Interim Financial Report First quarter 2015 Conference call …bpost.production.investis.com/~/media/Files/B/Bpost/... · 2015. 5. 7. · For the first part of this call let me remind

Transcript of the conference call held on May, 7th 2015 10:00am CET

Interim Financial Report First quarter 2015

Conference call transcript

Brussels – May, 7th 2015

Koen Van Gerven, CEO Pierre Winand, CFO

2

Presentation

THE OPERATOR: Ladies and gentlemen, welcome to the Bpost First Quarter 2015

Results Analysts call. I am pleased to present Mr Koen van

Gerven, CEO, and Pierre Winand, CFO.

For the first part of this call let me remind you that all of the

participants will be on listen-only mode, and afterwards there

will be a question and answer session.

I would now like to return the conference call to Koen Van

Gerven and Pierre Winand. Gentlemen, your line is open.

KOEN VAN GERVEN: Thank you very much indeed. Good morning, ladies and

gentlemen, thank you for joining us as always. I have with

me Pierre as well as the IR team with Saskia and Paul. And

I imagine that you have already the opportunity to go through

the material we posted yesterday evening, and I will try to

briefly summarize some key matters and afterwards which we

will go rapidly to the Q&A.

So I propose that we move to page 3. And there you can

see that the results of the first quarter are fully in line with

our outlook. Mail volumes have been soft in the first quarter

with the decline of 5.3 per cent. And this, combined with the

lower remuneration of the Services of General Economic

Interest resulted in a decrease, a slight decrease, of the

revenues by 1.6 per cent. Nevertheless, a strong

performance in parcels, and the excellent results delivered on

our cost saving plans allowed us to compensate those

impacts. And, as a result, EBITDA and the net profits of bpost

3

SA are stable versus last year.

As we move to page 4, there you can see the various

impacts I just mentioned. If one excludes the impact of the

lower compensation, the 4.2, the EBITDA progresses with 4.0,

with growth in parcels and cost savings more than

compensating the decrease in mail revenues. And Pierre will

come back on this later.

Now, before handing over to Pierre I would like to take the

opportunity to thank him for the good work at Bpost for the

past nine years. As you have seen, Pierre decided to take

another challenge outside of bpost as from July. But for the

time being he is still here and he will provide some additional

comments and afterwards, of course, I'm sure that you have

some -- some good questions for him.

PIERRE WINAND: Yes, thank you very much Koen. Moving on to page 6 you can

read on an organic basis sales have been lower by 6 million

euros or 1 per cent. In addition to that there has been

a decline of the services of the remuneration we get for the

Services of General Economic Interest of 4.2 million. This was

announced, this is part of the 16.5 million reduction of the

remuneration that we had announced.

If with go product-per-product and if we move to slide 7

which talks about domestic mail, Koen already said that we

lost 5.3 per cent in terms of volume. If you look by product at

the underlying level, transactional mail was a decline of

5.3 per cent, which was a little bit higher than what we had in

4

the full year 2014.

On the other hand, in advertising mail we have a decline of

5.9 per cent, which is quite a bit more than the 3 per cent

that we had registered for the full year of 2014. Which means

basically that advertising mail and probably the advertising

sector in general still has not recovered compared to previous

years.

In terms of the press, decline was 3.1 per cent, which is

basically in line with the full year. There are variations during

the year quarter-for-quarter so I would not certainly worry too

much about that one.

Moving on to page 8 and parcels, there we can say I think we

had a very good performance in domestic parcels with

a volume growth of 10.2 per cent, which is basically explained

by the success of our biggest customers in particular, which

also explains why there was a negative mix effect of

3.7 per cent. Actually, the price effect is slightly positive,

which means that customer prices are not going down, but

because of the great success of the largest customers, those

who got the smallest prices, the mix, basically, is negative.

On the positive side in this story of mix we have mentioned

last year that we had been declining in C2C because basically

one of our competitors, in particularl Kiala, had done a very

good job at luring away some of our more accuracy C2C

customers. You know that we launched a new product at the

back end of last year to respond that, and in this quarter

5

we've registered a small growth of our C2C segment, which is

of course one quarter doesn't make the year but it is good

news and could indicate that the products that we have

launched are positive.

In terms of international parcels, we've done well in the US,

we've done well in Asia, in China. We had a decline in the

shipments of milk powder to China, but that is something that

we also said we would say for a long time that one day it will

go down. It has gone down. It's too early to say if it's

a long-term trend, but I think we repeat what we've always

said: this is a part of the business that is not maybe for ever.

Looking into slide 9, the other sources of revenue. The only

really negative one is international mail. And there's it's the

continuation of our restructuring of our international

operations. We did quite a bit of work last year, but this year

we've drastically reduced our wholesale activity in

international mail. "Wholesale" means that we are not in

contact with the ultimate customer, we are kind of a middle

man who is selling capacity. It is an extremely low margin

business and we have felt it didn't serve the strategy of the

company and did not help us achieve our goals. So we've

strongly curtailed that, almost completely stopped in the US,

and reduced it a lot in the UK.

That improves the margin, basically, of the company.

Moving on to slide 10 and the cost. Costs are absolutely

under control, with a reduction in particular with the payroll

6

costs and interim costs, which is driven both by the reduction

in the number of FTEs, 681 FTEs in the first quarter compared

to the first quarter of 2014. This is absolutely in line with our

expectations and with our plans, and therefore we are quite

happy about that. And there are other positive effects in the

personal cost that has helped make the savings. All other

costs are under control also.

Looking on cash flow, page 11. Cash flow has been,

operating free cash flow, has been impacted by a number of

elements. The first one is the cash payment of the stub of

taxes relating to 2013 when we had this special tax also -

42 million were paid in January. We never know exactly when

we are going to have to pay, depends when we receive the

statements from the authorities for the taxes. It happened in

the first quarter, 42 million.

Then we have some impact of the payments of the terminal

dues for about 25 million, 7 of which is basically phasing

between the quarter, and 18 is the famous payment we

mentioned last year we had received twice, basically they paid

us two years in one -- one particular partner. Last year we

said that this year we would only get one, which is more

logical, and it happened in the first quarter.

There are then a few other things but they remain under

control.

With this I would like to hand back to Koen.

KOEN VAN GERVEN: Thank you, Pierre.

7

So with all of this I am comforted with this quarter by our

strong results in parcels and in cost control, which allow us, as

we set out in our outlook, to generate results in line with last

year, despite the lower compensation for SGEIs and the

higher decline in mail. And at this stage, and with the

elements we have in hands, we can firmly confirm our outlook

for this year.

Question and answer session

THE OPERATOR: And our first question is from Christopher Combe from JP

Morgan. Please go ahead, your line is open.

CHRISTOPHER CROMBIE: Good morning everybody. Just a couple of questions.

First of all, given your domestic volume growth in the first

quarter is your unchanged guidance for the full year not

overly conservative? And if you see the (inaudible) gains

continue what impact should we expect on price-mix?

PIERRE WINAND: I didn't understand the last question. On parcels? Okay.

I think for the full year guidance we always are cautious

after the first. And cautious in general, I mean I don't mean

we are being cautious and conservative, I am saying we are

cautious because one quarter doesn't make the full year. If

you remember last year we had a pretty weak first quarter,

even were second quarter in terms of volume, and then we

had a much better third quarter and very good fourth quarter.

So it's very difficult to say quarter-to-quarter.

8

I think what we noticed is that 5.3 -- a weaker quarter also

like last year. If everything goes right it will have the same

shape as last year, but we don't know yet.

So at this stage we don't feel any confidence that we can

improve the quarter, but also no worry that what we -- what

we guided is to risky particularly.

In terms of price mix, in many ways this price mix is

affected a little bit as a result of our success. With the very

good growth of some of the big e-tailers it has an impact on

price mix. So we have guided for the full year parcels and

kind of mid-single digit. I suspect if we do better than that

the price mix will be worse; if we do less good as that it's

probably -- or if we do around our guidance it's probably

because the most -- the biggest have started to slow down a

bit which could be positive for the -- for the guidance or for

the price mix.

But on -- on balance it is still very positive, of course, and we

like this additional volume which shows also that E-commerce

is doing well in Belgium.

CHRISTOPHER COMBE: Okay, and just one last one on SGEI. What's the real

probability of possibly addressing the shortfall? And can you

update us on your efforts in that respect?

PIERRE WINAND: So for 10 million of the 16.5 million was contractual so it always

in the cap and it was always -- it was even in the IPO

documentation. You know, there was a cap and the cap for

the year was 10 million lower. So that one, nothing to do.

9

The 6.5 million what we have done, we've reserved our

rights, i.e we basically told the State that they had no legal

basis for that, but that we were going to look at that as a part

of our overall negotiations. As you know, we've got the two

contracts, the two press contracts, for which we need to

submit the tender. But there is also, for the other services,

discussions around the renewals, and I think ourselves and

the Board will look at it on balance taking into account the

whole of our relationship during the year.

So for the moment we are assuming that the 16.5 million

are the ones that we will see in are figures this year.

CHRISTOPHER COMBE: Okay, thanks, and good luck in your next role.

PIERRE WINAND: Thank you.

THE OPERATOR: Thank you very much. The next question is from Andy Jones

from RBC. Please go ahead, your line is open.

ANDY JONES: Good morning. Thanks for taking the question. I've just got

a couple as well.

First one on cost, I know in the past when you've had

a weaker quarter you've made kind of -- what can I say? --

emergency safeguarding of certain costs. Was that kind of

similar in Q1? I think the point I'm trying to get out is, you

know, how much of this cost can be held onto beyond

a couple of quarters and does it need to come back?

My second question is on the other SGEIs, so the non-press

SGEIs contracts that you have with the Government. Do

these have to be settled by 1 January 16? Or can they kind of

10

roll on as it is with the 5th management contract?

Thank you.

PIERRE WINAND: On the costs, we don't necessarily manage costs in the sense

that we move things from one quarter to the other. What we

do is then when we do things that there is weakness we start

telling the units to be more conservative in their costs. And

we release that, i.e. we let them spend if we feel more

confident about the top line. So it's not a question of

manipulating the cost from one quarter to the other. But

clearly if the volume remains soft there are a number of

spends that we had initially foreseen for the year that we will

not do. We've asked the units to ring-fence some costs, as

we call it, internally, i.e. it's still there, but they cannot spend

it until we give them the green light and the green light will

depend on how volume evolves in the next few months.

So that's clearly -- on the non-press, the contract is until

31 December 2015, so in principle it has to be resolved by

that date. Otherwise, the Government could of course roll it

forward. They can do -- you know, they are the Government.

But I think it would not be good with the European Union if we

were to do that because they always want to have a strong

legal basis for those kind of services.

KOEN VAN GERVEN: And we started off discussing with the Government, and we

expect that later in the second quarter or the third quarter we

will find an agreement on the content and, of course, the

compensation.

11

ANDY JONES: Okay, thank you.

And just a couple of follow-ups on those questions. Firstly, on

the ring-fencing. Is your kind of full year guidance -- does

that kind of allow for some of this ring-fencing in addition to

what is already factored in?

And on the SGEI, what is the total revenue amount? I know

what the revenue is for the press contracts, but kind of the

other SGEIs that are in discussion as well.

Thank you.

PIERRE WINAND: I need to check the exact amount. It's 100 -- the total amount

is 290, and within that the press is, what, 190? So it's about

100 million on the other services.

KOEN VAN GERVEN: And, as you know, the other services, they cover the retail

network, the distribution of pensions and the cash payments

in the offices, which are the biggest one, and then a number

of other ones. So -- and those are the main things that will

be under discussion.

PIERRE WINAND: And the ring-fence doesn’t impact really the outlook because

again those are spends that if volume evolution is okay we will

do, if volume evolution is not good we will not do. So

basically we flex it depending with the eye to get to our

outlook.

ANDY JONES: Okay, perfect, understood. And thank you very much, and best of

luck, Pierre, with your future role.

PIERRE WINAND: Thank you very much.

ANDY JONES: Thank you.

12

THE OPERATOR: Thank you. And the next question is from Dieter Furniere from

KBC Securities. Please go ahead.

DIETER FURNIERE: Yes, good morning. A couple of questions from my side.

Firstly, on the parcels performance, if you look at parcels

and international and there is a margin of around 14 per cent

which I think to be quite strong, especially against last year

which was 9 per cent and against other quarters that were

loss-making. Could you just provide more detail whether we

should see it as an underlying margin as there were no

restructuring costs and no exceptionals?

And second question is on mail volumes and Q2. Could you

just provide some more details on whether there is a working

day adjustment, election mail impact that could skew

performance?

And third question is on a study that was out by the Belgian

regulator BIPT which WIK provided on the Belgian postal

market.

Could you provide your take on this? And also where do you

see the biggest risks? And also opportunity on the base of

this document.

Thank you.

PIERRE WINAND: The parcels in international margins. As you know, last year we

started effectively restructuring the parcels and

international -- particularly international activities, which

include international parcels, with a new management led by

Dave Mays from our US subsidiary. We took over the whole of

13

the international operation. And what has been done is

indeed to clean up the portfolio in many ways, loss-making

clients, loss-making products, but also reducing the overhead

costs and a number of structural costs.

So what we are seeing this year in terms of improvement of

the margin is a combination of a number of factors. It's good

sales in both domestic and international parcels. The no

margin or very low margin going away, which of course

improves the margin even if it has an impact on sales, and the

costs going away.

In terms of sustainability, I think -- I don't know if we'll

keep the 14 per cent because it depends a bit on the mix in

the various product lines, and how much, you know, the

international versus domestic and the lanes, et cetera, are

going to work during the year. But the purpose was

absolutely to increase the profitability and the margin of that

activity, which we didn't feel was satisfactory. And so far the

new management team is delivering on what they are -- on

what they promised.

In terms of -- and, yes, there was some Combo start up

cost also in the first quarter of 2014. Combo is now being

launched operationally and so there are less start-up costs.

So altogether improve the margin.

In terms of the next quarters, I don't know about working

days but working days have a relatively limited impact. But

the biggest impact in the next quarter is elections which is

14

about -- we estimated 5 million in revenues in total. About, I

think, 4.2 million in domestic and 800k in international. So

that we will not have next quarter whereas we had it last

year. So 5 million in total revenues.

KOEN VAN GERVEN: Yes, BIPT actually there are two points that are worthwhile

to mention. First of all, as you know, we have number of

licensing conditions that for a certain time already are seen by

the European Commission as a kind of a barrier to entry that

is too high. I remind you that the licensing conditions that

new players that come into this mail market have to comply

with are mainly 4. They have to work with contractual

workers on the one hand. Over time, over a period of five

years, they have to cover the entirety of the territory of

Belgium, and they have to at least deliver mail two times

a week. And with all of this there is the uniformity of pricing

over -- over the territory.

So those are the licensing conditions.

Europe already pointed out in 2013 that a number of them

were considered as too stringent. And more particularly the

geographical coverage, and the uniformity of the tariffs.

Those are the major concerns. Important to mention is that,

for example, the condition on contractual workers is

something that they have not challenged. And, moreover, at

certain moments in time they acknowledged that this was

accepted or acceptable at least.

So this is one thing.

15

Now, provided that the European Commission was not

satisfied with the reactions or the actions that were taken until

now, they started off an infringement proceeding against the

Belgian State late 2014. So we expect that of course the

Government will react on that. So this is one part.

The second part is the study you mentioned which was

commissioned by BIPT, and they tried to make an evaluation

of actually the impact on the market of the opening. And they

came to the conclusion that at the end of the day they

considered that the opening didn't work, or at least failed, and

they jumped to the conclusion that it is due to the access

conditions. And, on the other hand, they think that we didn't

grant sufficiently access to bpost's infrastructure.

So, based on those two things, of course the Government will

have to look into this, and probably we expect that... we

expect that a number of changes at this legislation could

occur in the future.

Two additional comments on this. First of all, I think that it's

a little bit premature to jump to the conclusion that the access

conditions are the reason why the opening failed and there

are no new entrants or no more new entrants, because there

is one on the market. If you look to other countries, for

example the Netherlands, yes, indeed the access conditions

are probably in one or other ways softer; but even in that

market, after ten years of a fully free and liberalized

environment you don't have many players neither. And the

16

only player there, it took him 10 years of start-up costs before

he stopped losing money.

The second observation is that if we talk about competition in

that market, then of course I think it's correct to say that the

main competition in the postal business doesn't come from

other players that could appear in the market, but that a

much more important competitor is everything that has to do

with the digital world and Internet.

DIETER FURNIERE: Okay. And are there also I think opportunities for you coming

from the document. I read about the retail network for

instance, that the requirement to have and the number of

retail offices is not giving you sufficient flexibility, I think. On

the other hand you are obviously paid through the

management contracts so for that.

Do you see that more as an opportunity also for you from

that advice?

KOEN VAN GERVEN: Well, I think that's too early to point out in one or another

direction, but I fully agree with you that there are a number of

constraints that we have to live up and for which probably we

get some compensation. But if we are not -- are not well

obliged to do that, that we can put in another framework.

And I'm not sure that indeed we will continue to do everything

that we do today in the same format.

DIETER FURNIERE: Okay. Many thanks for the elaborate answer.

THE OPERATOR: Thank you very much. The next question is from Hugo Turner

from Credit Suisse.

17

HUGO TURNER: Hi, I've got three questions, please.

The first is I am trying to understand if you have put in

anything for the Alpha plan restructuring in the first quarter,

and how you expect those restructuring costs to spread over

the rest of the year.

And the second is I was wondering if you'd give a bit of

guidance on how the second quarter started in terms of mail

volume trends. I am trying to understand whether the first

quarter, the weakness was really a phasing effect on the

fourth quarter and maybe how the second quarter has started.

And the third question is just on the 10% volume growth in

domestic parcels, you know, in your opinion how much of that

is E-commerce in Belgium starting to pick up the European

averages and how much of that is really market share gain in

B2C, C2C and B2B?

Thanks.

PIERRE WINAND: The restructuring costs, we have none in the first quarter. As

you know, there is an elaborate process in terms of

consultation for any restructuring plan that we may want to

do, which has a big impact not only on the package that

people could get but also on how many people basically could

become entitled to that package and many FTEs, et cetera.

So at this stage the negotiations or discussions are following

their course, but it is too early to say how much it will

represent both in terms of one-off costs, restructuring costs,

or in terms of benefits.

18

We would expect, but just an expectation the negotiations

will have well advanced by the end of the second quarter,

which might then be the trigger for the restructuring provision

to be taken at that particular moment.

April, volume trends, too early to tell. We get the definitive

figures and detailed figures in a couple of days, I think.

Therefore, I can't tell you. I will just say last year -- but again

I'm not saying this is a new yearly trend -- we had a pretty

weak first quarter, weak second quarter and then it started

getting better. So too early to tell if it is indeed an impact of

the very good last quarter or if it's something a bit more

structural. Sorry not to be able to say that.

Volume growth and E-commerce. E-commerce is doing very

well in Belgium, I think everybody is getting pretty very good

figures, I've heard 15 per cent recently, which is pretty good.

I don't know if it’s a catch up, but it is pretty good.

Also, the customers, which are declining very heavily, in

particular in distant selling, are getting smaller and smaller.

So as an impact, although they are continuing to decline, their

impact on our figures is less, especially because the big

e-tailers are continuing to grow pretty aggressively. So the

two together help our overall figures. But -- plus the fact that

we are certainly keeping our share in the segment. If we look

at the balance of the contracts we win and with those we

don't; or those customers we lose and those we gain, we are

pretty sure that we are having our fair share of the particular

19

evolution.

B2B, again it is growing, it is growing above the market,

without any doubt, but from such a small basis it has a lower

impact on the figures.

And C2C, which helps -- in the last year we lost quite a bit

there and it was, you know, pretty high, single digit losses

most quarters. Now we are back in slightly positive, again it

helps in terms of the overall 10 per cent growth.

HUGO TURNER: All right. Thank you and best of luck, Pierre.

PIERRE WINAND: Thank you very much, Hugo.

THE OPERATOR: Thank you. And before we go to the last question, for the

moment. Let me remind you that you can still press 01 on

your telephone keypad if you wish to ask a question.

And we have the next question is from Edward Donoghue

from One Investments. Please go ahead.

EDWARD DONOGHUE: Good morning. A couple, if I may.

Just one, I'd like to get an idea, previously when we've had

low mail volumes part of that's been put down to digital

campaigns from certain larger customers. Have you seen any

of that with regard to Q1 at all? And do you actually see any

planning of such campaigns evolving as you progress through

the rest of the year? Question number 1.

And then just with regard to the negotiations on Alpha. Is

that actually taking -- is that tracking as you expected with

regard to both the time frame and the, let's say, the

framework that you had in place with regard to the expected

20

costs and the expected savings?

KOEN VAN GERVEN: Okay, on the first one, and indeed last year when we took

the first quarter then we could see clearly that the number of

the big customers, a limited number I think we were talking

three or four in telecom and utilities, started off actually quite

aggressive campaigns in pushing their customers to the digital

environment. At least aggressive because they were less kind

and in our opinion less customer oriented than they used to

be before. And of course those campaigns continued and

probably continued for customers.

Next, of course, to the general pressure that we feel in the

market of people trying to push customers to the digital

formats, and the general campaigns on cost pressure that all

companies have.

Did we see new big customers going in the same direction

and starting up with quite aggressive campaigns? For the

moment the answer is no.

Do we expect additional ones in the near future? Of course,

we are in very close contact with our big customers. We have

account management to follow up those customers. And, as

far as we know, today we are not and we don't have

information on big, new waves that will start up.

So we expect that the things that are launched, of course

they will continue to bear their fruits. In the general market

the trends that we already feel will continue. But nothing

additional, important to mention on that behalf.

21

PIERRE WINAND: On the Alpha negotiation, both in terms of timing and shape,

it's according to plan so far. But, you know, the proof of the

pudding is in the eating so we won't know until we've got an

actual agreement. But so far so good.

EDWARD DONOGHUE: Is it correct to say that there's nothing from the Alpha

program in Q1 and nothing to be expected in Q2 yet?

PIERRE WINAND: Yes, there is something in Q1 of Alpha in terms of benefit, it's

a strange one, but it was already in Q4 last year. Basically

we've done a hiring freeze for the white collars in the scope of

Alpha, and as a result, because there is natural attrition there

as people leave the company for whatever reason, in reality

we've got some benefits which you see in the mix cost in the

personnel, we've got less white collar, less management than

in the previous or the comparative quarter last year. But

what we do not have is the full effects, number 1. And,

number 2, we don't have the one-off costs relating to that,

except some project costs, which are spent as they have been

incurred, basically.

EDWARD DONOGHUE: Sorry, just to go into more detail. But is it possible to

quantify that benefit in Q1 versus what we were seeing in Q4?

Because it was roughly, what, 45 FTEs in Q4. So if you could

quantify that for Q1?

PIERRE WINAND: It was about 1 million says1 of my colleague -- I need to check.

I want to check how many, it looks like a lot of FTEs. So

disregard this, we'll come back to you with the number of

FTEs. So we have certainly the carry-over of the 45, and

22

I need to check how many more we've got there and we'll get

back to you.

EDWARD DONOGHUE: Okay. And then just one last question. Just going back to

the point you were making earlier about the various business

units, the levers that they have on steering depending on how

volumes are tracking. If you actually curtailed some of the

spend does that actually have a direct commercial impact with

regard to your performance in the market vis-a-vis a cost

saving?

PIERRE WINAND: The policy that we have is that we try always to protect the top

line. So in the things that we are looking at we tried

to protect both the actual top line and the costs which are

incurred to generate savings. So what we try then to do is

looking at longer term phasing of some costs, but also for

some things which are may be less essential or contributing

less we become tougher. But it's always try to protect the top

line, try to protect the projects that will deliver cost savings

and everything else then becomes fair game.

EDWARD DONOGHUE: Just one final one, it's may be a little bit spurious, but with

regard to the decline in advertising volumes on the mail sides

versus the E-commerce pick-up on the other. On parcels, and

you are talking a large part of the advertising decline is due to

catalogue sellers declining, in aggregate do you actually see

a benefit of the two netting each other out?

PIERRE WINAND: Well, we would need to do the math, but indeed there is

a certain element of the two. The slight difference that could

23

be, you know, the catalogue sellers we were getting money

from two sources, they were sending catalogues and then

they were sending parcels for the people who ordered.

Whereas, in E-commerce we have -- we have -- mostly only

the parcels. Although we are -- and we had some success

there, we are trying to convince some of the e-tailers to also

use paper as a way to advertise their product, or to do

reminders to their customers who have not ordered for

a while, et cetera, et cetera.

So I think over time on balance certainly the growth in

E-commerce will certainly outpace the catalogue sellers, which

were always a small part of retail. Whereas, according to all

expectations, the E-commerce will take a bigger part of retail

than, you know, just replacing the catalogue sellers.

So over time certainly it will be net positive. This year we

need to look, probably I would say some balance, yes,

probably; but over time, as I said, as catalogue sellers

disappear and the growth continues we will certainly come out

winners there.

EDWARD DONOGHUE: Okay, and just reiterating what others have said: many

thanks for all your support and guidance. Thanks.

PIERRE WINAND: Thank you very much.

THE OPERATOR: And the next question is back to Dieter Furniere from KBC

Securities. Please go ahead.

DIETER FURNIERE: And maybe some smaller follow-ups to come back on the

parcels margin maybe could you provide some flavour

24

whether there is certain seasonality within the quarters in

terms of margin performance.

And, second follow-up, it's on E-commerce and specific.

I think the Belgian Government is currently deciding on the

use of a night labour to stimulate the Belgian E-commerce

sector.

Could you provide what the impact for Bpost would be both in

terms of the market competition or internally?

And the third one is also on the Belgian Government. I think

some recent articles that they could again re-open the

debates for a sale of Government stakes in Belgacom and

bpost itself. Could you say operationally whether a change in

ownership of the Government would operationally have

an impact on you?

Thanks.

PIERRE WINAND: Seasonality, there is an element of seasonality which, for

instance, we had in the past, what we called the "one-offs"

we would get on the terminal dues part of them were -- all of

them were in the parcels and international business because

we don't break down in our reporting parcels separately from

the whole in terms of margin. And usually we’ve tried to

identify those and mention those. So in the past we would

get, you know, those lumpy settlements that we would do

with our friends, so looking back to try to take them out.

We've got less of those because now we are trying to be more

precise in the way we make the accruals.

25

So there is an element of seasonality which is mostly linked

to these big one-offs.

In terms of what the Government is doing for E-commerce.

Basically, one, growth of E-commerce is good for us, let's be

clear. So anything that can be done through any means to

foster E-commerce is good for us because we think that our

product and our service serves well the E-commerce

community and I think that is acknowledged by our clients.

Second, this idea of nightwork is to try to do things like, you

know, go above and beyond almost D+1 and try to be able to

do as late-in as possible. So e-tailers would be able to take

orders pretty late in the night, then still fulfil the order during

the night and then give it to us. And that's what we call a

"late-in" which is what some customers of ours want to have

is to be able to bring in their products pretty late in our

sorting centres. So that creates a little bit of on operational

challenge. But so far we've stepped up to the plate, i.e. we've

kept up with what the e-tailers wanted to do.

Another thing that we hear about in the market is same day

delivery, which, you know, then you start having even orders

during the night and possibly fulfillment the same day. So far

in Belgium it's not yet a demand of our customers but that's

something we are monitoring very closely.

KOEN VAN GERVEN: As far as the revision of the law of ‘91 you are referring to,

Dieter, is concerned. A couple of thoughts on that. I think it's

a good idea to revise a law which was established in ‘91

26

because actually the law governance, the way the

Government handles with public enterprises and part of those

points are about governance. And I think since 91 both the

world and the company did change. We are stock-quoted

company now, and there are a number of smaller points on

governance that are very difficult to explain such as the

appointment of the CEO by the Government, a number of

balances that you have to have in the boards of directors,

things like that. So I think it's the right thing to do that you

bring actually a number of those things today.

Secondly, as a CEO, I can testify that in terms of daily

management I don't feel pressure or impact of the

Government at all. So I don't think that this is going to

change with a new legal environment.

Thirdly, one of the points indeed that is embedded in this

law of ‘91 is the shareholdership and the majority

shareholdership of the Government in those enterprises. To

be honest, if a government has to be or a state has to be

shareholder of a company, yes or no, it's for me not a

managerial question but it's a political question. And as

a CEO of one of those companies I'm not going to -- and I am

not supposed to I will not have an opinion, a public opinion,

on that. As management we do respect all shareholders as

long as they comply with a governance which is good and

sound for the company.

So -- and it's not the management that chooses the

27

shareholders, it's in reality the reverse, it's the shareholder

that chooses the management.

DIETER FURNIERE: Okay. Many thanks for your response, Koen. And best of

luck to you, Pierre. Thanks very much.

PIERRE WINAND: Thank you, Dieter.

KOEN VAN GERVEN: No other questions?

THE OPERATOR: Hello, we don't have any questions any more so back to you for

eventual conclusion.

KOEN VAN GERVEN: Thank you very much. And in concluding I think already

I said it in the beginning, I wanted to thank Pierre for his

support and his important role in the transformation of this

company. You have to know that we started off almost at the

same time nine years ago, and it’s always a little bit sad to

see a fellow traveller leaving the boat but those are things

that happen in life. And I wish Pierre all the success in his

new endeavors.

And the one question I expected of you is what Pierre is

going to do. It didn't come, so that you will discover later.

Thank you very much.

PIERRE WINAND: Okay, bye-bye.

KOEN VAN GERVEN: Bye-bye.

THE OPERATOR: Ladies and gentlemen, this concludes the conference call of

today. Thank you all for attending, you may now disconnect

your line.