PostNord Debt Investor Presentation September 2012
Disclaimer sc a e This document does not contain an offer of securities in the United States or any other jurisdiction; securities may not be offered or sold in the United States absent registration or exemption from the registration requirements under the U.S. Securities Act of 1933, as amended. Any offer of securities will be made, if at all, by means of a prospectus or offering memorandum issued by PostNord. Forward-looking statements Statements made in this document relating to future status or circumstances, including future performance and other trend projections are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are outside the control of PostNord. Forward-looking statements herein apply only as at the date of this document. PostNord will not undertake any obligation to publicly update or revise these forward-looking statements to reflect future events, new information or otherwise except as required by law.
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Team ea
Page 3
Lars Idermark
Henrik Rättzén
President and CEO f President and CEO since 2011 f Previously President and CEO of KF f Previously also CEO of the Second AP Fund and Executive Vice President and Deputy CEO off Fö Förenings-Sparbanken i S b k AB/Swedbank
Senior Vice President and CFO f CFO since 2012. Member of Executive Team and Group Executive Management f Previously Nordic CFO at Codan TryggHansa f Previously P i l also l P Partner t att KPMG
Torsten Fels
Magnus Wilsby
Oscar Hyléen
Se o Vice Senior ce President es de t and CFO of Post Danmark A/S f CFO of Post Danmark A/S and deputy CFO of PostNord since 2009 f Previously with Danske Bank f 27 years in financial management
Vice ce President es de t and a d Head ead of Treasury f Head of Treasury since 2009 f Previously Head of Treasury y of Posten AB f 24 years in Treasury
Vice ce President es de t and a d Head ead of Investor Relations f Head of PostNord Investor Relations since 2010 f Previously y Head of Investor Relations at Modern Times Group MTG AB f 13 years in Investor Relations
Co te ts Contents f
PostNord in brief
f
Business Overview
f
Business Strategy
f
Financial Position and Funding Overview
Page 4
All financial values prior to 2010 are pro forma
Leading Mail and Logistics Operator in the Nordic Region Page 5
C eated by the Created t e Biggest ggest Merger e ge of o its ts kind in Europe f
PostNord AB was created through the merger of Posten AB and Post Danmark A/S in 2009
f
40% of shares held by the Danish state and 60% by the Swedish state. Votes are allocated 50/50 PostNord offers communication and logistics solutions to, from and within the Nordic region in Europe
f
2011 results: Net sales of SEK 39 bn, EBIT margin of 4.0%
f
f
A leading supplier of business communication in the Nordic region
f
Mail operator for all of Denmark and all of Sweden
f
One of the largest operators in Nordic advertising markets
f
The strongest business partner for Nordic e-commerce
f
A leading provider of logistics services to, from and within the Nordic region g
Supporting pp g businesses, society y and individuals with distribution services since 1624
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Strong St o g Nordic o d c Presence ese ce f
PostNord offers mail and advertising services in Sweden and Denmark
f
g services for flows to, from Logistics and within the Nordic region
f
Information logistics services throughout the Nordic region and in a number of other European countries, through Strålfors
Net sales 2011
2% 3%
Average number of employees p y 2011
3% 1% 1%
9%
f
f
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12,000 mail carriers in Sweden and 11,000 in Denmark More than 4,800 distribution points with generous opening hours thoughout the Nordic region
36% 30%
56%
Sweden Denmark Norway Finland Other countries
59%
Co t ued Profitability Continued o tab ty in a Changing C a g g Market Mail volume development PostNord, indexed
EBIT PostNord, Posten and Post Danmark, SEKm1
4 000
100
80
3 000
60 2 000 40 1 000
20
0
0
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1 EBIT 2002-2003 Posten & Post Danmark non-IFRS, EBIT 2004-2007 Posten & Post Danmark IFRS, PostNord from 2008
Extensive te s e Staff Sta Reductions educt o s Implemented p e e ted
Average number of employees
60 000 50 000
-13,000 40 000 30 000 20 000 10 000 0 2008
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2009
2010
2011
Q2 2012
Mail a Business: us ess Increasing c eas g Efficiency c e cy Maintained level of mail business’ expenses per mail unit…
10 4000
6 4
3000
2
12
5000
10 8
4000
6 4
3000
2
0
2000 2008
2009
2010
2011
Q2 2012 LTM
Total expense/mail unit, SEK Mail volumes, million units
0
2000 2008
2009
2010
Q2 2012 LTM Avg no of employees/million units Avg. Mail volumes, million units
…in spite p of a total mail volume decline of 18% since 2008
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2011
Mail volumes
8
Avg. no of emp ployees/million un nits
5000
Mail volumes
Total exp pense/mail unit
12
Decreasing level of mail business’ employees per mail unit…
Logistics og st cs Business: us ess Increasing c eas g Logistics’ og st cs Share of Sales Net sales mix PostNord businesses, %1
Mail
Q2 2012 LTM 2011 2010 2009 2008
Logistics
Strålfors
Including the acquisition of Green Cargo Logistics, logistics services now represent more than 1/3 of Group net sales Page 11
1
Q2 2012 LTM includes 2011 net sales of Green Cargo Logistics.
Key ey Investment est e t Highlights g g ts Markets
Regulated g mail market with attractive cash flow p profile. Logistics g market with g growth opportunities. Strong e-commerce growth driving demand for parcel services.
Position
Strong position as Nordic market leader. Comparatively high barriers to entry in mail. Opportunity to grow logistics market share.
Financials
Stable financial position. Proven ability to deliver margins and cash flows in a changing market k t environment. i t Additional Additi l rationalization ti li ti potential. t ti l
Ownership
Highly critical service in society. Stable governmental shareholder structure in mid-term perspective Change of control clause (51%). perspective. (51%)
Financial targets
Return on equity to exceed 10% over a business cycle. Equity-to-assets ratio of at least 35% Policy to distribute 40% of net profit. 35%. profit
Credit g rating
Page 12
Unrated. Shadow ratings by SEB (BBB+) and Danske Bank (BBB+).
Business Overview
Page 13
Businesses us esses Business area Mail Denmark
Business area Mail Sweden
Delivers distribution solutions Delivers distribution solutions in the Danish in the Swedish communications market communications market
Mail
Net sales Q2 2012 LTM1
Business area Logistics
Strålfors
A leading operator in the Nordic logistics market offering a unique scope of coverage through the market’s strongest distribution network
Develops, produces and y and services delivers systems for efficient business communication
Adjusted EBIT margin, % Mail Denmark
10%
7% 22%
Mail il Denmark k Mail Sweden
34% 37%
Logistics
4% 2%
Strålfors ålf
0%
Q2 2012 LTM includes 2011 net sales of Green Cargo Logistics.
M il S d Mail Sweden
6%
Logistics
Page 14 1
8%
Strålfors
2009
2010
2011
H1 2012
Mail
Broad oad Service Se ce Portfolio o to o Key services
Net sales per service area Q2 2012 LTM
Mail distribution Business communication and other mail services (distribution of mail items/letters weighing less than 2 kg)
14% Advertising services
Distribution of goods d
Distribution of unaddressed and addressed direct mail Combined media services Consulting services Material maintenance, supplier management, t inventories, i t i customer t deliveries
Home delivery services
Concept for home delivery of goods, food and beverages to consumers
Facility services
Outsourcing of management of external and internal mail items for e-commerce, city logistics, municipal distributions, medical logistics, etc
Newspaper distribution
Distribution of newspapers and periodicals
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Letters
27%
Advertisements and Newspapers
59% Other
Mail
Structural St uctu a Market a et Changes C a ges from o Digitization g t at o PostNord mail volumes, million units
Market position
3 000 -3%
2 500
~-5%
2 000 1 500 -12%
1 000
~-12%
500 0 2008
2009 Breve Danmark
2010
2011
2012E
Meddelande Sverige
f Ongoing paradigm shift with an increased number of communication methods f Co-ordinated initiatives in Nordic business and societies towards increased digitization f Structural change to continue given increasing range of communication methods and political ambition to accelerate digitization for the public f Mail volumes will continue to fall sharply in coming years,, towards new and lower normalized levels y
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f PostNord’s market shares for physical mail distribution and direct marketing span from 65-95%, depending on service and market f PostNord distributes close to 90% of domestic mail volumes in Sweden and 100% of domestic volumes in Denmark -3% f Largest direct competitor is Posten Norge (B i (Bring Citymail) Cit il) – focus f on pre-sorted t d mail il in large urban areas in Sweden
f Bring Citymail closed its Danish operations in 2010
Mail
Upholding Up o d g Margins a g s Net sales, SEKm
EBIT margin, %
10 000
-3%
10% 8%
8 000
6%
6 000 4%
4 000
2%
2 000
0%
0
-2%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
-4% -6% 6%
2008
2009
2010
2011
2012
Page 17 Note: PostNord reporting started from Q3 2008
2008
2009
2010
2011
2012
Logistics
O e of One o the t e Region’s eg o s Leading ead g Logistics og st cs Companies Key services and top 3 market positions Parcels Parcels B2B
#1 in SE and DK, top 3 in NO
Parcels B2C
#1 in SE and DK, #2 in NO and SF
Net sales per logistics service area Q2 2012 LTM
24%
Green Cargo Logistics
Solutions I Ni ht InNight
#1 in i SE and d NO NO, ttop 3 in i DK and d SF
3PL
Top 3 position in Scandinavia
47% 7%
22% Consignment freight/part loads
Top 3 in NO
Courier
#1 in DK
Parcels Solutions S l ti Solutions: G Green C Cargo L Logistics i ti (2011 nett sales) l )
Other logistics services #2 in NO, top 3-4 in SE Groupage/ pallets
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Other logistics services
Logistics
E-commerce co e ce is s a Key ey Revenue e e ue G Growth o t Driver for postal operators Parcel market growth pattern in a typical country
f Parcel market revenues now exceed revenues from mail market f National operators’ revenues from parcels soon to exceed revenues from mail f B2C parcell market k t revenues to t exceed d mail market revenues in 6-7 years f Growth in e-commerce is driving growth particularly ti l l in i lightweight li ht i ht parcels l f With unrivalled geographical network coverage, national postal operators h have competitive ii advantages d
Source: IPC/BCG: Focus on the Future, April 2012
19
Logistics
Building u d g the t e Region’s eg o s Strongest St o gest Service Se ce Network Logistic’s g ’Wheel of fortune’
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Low unit costs
Strong Nordic infrastructure
Standardization and focus on scale increase efficiency and allow for competitive pricing
• Cohesive Cohesive, standardized products in all countries. • High level of local presence and accessibility
Large volumes
Attractiveness
Attracting large volumes creates economies of scale advantages
• Business partner with customized and environmentally sustainable logistics solutions • Focus on simplicity, reliability and quality • Framework of standardized production and administration
Logistics
Acquisition cqu s t o of o Green G ee Cargo Ca go Logistics og st cs Green Cargo Logistics
Acquisition rationale
f
Sweden’s second largest and Scandinavia’s third largest company within third-party logistics (parts of or all of a customer’s supply chain management functions
f
Large potential market for logistics services in Sweden and Scandinavia. Current outsourcing levels are relatively low in EU comparison
f
Net sales of SEK 1 bn and operating profit of SEK 61 m in 2011
f
f
Total storage space of 260 000 m2 in modern premises in Stockholm, Norrköping, Gothenburg, Helsingborg and Copenhagen
Provides PostNord with a leading position in a market area with healthy growth despite the recent economic downturn
f
Exposure towards resilient product segments such as alcoholic beverages, fast moving consumer goods and pharmaceuticals
f
Proven track track-record record of delivering organic revenue growth and significant profitability growth
f
Strong revenue and EBITDA development
f
Strong customer relationships and low churn
A solid foundation for continued development p within a strong gg growth area
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Logistics
Growth G o t Trend e d in Recent ece t Quarters Qua te s Net sales, SEKm
EBIT margin, %
4 000
4%
3 000
2%
2 000
0%
1 000
-3%
-2%
0 Q1 2008
Q2 2009
Q3 2010
2011
Q4 2012
Page 22 Note: PostNord reporting started from Q3 2008
-4% Q1 2008
Q2 2009
Q3 2010
2011
Q4 2012
Strålfors
Restructuring est uctu g and a d Focus ocus on o Value a ue Creation C eat o Operations
f
f
f
Core business to help large companies to communicate with their customers in an effective and cost saving way Collects, processes Collects processes, stores and delivers customers’ information that is crucial to the running of their businesses Business in Sweden, Norway, Denmark, Finland, Poland, France and the UK
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Key service areas
f
Business Communication
f
Data Management (maintenance and development of databases)
f
Marketing Communication
f
Service Fulfillment (supply chain activities serving g customers with information and logistics handling)
-3%
Strålfors
Return etu to Profitability o tab ty in 2012 0 Net sales, SEKm
EBIT margin, % 10%
1 500
-3%
5% 0%
1 000 -5% -10% 10%
500
-15% -20%
0 Q1 2008
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Q2 2009
Q3 2010
2011
Q4 2012
-25% Q1 2008
Q2 2009
Q3 2010
2011
Q4 2012
Business Strategy
Page 25
Strategic Outlook
Roadmap PostNord 2015 Target picture Deliver on merger rationale f Leading Nordic logistics business f Meet USO requirements Create financial value f Sustainable growth f Improve I operating ti margin i f Effective capital utilization Lay the groundwork for a potential IPO p f Profitable mail businesses f Growth within logistics f Appropriate capital structure f Attractive dividend Cohesive group with strategic governance f Increased coordination f Improved efficiency Page 26
Strategies Changes to meet mail volume decreases and ensure profitability
Expansion within logistics – broaden offer and market presence
Develop profitable businesses that support mail business
Value maximization of Strålfors
Activities f Cost adjustments f Implementation of new production strategy f Dialogue Di l on tomorrow’s t ’ USO f Organic growth through additional sales and partnerships f Potential complementary acquisitions fC Complementary l t digital di it l services f New areas of application for existing production resources f Cost reductions in existing core business f Growth activities within Data Management Marketing Management, Communication, Fulfillment
Mail
Defending e e d g Profitability o tab ty a and d Cash Cas Flows o s Investments in sorting terminals
f Continued reduction of costs and adjustment of staffing – increasing cost base flexibility production strategy: gy Investments for increased f New p scaleability
New letter terminal in Rosersberg, Sweden New letter terminal in Hallsberg, Sweden Co p eted efficiency Completed e c e cy measures in terminal structure
–
Establishing a new terminal structure for the Swedish mail business, including investments in equipment to maximize i i automation t ti
–
Streamlining of terminal structure has already taken place in Denmark
–
Reinvestments in vehicles and equipment in Sweden and Denmark
f Developing sales channels and service points
Rationalizations and investments to ensure profitability and ability to deliver required service and quality - based on lower demand Page 27
Mail
Regulatory egu ato y Perspectives e spect es European postal operators face similar challenges in the light of digitization and the opening of postal markets Introduction of competition in the entire European postal market following EU’s third Postal Directive*
Digitization and changing methods of communication
Declining mail volumes and increasing competition
Possible ways for postal operators to deal with the challenge in the mail market
Adapt pricing to increase revenue per unit
Service changes to lower costs
Streamline production to increase productivity and thereby reduce unit costs
USO changes are being implemented in several European countries to harmonize regulation with the structural market changes Page 28
*Sweden was opened for competition already in 1993. Denmark was opened in 2011.
Logistics
Growing G o g Profitably o tab y Investments in terminals
f Broadening of service offering and Nordic market presence:
New logistics terminal structure in northern Sweden New logistics terminal in Veddesta, Sweden Capacity investment in Norway
1.
Organically within existing structures through additional sales, sales concept development and partnerships
2.
Through add-on acquisitions broadening service offering and/or geographical presence
3.
Supporting activities increasing integration and streamlining of sales, services, production, systems and administration
f Parallel efficiency measures to reduce unit costs and increase competitiveness
Completed streamlining of terminal structure in Denmark
Building g the Nordic region’s g strongest g logistics g operator p
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Financial Position and Funding Overview
Page 30
Financing a c g Roadmap oad ap PostNord 2015 f
A cash generating mail business and growth opportunities within logistics
f
gy for repositioning p g PostNord in keeping p g A clear strategy with market changes
f
Increasing investments – allowing for greater operational flexibility and scaleability
f
Substantial restructuring costs but underlying cost cuttings
f
Continued acquisitions
f
St Strong fi financial i l position iti
f
Aiming for greater financial flexibility
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Group G oup Sa Sales es and a d Earnings a gs SEKm Net sales
H1 2012
H1 2011
2011
2010
2009
19,480
19,743
39,466
41,669
44,663
-1
-7
-5
-7
-3
114
631
1,571
1,375
284
769
8 804
1,891 8
2,057
1,689 8
59
498
1,225
1,031
2,414
06 0.6
32 3.2
40 4.0
33 3.3
06 0.6
3.9
4.1
4.8
4.9
3.8
Change, %
EBIT Adjusted d d EBIT
Net profit1
EBIT margin, i %2 Adjusted EBIT margin, %2
Adjusted EBIT margin, %
Return on equity, rolling 12 months, %3
12% 10% 8% 6% 4% 2% 0%
6% 4% 2% 0% 2009
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2010
2011
H1 2011 H1 2011
H1 2012 H1 2012
1 2 3
2009
2010
2011
Includes capital gain of SEK 2,002 on the sale of shares in bpost in 2009 Includes Other income Excludes capital gain of SEK 2,002 on the sale of shares in bpost in 2009
H1 2012
Cost Management a age e t Cost reduction program for administration as of 30 Jun, 2012
Expenses, SEKm 50000 40000 30000
2/3 completed J Jun 30
20000 10000 0
f Cost reduction program to reduce administrative expenses by SEK 1 billion by end of 2012, set up in 2011
Personnel expenses* Transport expenses, other expenses, depreciation and impairments* Restructuring costs Restructuring costs
f In addition to ongoing rationalizations made within the group
Cost base lowered by y SEK 6.2 bn from 2009 to Q Q2 2012 LTM
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*Excluding restructuring costs
Stable Stab e Cas Cash Flows o s SEKm
H1 2012
H1 2011
2011
2010
723
671
1,634
1,824
Investing activities
-2,026
-767
-1,813
-1,199
Financing activities
1,789
-1,305
-1,353
-1,782
-368
-1,000
-1,000
-1,440
Cash flow for the period
486
-1,401
-1,532
-1,157
Li id ffunds, Liquid d end d off period i d
2 591 2,591
2 240 2,240
2 107 2,107
3 640 3,640
4.9
3.4
4.9
3.1
Cash flow from operating activities
of which dividend payout to shareholders
CAPEX, % of net sales
Cash flow from investing activities, MSEK1
Cash flow from operating activities, MSEK1
2 000
‐4 000 1 500 1 000
‐2 000
500 0
0 Q309‐Q210
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2010
2011
Q212 LTM
Q309‐Q210
1 Data starting from creation of PostNord Group. 2009 cash flow from investing activities excludes effect from the sale of shares in bpost
2010
2011
Q212 LTM
Solid So d Financial a c a Position os t o Net debt and net debt/EBITDA, SEK and times
1,0
2000
0,5
1000 0
0,0
‐1000
‐0,5
‐2000 2000
‐1,0 10 Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Net financial position SEKm
Jun 30, 2011
Dec 31, 2011
Dec 31, 2010
Cash and cash equivalents
2,591
2,240
2,107
3,640
Interest-bearing liabilities
3,252
1,146
1,098
1,454
Pension provisions
1,640
1,402
1,587
1,458
2,301
308
578
-728
41
46
47
46
Equity-to-assets Equity to assets ratio, % Fin. preparedness, SEK bn
Q311
Q112
Q212
4.6
f
Operating leases of SEK 7.3 bn, of which 6.5 relating to real property
f
Pension commitments of SEK 18.2 bn, whereof SEK 15.8 bn funded pension plans. Assets managed by Posten Pension Fund amounts to SEK 14.3 bn, consolidation 104%. Expected payments of SEK 1 bn in 2012 relating to benefit plans
f Aiming g for g greater financial flexibility y
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Q411
Major off-balance sheet items as at 31 Dec 2011 Jun 30, 2012
Net debt
Q211
Debt ebt Profile o e Debt overview as at 30 Jun 2012
Debt maturity profile as at 30 Jun 2012, SEK
Total value SEKm
Drawn value SEKm
Date of arrangement
SEK Revolving credit facility, 5y
2.0 bn
0 bn
Dec 2011
SEK Swedish Commerical Paper program
3.0 bn
1.2 bn
Apr 2012
SEK term loan
1.0 bn
1.0 bn
May 2012
DKK Realkredit funding over real estate (Post Danmark A/S), 20y
0.8 bn
0.8 bn
1995-2006
S di h MTN program Swedish
SEK 6.0 6 0 bn b
0 bn b
J Jun 2012
Credit
2 500
2 000
1 500
1 000
500
0 2012
Total drawn debt as at June 30, 2012
SEK 3.0 bn
Available committed facilities
SEK 2.0 bn
Short term loan maturities
Page 36
SEK 2.2 bn
2013
2014
Overdraft DKK Realkredit RCF SEK (undrawn)
2015
2016
2017
Beyond
SEK Term loan SEK Commercial Paper p
Sources Sou ces and a d Uses of o Capital Cap ta C h generation Cash ti f
f
Increase group profitability and cash flow from operations
PP&E investments of SEK 7-8 b expected bn t d in i 2012-2014 2012 2014
f Logistics M&A
When available, acquire accretive businesses in line with ith strategy t t t grow to profitably
f Restructuring est uctu g costs
SEK 2-3 bn expected in total in 2012-2014. Normal run rate t off 0.5-1.0% 0 5 1 0% off personnell expenses
f Shareholder remuneration
Dividend policy: 40% of net profit. Dependant on implementation of strategy and financial position
f Liquidity/buffer q y/
Finance policy: Payment readiness to exceed SEK 1,5bn
Release of capital by increasing capital efficiency
E t External l funding f di f
f Investments in operations p
Optimise capital structure by increasing indebtedness
Prudent assessment based on general macroeconomic development, mail volume development and other significant market changes Page 37
Funding u d g St Strategy ategy Funding g to contribute SEK 6-7 bn in 2012-2014
f
Intention to establish scaleable funding – will allow for short notice fund raising (acquisition agenda)
f
Diversified funding in order to maintain stability
f
Prioritize cost efficient funding in order to support core business efforts
Page 38
Purpose u pose of o MTN issue ssue f
Increase tenors, strengthen payment readiness
f
Diversify to capital markets funding
f
Build investor demand for follow-up issues
Page 39
Recap
Page 40
Key ey Investment est e t Highlights g g ts Markets
Regulated g mail market with attractive cash flow p profile. Logistics g market with g growth opportunities. Strong e-commerce growth driving demand for parcel services.
Position
Strong position as Nordic market leader. Comparatively high barriers to entry in mail. Opportunity to grow logistics market share.
Financials
Stable financial position. Proven ability to deliver margins and cash flows in a changing market k t environment. i t Additional Additi l rationalization ti li ti potential. t ti l
Ownership
Highly critical service in society. Stable governmental shareholder structure in mid-term perspective Change of control clause (51%). perspective. (51%)
Financial targets
Return on equity to exceed 10% over a business cycle. Equity-to-assets ratio of at least 35% Policy to distribute 40% of net profit. 35%. profit
Credit g rating
Page 41
Unrated. Shadow ratings by SEB (BBB+) and Danske Bank (BBB+).
postnord.com Investor Relations
Treasury
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