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Edited Transcript of POST.VI earnings conference call or presentation 7-Aug-20 1:00pm GMT

·36 mins read

Q2 2020 Oesterreichische Post AG Earnings Call Vienna Aug 8, 2020 (Thomson StreetEvents) -- Edited Transcript of Oesterreichische Post AG earnings conference call or presentation Friday, August 7, 2020 at 1:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Harald Hagenauer Österreichische Post AG - Head of IR, Group Auditing & Compliance * Walter Oblin Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance ================================================================================ Conference Call Participants ================================================================================ * Andre F. M. Mulder Kepler Cheuvreux, Research Division - Analyst * David Kerstens Jefferies LLC, Research Division - Equity Analyst * Najet El Kassir BofA Merrill Lynch, Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome and thank you for joining Austrian Post half year 2020 results. (Operator Instructions) I would now like to turn the conference over to Harald Hagenauer, Head of Investor Relations. Please go ahead. -------------------------------------------------------------------------------- Harald Hagenauer, Österreichische Post AG - Head of IR, Group Auditing & Compliance [2] -------------------------------------------------------------------------------- Good afternoon, ladies and gentlemen. Welcome to this conference call of Austrian Post, where we want to discuss this difficult second quarter and for the half year figures of Austrian Post. And I would love to hand over to Walter Oblin, our CFO and Head of Mail Division. -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [3] -------------------------------------------------------------------------------- Good afternoon, ladies and gentlemen. It's a pleasure to have the opportunity to give you an update on how Austrian Post is doing amidst COVID-19 and to present to you our results for the first half year of 2020. Let me start the presentation on Page 3, which is a reminder that as of 2020, we are reporting in a new segment structure with the aim to provide even more transparency. The 3 segments are, first, Mail, including predominantly our Austrian incumbent Mail business with Letter Mail, Direct Mail and Media Post. Second segment being Parcel & Logistics, including our partner networks in Austria and a number of Eastern European countries as well as other services along the value chain of e-commerce. And third, the new segment, Retail & Bank, which includes both our branch network as well as our bank operations, our financial services business, that we started as of April 1. Of course, moving to Page 4, COVID-19 was keeping us busy in a very turbulent Q2 this year. The 2 most important priorities were, first, to protect the health of our employees and our customers on the one hand; and second, to hold up against the challenge of being a provider of critical infrastructure in Austria, where we successfully maintained the nationwide logistics and branch network and our universal postal services for both our mail as well as our parcel business. To accomplish this, we took a number of measures to, again, protect the health of our employees. I don't want to go into the details of all these measures. I think the numbers on the right side -- lower right side of this chart will give you an order -- give you an idea of the order of magnitude of some of the efforts and measures that are in place and also of the costs associated with those measures. I think overall, we mastered this challenge well, again, maintained our service with high-quality throughout Q2 and, as a result, can also report today stable revenues compared to last year. At the same time, moving to Page 5, COVID-19 had a significant impact on our business from 2 ends. On the one hand, revenue was substantially impacted in the core business lines. To start with Letter Mail, Letter Mail was down 13% in Q2. To remind you, Austria went through a very severe and strict lockdown quite early on with stores, restaurants, hotels and so on closed for a number of weeks as of mid-March, causing also, particularly the public sector, to almost close down for a number of weeks. And corporate activity, of course, was also lower. As a result, Letter Mail declined compared to last year by 13%. Even more severely suffering was Direct Mail, where in the first weeks of the lockdown, 50% of revenue was lost, given that the non-food retailers were closed and, of course, did not send out direct mail. So the Q -- through the second quarter, volumes and revenues recovered to some extent. And as an average, we lost 25% revenue in Q2. On the Parcel side, the COVID-19 pushed revenues into record highs, 40% more volumes in Q2, which are the result of both the takeover of the DHL network as of August last year and substantially increased volumes due to COVID-19. These very high parcel volumes also fundamentally challenged our logistics infrastructure, which, of course, resulted in sorting loads and delivery loads that were far above our capacity. As a result, substantial additional costs had to be -- resulted from various measures to still maintain a high service quality. We had one larger infection chain in March -- in May that led us to pretty much send home the whole staff of 2 logistic centers and to ask the Austrian federal army to assist in running these 2 sorting centers. We successfully continued with operations but had certain delays, had damages and had additional costs due to this infection chain. In total, COVID-19-related costs ranging from protective equipment to additional logistics costs for the reasons mentioned totaled to about EUR 20 million in Q2. Moving to Page 6, which shows you the group revenue development. Given all these developments, group revenue almost exactly at last year's level plus 0.1%. However, with fundamental changes in the composition of our revenues, Mail revenue down 10.5% or in absolute terms, EUR 70 million. Down also the Retail & Bank revenues, this predominantly to the fact that we -- that corporation with our former bank partner ended end of last year. And last year, we still had EUR 18.8 million of revenues from this corporation, whereas in the first half year of this year, we only had 1 quarter of bank operations, of course, resulting in substantially lower revenues. This total loss of almost EUR 85 million revenues was compensated by a strong growth in Parcels, plus EUR 85 million or plus 30%. Again, the sum of organic growth amplified by COVID-19 and the additional volumes from the takeover of the DHL network. On an EBIT level, unfortunately, not the same stability is on the revenue level. EBIT for the first 6 months down 55.2%. In our core logistics network, so EBIT before the EBIT of the Retail & Bank segment, EBIT down a good quarter, 27%, substantially impacted, of course, by COVID-19. The total group COVID-19 effect as shown on the lower right side is roughly EUR 45 million; EUR 20 million already mentioned, additional costs; EUR 25 million lost earnings and contribution margins, in particular in the Mail segment, but also in the Retail & Bank segment. So the -- you see here the change in the different segments, Mail down EUR 30 million, Parcel up EUR 3 million, corporate down EUR 2 million. And our Retail & Bank segment anticipated,a substantial start-up loss, given the ramp-up of our new bank. However, the start-up loss, a little bit higher than expected, given the fact that we launched the bank during the lockdown. We'll come to that later. Let me now, before we get more details into the numbers, give you an update on the implementation of our strategy. And in particular, let me also highlight how our different core business lines and core business activities were impacted by COVID-19, starting with the Letter Mail business on Page 10. Letter Mail. Of course, in the structural downward trend was 4% to 5% decline until Q1 this year. In Q2, decline in Austria volume-wise was about 13%. Revenue-wise, we'll come to that later, a little bit lower. You see the monthly development on the right side of this picture. And I think this should your comfort, and it gives us at least comfort that the worst is behind us. We have seen mail volumes coming back now every month. However, in June, we were still below what we would have expected without COVID-19. We also, Page 11, implemented a -- we already communicated postal rate adjustments as of April 1. Basically, an inflation adjustment with the -- this tariff adjustment was, I think, well accepted with our customers and supported our revenues a little bit given the strong decline in volumes. Austria, and this is the message of the side of this chart, still remains one of the cheapest European mail market of significant size, very close to Germany and with only smaller countries below the rates that we charge in Austria. I think also indicating and implying that there is potential to further increase prices once volumes decline faster. Page 12 gives you a few more details on how Direct Mail developed in the first half of this year. Q2 down, volumes down about 25%. Some impact already visible in March, of course, in the second half of March, the lockdown started. Therefore, Q1 also already impacted, as communicated in May. I think also here, you see that the worst should be behind us, and we have seen both addressed as well as unaddressed Direct Mail volumes coming back in an encouraging way. However, we remain cautious as the nonfood retail segment will remain under pressure in the second half of this year given the subdued economic activity in Austria at large. Moving to our Parcel segment. Very positive volume development and, again, here on the right side of this picture, you see the monthly development. You see that in April, we really had an explosion of volumes, almost or more than 50% above last year's volumes, fundamentally challenging, as already mentioned, our operations. In May, with still volumes more than 40% above last year, we were hit by an infection chain in the 2 big sorting centers around Vienna, our 2 most important ones. This little crisis, that I think you can call it that way, is now behind us. We are back to normal quality levels and still have substantially higher volumes than last year. We -- as a result, we also have slightly increased our forecast for the full year. We do now expect at least 150 million parcels. And there's good volume development that we saw in Austria, shown on Page 14. We saw also in Eastern Europe, where in all of our Eastern European subsidiaries, we had record growth of around 34% in Q2, 24% in the first half year also was good impact on EBIT development. The other important highlight of Q2 was that we signed a contract in Turkey to increase our shareholding in our cargo from 25% to 80%. Page 15 gives you a few facts about Aras Kargo. I don't want to go into the details of those. I think we remain convinced that the Turkish parcel market is a very attractive one. The volume development over the last months has confirmed this. We also remain convinced that Aras Kargo is well positioned to capture profitable growth from this positive market development, despite, of course, the macroeconomic and political volatility that we've seen in this market. The closing of this transaction is expected to happen during the next weeks. And we will further update you on this transaction. Let me move to our new bank. bank99 is the brand name. I think we explained the strategy to offer a very focused product offering for Austrian retail consumers, leveraging the platform of Austrian Post and particularly our branch network, where we are able with relatively low marginal cost to offer physical personal services to consumers who appreciate this. Of course, in addition to a competitive digital banking platform, we decided to go ahead with the launch of this bank during the lockdown. Successfully had built this bank with -- from scratch pretty much in less than 12 months, successfully launched the bank on April 1 and, in the meantime, have acquired more than 40,000 customers. I think a very encouraging development, confirming that there is an opportunity for Austrian Post in the Austrian financial services marketplace and that we are able to provide an attractive offering to the more than 1 million Austrians who were used to -- who were and are used to use financial services offered in post offices and postal (inaudible) postal partners. Page 17 shows you that we will now, almost every quarter and every month, introduce new services. We successfully launched current account product, the savings product, credit card products. With the launch on April 1, have now this week added services like Apple Pay or wallet payment services among the first banks in Austria to do this. And the page shows you the core products that we will add on the one hand to win additional customers also in a younger, more digital -- more digitally oriented segments and on the other hand, to leverage now the customer base that is building up. Moving to Page 18. Page 18 gives you an update on our e-commerce marketplace for Austria with the brand name shopping. shopping was built up to provide a platform for Austrian retailers and producers to sell online to Austrian consumers and on the other hand, a platform for Austrian consumers to buy from Austrian retailers and producers. COVID-19 has presented a strong opportunity for shopping to accelerate its growth, and we are pleased to see that post accesses as well as parcel volumes increased by a factor of 4 to 5 compared to last year. And we are optimistic that shopping now is a brand in the marketplace well known to many Austrian online shoppers and will continue to grow its retailer, consumer and, of course, revenue base. Moving back to our core business on Page 19, coming to the third pillar of our strategy, increasing capacity, efficiency and flexibility of our operations. We decided, despite all the challenges that the COVID-19 situation brings for us and for our society, to go ahead with the expansion of our capacity and are pleased to be able to tell you that we opened another new sorting center in the South of Austria, called Kalsdorf close to Graz, replacing a smaller and older logistics center. This will help us to become more efficient in the second half and to cope better with high parcel volumes. This page also showed you that we are making great efforts to provide logistics services in a sustainable way. We implemented an innovative green space concept here for this new logistics center. Page 20 shows you that there is a pipeline of further projects, which are in different phases of planning or construction. We plan to bring to operation a new large postal base in the mid of Austria in the region of Salzburg, a place called Thalgau, during Q3, kind of a smaller logistics center. And then there are 2 bigger projects in the West Austria, in the Voralberg, a very far western part of Austria and then Tirol. And then for '21 and '22, we plan to increase the capacity in 2 of the largest of our sorting centers in Upper Austria and in Vienna. We also have continued in the last months with the transformation of our staff structure. Moving to Page 21. You see here that the change from a civil servant based staff structure to the new collective wage agreement is running at accelerated pace. We had a quite a strong change in the last 12 months. Despite the strong increase in parcel volumes in the first half year, we only had 100 more FTEs in our full workforce, which I think also shows you that productivity is continuing to increase. And of course, this development will continue over the next months and years. Page 22 gives you an update on the development of our self-service solutions, which we have installed countrywide and which has proven to be even more important than before in the lockdown phase and -- which are a clear source of competitive differentiation in the Austrian postal market. To close, let me close this chapter with, I think, also a very positive development. We, in the last weeks, launched the second edition of a Crypto Stamp, an innovative product for the philately market, where, in addition to the physical stamp, there is a digital twin in the blockchain. We very quickly sold out on this second edition for -- so the whole theme was the hunt for the Golden Unicorn for a stamp motive 60,000 each with a EUR 7 price tag, which is sold out. And we also sold a limited edition of the stamp with the highest nominal value in the world with a 1-gram gold bar included. In total, a very, I think, innovative product in enhancing our reputation in the philately market but also providing significant revenues in Q2. Yes. Let me now move to the group results in the first half of 2020. Page 25 summarizes the key financial indicators. Revenue, as already mentioned, stable at EUR 982 million; margins, as already mentioned, down substantially; EBITDA at 11.4%; EBIT margin for the group at 4.9%; for the logistics business at 8.1%; earnings per share, 43% below last year at EUR 0.66 per share. We have remained cash generative with cash flow of EUR 45.3 million and continue to operate a conservative and stable balance sheet. Nominally, equity ratio came down, but this is pretty much due to balance sheet expansion given customer deposits in our bank. Page 26 shows you our group P&L. I already commented on the revenue development. I think -- let me just highlight here a few developments. Raw materials and other operating costs up given the strong parcel volumes, with additional transport and subcontract delivery companies, of course, increasing. Staff costs even down a little bit, EUR 12.6 million, mostly caused by operational staff costs down. The other thing I would like to highlight is a positive one-off in other financial -- in the other financial result. We successfully sold our stakes in flatex, resulting from a corporation which we did not implement with the flatex group, where we had bought a significant stake in flatex group. We sold this, resulting in a realized total gain from this transaction of EUR 3 million and a few million more in 2020 as stake was valued down in 2019. Let me now comment on the development of our core segments, starting with the Mail division. Page 27 shows the relevant revenue development of the core product segments. Letter Mail and Mail Solutions in the first 6 months, down 6.7%. This is the combination of a Q1 that was pretty much in line with the development that we have seen last year. Structural decline of Mail volumes and a COVID-19 Q2 with volumes down in Q2, as mentioned, at 13% and the impact of a positive impact of our tariff adjustment. On the right side, Direct Mail and Media Post down 16.7%. Again, here in Q2, revenue was down 25%. And I already explained the reasons for that. P&L of Mail division on Page 28. Given the high fixed-cost share of our mail operations, I think we are quite pleased that the impact of EUR 70 million, lower revenues only resulted in a decline in our Mail EBIT of EUR 30 million. Of course, many measures to contain costs despite the additional COVID-19 burdens and also an increased utilization in our last mile where we apply in a large part of Austria integrated delivery, meaning that the postmen brings those mails and parcels. And here, we saw a good hedge of our business in the last mile with Parcel taking up more of the utilization of this part of our delivery network compared to last year. Page 9, moving -- Page 29, moving to Parcel & Logistics. Revenue up 30%. This is predominantly coming from Austria where revenue was up 33%. But for the already mentioned reasons, roughly 20% of that coming from -- 18% to 20% of that coming from the takeover of the DHL volumes, which started August 1. So this will -- this effect impact compared to prior year now ends with the end of July. We'll get back to a more organic development, but this substantially increased revenues in the first half year, very good development also in Central and Eastern Europe in our Parcel networks there, 23% growth in Q2. And we are optimistic that these companies will develop well also in the second half of this year. Page 30 shows you our segment P&L for the Parcel & Logistics division. Revenues up 30%, EBIT up 22%. Of course, I think we are not satisfied with this development. But this EUR 18.2 million includes roughly EUR 5 million of COVID-19-related costs, most of them, in our view, nonrecurring. And as a result or given this, we are optimistic that we can improve our margin in the Parcel & Logistics business in the second half substantially. Page 31, Retail & Bank division. Revenue down, given the termination of our corporation with BAWAG P.S.K., down 35%. Our income from financial services, down from EUR 18.8 to EUR 6.2 million. The pure branch services slightly up EUR 22 million after EUR 20 million last year. And EBIT-wise, as already mentioned, we, as expected, have a substantial loss in this -- ramp-up loss in this segment with the ramp-up loss being higher than expected due to COVID-19, which, despite the good customer ramp-up, had substantial negative impact on nonbank clients, in particular, on ATM fees -- things like ATM fees or wiring services in our branch network. Page 33 gives you an update on our balance sheet. We continue to operate a conservative and robust and healthy balance sheet, which I think is even more important in the difficult economic environment. These days, our equity, we -- our balance sheet continues to have a high equity position with EUR 600 million. The decrease of roughly EUR 100 million in equity is due to the payment of our dividend. We paid out EUR 140 million as of June 30 after we had our virtual AGM mid of June. And as said, we continue to have a strong equity position. The whole -- the balance sheet expanded given the start of our financial services activities. We try to make these financial assets and financial liabilities from our financial services business transparent by adding a separate category here in our balance sheet, both on the equity and liability side as well as on the asset side so that you can easily see what our balance, what is the -- what are the balance sheet positions from our industrial business and what results from our financial services business. From financial services business, an increase of EUR 240 million in customer deposits and cash positions related to our cash payout business in our branch networks, similar position of similar order of magnitude on the asset side. I think the industrial part of our balance sheet quite stable, quite unchanged. We continue to have a substantial cash surplus, liquid financial resources of EUR 260 million even after the payout of our dividend, and we are free of financial debt. Page 34 gives you an update on our cash flow development. I think core message here is EUR 45 million operating free cash flow compared to EUR 99.6 million last year, given that this is also kind of the cash flow line that we always -- where we always try to cover our dividend payment. I think the message you should take away here is that also from a cash flow perspective, we are well under way to have a cash flow that would justify an attractive, however, lower dividend proposal for the full year 2020. Let me close with our outlook on Page 36. After we discontinued our guidance mid-March, we now are trying again to give you an indication where our full year's revenues and earnings should come out for the full year. In terms of market environment, we assume here a slow and steady economic recovery during the year. We assume here that the COVID-19 situation in Austria remains relatively stable. Of course, we do not experience a second severe lockdown but regional clusters that are -- that quickly can be contained, which is what we see right now. And that I said, the economy recovers, as it has done in May, June and also in July. As a result, we expect Letter Mail and Direct Mail to recover close but not fully to pre-crisis levels. And on the other hand, we also expect that we continue to see positive volume developments from COVID-19 in our B2C Parcel business again, with the COVID-19 impact coming down as we've seen volume growth coming down from the peaks in April and May. But we expect that there is a sustained COVID-19 plus for our Parcel business. Revenue-wise, this translates into a forecast of roughly stable full year revenues where Mail should decline in the upper single-digit range revenue-wise. And Parcel & Logistics revenues should grow order of magnitude of about 20%. Of course, the Retail & Bank division will continue to be revenue-wise below the prior year level due to the start of the bank99. We also do expect the closing of Aras Kargo during the next week. And this revenue that will result from the full consolidation would come on top of this forecast of stable revenues. CapEx-wise, our guidance is unchanged compared to pre-corona guidance. We expect maintenance CapEx of about EUR 70 million and gross CapEx of more than EUR 50 million as well as one or the other strategic planned acquisition. Earnings-wise, we target an EBIT for the pure -- or the core logistics business of our group, excluding the Retail & Bank division, of at least EUR 160 million. I think this should be the -- yes, the minimum EBIT that we target for this year under the assumptions I've mentioned. The group impact will -- could benefit from the positive effect, depending on the timing of the full consolidation of Aras Kargo. That will, of course, then be burdened by the start-up losses from the start-up of bank99. I think current view is that this will add up to roughly EUR 40 million. For 2021, of course, we expect that our earnings will improve for all divisions. The Mail should benefit from sustained recovery on -- our Parcel business should benefit from streamlined operations and increased productivity and the lack of one-off costs resulting from COVID-19. And also, of course, the ramp-up of our bank should continue, and start-up and ramp-up losses should decline in the years ahead. With that said, let me to close with reminder of our commitment to being an attractive dividend stock. We confirm this commitment with maintaining our dividend for 2019 despite COVID-19, which we paid out at EUR 2.08 end of June. And I think management is also committed to propose a dividend in line with earnings for 2020. So thank you very much for your attention, and we're now happy to take your questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question is from the line of David Kerstens with Jefferies. -------------------------------------------------------------------------------- David Kerstens, Jefferies LLC, Research Division - Equity Analyst [2] -------------------------------------------------------------------------------- A couple of questions, please. First, on your letter volume. I think if you combine the addressed mail and marketing mail, you were down in line with your peers. Whereas normally, you would expect to do somewhat better. Was the 13% decrease in addressed letter volume, was that worse than expected? And do you see some accelerated e-substitution now because of COVID-19? And would you expect also to be a number worse than the 5% you were previously guiding for the second half of the year? Secondly, on the parcel volume growth number of 40%, does it imply that your underlying growth was around 20%? Do you have an indication of what kind of market growth you saw in the second quarter? Was -- that number sounds quite low if you look at what some of your peers have recently reported. And was it because you had some bottlenecks in your capacity? Or is it a reflection of some further in-sourcing by your largest customer? And then maybe another question on the timing of the flatex sale. Can you confirm when that stake was sold and at what price? And I think in the first quarter, there must have been a revaluation in your interest line and a book gain in the second quarter. Can you please confirm the amounts for the total revaluation gain and the book gain on that stake? -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [3] -------------------------------------------------------------------------------- Yes. Thank you, David, for your questions. I think on Letter Mail volumes, I think it's really too early to have a clear view on how COVID-19 will in the longer -- in the medium and longer-term impact mail volumes. I think we -- as I said, we have seen recovery in the month of June and July. Still, we remain cautious as it's a little bit unclear what is now catch-up volumes of letters and transactions that were not standing given the disclosure of public offices in -- during the lockdown and what is a sustained effect. I think we'll be able to provide more clarity around Q3. I think for the second half, we would expect mail volumes to decline compared to last year, maybe around 1 to 3 percentage points higher than the 5% that we have seen in previous years. -------------------------------------------------------------------------------- David Kerstens, Jefferies LLC, Research Division - Equity Analyst [4] -------------------------------------------------------------------------------- That's very clear. -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [5] -------------------------------------------------------------------------------- An assumption and -- which has to be confirmed in the next month. On the parcel side, yes, we've seen around 40% volume development in Q2. 20% of that was DHL volume or a little bit less than 20%. So we saw net over the first -- over these 3 months, a net organic increase of around 20%. Total market growth is probably a little bit higher, given that we have our largest customer building up its own delivery in selected areas in Austria, in particular around Vienna. We do not have good transparency about how this buildup will continue, but I think it's fair that it will continue and there will be further in-sourcing steps done as already communicated before. On flatex, this was not a onetime transaction. We sold our shares over the first 4 to 5 months. Total realized gain on the full transaction was EUR 3 million, and I think the gain in this year's books was around EUR 3 million to EUR 4 million higher. That's -- if you are interested in the precise number, we can provide that later on. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- (Operator Instructions) The next question comes from the line of Najet El Kassir with Bank of America. -------------------------------------------------------------------------------- Najet El Kassir, BofA Merrill Lynch, Research Division - Research Analyst [7] -------------------------------------------------------------------------------- Three questions, please, for me. First is what price/mix impact have you seen on your Parcel business? And secondly, what is the level of loss that we should expect for Retail & Bank, given that the initial guidance was about EUR 35 million for the full year, and you're already at almost EUR 29 million? And my last question is, again, regarding Parcel. Revenue has increased by EUR 51 million, and the EBIT has only increased by EUR 1.3 million. I just wanted to understand the reason of such a small drop-through and how we should think about it going forward. -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [8] -------------------------------------------------------------------------------- So thank you for your questions. Pricing impact on Parcel business, I think was the first question. So there is a moderate, quite positive price impact on some of our business accounts resulting from efforts that happened before the crisis on the Retail side. We had the volumes but no price impact. We did not want to utilize this situation where we had a very visible and good role in the public space during the lockdown. And of course, we also have to get approvals from the regulator to get us a price increase. I think that was the first question. The second question was the bank. I think, as I said, we do expect an order of magnitude of ramp-up losses for the Retail & Bank segment of around EUR 40 million. The question was why -- or is it possible with already EUR 28 million of losses booked? And I think the answer is we only had one early quarter of operations. We have 2 more to follow with, hopefully, revenues from acquired customers but also from a recovery in volumes from one non-client business in our Bank & Retail network. And third, we also had one-off buildup costs in the first quarter, which will not recur. Then I think the second -- the third question was on Parcel profitability, and may you -- may I ask you to repeat that question as I've not fully... -------------------------------------------------------------------------------- Najet El Kassir, BofA Merrill Lynch, Research Division - Research Analyst [9] -------------------------------------------------------------------------------- Yes. In the quarter -- in the second quarter, revenue has increased about EUR 51 million. The EBIT only increased by EUR 1.3 million. You have not -- I'm just wondering why there is such a small drop-through. -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [10] -------------------------------------------------------------------------------- Yes. I tried to give some flavor on that question. So the short answer is that we have substantial additional costs resulting in COVID-19, at least EUR 5 million in our Parcel & Logistics business. This is not counting for the inefficiencies from high volumes. This is just a pure direct COVID-19 impact from protective equipment, up to additional costs when we had to ask the Austrian federal army for support. If you adjust for that, you end up with the margins for the first half year that would be around 1% higher for the Q2, which would be around 2% higher. And I think for the second half, assuming that most of these one-off costs are not recurring, I think we would expect our positive margins in the second half to improve to around 6.5% order of magnitude. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- At this time, we have a follow-up question from the line of David Kerstens with Jefferies. -------------------------------------------------------------------------------- David Kerstens, Jefferies LLC, Research Division - Equity Analyst [12] -------------------------------------------------------------------------------- Just to follow up on the costs that you reported in the Parcel business of EUR 5 million, how does that compare with the total that you mentioned in the presentation of EUR 20 million in your Logistics business? Was that for the Mail and Parcel operations combined? And in Parcel, only EUR 5 million? Or was the EUR 5 million netted against the incremental revenue that you have as a result of COVID 19, the EUR 40 million? -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [13] -------------------------------------------------------------------------------- Yes. The EUR 20 million is for the whole group. We -- of course, also including our mail operations, including our retail network, including our corporate staff, this ranges from premiums that we paid to compensate for our employees for the great job they did during the lockdown when they were going out to deliver mail, parcels into -- operating in our retail networks when everybody else was in the home office or not working at all, protective equipment for 20,000 people, [marked] disinfectionary equipment and so on, plexiglass walls in our retail network. I hope that answered the question. Yes? -------------------------------------------------------------------------------- David Kerstens, Jefferies LLC, Research Division - Equity Analyst [14] -------------------------------------------------------------------------------- And is that for the second quarter only or for the first half? Just to be clear. -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [15] -------------------------------------------------------------------------------- I think that is for the first half, but most of that is in Q2. -------------------------------------------------------------------------------- David Kerstens, Jefferies LLC, Research Division - Equity Analyst [16] -------------------------------------------------------------------------------- And against the net stable revenue, so you did not have a net revenue benefit from COVID-19. -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [17] -------------------------------------------------------------------------------- I don't fully understand the point you're making. I'm sorry. -------------------------------------------------------------------------------- David Kerstens, Jefferies LLC, Research Division - Equity Analyst [18] -------------------------------------------------------------------------------- Your parcel volume clearly benefited from the pandemic, but your mail volume suffered. But the net effect was 0, right, because you had stable revenue in the first half. So it's a net number, the EUR 20 million. -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [19] -------------------------------------------------------------------------------- The EUR 20 million is a cost -- additional costs related to COVID-19, direct -- really direct COVID-19 additional costs. We're not talking about contribution margins. This come on top. On Page 7, we try to give an indication about the order of magnitude. So where we say it's about EUR 25 million, the change of revenues from losing higher-margin Mail business and to compensate this with lower-margin Parcel business. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- The next question is from the line of Andre Mulder with Kepler Cheuvreux. -------------------------------------------------------------------------------- Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [21] -------------------------------------------------------------------------------- A couple of questions. I could not understand what your answer was to the expected start-up costs for the bank for the full year. And maybe you can also repeat in which year you see the breakeven happening for the bank? Then on Aras, you're now the majority. Anything that you would like to change in that company? Second question to that, do you have the numbers for the first half, either the rise in sales in euros or in the Turkish pound? And last and possibly the $1,000 question. On dividend, it's very likely that your profits will go down, let's say, to maybe EUR 1, EUR 1.30 per share or so. Would you be prepared to pay more than 100% of your profits, also looking at your financial ratios. Or would that really stop there? -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [22] -------------------------------------------------------------------------------- Well, thanks, Andre, for your questions. I think the first on the bank loss, I can only repeat our expectation at this point in time is around EUR 40 million ramp-up loss this year. Meanwhile, the second half should do much better than the first half. Also given some one-offs in the first half and also in the second half, the breakeven we target was 2023. And of course, the target is in the years when we do make substantial steps in reducing ramp-up loss which leads to breakeven in 2023. On Aras, I think I ask you for your understanding that before we close this transaction that we are not in a position to provide details about the financial development, but I think there has been a very good financial development of the company both revenue-wise as well as profit-wise. And we are really optimistic about the strong position Aras Kargo has in the Turkish parcel market about the performance that the company will take, in particular in the last 18 months. And on dividend, I ask also for your understanding that at this point in time, we are not able to give any guidance on the details of our dividend payment, but I think the development in the past where we had a formal dividend policy of paying out 75 -- at least 75% of net earnings and reality paid out close to 100% of net earnings should be a good indication for that could happen or what could be management's proposal for 2020. -------------------------------------------------------------------------------- Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [23] -------------------------------------------------------------------------------- But in terms of the dividend policy, you're really looking at the bottom line. You don't adjust for any numbers also. -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [24] -------------------------------------------------------------------------------- I think the formal as well as practical policy was to look at net earnings, earnings per share and then have the dividend highly correlated with that number. -------------------------------------------------------------------------------- Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [25] -------------------------------------------------------------------------------- And coming back to your forecast, you said the other parts ex the bank would be earning at least EUR 160 million. You're now saying EUR 40 million for the bank. What kept you from just saying that the EBIT will be at least EUR 120 million for the whole of the group? -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [26] -------------------------------------------------------------------------------- Well, there is another variable that is also, I think, mentioned in the outlook, which is Aras Kargo, where we are currently -- I'm clear about the timing of the closing, which also could have a positive effect, but I agree with you it's been a quite simple -- it's quite simple mathematics, yes. -------------------------------------------------------------------------------- Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [27] -------------------------------------------------------------------------------- All right. One question on Eastern Europe. Maybe you've seen an increase in sales of 22%, but volumes were up 34%. I think last year, those developments were, let's say, parallel. Now we're seeing that volume development is stronger than, say, i.e., there's a negative price/mix effect. What has caused that? -------------------------------------------------------------------------------- Walter Oblin, Österreichische Post AG - CFO and Deputy Chairman of the Management Board and Deputy CEO of Mail & Finance [28] -------------------------------------------------------------------------------- I think the core reason is that these companies are predominantly coming from a B2B focus and strong growth has come from B2C, which has lower revenue per parcel and also is predominantly a mix impact. Product-wise, this -- all these companies have done very well. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- (Operator Instructions) At this time, I see no further questions, so I hand back to Harald Hagenauer for closing comments. -------------------------------------------------------------------------------- Harald Hagenauer, Österreichische Post AG - Head of IR, Group Auditing & Compliance [30] -------------------------------------------------------------------------------- Thank you, ladies and gentlemen, for participating in this call. We hope to hear or see you in the next coming weeks. Maybe it's possible during [visiting] or virtual roadshow in the next month. Have a nice day and have a nice weekend. Bye-bye. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.