31
Posti Group Corporation Interim Report Q2/2016 July 18, 2016
Posti Group CorporationInterim Report Q2/2016
July 18, 2016
Contents
• April-June 2016
• January-June 2016
• Business groups- Postal Services- Parcel and Logistics Services- Itella Russia- OpusCapita
• Current topics
• Appendices
Posti GroupJuly 18, 2016
2
Posti Group3July 18, 2016
Growth in parcel and freight volumes• The first half of the year was a satisfactory one for Posti in a difficult market climate. The
adjusted operating result improved both in April–June and in January–June in spite of lower netsales across all business groups.
• Volumes of parcel and domestic road freight grew.
• OpusCapita acquired the Germany-based software company jCatalog Software.
• Posti signed an agreement to acquire a logistics company Veine.
• Posti renewed its mail delivery with the aim of flexibly combining other services with deliveryoperations. The goal of the changes is to control the rise of unit costs in delivery operations.
• Following the amendments to the Postal Act, the entire postal market is now open to freecompetition.
• Posti’s universal service obligation will be discontinued for domestic parcels, but it will remain ineffect for international parcels sent from Finland, weighing no more than 10kg.
• 49.9% of the ownership of Posti Group Corporation will be transferred to a newly establisheddevelopment company. The Finnish State’s holding in Posti Group Corporation will remain at50.1% at a minimum.
• Posti specified the company’s strategic goals. The main strategic goals remain unchanged andPosti will continue on the path of renewal and growth.
Posti Group
17.0 17.3
0
5
10
15
20
H1-2015 H2-2016
+2%
Milionunits
OpusCapita’s electronic transactions
Parcels
Addressed letters
Volumes January-June 2016
Millionunits
4
Millionunits418 388
0
100
200
300
400
500
H1-2015 H1-2016
-7%
85.5101.8
0
20
40
60
80
100
120
H1-2015 H1-2016
+19%
Domestic freight
Millionunits
1.11 1.16
0
0,25
0,5
0,75
1
1,25
H1-2015 H1-2016
+4%
July 18, 2016
Q2: +5% Q2: +9%
Heavy traffic volumes are growing afterdeclining for 47 months
Posti Group5
Source: Finnish Transport Agency
July 18, 2016
Change12 months
The development in main roads, heavy traffic
April-June
Posti Group6July 18, 2016
Key eventsApril-June
Posti Group
• Comparable net sales grew by 3.3% in Parcel andLogistics Services.
• There were 3 more working days in Q2/2016compared to Q2/2015.
• Domestic freight volumes grew by 9%, parcelvolumes by 5%.
• Itella Russia’s net sales increased by 3.4%• Adjusted operating result improved in Parcel and
Logistics Services and in Itella Russia.• OpusCapita acquired the Germany-based software
company jCatalog Software.
• The Group’s net sales decreased by 5.0%.• Adjusted operating result improved in Postal
Services and in OpusCapita.• Net sales declined in Russia because of the
weakening of the ruble.• The operating result was weighed down by special
items with personnel restructuring costs in domesticproduction operations representing the mostsignificant proportion of this total.
++
––
7July 18, 2016
406.3 385.9
-12.0%
-5.0%
-15,0 %
-10,0 %
-5,0 %
0,0 %
0100200300
400500
Q2 2015 Q2 2016
NET SALES
MEUR Growth-%
-6.8
-0.9-1.7%
-0.2%
-3,0 %
-2,0 %
-1,0 %
0,0 %
-10
-5
0
Q2 2015 Q2 2016
OPERATING RESULT,adjusted
MEUR EBIT-%
0.0%
-5.0%
-10.0%
-15.0%
0.0%
-1.0%
-2.0%
-3.0%
Key figuresApril-June 2016
• The Group’s net sales decreased by5.0%. Comparable net sales declined by3.1%.
• Net sales decreased by 5.3% in PostalServices, by 1.9% in Parcel and LogisticsServices, by 18.9% in Itella Russia andby 6.9% in OpusCapita.
• The adjusted operating result improvedand was EUR -0.9 (-6.8) million.
• The operating result was weighed downby special items in the amount of EUR -4.8 (+34.7) million, with personnelrestructuring costs in domesticproduction operations representing themost significant proportion of this total.
• The operating result declined andamounted to EUR -5.7 (27.9) million
• Mail items covered by the universalservice obligation accounted for 3.8% ofall of Posti’s mail items.
4-6/2016
4-6/2015
Net sales, EUR million 385.9 406.3
Adjusted operating result, EURmillion*
-0.9 -6.8
Adjusted operating result, %* -0.2 -1.7
Operating result (EBIT), EURmillion
-5.7 27.9
Operating result (EBIT), % -1.5 6.9
Result before taxes, EUR million -4.2 22.8
Result for the period, EUR million -3.1 17.0
Gross capital expenditure, EURmillion
48.6 15.5
8 Posti GroupJuly 18, 2016
* excluding special items
Change in costs*Q2/2015 => Q2/2016
Posti Group9July 18, 2016
* excluding special items
January-June 2016
10 Posti GroupJuly 18, 2016
Posti Group
• Adjusted operating result was at the previousyear’s level.
• Adjusted operating result improved in PostalServices.
• OpusCapita sold its businesses serving the localmarkets in the Baltic countries to BaltCap inJanuary.
• Itella Russia acquired the Russian courier companyMaxiPost in March.
• The Group’s net sales decreased.• Net sales decreased in all business groups.• Adjusted operating result declined in Parcel and
Logistics Services, Itella Russia and OpusCapita.• The operating result was weighed down by special
items in the amount of EUR -15.0 (+34.7) million,with personnel restructuring costs in domesticproduction operations representing the mostsignificant proportion of this total.
• The operating result declined.
++
––
11
Key eventsJanuary-June
July 18, 2016
842.2 776.5
-9.6%-7.8%
-15,0 %
-10,0 %
-5,0 %
0,0 %
0200400600
8001000
1-6 2015 1-6 2016
NET SALES
MEUR Growth-%
13.7 14.0
1.6% 1.8% 0,0 %
2,0 %
4,0 %
6,0 %
0
5
10
15
1-6 2015 1-6 2016
OPERATING RESULT,adjusted
MEUR EBIT-%
0.0%
-5.0%
-10.0%
-15.0%
6.0%
4.0%
2.0%
0.0%
• The Group’s net sales decreased by 7.8%.Comparable net sales decreased by 4.3%.
• Net sales decreased by 4.5% in PostalServices, by 9.4% in Parcel and LogisticsServices, by 21.5% in Itella Russia and by8.0% in OpusCapita.
• The adjusted operating result improved andwas EUR 14.0 (13.7) million.
• The adjusted operating result improved inPostal Services and declined in Parcel andLogistics Services, in Itella Russia and inOpusCapita.
• The operating result was weighed down byspecial items in the amount of EUR -15.0(+34.7) million, with personnel restructuringcosts in domestic production operationsrepresenting the most significant proportion ofthis total.
• The operating result declined and amountedto EUR -1.0 (48.4) million.
• Investments increased. Capital expenditureamounted to EUR 56.4 million. The Groupinvested in acquisitions, information systems,the transport fleet, production projects duringthe quarter.
1-6/2016 1-6/2015
Net sales, EUR million 776.5 842.2
Adjusted operating result, EURmillion*
14.0 13.7
Adjusted operating result, %* 1.8 1.6
Operating result, EUR million -1.0 48.4
Operating result, % -0.1 5.8
Result before taxes, EUR million -0.7 44.2
Result for the period, EUR million 0.3 32.8
Return on equity (12 months), % 0.5 4.4
Return on invested capital (12months), %
1.2 5.8
Equity ratio 47.9 48.0
Gearing, % -4.2 7.9
Gross capital expenditure, EUR million 59.9 32.0
12
Key figuresJanuary-June 2016
Posti GroupJuly 18, 2016
Change in costs*1-6/2015 => 1-6/2016
Posti Group13July 18, 2016
* excluding special items
Employees
Number of employees in Finland and other countries
• At the end of June, thenumber of employees stoodat 21,905. The averagenumber of personnel inJanuary-June was 20,838.
• Of all employees 17,374worked in Finland.
• The Group’s personnelexpenses decreased by 5.0%year-on-year. Withoutrestructuring costs, personnelexpenses decreased by 7.2%.
• As of June 30, 2016, a total of2,132 employees haveapplied for the Uusi polku(New path) program, and1,566 have been accepted.
0
5 000
10 000
15 000
20 000
25 000
30 000
2012 2013 2014 2015 Jan 30,2016
Other countries
Finland
Posti Group14July 18, 2016
Employeesby businessgroup
Postal Services
Parcel and LogisticsServices
Itella Russia
OpusCapita
Operations
Other functions
Business groups
Posti Group15July 18, 2016
Postal Services
Posti Group
4-6/2016 4-6/2015 Change-% 1-6/2016 1-6/2015 Change-%
Net sales 168.1 177.6 -5.3% 356.8 373.4 -4.5%
Adjusted operatingresult *
3.6 4.8 -26.3% 28.3 25.9 9.6%
Operating result 3.6 4.8 -26.3% 28.3 26.0 8.8%
Adjusted operatingresult, % *
2.1% 2.7% 7.9% 6.9%
Operating result, % 2.1% 2.7% 7.9% 7.0%
April-June
• Net sales declined by 5.3%.
• The adjusted operating result declined to EUR3.6 (4.8) million. Cost adaptation measures havenot fully compensated for the decline in thevolume of domestic delivery products. No specialitems were recognized during the period.
January-June
• Net sales declined by 4.5% due to a decline in thedomestic delivery product volume.
• The adjusted operating result improved to EUR 28.3(25.9) million. The result was boosted byimprovements in operational efficiency, theincreases in postage fees that took effect at thebeginning of 2016, as well as higher deliveryvolumes related to Easter and Valentine’s Day.
• Operating result was EUR 28.3 (26.0) million.
16July 18, 2016
* excluding special items
Postal Services
Posti Group17
219200
0
50
100
150
200
250
H1-2015 H1-2016
-2%
139128
0
50
100
150
H1-2015 H1-2016
-8%
MagazinesNewspapersAddressed letter
April-June
• Posti revised delivery routes and extended maildelivery towards the evening.
• Tuesday mail delivery will be renewed startingfrom January 2017.
• Posti will combine the 1st and 2nd letter classesstarting from the beginning of 2017.
• Interest in the home services launched by Posti inthe spring, particularly the lawn mowing service,exceeded expectations.
January-June
• In cash services offered to consumers, Postiadopted the pricing model used commonly inEurope, in which all domestic and foreign letteritems have their own fees. There were also priceincreases in other cash-paid postal services.
• The number of Netposti users increased by 8%year-on-year and stood at 663,000 at the end ofJune.
Millionunits 418 388
0
100
200
300
400
500
H1-2015 H1-2016
-7%
July 18, 2016
Parcel and Logistics Services
Posti Group18
4-6/2016 4-6/2015 Change-% 1-6/2016 1-6/2015 Change-%
Net sales 146.0 148.8 -1.9% 281.4 310.6 -9.4%
Adjusted operatingresult *
-0.6 -2.1 - -5.9 -1.1 -
Operating result 0.0 -13.7 - -5.7 -14.7 -
Adjusted operatingresult, % *
-0.4% -1.4% -2.1% -0.3%
Operating result,%
0.0% -9.2% -2.0% -4.7%
April-June
• Net sales decreased by 1.9%. Comparable net salesgrew by 3.3%.
• Warehousing business, parcel services and domesticroad freight grew.
• The adjusted operating result improved. The resultwas favorably affected by improved operationalefficiency resulting from the divestment ofinternational freight operations.
• The operating result improved clearly.
January-June
• Net sales decreased by 9.4%. Comparable net salesdecreased by 0.6%.
• The adjusted operating result declined. The result wasweighed down by the low warehouse fill rate early in theyear, investments in information systems in productionoperations, and start-up costs arising from newcustomer relationships. Further factors that had anegative effect on the result included tighter competitionin the parcel business and a negative change in the fuelsurcharge.
• The operating result improved.
July 18, 2016* excluding special items
Parcel and Logistics Services
Posti Group19
April-June
• Parcel volumes grew by 5%.
• Domestic freight volumes grew by 9%.
• The logistics operations of Hobby Hall were transferredto Posti. Posti signed an agreement to acquire the entireshare capital of Veine Ltd.
• The Finnish Communications Regulatory Authoritydecided that Posti’s universal service obligation will bediscontinued for domestic parcels starting from October31, 2016, but it will remain in effect for internationalparcels sent from Finland, weighing no more than 10kg.
January-June
• The amount of parcels delivered grew by 2%. Thenumber of parcels going through Posti’s parcel pointsgrew by 26% year-on-year.
• Domestic freight volumes grew by 4%.
• The fill rate for warehouses in Finland was 78% (71%) atthe end of June.
• Posti had 1,413 service points, of which 480 parcelpoints in Finland at the end of June.
8,18,6
6
7
8
9
10
Q2-2015 Q2-2016
+5%
Milionunits Domestic freightParcels
Millionunits
0,570,62
0
0,25
0,5
0,75
Q2-2015 Q2-2016
+9%
17,0 17,3
0
5
10
15
20
H1-2015 H1-2016
+2%
Millionunits Domestic freightParcels
Millionunits
1,11 1,16
0
0,25
0,5
0,75
1
1,25
H1-2015 H1-2016
+4%
July 18, 2016
Itella Russia
Posti Group20
4-6/2016 4-6/2015 Change-% 1-6/2016 1-6/2015 Change-%
Net sales 25.2 31.1 -18.9% 46.2 58.8 -21.5%
Adjusted operatingresult *
-1.6 -2.0 - -3.9 -2.9 -
Operating result -1.6 -2.2 - -1.8 -3.2 -
Adjusted operatingresult, % *
-6.2% -6.5% -8.5% -4.9%
Operating result, % -6.3% -7.0% -4.0% -5.4%
July 18, 2016* excluding special items
April-June
• In local currency, net sales turned to an increase of3.4%. Net sales were favorably affected by higherdemand for air, sea and road freight as well as thetransport business. The new business brought in bythe MaxiPost acquisition also contributed to theincrease. Warehouse processing volumes also beganto grow.
• Euro-denominated net sales decreased by 18.9%.The decrease in net sales was attributable to thedepreciation of the ruble.
• Adjusted operating result and operating resultimproved.
January-June
• In local currency, net sales decreased by 4.6%. Netsales were negatively affected by the weak economicclimate and GDP decline and the weak demand forlogistics services due to lower customer volumes.
• Euro-denominated net sales decreased by 21.5%. Thedecrease in net sales was attributable to thedepreciation of the ruble.
• The Russian ruble declined by 14.7%.
• The business group’s adjusted operating result declined.The weaker result was attributable to lower net sales.The operating result improved.
Itella Russia
Posti Group21
Warehousefill ratesJune 30, 2016
April-June
• The demand for air, sea and road freight andtransportation services grew.
• New business brought in by the MaxiPostacquisition.
• The handling volumes in the warehouses beganto grow.
January-June
• The steepest decline was seen in the demand forwarehousing services. Handling volumes began togrow.
• The demand for air, sea and road freight grew.
• The fill rate of all warehouses was at 82% in theend of June. The warehouse fill rate in Moscowwarehouses improved slightly and was at 80%. Thewarehouse fill rate in other areas’ warehousesdeclined and was at 89%.
91%94%
89%85% 86%
93% 92%86%
83%77%
89%86%
77%80%
65%71% 71%
79% 81%76%
69%
76%81%
84% 85%90%
86%89%
40%
50%
60%
70%
80%
90%
100%
3-2013 6-2013 9-2013 12-2013 3-2014 6-2014 9-2014 12-2014 3-2015 6-2015 9-2015 12-2015 3-2016 6-2016
Moscow Other areas
July 18, 2016
OpusCapita
Posti Group22
4-6/2016 4-6/2015 Change-% 1-6/2016 1-6/2015 Change-%
Net sales 60.8 65.2 -6.9% 122.1 132.7 -8.0%
Adjusted operatingresult *
1.4 2.1 -34.0% 3.4 6.8 -50.2%
Operating result 0.9 2.0 -55.0% -0.6 5.9 -
Adjusted operatingresult, % *
2.3% 3.3% 2.8% 5.2%
Operating result, % 1.5% 3.1% -0.5% 4.5%
April- June
• Net sales decreased by 6.9%. Comparable net salesdecreased by 5.0%. Net sales decreased due todeclining traditional mail delivery volumes and theaccelerating shift from paper to onlinecommunications.
• The adjusted operating result declined due to thedecrease in traditional print volume, the divestment ofthe businesses serving the local markets in the Balticcountries and investments in the new strategy.
• Operating result declined.
January-June
• OpusCapita’s net sales decreased by 8.0%. Comparablenet sales decreased by 5.1%.
• 60% of the net sales comes from Finland, while theremaining 40% comes from other countries.
• The adjusted operating result declined due to thedecrease in traditional print volumes, the divestment ofthe businesses serving the local markets in the Balticcountries and investments in the new strategy.
• Operating result declined.
July 18, 2016* excluding special items
OpusCapita
Posti Group23
April-June
• Electronic transaction volumes saw stronggrowth, with a comparable increase of 23%.
• The volumes of iPost products fell by 12%.
• OpusCapita acquired the Germany-basedsoftware company jCatalog Software. jCatalog’snet sales in 2015 amounted to approximatelyEUR 10 million.
January-June
• The comparable increase in the electronictransaction volume was 19%.
• The volumes of iPost products fell by 11%.
• OpusCapita sold its business operations in Estonia,Latvia, and Lithuania, which served the localmarkets in the Baltic countries. The transaction didnot include the service centers and centers ofexpertise related to OpusCapita’s global businessthat are located in the Baltic countries.
Electronic transactionsMillionunits
85.5101.8
0
20
40
60
80
100
120
H1-2015 H1-2016
+19%
July 18, 2016
Posti Group24July 18, 2016
Outlook for 2016• The Group’s business is characterized by seasonality. Net sales and operating profit
in the business groups are not accrued evenly over the year. In postal services andconsumer parcels, the first and fourth quarters are typically strong, while the secondand third quarters are weaker.
• Comparable net sales in euros for 2016 are expected to decrease compared to 2015.
• The Group’s adjusted operating result is expected to remain on par with the previousyear.
• There is continued uncertainty related to the development prospects of the resultachieved in Russia.
• The operating result for 2016 will continue to include significant special items.
• The development of exchange rates, especially the ruble exchange rate, may affectthe Group’s net sales, result and balance sheet.
• Capital expenditure is expected to increase from 2015.
Appendices
Posti Group25July 18, 2016
• Adjusted operating result percentage exceeds 5%
• Gearing does not exceed 35%
• Return on invested capital is at least 10%
• More than 10% of the Group’s net sales will come from new business areas in 2018
Financial Targets
Posti Group
23.5 21.117.2
-10.5-4.2
-15-10-505
1015202530
2012 2013 2014 2015 H1-2016
4.7
1.3 1.0
6.3
1.2
0
2
4
6
8
2012 2013 2014 2015 H1-2016
%%
Return on invested capitalGearing
2.7 2.6 2.7 2.9
1.8
0
1
2
3
4
2012 2013 2014 2015 H1-2016
Adjusted operating result, %
%
26July 18, 2016
Group cost structureJanuary-June 2016
Posti Group
Indirect costs, EUR million
27July 18, 2016
209197
0
50
100
150
200
250
2015 2016
-6%
Balance sheet
Posti Group
EUR million
28July 18, 2016
186 204
458 406
194104
509567
1,3471,280
Q2/2015 Q2/2016
ASSETSGoodwill Tangible assetsOther non-current assets Current assets
628 598
48.0% 47.9%
Q2/2015 Q2/2016
EQUITY AND EQUITYRATIO
Equity Equity ratio (%)
Cash flow
Posti Group
1-62016
1-62015
2015
Result for the period 0.3 32.8 36.0
Cash flow from operatingactivities before financialitems and taxes
42.5 34.3 92.4
Cash flow from operatingactivities
28.2 33.3 81.9
Cash flow from investingactivities
-25.0 -34.3 -40.4
Cash flow from financingactivities
-24.9 -5.6 -8.0
Change in cash and cashequivalents
-21.7 -6.6 33.4
Cash and cashequivalents at the end ofthe review period
109.2 93.8 130.1
• Cash flow from operating activities before capitalexpenditure was EUR 28.2 million.
• Capital expenditure amounted to EUR 56.4 million.The Group invested in acquisitions, informationsystems, the transport fleet, production projectsduring the quarter.
• Proceeds from divestments totaled EUR 9.0 million.The most significant divestment was OpusCapita’ssale of its businesses serving the local markets inthe Baltic countries.
• At the end of the reporting period, liquid assetstotaled EUR 224.8 million, and undrawn committedcredit facilities amounted to EUR 150.0 million.
29July 18, 2016
11981 93 82
28
-123-49 -46 -40 -25
-150
-100
-50
0
50
100
150
2012 2013 2014 2015 1-6/2016
Cash flow from investing activities, EUR million
Cash flow from operating activities, EUR million
Net debt and the maturity structure ofloans
Maturity structure of loans and financingarrangements, EUR million
Posti Group
Net debt and gearing
30July 18, 2016
161139
99
-64-25
23.5%21.1%
17.2%
-10.5%
-4.2%
-20%
-10%
0%
10%
20%
30%
-100
-50
0
50
100
150
200
2012 2013 2014 2015 Q2/2016
Net debt, EUR million Gearing (%)
150
100
150
0
20
40
60
80
100
120
140
160
2016 2017 2018 2019 2020
Bonds Unused credit limits
Result announcementsin 2016
Q1: April 29, 2016 at 10:00 amQ2: July 18, 2016 at 10:00 amQ3: October 31, 2016 at 10:00 am
Posti Group31July 18, 2016
