Focus on the potential of the parcel business
Balanced volume growth, resulting in improving profitability and cash conversion
At its Capital Markets Day to be held today, PostNL will present an update of its strategy for its parcels business, which aims to improve the margin and lower the cost per parcel delivered. This will help the parcel business achieve a better balance between volume growth, profitability and sustainable cash generation. PostNL today also announces that, as of 2020, it will manage its financial performance based on normalised EBIT and free cash flow (FCF). These new key financial metrics have been chosen in order to improve the visibility and comparability of PostNL’s financial performance.
Herna Verhagen, CEO of PostNL, comments: “PostNL has played a key role in the strong growth of e-commerce in the Benelux region. In the last five years, our parcel business has grown by almost 100%, and we now deliver 251 million parcels a year. In our strategy update, we define multiple levers to further shape the growth of e-commerce. We aim for higher customer satisfaction by introducing innovative solutions, new services and improved digitised interaction with consumers. Smart yield management, a sharp focus on efficiency and innovative investments in our capacity will help us to improve the average margin per parcel. Balanced growth, profitability and sustainable free cash flow, while addressing the needs of society, people and the environment: together, these are the basis for sustainable value creation for all our stakeholders.”
The strategy for Parcels aims to capture value through yield management and several other commercial and operational initiatives. PostNL will optimise collection, transport and network control, leading to lower costs per parcel. More and better digitised interaction with consumers will improve first-time-right delivery, reducing time per stop and the number of kilometres driven. New smart receiver options at and near home will be introduced, such as safe-place deliveries and new pick-up points.
PostNL assumes volume growth of ~14% CAGR (2018-22). The expansion of logistics solutions, focusing on niche markets and offering additional services, will complement the parcel business. Spring’s international activities will also help PostNL’s parcel business to grow, by optimising its cross-border network and providing in-feed for its Benelux networks. This is expected to translate into ongoing revenue growth (assumption: 10%-12% CAGR 2018-22) that reflects an improving balance between volume and value.
As of 2020, PostNL will manage its financial performance based on normalised EBIT and free cash flow (FCF). These new key financial metrics have been chosen in order to improve the visibility and comparability of PostNL’s financial performance.
PostNL confirms its UCOI outlook 2019 at €170 million - €200 million. The UCOI outlook for 2019 would equate to normalised EBIT of €155 million - €185 million. Assuming approval for the transaction with Sandd in Q4 2019, the result in 2019 is expected to be impacted by €25 million - €35 million, based on the financials as presented on 25 February 2019. Normalised EBIT is expected to increase, with free cash flow as a percentage of normalised EBIT of over 50% after 2020, providing a sustainable basis for shareholder return.
After 2020, PostNL’s cash conversion potential is expected to improve significantly, with free cash flow as a percentage of EBIT substantially increasing to over 50%.Published on the 7th of May 07.00 am
We are PostNL, the mail and logistics solutions provider for all. We have been delivering special moments for over 220 years and aim to be our customers’ favourite deliverer by making it as easy as possible for them to send and receive parcels and letters. We constantly offer new services by combining state-of-the-art logistics, digital applications and the right communications channels. And every day we’re looking to do things even better – from apps to digital stamp codes, to sustainable transport and city logistics. On weekdays, we deliver an average 800,000 parcels and 7 million letters across the Benelux region, and our 38,000 people are right at the heart of society.
PostNL NV is a listed company with revenues of €2.8 billion in 2018, 48% of which derived from e-commerce.