EQS-News: AUSTRIAN POST'S 2021 FINANCIAL YEAR

AUSTRIAN POST'S 2021 FINANCIAL YEAR:
Improved 2021 revenue and earnings; parcel exceeds mail business
Cautious outlook, difficult start into 2022
 

Parcel volume growth, Letter and Direct Mail decline

- Parcel volumes in Austria +11 %, Turkey +5 %, CEE/SEE +16 % in 2021

- Letter mail volumes -4 %, direct mail items -1 % in 2021

2021 revenue increase of 14.9 % to EUR 2,519.6m (+5.7 % organic)

- Mail +0.1 % to EUR 1,224.2m

- Parcel & Logistics +36.4 % to EUR 1,245.7m (+14.2 % organic)

- Retail & Bank +10.8 % to EUR 74.7m

Earnings

- EBITDA +22.3 % to EUR 370.4m

- EBIT +27.5 % to EUR 204.7m

- Mail: -5.6 % to EUR 155.2m

- Parcel & Logistics: +60.6 % to EUR 118.1m

- Retail & Bank: +10.4 % to minus EUR 39.2m

- Earnings per share +28.7 % to EUR 2.25

Cash flow and balance sheet

- Operating free cash flow of EUR 217.9m

- Balance sheet total now at EUR 4.8bn (+78.8 %) due to bank99

Outlook for 2022

- Difficult outlook in a challenging market environment (acts of war in the Ukraine fuels Inflation and subdued consumer behaviour in many markets)

- Start 2022: First half-year with economic headwinds

- Aiming for as stable as possible in revenue and earnings as close as possible to 2021 level
 

The year 2021 was very successful for Austrian Post. The business environment in the national and international mail and parcel business consistently improved following a difficult pandemic-driven 2020. "We managed to ensure the safety of our staff and safeguard our logistics performance as well as increased the profitability of our company", says CEO Georg Pölzl.

Group revenue rose by 14.9 % in 2021, of which 5.7 % is attributable to organic growth and the remainder to the full consolidation of the Turkish subsidiary Aras Kargo. Following strong pandemic-driven momentum in the parcel business during the first three quarters there was a consolidation in the fourth quarter. Fourth quarter 2021 parcel revenue was up by 0.9 % from the previous period. The basic trends impacting current business activities were also visible in 2021 i.e., declining letter mail and direct mail volumes accompanied by a simultaneous increase in parcel volumes also triggered by lockdown-related closures of retail stores. The Group's divisional revenue distribution has changed significantly in 2021: The Parcel & Logistics Division generated the largest share of the Group's revenue at 49.0 % followed by 48.1 % generated by the Mail Division and 2.9 % by the Retail & Bank Division. Revenue of the Parcel & Logistics Division climbed by 36.4 % to EUR 1,245.7m, implying organic growth of 14.2 %. This development can be mainly attributed to the Turkish subsidiary Aras Karo as well as to strong business in Austria and in Southeast and Eastern Europe. The Mail Division generated revenue of EUR 1,224.2m (+0.1 %) and was impacted by declining letter mail volumes and an ongoing difficult market environment for direct mail and media post due to various lockdown measures imposed on the retail market. Revenue of the Retail & Bank Division improved by 10.8 % to EUR 74.7m in the 2021 financial year. In addition to the positive development of its customer ramp-up efforts, the subsidiary bank99 also acquired the retail business of ING in Austria at the end of 2021, thus enabling it to extend its existing offering by adding its own loan and investment products.

Earnings also reflected the improved revenue situation. EBITDA increased to EUR 370.4m (+22.3 %) and earnings before interest and tax (EBIT) rose by 27.5 % to EUR 204.7m. The Mail Division reported an EBIT decline of 5.6 % to EUR 155.2m. In contrast, EBIT of the Parcel & Logistics Division increased from EUR 73.5m to EUR 118.1m (+60.6 %) and the Retail & Bank Division improved its earnings performance to minus EUR 39.2m compared to minus EUR 43.8m in the previous year. Austrian Post's profit for the period amounted to EUR 158.4m compared to the prior-year level of EUR 115.3m. Earnings per share in the 2021 financial year equalled EUR 2.25. Based on good results, an attractive dividend of EUR 1.90 per share will once again be proposed to the Annual General Meeting scheduled for 21 April 2022.

From today's perspective, a challenging environment is anticipated in the 2022 financial year as well as the non-recurrence of positive pandemic-related one-off effects. Delays in the global value chain and rising inflation already took place in 2021 alongside pressure on the Turkish lira. The current political events pose major challenges to the European population and companies. "We are deeply saddened by the war taking place in Ukraine. Human suffering dwarfs all the other effects," says Austrian Post CEO Georg Pölzl.

The direct impacts on the business model of Austrian Post in terms of mail and parcel flows from the countries involved are relatively minor. However, indirect effects are, in fact, expected. Inflation based on price increases for energy and raw materials will intensify and could thus have adverse effects on consumer behaviour in the future. Furthermore, negative effects are also expected with respect to the Austrian Post subsidiary bank99 as a result of payments to be made within the context of bank deposit insurance in Austria. Due to market headwinds it is not expected that earnings in the first half of 2021, which were supported by positive special effects, will be achieved over the same period in 2022. In spite of this looming negative market environment, Austrian Post aims to keep revenues as stable as possible and operating earnings (EBIT) once again close to the prior-year level.

Continuity with regards to the expansion programme for logistics capacities is also a priority. Austrian Post will continue to invest both in growth and in the decarbonisation of logistics in 2022. The target is to strengthen Austrian Post's top position with respect to quality and speed as well as to safeguard its pioneering role in the decarbonisation of logistics.

"Our more than 27,000 employees are the foundation for our success. They work for the benefit of our customers with high commitments on a daily basis. Many thanks to them for this. Together we will succeed in continuing to be the preferred partner of our customers", CEO Georg Pölzl concludes.

KEY FIGURES

¹ Adjusted presentation
² Includes the intra-Group cost allocation procedure
³ Undiluted earnings per share in relation to 67,552,638 shares
⁴ Free cash flow before acquisitions/securities/money market investments, Growth CAPEX and core banking assets
 

EXCERPTS FROM THE MANAGEMENT REPORT 2021

REVENUE DEVELOPMENT IN DETAIL

The Austrian Post Group's revenue rose by 14.9 % to EUR 2,519.6m in 2021, with organic revenue growth of 5.7 %. In the 2021 financial year, the Parcel & Logistics Division achieved revenue growth of 36.4 % (organic growth of +14.2 %) and the Mail Division showed stability with an increase of 0.1 %. The Retail & Bank Division also reported a 10.8 % increase in revenue to EUR 74.7m in the reporting period.

2021 brought a major shift in the divisional breakdown, with the parcel business now playing more of a role. Revenue in the Parcel & Logistics Division increased from 41.5 % in 2020 to what is now 49.0 % of total revenue in the reporting period. On the one hand, the full consolidation of the Turkish company Aras Kargo with effect from 25 August 2020 brought revenue growth amounting to EUR 290.7m in the 2021 financial year. On the other hand, the 36.4 % revenue increase in the Parcel & Logistics Division in the 2021 financial year was also driven by organic growth from online orders and positive non-recurring effects from logistics services. The Mail Division's share of Austrian Post's revenue declined to 48.1 % in the year under review (2020: 55.5 %). Whereas in the previous year - which was still hit hard by negative COVID-19 effects - revenue dropped by 7.4 %, a slight increase of 0.1 % was witnessed in the 2021 reporting period. The current financial year also saw positive COVID-19 effects relating to special mailings. The overall downward trend in conventional mail as a result of e-substitution continues to progress, however. The direct mail business showed volatile development, with signs of a slight recovery in Direct Mail and Media Post following a marked slump in the previous year. On 1 April 2020, letter mail products and prices were adjusted, with a positive knock-on effect on revenue. The Retail & Bank Division achieved a 2.9 % share of revenue in the 2021 financial year with revenue totalling EUR 74.7m (+10.8 %). bank99 was launched on the market on 1 April 2020.

Revenue in the Mail Division amounted to EUR 1,224.2m in 2021, 63.0 % of which can be attributed to the Letter Mail & Business Solutions area, 26.9 % to Direct Mail and 10.1 % to Media Post.
At EUR 771.6m, the revenue generated in the Letter Mail & Business Solutions area in the 2021 financial year fell short of the prior year's level by 1.3 %. The declining volume trend resulting from the substitution of letters by electronic forms of communication continued. After a turbulent 2020 marred by COVID-19, which saw a 7 % drop in the letter mail volume due to stringent lockdown measures, the volume decline for the current period came to 4 %. The development remains characterised by the difficult overall conditions. Special mailings due to COVID-19 measures and the adjustments to letter mail products and prices with effect from 1 April 2020 had a positive impact on revenue. The Business Solutions area showed a decline compared to the previous year.
Revenues in the Direct Mail segment increased by 2.6 % to EUR 329.3m in the 2021 reporting year. The same period of the previous year saw a decline of 13.7 %. In the Direct Mail business, the branch closures imposed by the authorities in response to COVID-19 had a particularly negative impact. The current situation is a volatile one, and direct mail will continue to decline as part of a structural transformation process.
The revenue from Media Post, i.e. the delivery of newspapers and magazines, rose by 2.8 % year-on-year to EUR 123.4m. This increase is mainly due to the decline in the previous year (-9.1 %).

Revenue in the Parcel & Logistics Division increased by 36.4 % to EUR 1,245.7m in 2021, with organic growth of 14.2%. Parcel volumes in Austria showed weaker growth after substantial increases in the comparable period of the previous year (2020: +30 %) and came in at the forecast value of 11 % in 2021. The increase in parcel volumes was also less pronounced compared to the previous year in the Southeast and Eastern European market at 16 % (2020: +27 %). In Turkey, Austrian Post recorded a moderate increase in parcel volumes of 5 % as against the strong previous year (2020: +37 %). The positive development in the Parcel & Logistics Division is based, among other things, on the ongoing e-commerce trend in all markets. The COVID-19 pandemic has had a long-term impact on online retail. The Turkish subsidiary Aras Kargo, which has been included in the consolidated financial statements as a fully consolidated subsidiary since 25 August 2020, also made a positive contribution of EUR 290.7m to revenue development in 2021. The reporting period also included positive non-recurring effects from logistics services amounting to around EUR 30m.
The trend towards faster parcel delivery continues. In total, 66.0 % of the division's revenue in the reporting period was generated in the Premium Parcels segment (delivery on the working day after posting). This corresponds to an increase of 44.8 % to EUR 822.2m in the 2021 financial year.
The Standard Parcels segment accounted for 25.1 % of total revenue for the division. In the 2021 financial year, this segment recorded a 14.3 % increase in revenues to EUR 313.2m.
The other parcel services segment, which comprises various additional logistics services and accounts for 8.9 % of divisional revenue, generated EUR 110.3m in revenue in 2021, up by 54.2 % thanks to positive non-recurring effects.
An analysis by region shows that in 2021, 63.6 % of divisional revenue was generated in Austria, with an increase of 18.5 % compared to the same period of the previous year. 36.4 % of the division's revenue was generated by subsidiaries' international business, with 23.3 % generated in Turkey and 13.1 % in Southeast and Eastern Europe. Revenue growth in the highly competitive Southeast and Eastern Europe region came to 13.6 % in 2021, driven by increased parcel volumes due to the COVID-19 pandemic.

Revenue in the Retail & Bank Division increased by 10.8 % from EUR 67.4m to EUR 74.7m in the 2021 financial year.
Branch Services fell by 6.8 % from EUR 44.8m to EUR 41.8m in the current reporting period due to the absence of various service fees from the former banking partner, which were still included in the figures for the previous year, as well as lower revenue from the sale of merchandise. The branch products developed in the opposite direction, showing a slight increase due to additional orders.
Income from financial services of EUR 32.9m showed a positive development in the 2021 financial year. bank99 entered the market on 1 April 2020, and the transaction to take over ING's retail banking business in Austria was closed in December 2021. This means that, by the end of 2021, bank99 already boasted more than 200,000 customers.

EARNINGS DEVELOPMENT

The structure of expenses of Austrian Post is characterised by a high share of staff costs. Accordingly, 48.1 % of total operating expenses incurred by Austrian Post in 2021 were accounted for staff costs. The second largest expense item, which constituted 29.7 % of operating expenses, was raw materials, consumables and services used, a large part of which related to out-sourced transport services. Furthermore, 15.1 % could be attributed to other operating expenses and 6.9 % to write-downs. The item Expenses for financial services accounts for 0.2 % of total operating expenses. The individual income statement items can only be compared with the previous year to a limited extent due to the full consolidation of the Turkish company Aras Kargo with effect from 25 August 2020.

Staff costs in the 2021 financial year amounted to EUR 1,160.1m, up by 11.4 % or EUR 118.7m. On a comparable basis, i.e. excluding Aras Kargo, staff costs were up by 7.1 % overall or EUR 72.8m in a year-on-year comparison. Operational staff costs expenses rose in a year-on-year comparison due to the full consolidation of the Turkish company Aras Kargo, as well as additional expenses resulting from the increased parcel business. The Austrian Post Group had an average of 27,275 employees (full-time equivalents) in 2021, compared to an average of 22,966 employees in the same period of the previous year (+18.8 %). Once again, the increase is mainly due to the full consolidation of Aras Kargo, as well as to increased demand for employees in logistics. Excluding Aras Kargo, the average number of employees in 2021 increased by 1.3 % or 277 full-time equivalents. In addition to operational staff costs, staff costs of Austrian Post generally also include various non-operating expenses such as severance payments and changes in provisions, which can be attributed primarily to the specific employment situation of civil servant employees. Non-operating staff costs rose compared to the previous year, mainly as result of staff-related provisions for under-utilisation.

Raw materials, consumables and services used increased by 20.0 % to EUR 715.7m. On a comparable basis, i.e. excluding Aras Kargo, the cost of materials was up by 5.6 % or EUR 30.3m on the previous year's level. The increase is mainly due to higher transport expenses as a result of the huge parcel volumes and higher sales commission.

Other operating income rose by 48.5 % to EUR 95.2m in 2021. On a comparable basis, i.e. excluding Aras Kargo, other operating income was up by 39.9 % or EUR 23.5m on the previous year's level, and included effects resulting from the takeover of ING's retail banking business in Austria. Other operating expenses also rose by 15.7 % to EUR 363.8m. On a comparable basis, i.e. excluding Aras Kargo, other operating expenses were up by 11.2 % or EUR 34.1m on the previous year's level. In the reporting period, this item mainly included the options for the acquisition of the remaining 20% of the shares in Aras Kargo, as well as provisions set up in connection with data protection proceedings.

EBITDA of EUR 370.4m was EUR 22.3m above the previous year (EUR 302.8m), corresponding to an EBITDA margin of 14.7 %. The increase in EBITDA is a result of the excellent parcel revenue development in all markets. Depreciation, amortisation and impairment losses in the reporting period totalled EUR 159.6m, compared with EUR 139.8m in the previous year. The increase is mainly attributable to investments in new parcel logistics infrastructure locations and the full consolidation of Aras Kargo. Impairment losses of EUR 6.1m were above the previous year's level of EUR 2.3m. EBIT of EUR 204.7m was up by 27.5 % from the previous year. The EBIT margin amounted to 8.1 %, allowing EBIT to exceed the 2019 pre-pandemic level.

The Group's financial result of EUR 11.7m was EUR 10.2m above the level seen in 2020 and mainly related to foreign currency effects. After deducting income tax of EUR 58.0m, the profit for the period therefore came to EUR 158.4m (+37.4 %). Basic earnings per share were EUR 2.25 compared to EUR 1.75 in the same period of the previous year.

EARNINGS BY DIVISON

Earnings (EBIT) rose from EUR 160.6m to EUR 204.7m (+27.5 %) in the 2021 financial year and were characterised primarily by the improved earnings trend in the Parcel & Logistics Division. Both the domestic business, with higher parcel volumes and positive non-recurring effects, and the international parcel business showed very encouraging development. The full consolidation of the Turkish company Aras Kargo has been making a positive contribution to Group net profit since 25 August 2020.
In terms of divisional result, the Mail Division achieved an EBIT of EUR 155.2m in 2021. This corresponds to a drop of 5.6 % to EUR 9.2m. In the current reporting period, the adjustments to letter mail products and prices with effect from 1 April 2020, as well as special mailings in connection with the COVID-19 pandemic, had a positive effect, while the high intensity of fixed costs in the letter mail business and negative effects in the form of provisions had the opposite effect.

The Parcel & Logistics Division achieved revenue growth in an environment of intense competitive pressure, generating EBIT of EUR 118.1m in 2021. This corresponds to an increase of 60.6 % or EUR 44.5m compared to the same period of the previous year. All markets reported increased earnings due to excellent revenue development. The full consolidation of the Turkish company Aras Kargo, which was hit by negative currency translation effects due to pressure on the Turkish lira in the second half of the year, had a significant impact on the increase in earnings, but showed excellent development in operational terms. The parcel business in Austria also showed positive development on the basis of revenue. Positive non-recurring effects were achieved through logistics services relating to the pandemic.

The Retail & Bank Division reported EBIT of minus EUR 39.2m in 2021, as against minus EUR 43.8m in the previous year. The ramp-up of the financial services business had a positive effect on the result, which improved by 10.4 % or EUR 4.6m. The result for 2021 also includes a negative non-recurring effect in the form of a personnel provision that was recognised primarily in the first quarter of 2021.

EBIT in the Corporate Division (including consolidation and intra-Group cost allocation) changed from minus EUR 33.5m to minus EUR 29.3m due to positive income from the sale of properties. The Corporate Division provides non-operating services which are essential for the purpose of the administration and financial control of a corporate group. In addition to conventional governance tasks, these activities include the management and development of properties not required for operations, the management of significant financial investments, the provision of IT services, the development of new business models and the administration of the Internal Labour Market of Austrian Post.

CASH FLOW AND BALANCE SHEET

Cash flow from earnings amounted to EUR 442.4m in the 2021 financial year, compared with EUR 328.3m in the previous year (+34.8 %). Cash flow from operating activities amounted to EUR 493.3m in the reporting period after EUR 732.6m in the previous year. The biggest effects here included the changes in the core banking assets of bank99 (financial assets/liabilities from financial services) of EUR 193.2m; these amounted to EUR 522.2m in the previous year. Core banking assets include the change in the balance sheet items Financial assets from financial services and Financial liabilities from financial services, excluding cash, cash equivalents and balances with central banks, meaning that they encompass bank99's deposit and investment business.

Cash flow from investing activities amounted to EUR 255.1m in 2021 after EUR 7.0m in the previous year. The increase was mainly due to the takeover of ING's retail business in Austria and the cash and cash equivalents acquired in the process. The purchase /sale of securities /money market investments was lower in the current reporting year than in the previous year, as the returns from fixed-term deposits were lower in 2021 than in 2020.

Austrian Post relies on operating free cash flow as an indicator in order to assess the financial strength of its operating business and to cover the dividend for the financial year. Excluding the change in core banking assets, operating free cash flow amounted to EUR 217.9m in the current reporting period, compared to EUR 125.7m in the previous year.

Cash flow from financing activities came to minus EUR 123.3m in the 2021 financial year and mainly included distributions of EUR 120.0m.

Austrian Post relies on a solid balance sheet and financing structure. This is demonstrated by the excess liquidity and the solid investment of cash and cash equivalents at the lowest possible risk. Austrian Post's total assets amounted to EUR 4,792.6m as at 31 December 2021. On the asset side, property, plant and equipment amounting to EUR 1,206.5m is one of the largest balance sheet items and includes right-of-use assets in connection with leases in the amount of EUR 331.3m. In addition, there were intangible assets and goodwill from company acquisitions, which are reported at EUR 143.8m as at 31 December 2021. The balance sheet shows receivables of EUR 391.0m, which include current trade receivables of EUR 303.8m. Other financial assets amounted to EUR 37.0m as at 31 December 2021. Financial assets from financial services amounted to EUR 2,715.8m at the end of 2021 and mainly result from the business activities of bank99.
On the equity and liabilities side of the balance sheet, the equity of the Austrian Post Group amounted to EUR 672.2m as at 31 December 2021 (equity ratio of 14.0 %). Provisions amounted to EUR 687.9m, while trade and other payables totalled EUR 484.6m at the end of December 2021. Financial liabilities from financial services amounting to EUR 2,543.5m result primarily from the business activities of bank99 (deposit and investment business of bank99's customers).

OUTLOOK FOR 2022

The impact of the COVID-19 pandemic also left its mark on a number of economic indicators in the second half of 2021. Supply bottlenecks and delays in the global value chain emerged, as did a trend towards rising inflation figures. These trends are expected to continue and have a negative impact on the flow of trade and goods in the mail and parcel business. Positive special effects from logistics services are likely to decrease in the course of 2022. The Austrian market is currently characterised by restrained consumer spending, and the Turkish market, which is important for Austrian Post, is also facing a difficult environment due to inflationary and currency pressures. In addition, inflation is likely to become more entrenched as a result of the acts of war in the Ukraine. Very challenging economic conditions can therefore be expected for 2022.

Revenue stable in 2022
Given the emerging economic challenges, Austrian Post is aiming for as stable revenue performance as possible for the full year 2022. This will require a gradual trend towards the economic environment and the propensity to consume returning to normal, but also an easing of the currency pressure on the Turkish lira.

In the Mail Division, business is expected to decline slightly in 2022. The volatile development witnessed over the last years - caused by various restrictions imposed in response to the pandemic - will decrease overall. The volume of traditional letters is likely to continue to decline due to structural factors at a rate of around 5 % p.a. in the coming quarters. Inflationary cost increases heighten the need for corresponding product and price adjustments. Slightly negative trends are also to be expected in Direct Mail and Media Post due to restrained advertising behaviour.

Revenue in the Parcel & Logistics Division has doubled over the last two years thanks to both organic and external growth. Volatile development is expected over the quarters in 2022, and the overall target is to match the previous year's level. It will, however, be especially difficult in the first half of the year to reach the peak values of the previous year as these were caused by non-recurring effects. In 2021, the pandemic boosted e-commerce across the board and also increased competition. In the current year, the internal delivery service of a major customer in Austria will continue to rise and the positive effects from pandemic-related logistics services will decrease. The economic environment in the Turkish market is also expected to be challenging in the current year.

By contrast, revenue development in the Retail & Bank Division, which comprises bank99 since the latter was launched in April 2020, will improve in the 2022 financial year. In December 2021, the transaction to acquire ING's retail banking business in Austria was closed, laying a solid foundation for integration and growth.

Group Earnings in 2022
An earnings forecast for 2022 for Austrian Post is difficult given the current environment. There is reason to fear that we will see inflationary tendencies not only in the short term, but also in the longer term. This could have an impact not only on the cost situation, but also on the purchasing power and buying behaviour of consumers. After the exceptional tailwind seen in the parcel business in recent years, we now expect a consolidation and a decline in positive non-recurring effects.

Despite the emerging negative environment, Austrian Post is aiming for a Group result (EBIT) that is as close as possible to the level seen in the previous year (EBIT 2021: EUR 205m). The assumption is that further lockdowns can be avoided in the retail sector and efficient letter and parcel logistics can be maintained.

Continuous Investment Programme
The parcel growth seen in recent years shows how important it is to be able to ramp up the necessary logistics capacities quickly. The planning parameters for the expansion programme include the predicted annual volume increases in the individual regions and the planned steps towards carbon-neutral delivery. As a result, Austrian Post's investment programme will remain intact so that it can ensure high-quality service in terms of efficiency and speed. The measures are based on maintenance CAPEX in Austria, South-eastern and Eastern Europe and Turkey of approximately EUR 100m for the 2022 financial year. In addition, the company is once again planning growth CAPEX of around EUR 80m in Austria. The changes to logistics structures to enable climate-neutral Delivery plays a key role in all investment projects.

Austrian Post's goal remains to combine growth with strong dividends. The growth opportunities that arise will be secured through appropriate structural investments. In addition, the aim is for the cash flow generated from operating activities to continue to cover the necessary basic investments, as well as allowing the company to maintain an attractive dividend policy.

The Management Board will propose to the Annual General Meeting scheduled for 21 April 2022 the distribution of a dividend in the amount of EUR 1.90 per share. Thus, the company is continuing its attractive dividend policy on the basis of a solid balance sheet structure and generated cash flow. Austrian Post continues to pursue the objective of distributing at least 75 % of the Group's net profit to its shareholders.