From Making elephants dance to Shooting for the moon - ADM January 24, 2019 Faculty Club
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From
Making elephants dance
to
Shooting for the moon
ADM
January 24, 2019
Faculty Club
2
Agenda
The company at a glance
How to make elephants dance
The Strategy going forward
The Moonshot
3
bpost is an efficient mail operator transitioning towards global
eCommerce logistics
2017
Revenues: €3,024m Revenues: €3,024m Revenues: €3,024m
International Regulated/ Parcels & Logistics
Commercial
Contract related1
26%
33%
46% Mail &
54% Retail
67%
74%
Domestic
EBITDA Letters per day (BE) Parcels per day (BE) FTE Point of presence
€
€598m 8.1m 190k 26,908 ~2,5002
Main subsidiaries (Revenue €m)
~9003 282 132
1 Including revenues from Universal Service Obigation (USO) and Invoice To The State (ITTS, Direct and indirect)
2 Includes 662 post office, 674 Postpoints, ~1000 Kariboo
3 $1082m in 2017 FY. Only €203m (only for 6 weeks in Q4 2017) were attributed to bpost (consolidation of the results as of Q4 2017)
SOURCE: Domestic includes Domestic mail, domestic parcels, other sources of revenues (excl. International mail) and ITTS
4
Agenda
The company at a glance
How to make elephants dance
The Strategy going forward
The Moonshot
5
Continuous improvement is in our DNA. We have
a proven transformation track record
2017
2004 2009 2011-2020 Launch
Transformation journey
• Building of new Implemen- Strategic ‘Vision 2020’ New
sorting centres tation of new program in mail service Brussels
• Transformation of distribution operations to further increase X sorting
the network 2007 structure efficiency facility
Automated with reduced
round number of
2003 sorting and buildings
mail
Start of sequencing
continuous
optimization of
delivery rounds
Normalized1
EBIT
2008
2003 2006 2013
Key events
Danish Post
New management CVC and Danish Post sells its IPO in June at € 14.5/share
& start of the enter into the capital stake to CVC CVC sells 30% in IPO and
transformation for 50%-1 share remaining 20% in December
period (split 50/50),
government holds
50%+1 share
1 Normalized figures are not audited
6
bpost has delivered distinctive financial performance
compared to peers
An EU leader in mail
volume per FTE2
EBITDA margin 2017 Thousand items, 2017
bpost 137
19.8%
EU top 25% 134
8.8%
EU average 100
7.4% EU bottom 25% 62
7.3% Corporate EBITDA
margin3
7.2% 2017
bpost 20%
3.9%
EU top 25% 14%
3.5%
EU average 9%
EU bottom 25% 4%
2 Based on outside-in view bpost, Posten Norge, PostNL, Swiss Post, Austria Post, Royal Mail, CTT, Deutsche Post, Correos, La Poste
3 Peers include Post Nord, Posten Norge, PostNL, Swiss Post, Austria Post, Royal Mail, CTT, Deutsche Post, La Poste. EU average includes bpost
SOURCE: bpost annual reports
7
Agenda
The company at a glance
How to make elephants dance
The Strategy going forward
The Moonshot
8
Multiple trends disrupt the postal industry, requiring
postal operators to transform
Fast-
changing Consumers and
consumer businesses receive more
require- & more electronic
ments & communication &
behavior, services, thus causing a
are driving decline in mail volume
disruptive
trends in
the postal Consumers’ needs
82% all consumers
landscape in parcel delivery
have shopped
are changing –
online over the
demanding for
past 3 months,
faster, more
driving an increase
flexible, low
in parcel volume
priced services
New technologies e.g., self-driving cars, will
help deliver convenience & flexibility
SOURCE: Company (annual) reports, SPF Economy
9
A mail volume decline of 19% over last 5 years puts
pressure on bpost’s large fixed cost base
bpost’s cost base is mainly fixed and hence
cannot easily adjust to mail decline and
reduced drop density:
▪ Collect (e.g., large number of red boxes)
▪ Sorting (e.g., 5 sorting centers with ~150
sorting machines)
▪ Transport & Distribution (e.g., large
fleet, fixed mail rounds)
-19% ▪ Etc.
cumulative volume1 decline
in last 5 years
-6.6%
In 2018Q12 vs. -3.5% in 2012
-266m€
Loss in domestic mail revenue
in last 5 years3
1 indexed 2013; Assuming revenue-weighted average volume decline 2 Underlying mail volume decline
3 excluding price/mix effect
SOURCE: Annual reports; SPF Economy
10
The promising development of domestic
parcels is not sufficient to compensate mail decline
Though eCommerce sales are
booming… €bn, EU … it is not sufficient to compensate mail decline
Volume
change, %
+14% p.a. 2013-17, -19% +81%
domestic 109
~224
Revenue
change, €m
~133 2013-17,
domestic
-266
2013 2017 Mail Parcels
SOURCE: Forrester11
Developing into an e-commerce logistics player in Belgium &
beyond is a natural next step for bpost
2016
Scale-up in
2014-15 e-commerce
Climbing the logistics
2013 e-commerce
Entry in
value chain
e-commerce
2009 logistics
2006 e-commerce
Developing takes of in
parcels Belgium
1980-90 offering in
The missed bpost
opportunity12
Agenda
The company at a glance
How to make elephants dance
The Strategy going forward
The Moonshot13
Vision for 2022
Beyond mail, be an efficient global e-commerce logistics player
anchored in Belgium”
Share of revenues
generated in EBIT Efficient
parcels & logistics provider
~60% Progressive profit of mail universal,
generation retail & public
services14
bpost will deliver on 3 strategic aspirations
1 Mail services to citizens
and State remain core and
2 Drive profitable growth in
parcels in BeNe and
will continue to e-commerce logistics in
generate profit with a Europe
more adapted
distribution model
CASH GENERATION
& DIVIDENDS
3 Optimize
Fix Radial
the
promising
Radial
into the
investment
North
to deliver on
thesis
American
in the
promising
e-commerce Northmarket
American
and
e-commerce
help deploy profitable
market
solutions in EuropePROVIDE UNIVERSAL AND PUBLIC SERVICES TO BELGIAN STATE AND CITIZENS
15
bpost will evolve towards a differentiated offering to
accommodate changing customer needs
Acceptance for D+3-41 Optimizing drop density
1 Based on a bpost study with 1,000 households & 500 businesses (PROVIDE UNIVERSAL AND PUBLIC SERVICES TO BELGIAN STATE AND CITIZENS
16
The alternative distribution model will only reduce
delivery frequency of non-prior mail
Mail Parcel Prior mail Newspaper
Round A, e.g. Knokke Round B, e.g. Heist
Monday
Tuesday
Mail
Wednesday
center
Thursday
Friday Parcel
center
Saturday
Sunday
Δ vs. Today
• D+1 only for prior • No change1
• D+2/3 for non-prior
1 Until end of 2020 D+1; for 2021 on, negotiations are on-going with Government (Cleopatra 2 project) for which there are two options: D+1/2 at higher cost as
periodicals will have to be delivered in dynamic rounds or D+2/3 at more economic cost as it can be included in CouReg rounds.
2 Except if specified otherwise in SLAsBECOME A LEADING eCommerce LAST MILE AND LOGISTICS PLAYER IN BENE
17
New partnership with DHL Parcels NL will allow to cover the full
BeNe region and to capture important cross-border flows
Purchasing behavior
• NL is the most important Large NL-based e-commerce players
import country to BE (~25% of
import flows) • Looking for a BeNe wide offering
with regards to last mile
• BE consumers mainly buy
from NL players such as • Benchmarking prices on a BeNe
Bol.com (7%) and Coolblue (6% level
of BE online sales)
Competitive offering
Launched in June 2018
• Very competitive & dynamic region
with many large players such as
PostNL, DHL, DPD, FedExBECOME A LEADING eCommerce LAST MILE AND LOGISTICS PLAYER IN BENE
18
Supported by acquisitions, bpost has initial assets in Europe
along the entire value chain of e-commerce logistics
E-commerce logistics operations in Europe E-commerce logistics offering
Order
• Order
management
• Payment
Cold chain facility Fulfilment sites Personalized logistics Customer services, tax
care services and
fraud prevention
• Phone, 1
email,
social
Realtime
media & 4
technology
The chat
Netherlands support
2
• Advanced
UK analytics 3
Poland
Germany
Belgium
• Hybrid transport
Delivery network for high- Fulfilment
end and urgent
delivery • Order
~€130m pro forma1 9 fulfilment centers /
• Last mile delivery reception in
2017 revenue facilities2 warehouses in
5 countries >600 employees the proximity of
clients
• Preparation for
shipment
1 Assumes FY17 revenue from new acquisitions (Radial, Leen Menken); excludes Active Ants as only acquired in 1Q18
2 Including Leen Menken and Active Ants, excluding bpost sorting centersBE A LEADING INDEPENDENT ECOMMERCE LOGISTICS PLAYER IN NA
19
In 2017, bpost acquired Radial, an integrated eCommerce
logistics solutions provider…
High-level description Key numbers
Origin 2016 merger of
6,700 of which 6,100 US
employees (FTEs)
▪ eBay Enterprise active in web services
▪ Innotrac active in order processing & fulfilment, call
centers alternative work
Strategy Radial is repositioning itself
25,400 force hires
during peak
▪ From a large webstore provider to an integrated
1,082 ($m)
eCommerce logistics solutions provider 2017 revenue
▪ With a particular focus on mid-size customers
▪ And a push on cross-selling across the value chain
57 ($m)
2017 EBITDA
24 (13 million sqf.)
fulfillment centers
295 shipped (1m/d
million units
during peak)
$6.2 processed
billion in orders
SOURCE: Company website; Press; Management presentationBECOME A LEADING eCommerce LAST MILE AND LOGISTICS PLAYER IN BENE
20
Radial offers multiple services across the entire e-commerce
logistics value chain
Customer Order
care
▪ Order
▪ Phone, email, management
social media and 1 ▪ Payment
chat support services, tax
▪ Advanced services, and
analytics fraud
Realtime prevention
4
technology
2
3
Fulfilment
▪ Order reception in
warehouses in the proximity of
clients
Delivery ▪ Hybrid transport network for high-end and ▪ Preparation for shipment
urgent delivery
▪ Last mile deliveryBE A LEADING INDEPENDENT ECOMMERCE LOGISTICS PLAYER IN NA
21
Radial North America market dynamics and competitive landscape
Online revenue e-tailers, US Addressable e-commerce logistics sector
$ 27-37bn
addressable e-
commerce
logistics
Radial’s target audience
$ 2,000m
Radial’s target e-commerce revenue
$ 150-155bn
audience
($ 20m – 2bn ~$ 460bn total
revenues) US online Retail
• Mid-market e-commerce
segment
($ 20-200m
online revenue)
Independent e-commerce logistics providers
• Enterprise
segment Revenue per e-commerce logistics provider Year of
$m, 2016-17 Owner acquisition
($ 200-600m)
$ 20m Genco 1,524 2015
• Some selected
key accounts DHL e-commerce 1,385
($ 600m-$ 2bn) OHL 1,350 2015
Radial N. America 1,014 2017
Digital River 309 2015
Ingram Micro 194
Newgistics 164 2017
$ 460bn1
expected Speed commerce 120 2016
US online retail revenue in 2017 Trade Global 86 2015
Jagged Peak 74 2015
1 Source: Forrester Data, Online Retail Forecast, 201722
Agenda
The company at a glance
How to make elephants dance
The Strategy going forward
The Moonshot23
Vision for 2022
Beyond mail, be an efficient global e-commerce logistics player
anchored in Belgium”
Share of revenues
generated in EBIT Efficient
parcels & logistics provider
~60% Progressive profit of mail universal,
generation retail & public
services24
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