, according to the company. Subcontractors have the choice of joining the company on indefinite contracts under collective labour agreements or remaining independent and receiving a pay rise of about 10%. About 500 people have opted for employee status but most decided to remain independent and take advantage of the pay increase.
Moreover, the €240 million modernisation of the Dutch parcel operations is nearly completed, with 18 new regional centres open and all old ones closed as of December 31, 2015, the company pointed out.
PostNL continued to reorganise its International operations last year with the sale of British subsidiary Whistl in a management buyout while deciding to retain and invest in its Italian business. Verhagen noted: “The strategic review in Germany is nearing its completion. We estimate the equity impact to be limited. At the same time, we are working on initiatives to further improve the performance of Postcon, in addition to the restructuring projects.”
In 2015, PostNL’s International division (excluding Whistl) increased revenues by 6.7% to €983 million and the underlying cash operating income improved to €19 million from just €2 million in 2014. In Germany, Postcon’s revenues increased by 1.2% to €494 million and results improved due to cost savings. In Italy, Nexive’s revenues were flat at €236 million and profits were impacted by start-up losses from new parcel services. Spring (and other businesses) grew revenues significantly by 21.4% to €238 million, driven by inbound volumes from Asia, and profits further improved.
For this year, PostNL reconfirmed its outlook with expected low single-digit revenue growth and full year underlying cash operating income between €220 million and €260 million. The decline will be influenced by falling mail volumes and cost savings.
Verhagen said: “For 2016, we are well-positioned to further benefit from the growing e-commerce market, given our focus on innovative and market driven solutions. For Parcels this means that we expect continued growth and to build upon our solid market position. The same applies to our cross border activities, where we expect to leverage on the growing international parcel volumes. In International we will focus on improving our cash profitability.
“Our main focus in Mail in the Netherlands will be on retaining volumes and the successful implementation of our restructuring plans. We expect the regulatory environment to remain challenging during the year, requiring significant management attention.”
PostNL expects Dutch mail revenues to further decline by a mid-single-digit figure and profits to weaken slightly, while Parcels and International should again generate high single-digit revenue increases.
The CEO concluded: “As announced on 3 November, for 2016 we aim to deliver underlying cash operating income of between €220 million and €260 million. We are confident to further improve our cash and equity performance supporting our commitment to restore dividend as early as possible.”
