Q3-13 results. Investor presentation. Brussels November, 8 th 2013 Johnny Thijs, CEO - Pierre Winand, CFO. Presentation transcript

Transcription

1 Q3-13 results Investor presentation Brussels November, 8 th 2013 Johnny Thijs, CEO - Pierre Winand, CFO Presentation transcript

2 Thursday, 8 November 2013 (10.00 am) THE OPERATOR: Ladies and gentlemen, welcome to the third quarter 2013 interim financial report. Today I am pleased to present Mr Paul Vanwambeke. Please go ahead. PAUL VANWAMBEKE: Good morning, everybody, welcome to the call. We have Johnny Thijs and Pierre Winand; they will bring you through the presentation and then we will have some time for a Q and A session. Just in terms of timing we should stop at 12 sharp because there is another meeting starting at the same moment. So, Johnny please go ahead. JOHNNY THIJS: Thank you Paul, good morning. Happy to present the results for the quarter 3 of the year. I suggest we move to page 2 of our presentation which summarises our business overview and starts first with the total operating income, so revenue has increased by 17.2m to reach 566m. Organic revenue growth amounted to 14.2 million, driven by the proceeds of the announced building disposal programmes which we discussed with you in quarter 2 results and which represents 11.4 million euro, are represented by one single building. All those things were announced by the Q2 results underlying domestic mail volume decline the same level decline in Q2 and below, slightly below expectations for the full year but in line with what we announced in Q2, Continuing strong performance in parcels with a organic revenue growth of 9.8 million euros. Domestic revenue up 5 percent and volumes up by 7 percent versus 6.4 percent in the first half of the year. The focus has been 2

3 put on capturing major customers to benefit from the growth of the e-commerce programme in our country. Cost and productivity programmes delivering slightly ahead of expectations with a further organic costs reduction of 7.3m and a full time equivalent reduction of 974 full time equivalents versus the same period in As a consequence of all that EBITDA margins for the quarter are improving strongly to reach 18.3 percent (plus 2.8 percentage points), to reach million euro on a normalized basis; EBIT at 81.5m for the quarter. Excluding phasing and scope impacts and the proceeds from the sale of the single building of 11.4 million. EBITDA and EBIT still grow, pretty strong with 9.9 million or 11.6 percent for EBITDA 8 million or 13.8 percent for EBIT. On page 3, top of the page, therefore the result of that is that Belgian GAAP net profit amounts 44.9 million for the quarter, which shows a solid improvement of 12.8m versus last year which brings the total year to date Belgian GAAP net profit at million, up 4.7 million versus last year. The dividend policy, and we will provide further full details later on in the presentation, the dividend policy and the compensation of the pre-lisiting exceptional tax charge are confirmed. You remember there was a discussion point as part of the Q2 announcements. We had the board meeting yesterday and I will explain the details of that in a few minutes from now. Moving on to page 4 with the EBITDA bridge for the Q3 results starting with 85.4 million last year, Q and we have 2.9 million negative which is explained by the scope changes, on the one hand acquisition and disposals, Landmark and also Certipost and also the slightly lower compensation for SGEI over the period. All that solidly compensated for an uptake of 3

4 21.5 million, good results in parcels and at the same time in corporate which includes the positive results of the sales of buildings. The negatives come from the decline in domestic mail where we still have a slight, for once, positive phasing effect because there was one working day more in the period than last year and the other sources of growth are down 2.6 million which is the combined effect of lower volumes and margins in international mail as well and slightly lower revenues in banking. All that leads to a solid growth of EBITDA to achieve million for the period. I hand over now to Pierre for the full details but I will come back again. PIERRE WINAND: Good morning, page 5 is normally where we show the difference between reported and normalised but this quarter there is no difference between reported and normalised results. As a result EBITDA and EBITDA, as Johnny mentioned the profits before tax, net profit of 53.8 million and the net profit of the parent company under Belgian GAAP 44.9 million as mentioned by Johnny. A question we have received is the sale of buildings, the sale of buildings always historically is always included in the normal results of the company. What is normalised has been agreed with the stock exchange regulator and has been clearly defined in our prospectus. The only thing we can normalise are nonrecurring items of 20 million or more. The profits or losses on the sale, on the disposal of businesses or investment in subsidiary and the reversal of provisions that have themselves been normalised because over 20 million, et cetera. So the sale of buildings are part of the normal process of the business. We do every year some of it and we will continue to do that for the foreseeable future as building becomes free as part of our restructuring of our network. 4

5 On page 6 we mention a few key elements impacting the results Johnny mentioned. Changes which are detailed in there. I won't go into detail but it's still the same Landmark joining us since January 2013, the activities of Certipost leaving at the same date. In terms of the fifth management contract, two things. In terms of remuneration, about 20 million less for the full year but also a different split between the product group compared to We will come on that. The last point was the sale of building programme. In the quarter we didn't sell many buildings. We only sold one big one and that allowed us to catch up the delay we had in the half year, the delay of 4.3 million compared to the previous year. Now we are slightly ahead. For the full year we should be somewhat ahead compared to last year as the building programme, sale of buildings, continues. Slide 7 provides a bit more detail on our revenues per big product line. The first line, the second column represents the impact of scope. The consolidation of Landmark brings in the quarter 8.9 million of parcels revenue. The disposal of Certipost cost us 2 million in revenues which is part of value added services. Third column, shows not only the reduction of 3.9 million overall of the remuneration for the services of general economic interest. But also the fact that the split is quite different. We are receiving 22 million less for newspapers and periodicals for the press but we're getting more money, we're getting money for the retail network and it's shown under the line others for 21.6 million. Then what remains is the organic growth of decline of the various businesses and that's what we will focus later in the presentation. Page 8 we go to domestic mail and if we look, and excluding the services of 5

6 general economic interest, overall domestic revenues went down by 4.3 million euros. The first component is the elections. We had elections in We will have elections in 2014 but we didn't have this time around and that cost us 3.1 million. Phasing Johnny mentioned we had one business day more for most of our activities, not all of them but one business day more. And that brought us 0.8 millions euros. If we exclude those two elements the volume decline was 11.2 million euros which corresponds to 3.7 percent volume decline compared to last year, the third quarter of last year. That compares with a 3.8 percent we had in quarter 2 and the 4.8 percent again, underlying, if we eliminate the impact of the number of the number of business days, 4.8 percent in the first quarter which means practically that the slow down of the decline or the fact that it has not accelerated is confirmed. Johnny said it's slightly disappointing we had 4 percent for the full year in half, first half, which means implicitly we were expecting 3.5 percent for the second half. We are slightly ahead of that but there is no acceleration of the decline which is, to us, good news. In terms of price and mix, that generated 9.2 million of additional revenues and that is perfectly in line with the price increases that we put up in the beginning of In terms of parcels, if we look at the organic growth, that was 9.8 million euros; 1.5 million euros coming from domestic parcels and in there we had a 7.7 percent volume increase in the quarter. If you remember in Q1 and in Q2 we had had 6.4 percent each quarter, so there is a slight acceleration of the volume growth. In terms of revenues, they are up 5 percent, a bit slower than the volume growth because we had a little bit of a mix impact, product 6

7 mix impact. People are moving out of the full tariff to get a contract with us which means they can attract new discounts. Also we have a customer mix impact with a few big customers who are really performing extremely well and as they have a slightly lower prices than smaller customers, the overall mix is slightly negative but it fuels, of course, the volume growth. In terms of international parcels, up 9.2 million euros in revenues. 60 percent of that growth comes from the outbound parcels to China. It's perfectly in line with the previous quarters. We have said one day this thing will slow down but so far in the quarter it has performed as well as the previous quarters. The other international parcels activities represent 40 percent of that growth which shows again that they are also growing pretty well. Special logistics are in line with the previous quarters, a decline due to lower sprinter volume and churn of some customers. In terms of page 10, the other revenues, international mail continues to be negative in terms of revenues, 3.1 million in income from international business mail, which is transit mail, and there it is the continuation of the trend we had mentioned in the previous quarter which is that basically putting up the prices to improve profitability and we lose a number of customers as we do that but that's put in line with our strategy. The next category is value added services and there we have a nice growth of 2.3 million which is ahead of what we had had in the first half and that is a number of new solutions coming in line. We have won a contract to provide registration documents, special new registration documents that must accompany cars when they are sold, after. They must follow the life of the car, basically. And the second, we won a contract to do some printing for some publications in our document management business. 7

8 In terms of banking, difficult quarter, 2.7 million it's in particular because there was a difficult comparative in the third quarter of last year, we had attracted a bonus in the commission scheme from the bank because we had hit a particular milestone in terms of collection of money in our network for current accounts and because we had hit that particular milestone we got a bonus. This time around we have not attracted a similar bonus so the comparative is negative and the second impact is part of our remuneration or commission is based on the transformation margin made by the bank and with lower interest rates, the transformation margin is going down in absolute terms. And that is partially compensated by the fact that the bpaid credit card is doing very well. We had a hundred thousand at the end of last year and we are now at 190,000 cards in the market. Then the other activities are positive for 1 million euros. Slide 11, shows a small summary on the costs side and if we take the organic evolution of our costs they went down by 7.3 million euros in the quarter, driven by payroll and interim cost which was down 9.2 million that is driven by 974 less FTEs less on average during the quarter compared to the previous year, which delivers 12 million euros. 2.2 million euros due to a favourable mix of personnel and in particular more auxilliary postmen in the total mix which offsets the salary increases, year over year inflation, the merit and the seniority increases of 5.8 million. The general cost of all the other bought in services are down 1.9 million in the many different movements in there but for instance consulting costs go down. Other cost are going up by 3.9 million. 3.5 million of this 3.9 million comes from the fact that normally we should become liable to a number of 8

9 local taxes. We used to be and we are technically still exempt from a number of local taxes because of the public services that we render but as part of the agreement with the European Commission, it was agreed that those exemptions would be removed. There is a project in the Government to do that and we have been informed that it will be retracted since the beginning of the year, so we have provided in this quarter, the first nine months of the year, which cost us 3.5 million euros and if we look on an ongoing basis it should be about 400,000 on a monthly basis that it would cost us. But overall costs down 7.3 million. Looking into cash flow and if we look at operating free cash, first cash flow from operating activities, 900,000, lower than last year but it is exclusively due to the fact that we have made a tax pre-payment. In Belgium you can make pre-payments at various moments into the year in order to get no penalty or kind of benefit in doing that and we have paid more taxes which is a reflection of the fact that in particular there is this 17.6 million exceptional tax which was taken in the first half but which goes into pre-payment. Without that we would have been better than last year. Cash flow from investing activities is actually positive and it's due to the proceeds on the sale of the building, the gross proceeds of the sale of the building and a capex which is a bit lower than last year. We expect to catch up in the last quarter, in capex there was a little bit of a delay in the payment. So overall and accommodation of those operating free cash flow is negative 2.5 million which is normal. It's the normal seasonality. This is the lowest quarter in terms of revenues because of the summer. It is also as you know we receive a pre-payment of the services of general economic interest in the beginning of the year, so every month we eat a little bit of that money 9

10 but that's the normal seasonality of our cash flow. Financing activities, as you can see, relatively neutral which means the net cash movement is negative 2.6 million compared to 31.1 million same quarter last year. Page 13 shows the balance sheet and there there is not much change compared to last time. We're in a cash position which remains very good in spite of, as you know, the payment of the capital reduction and the exceptional dividend of 198 million in the first half of the year. This is a comparison to 1 December but it still remains a solid balance sheet overall. Page 14 shows the evolution of the earning after tax, Belgian GAAP of the parent company and we compare that to the group EBIT, evolution of the group EBIT under IFRS. To show that the Belgium GAAP results actually move in tandem with the underlying results of the group and there is no disconnect between the two. The group EBIT went up by 27.4 percent in the quarter. The earning after tax went up by 39.7 percent in the quarter also. Same thing to a certain extent in the year to date in spite of the tax, the 17.6 million tax. Again we see a modest growth of the EBIT of 3.3 percent and we see this growth translating in the Belgian GAAP earnings after tax so there is no disconnect between our operational results and our net after tax results. Now, Johnny. JOHNNY THIJS: Thank you, Pierre. To page 15, where I can confirm that the Board of Directors confirm the dividend payout at 85 percent as well as the compensation of the exceptional tax charge of 17.6 million as part of the dividend payout which was done before the IPO. This means that for the interim dividend which will be paid on the 12 th of December of this year, we will take 85 percent of the sum of one the bpost Belgian GAAP EAT for the 10

11 period January to October to which we add a compensation for the exceptional tx charge of 17.6 million and again of those two amounts we take a multiple of 85 percent to be paid on the 12 th of December and the final amount for that will be announced on 4 th of December. Then the final dividend which will be paid on 22 nd of May of next year will normally and of course perfectly normally be the result of bpost and after tax, BGAAP for the two remaining months of the year, November, December, for which again the 85 percent multiple will be applied. This brings me to the key take aways of the quarter results which we announced yesterday evening. I think we can conclude by saying that overall we have solid result improvements in the third quarter. Solid performance which makes us very happy and solid and confident for the future. Solid performance in parcels. Moderate volume decline in domestic mail overall. Good results from building disposal programme which can catch up for the delay we had in the second quarter. And the cost discipline which is confirmed. Dividend policy is confirmed as I announced it two minutes ago. The outlook for the year remains unchanged with a domestic volume decline between 4 and 4.5 percent. We remain prudent on that side of our business. Taking this into account, as well as the strong results in parcel we confirmed our previously communicated outlook revenue should remain stable for the total year. We are more confident than ever before that we will at least maintain the operating results at level of EBITDA and EBIT operating for We do not expect any material exceptional cash outflows. Cash generation is back to normal as Pierre has explained in detail and the net capex for the year is still to be expected around 90 million perhaps 11

12 slightly below. That's it, ladies and gentlemen. I think the time is now there for questions. THE OPERATOR: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press 01 on your telephone keypad. The first question comes from Mr Dieter Furniere from KBC Securities. Please go ahead. Q. Yes, couple of questions from my side. Firstly in general, on the management contract, could you provide us some more clarity where the discussions are currently at and what's your feeling based on these discussions? Second question relates to the upcoming CLA which I expect is to be signed for year end. We saw some social unrest in Brussels on the wages for auxilliary postmen. Could you provide your feeling on which direction we are moving there and what the is the stance of the unions? My third question is in respect to Landmark, obviously in scope effect but could you give a bit of feeling if you would compare Landmark versus the Landmark of 2012, what the actual organic growth was for these activities? Thank you. A. Okay, first the management contract, I understand that the the Government has started preparations for the organisation of the tenders. The Council of Ministers is now to decide very soon on the formal start of the proceedings and as we have always anticipated we expect the Government to take a decision on the concession from both the magazines and the newspapers, by the latest, end of next year. In terms of our chances to win or lose, I'm not sure I have to repeat everything. We do not have any real concern on the magazines because for 12

13 that it takes a competitor which has an addressed distribution network that covers all of the country, which is not there today. For the newspapers it will all depend on the conditions of the tenders. We are preparing our offers and of course we remain committed to making sure we keep both of the contracts. On the upcoming CLA discussions, first and foremost indeed they are upcoming. They are to cover the year 2014 and 2015 but there is no obligation whatever to have them concluded by the end of this year. If I go back to the past, almost always those have taken us into January or even February. It will all depend on the discussions with the unions but we are preparing for that to start now or in the following weeks. Indeed there have been an action of the unions, which went to see our minister M. Labille, two weeks ago with a clear demand on the wages for the auxilliary postmen. This is something which we are preparing for. We are preparing for the discussions, the unions know where we are wanting to go and so we are, I'd say, prudently confident that what we have planned to happen as part of the negotiations with a specific focus on slightly improving the employment conditions for the auxilliary postmen will be happening according to things which have been done over the past year. So we are making sure that negotiations will be done in a very professional way. On Landmark, in terms of their organic growth and we take Landmark and MSI together because there is a parcels business in MSI also, year to date the growth is over 20 percent in terms of revenues. We will see what it makes in the last quarter because they had a very strong quarter in the last year but they are opening new lanes. The business is developing very well. Q. Okay, thank you. May I ask another question to the management contract. 13

14 So next to the tender being opened are there political discussions, it may be a bit early giving elections next year for it reducing the total scale of the management contract, 300 million or is it something that is currently not up for debate? A. As far as we know, no discussions on that front as per today. Q. Okay, thank you. THE OPERATOR: The next comes from Nigel Van Putten from Kempen & Co. Q. Hi, I have a question on the EBIT per segment it seems from what you disclosed on the website that the mail and parcels were broadly in line with last year but the corporate division was much stronger so if I deduct the sale of real estate there I m left with some 6 million. Could you give us an idea of what cost saves are achieved there? A. In there you have got the cost saving of 1.2 million which comes from a number of central departments, sorry 1.7 million which is basically a number of central departments like finance, legal, a whole raft of departments which are in there which like every other department in the company has worked on improving their productivity and that delivers 1.7 million of improvements and then you have got about 3.3 million euros which in reality it's a slightly different way we're booking a number of costs. They used to be booked centrally into the corporate division. We are now booking them in P&I and in MRS on in reality the results of MRS and P&I on a purely comparable basis are slightly better than what the figures are showing there to the tune of 3.3 million. Then there is another amount of 1 million about which is the reduction in the employee benefit costs, some of those costs that we keep centrally for ease and that 1 million comes from a variety of things, which is less FTE s in general and it s across all the units. 14

15 Less civil servants within the FTE and they had more employee benefits. And then some of the costs we renegociated. So, on the improvement that I mentioned, it s savings in the central departments it's savings in reality in the other departments MRS and P&I but that is shown differently and then it's savings across the whole companies in terms of employee benefits but we keep it centrally, the amount. Q. Okay, thank you. Just maybe one follow up, could you share with us the distributable equity under the BGAAP accounting system as per the third quarter? A. It's about the result of the quarter. Sorry, of the nine months. Because, as we mentioned, we had no distributable reverse above and beyond the results we are generating so it should be which is the result of the nine months. Q. Okay, thank you. THE OPERATOR: Thank you. The next question comes from David Vagman from Exane BNP Paribas. Go ahead. Q. Good morning, everyone. So three questions. The first is could you give us an update on your view on staff attrition, productivity increase and wage inflation going forward. Second one is about the other operating expenses next to staff, so how much have the cost reduction could be considered as structural of the cost reduction Q3 and then could you give us any view on the possible Belgian GAAP - IFRS differences for Q4? A. I think if we take staff attrition going forward, we always said for the next five years it would be a thousand on average. A thousand FTE s per year on average with big years and smaller years, depending on the specific plans that we have between 800 and 1200, depending on the year. We continue to 15

16 be completely in line with that. Inflation is more difficult. You can only look what the Bureau du Plan in Belgium, that's the Government agency that does economic forecast is saying. It's talking about 1.1, 1.2 percent for next year which means, but, as you know, our salaries increase each time that a particular cost of living increase, it s an increment of 2 percent. Based on that if we believe the Bureau du Plan that should happen somewhere in the middle of next year but again we have to be careful about that, but that's the assumption. To your question about how much of the attrition is volume related related and how much is structural or, you know, the volume related on a very short term period is very limited, so if we take for the quarter it is mostly, I mean, structural, it is all structural and it's mostly productivity improvement. Finally on the gap, there should be nothing special in the last quarter but again what is important to say is that Belgian GAAP results follow, net after tax results follow pretty well the evolution of our underlying business, as shown by the IFRS EBIT. What happens in IFRS between EBIT and net after tax is influenced by accounting elements such as discounting and I don t what the latest changes in the ECB rates are,we need to look what is the impact on the long term. That creates, you know, potentially movement either positive or negative but it does not affect our Belgian GAAP results which therefore are much more in line with the evolution of our underlying business. Q. Clarification to the answer on my first two questions. About the wage inflation, referring to the baremic increase, that first and then about the structural or decreasing operating expenses. I was also referring to the non-staff related decrease in costs. 16

17 A. Okay, so on the the baremic increase, as you know, a lot of our people are on a salary scale which means that their salaries evolve with promotion and evolve with merit and evolve with seniority. That s a percentage we see reasonably stable year over year on average about 0.6 percent, 0.5 0,6 above inflation. That's the historical observation of that element and it's partly counterbalanced as we have said by the mix, the favourable mix impact that comes into there. That was the question. The other question? Q. Operating expenses? A. Other operating expenses. Yes, because of the volume declines in domestic mail, 3.7 percent, you know, we're very careful with our costs and we will continue to be very careful with our other costs, certainly for the rest of the year and going forward also. Q. Thank you. THE OPERATOR: Thank you. The next question comes from Mr Andy Jones from RBC. Q. Good morning, two questions. Firstly I saw an article this week about DPD starting placing its own parcel shop in Belgium. In general how do you think parcel shop network of your peers affects the competitive position versus what bpost can offer? The second question is on the price increases that was announced earlier in the week as well. Just looking at it, it doesn't seem like you're using much of the additional pricing buffer so does this suggest that you're a little bit more confident about how volumes will pan out for the next year, particularly given that your medium term cost planning is for the decline to be higher? A. On the DPD announcement, well, DPD is a solid competitor in the parcels delivery, especially in the B2B. We expect they had announced that they 17

18 would put in place their pick up and pick up the delivery network already several months ago so they are a player in that market. The PUGO as we call it for us as per today is not important. We have ambitions to slightly grow our position in that segment. It's very price sensitive but fundamentally the DPD announcement does not really have a major impact in our plans in the path of business going forward. On the price increases; so it's on average 2.3 percent, which is based on an assumption of inflation of about 1.2 percent which means that we are increasing prices ahead of inflation on average by 1.1 percent which historically is a high figure. Usually we have always said we increase around 0.3, 0.4 percent will be what we do most years. This year, as the inflation was quite low we increased it to 2.3 percent. Again, more of a view we have on volume going forward, we are quite mindful not to start creating price elasticity. 2.3 percent, you know, we believe on average and again it depends on the various products, seems to us like a reasonable price increase that we can defend. If we had gone to 3 percent or 4 percent which we could do with the reserve that we had, we believe that it would increase reactions from our customers that would be detrimental for volume development. Q. Thank you very much. That's very clear. THE OPERATOR: The next question is from Mark Zwartsenburg from ING. Q. Good morning, a couple of questions left. First the mail volume guidance 4 to 4 and a half percent. Is there any reason why this trend is the election we knew about that and also the working day, so has there been any change in the trend through the quarter? Can you share with us the exit of the volume declines? 18

19 A. We had said four percent in the previous quarter so what we are saying is indeed there is a little bit more between 4 and 4.5 percent and it's a little bit of a mechanical element, to achieve 4 percent for the full year after the first half we needed to do 3.5 percent in each of the last two quarters. We did 3.7 percent on the underlying so we are slightly ahead which is why we are being conscious compared to that. So we are not seeing recovery from the volume but we are not seeing any worsening neither since we are at 3.7 percent versus 3.8 percent in the previous quarter. Overall we remain prudent on that one. Q. It didn't change through the quarter? A. I mean, we have got volatility in the month. That's a characteristic of crises years. You have got very good months and poor months, basically but there is no trend within that. Q. Okay, the bit of follow-up on volumes, it seems the advertising volume is sleeping can you give a flavour on that specifically? A. So the election volume is part of advertising so if you take advertising without the elections, so it's 7.3 percent. Q. Okay. A. Which is more or less in line, which confirms what we're saying, the advertising volumes if we exclude this election thing, the advertising volume which is more reactive to economic sentiment let us put it that way. We're not really seeing a pick-up, we are not yet hearing from other media marked pick up either. Q. The other question on the tax rate. A little bit lower in the quarter, it seems. It think the guidance is 35 to 36, is there anything we should changes our numbers for 2014 onwards? The tax rate is a little bit lower? 19

20 A. No, I think going forward, as we said, the headline tax rate is 34 percent. We had the situation where the notional interest reduction were cancelling out our disallowed expenses. As you know there is an announced, two things, we have got less equity, so less notional interest reduction going forward because of the equity reduction that happened and as you know there are some plans of the Government to lower in some ways the notional interest reductions, so we would think that, you know, we continue to have disallowed expenses and we will have less of a shield from the notional interest reduction going forward. Q. Okay. Then a final one for you, Johnny. Is there any update on your discussions with, in terms of salary and staying with PostNL, with bpost sorry? A. As you probably know the board of directors has recommended that my mandate is renewed. I accepted to continue serving as bpost CEO. My current mandate ends in January 2014 and the Government now has to confirm that by royal decree. I am in discussions with the Government. There has been a positive atmosphere and you can be confident that I will be on board still after January of next year. Q. Very good, thank you. THE OPERATOR: Thank you. The next question comes from Dominic Edridge from UBS. Go ahead. Q. Hi there. Two questions for myself. Firstly, I just wanted to confirm the SGEI decline for this year. I know obviously year to date we were on minus 11 and a half million. I wanted to clarify why in Q4 there will be significant uplift. Because you have reiterated the guidance of twenty million decline for the full year. I want to understand what seasonality was that. 20

21 Second question is on the price rises. In terms of the 2.3 percent, can you confirm in terms of what you're dealing with your large customers is it a set discount depending on the size. Is there a lot of individual negotiations that go on, so that 2.3 percent could change a little bit so is it effectively there is a set price depending on the size of the customer and if they don't like it, well, that's tough for them? A. Let there not be any doubt, the customers do not really like it but there is no discussion around the 2.3. It's a set amount. Period. The only thing that could happen but we don't think it could happen here but sometimes there are price increases that are bigger than customers want. They try to attract new discounts so they will modify their behaviours to attract operational discounts. Prepare them better so they can get to a lower price which is a negative effect on the ASP but then we have operational savings by them doing that but in terms of our regulatory regimes means that we are not allowed to have individually negotiated prices. We have to have grid, we have to have set discounts, it has to be transparent. Everybody has access to those discounts and from there, you know, nothing can be done. In terms of the question on the SGEI, in the old regime, the regime which was applicable in up until the end of 2012, there was a indexation which happened in the last quarter of the year which therefore meant that the amount of money we could accrue for the last quarter of the year was higher than in the previous quarters, which means that at this time it's a flat amount for the full year and it's split evenly, between the quarters, which means that the gap is growing in the second, in the last quarter and that's -- we confirm this amount a little bit under 20 million for the full year. Q. Okay, thank you very much. 21

22 THE OPERATOR: Thank you. The next question comes from Mr Douglas Hayes from Morgan Stanley. Q. Good morning. One question remaining, in the parcels division, can you give us a little more colour into what drove the losses? I would have thought the strong volume growth and the additional Landmark you guys could have maybe turned a corner there so approximate you can give a bit more insight into into the costs that you have seen? A. In that division which is part of the international you have got two different activities. International and parcels so it's not like a parcels division is losing money; it's the combination of the two and in there also you have got project Shop and Deliver, for instance and that project, shop and deliver in the quarter by itself cost us 2 million euros, so without that, the quarter would have been profitable in the whole of the division, parcels and international. For the rest, on the pure parcels side, we are doing well. On the international side we are doing a bit less well which is a combination of, as we said, we are trying to get more profitability in percentage terms but also, we didn't mention, there is still a delay compared to the previous year in the terminal dues settlement, it's a settlement that normally will happen but in the quarter itself it has cost us another 600,000 negative. Without that, compared to the previous year. Without that and without the would have been certainly in the black. Q. That's very clear. Thank you very much. THE OPERATOR: Ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keypad. We have no further questions. A. Thank you very much. See you next time. THE OPERATOR: Ladies and gentlemen, this now concludes our conference call. Thank you all 22

23 very much for attending. (10.55 am) 23