France’s Groupe La Poste today announced a sharp drop in profits for 2018 as falling mail volumes and weaker financial services results outweighed strong revenue growth at international parcels division GeoPost/DPDgroup.
Le Groupe La Poste’s consolidated turnover increased by a moderate 2.4% to €24.7 billion last year (underlying +1.2%) but operating profit dropped by 11.8% to €892 million and net profit weakened by 6.3% to €798 million.
“Efforts by all business lines to rein in expenses have not managed to fully offset the accelerating decline in mail volumes, the costs linked to the growth of parcel activity in France, and Europe-wide pressure on express parcel margins, in Germany in particular,” the group stated.
CEO Philippe Wahl admitted that 2018 had been a “challenging” year but insisted the group had “invested for growth” and had a “robust” multi-business model enabling it to continue transforming for the future.
“The year 2018 was a challenging one for La Poste's various markets: decreasing mail volumes, historically low interest rates and pressure on parcel margins throughout Europe have led to a decline in our profits,” he stated.
But he emphasised: “We made the choice to continue to invest in our industrial and logistics facilities so as to support the growth in the parcel market and to pursue our external growth transactions. This will enable us to prepare efficiently for our Group's future and ensure its successful transformation.”
The largest division, Services-Mail-Parcels, covering mostly the traditional letters business and the French B2C parcels business (Colissimo), increased revenues by 1.3% to €11,577 million. This was driven by several small acquisitions and the consolidation of Asendia. Revenue fell by 1.4% on an underlying basis excluding scope and exchange rate effects.
Mail revenues dropped to €8,733 million on a 7.3% fall in addressed mail volumes that outweighed the positive effects of an average 4.9% price rise in January 2018. Colissimo parcels revenue rose by 4.7% to €1,819 million as volumes benefited from French e-commerce growth and increased by 4.8% to 335 million parcels.
But the division’s operating profit fell by 17.6% to €495 million as lower mail volumes reduced their profit contribution and operating costs increased.
“Confronted with a decline in its historic markets, the Services-Mail-Parcels business unit has been implementing its strategy to conquer new services and international flows with a view to gradually desensitizing (itself) to the traditional mail market,” La Poste commented. “It has chosen to continue to invest in profitable development with a new industrial and logistical organisation (industrial master plan) which aims to adapt its Mail and Parcel handling capacities, modernise its IT systems and improve the efficiency of its organizations.”
Meanwhile, GeoPost (DPDgroup) had a mixed year with strong revenue growth but a drop in operating profits. The international parcels division increased its revenue by 8.2% to €7,373 million (underlying +8.6%) but its operating profit fell by 19.7% to €346 million, affected by an adverse cost environment, notably in Germany, significant negative currency exchange rate effects (including the British pound) and a €57 million asset impairment in Russia. But the decline was only 4.3% when excluding the impairment and at constant scope and exchange rates.
Revenue growth was driven by a 6.7% rise in volumes to 1,310 million parcels delivered across all countries, reinforcing DPDgroup’s position as Europe’s second-largest parcels carrier. B2B parcels remained the bulk of the business at 59% but B2C volumes grew by 16% last year and now account for 41% of volumes. Moreover, revenues from cross-border flows, where DPDgroup sees itself as market leader, grew by 13.6% last year.
At country level, the fastest-growing markets were Belgium (revenues +23%), Poland (revenues +20%, volumes +15%), Ireland (revenues +17%), the Netherlands (revenues +16%), France (revenues +9%, volumes +7.9%) and the UK (revenues +9%, volumes +7.7%). DPDgroup pointed out that its 2018 growth had been sustained by several acquisitions, including French fresh food delivery firms ALP Delifresh, Freshlog and 360° Services, two more SEUR franchisees in Spain, and a minority stake in South-East Asian firm Ninja Van.
Elsewhere in the group, La Banque Postale reported a 2.1% drop in revenue (Net Banking Income) to €5,570 million and its operating profit dropped by 6.6% to €813 million. The new Digital Services business unit increased revenues by 6.6% to €716 million and broke into profit (€1 million) from a previous year loss of €20 million.
Looking ahead, La Poste predicted that 2019 would be a similar year to 2018 in terms of macro-economic and business trends, including continuing pressure on parcel margins in Europe, and it thus expects moderate organic growth in revenues and operating profit.
“In 2019, we will continue to make our customers’ lives easier and innovate to meet their needs in terms of local services, this is La Poste's raison d’être, the main focus of our business, and how we ensure we remain useful to millions of people,” said CEO Wahl.
He also pointed out: “The year 2019 will see an important milestone in the strategic equity alliance between La Poste and (investment fund) Caisse des Dépôts (CDC). This transaction will enable us, through equity investment, to accelerate our development for the benefit of our customers and local communities."
Under a complex deal between the two state-owned companies, CDC will increase its existing minority stake in the French postal group to a majority stake of between 50% and 60% by the end of 2019. As part of the deal, La Poste will gain a majority stake in CDC-owned insurance company CNP and will merge La Banque Postale with CNP to create a much larger financial services provider.
