EANS-News: AUSTRIAN POST Q1–3 2018: PARCEL GROWTH COMPENSATES FORMAIL DECLINE

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Quarterly Report

Vienna, November 15th 2018 –

Revenue

Revenue increase of 0.8% to EUR 1,416.4m in the first three quarters of 2018
Parcel growth (+11.5%) compensated for the decline in the Mail & Branch Network Division (-2.6%)
Earnings

EBIT up by 1.5% to EUR 141.9m
Earnings per share of EUR 1.56 (-0.8%)
Cash flow and balance sheet

Higher cash flow due to special payment by BAWAG P.S.K.
Conservative balance sheet structure with low level of financial liabilities
Outlook 2018 and 2019

* Targeted stability in revenue and operating earnings

Austrian Post’s Group revenue in the first three quarters of 2018 improved to
EUR 1,416.4m, comprising a year-on-year increase of 0.8%. Growth in the parcel
business (+11.5%) compensated for the decrease of revenue in the Mail & Branch
Network Division (-2,6%).

The Mail & Branch Network Division accounted for 72.3% of total Group revenue.
The mail business was characterised by a fundamental decline in addressed letter
mail volumes due to electronic substitution, along with lower direct mail
revenue compared to the strong advertising business in the previous year and the
structural reduction in financial services revenue. In turn, the new product and
postal pricing model offering customers the choice between time-critical and not
time-critical items since July 1, 2018 has positively impacted the division’s
revenue development.

The Parcel & Logistics Division generated 27.7% of Group revenue in the period
under review against the backdrop of an ongoing upward trend. The 11.5% revenue
increase was primarily driven by organic volume growth in Austria. Austrian Post
profited from dynamic volume growth related to the ongoing online shopping
trend. The implied competition and price pressure remain high. „We are
optimistic that we will be able to continue maintaining our strong position in
this highly competitive market thanks to our outstanding delivery quality and a
broad offering of individual customer solutions“, states Austrian Post CEO Georg
Pölzl. A capacity expansion programme was launched to enable the company to
handle the steep increase in parcel volumes in the future on the basis of
expanding existing sorting capacities as quickly as possible. The ground-
breaking ceremony for the new parcel centre in Hagenbrunn in the north of Vienna
took place in July 2018. Preparations are underway for construction of a new
logistics centre in Kalsdorf near Graz. Austrian Post is also steadily pressing
ahead to enhance its service offering based on self-service and online solutions
to make it even easier and more convenient to send and receive parcels.

It is important for Austrian Post to roll out a new nationwide financial
services business by the beginning of 2020 alongside its regular mail and parcel
operations. An important step in this process is the implementation of a banking
joint venture with FinTech Group AG.

These targeted growth investments should enable Austrian Post to safeguard its
strategic positioning, whereas the cash flow from operating activities will
continue to be used for investments in the operating business and maintaining
the attractive dividend policy.

On the basis of the solid revenue development combined with strict cost
discipline, Group EBIT totalled EUR 141.9m, implying a year-on-year increase of
1.5%. This solid development in the first nine months of 2018 should enable
Austrian Post to maintain its clear capital market positioning as a reliable
dividend stock. „Reliability and stability towards our shareholders and other
stakeholders of our company remain the focal point of our strategic activities,
and we want to continue along this path“, adds CEO Georg Pölzl. Accordingly,
Austrian Post aims to achieve a stable development in revenue and operating
results for the entire year 2018 in line with the previous year.

The entire report is available on the Internet at www.post.at/ir –> Reporting.

KEY FIGURES

Change
EUR m Q1-3 20171 Q1-3 2018 % EUR m Q3 20171 Q3 2018
Revenue 1,404.7 1,416.4 0.8% 11.7 451.0 461.1
Mail & Branch 1,055.3 1,027.3 -2.6% -28.0 333.9 332.3
Network
Parcel & Logistics 352.4 392.9 11.5% 40.4 118.1 130.2
Corporate/ -3.1 -3.8 -24.1% -0.7 -1.0 -1.4
Consolidation
Other operating 43.2 73.9 71.1% 30.7 15.5 22.9
income
Raw materials,
consumables and -296.5 -313.3 -5.7% -16.8 -100.2 -107.0
services used
Staff costs -744.8 -756.9 -1.6% -12.1 -230.4 -240.4
Other operating -206.7 -211.3 -2.2% -4.6 -80.0 -73.4
expenses
Results from
financial assets -1.1 -1.7 -57.1% -0.6 -0.4 -0.5
accounted for using
the equity method
EBITDA 198.7 207.1 4.2% 8.4 55.4 62.8
Depreciation,
amortisation and -58.8 -65.2 -10.8% -6.3 -17.7 -25.9
impairment losses
EBIT 139.9 141.9 1.5% 2.0 37.7 36.9
Mail & Branch 200.0 199.0 -0.5% -1.0 55.1 60.3
Network
Parcel & Logistics 28.9 26.6 -8.0% -2.3 10.0 6.3
Corporate/ -89.1 -83.7 6.0% 5.3 -27.3 -29.7
Consolidation
Other financial 0.6 4.2 >100% 3.6 0.7 1.0
result
Earnings before tax 140.6 146.2 4.0% 5.6 38.5 37.9
Income tax -34.7 -40.9 -17.9% -6.2 -8.8 -8.5
Profit for the 105.9 105.3 -0.6% -0.6 29.7 29.4
period
Earnings per share 1.57 1.56 -0.8% -0.01 0.44 0.43
(EUR)2
Cash flow from
operating 166.5 252.5 51.6% 85.9 57.6 79.1
activities
Investment in
property, plant and -49.5 -86.2 -74.3% -36.8 -21.5 -18.9
equipment (CAPEX)
Free cash flow 115.9 129.6 11.9% 13.7 52.0 25.6
Free cash flow
before
acquisitions/ 135.2 196.9 45.6% 61.7 42.1 62.8
securities and
growth CAPEX3


1 Adjustment of revenue in segment reporting and adjustment of the recognition
of profit and loss in the income statement resulting from the disposal of
financial assets
accounted for using the equity method, recognition is carried out under other
operating income or expenses.
2 Undiluted earnings per share in relation to 67,552,638 shares
3 Q1-3 2017, Q3 2017: Free cash flow before acquisitions/securities and new
corporate headquarters

EXCERPTS FROM THE GROUP MANAGEMENT REPORT:

REVENUE DEVELOPMENT IN DETAIL

In the first nine months of 2018, Group revenue of Austrian Post improved by
0.8% to EUR 1,416.4m. Revenue growth of 11.5% in the Parcel & Logistics Division
compensated for the 2.6% revenue decline in the Mail & Branch Network Division.

The Mail & Branch Network Division accounted for 72.3% of Group revenue during
the period under review. The decline in divisional revenue during the first
three quarters of 2018 was due to the fundamental decrease in addressed letter
mail as a result of electronic substitution, lower direct mail revenue compared
to the previous year and the structural decline in the financial services
business. In turn, the new product structure, expansion in the area of Mail
Solutions and growth driven by increased international e-commerce volumes helped
to increase revenue. The Parcel & Logistics Division generated 27.7% of total
Group revenue in the reporting period against the backdrop of an ongoing upward
trend. The 11.5% revenue increase was driven primarily by organic volume growth
in Austria.

Revenue of the Mail & Branch Network Division totalled EUR 1,027.3m in the first
three quarters of 2018. Of this amount, 57.0% can be attributed to the Letter
Mail & Mail Solutions business, whereas Direct Mail accounted for 27.0% of total
divisional revenue. Media Post, i.e. the delivery of newspapers and magazines
had a share of 9.0%. Branch Services generated 7.0% of the division’s revenue.
In the first nine months of 2018, Letter Mail & Mail Solutions revenue amounted
to EUR 585.2m, representing a year-on-year increase of 1.9%. Third-quarter
revenue was up by 9.1% to EUR 194.2m. The downward volume development as a
consequence of the substitution of letters by electronic forms of communication
continued. Revenue was impacted by various special effects, especially in the
third quarter of 2018. Transported volumes were supported by numerous one-off
mailings by banks. Furthermore, a positive pricing outcome effect took place
thanks to the launch of the new product structure as of July 1, 2018. Moreover,
additional revenue of EUR 12.0m was achieved by increased international e-
commerce volumes, which were largely recognised as direct mail revenue in the
previous year. The Mail Solutions business area generated a higher revenue of
EUR 4.0m, mainly in the fields of document logistics and output management. In
contrast, the segment change of the Croatian subsidiary Weber Escal d.o.o.
assigned to the Parcel & Logistics Division since January 1, 2018, as well as
the exit from the mail business in South East and Eastern Europe have negatively
impacted the revenue. Revenue of the Direct Mail business amounted to EUR 277.9m
in the first nine months of 2018, comprising a year-on-year decline of 6.8%.
Third-quarter 2018 revenue fell by 8.7%. The revenue decrease resulted from a
drop in operating revenue of about 2-3% and the previously mentioned change in
the product assignment of international mail items. In addition, higher direct
mail revenue was generated in the previous year from elections and a strong
increase related to new sales initiatives, whereas direct mail volumes decreased
in the reporting period. Several customers showed uncertainty with respect to
addressed mail items as a result of the new General Data Protection Regulation.
Similarly, the exit of Austrian Post from the direct mail business in South East
and Eastern Europe also had the effect of reducing revenue.
Media Post revenue was down by 4.1% to EUR 92.8m in a year-on-year comparison.
Revenue in the third quarter of 2018 fell by 5.0%. This development is
attributable mainly to the declining subscription business for newspapers and
magazines. Branch Services revenue declined by 17.0% in the first nine months of
2018 to EUR 71.5m. Third-quarter 2018 revenue was down by EUR 8.0m. In line with
the agreement concluded with the banking partner BAWAG P.S.K., a step-by-step
dissolution of the partnership is to take place for the most part by the end of
2019. Revenue from consulting services will be continuously reduced but the
offer of counter transactions will remain unchanged. The change in accounting
treatment of sales in the area of telecommunications and services in line with
IFRS 15 also tended to reduce revenue, in contrast to the decrease in the
corresponding cost position.

Total revenue of the Parcel & Logistics Division rose by 11.5% in the first nine
months of 2018 to EUR 392.9m from EUR 352.4m in the previous year. The segment
change of the Croatian subsidiary Weber Escal d.o.o. effective January 1, 2018
increased revenue during the reporting period, given the fact that the company
was still recognised as part of the Mail & Branch Network Division in the prior-
year period. Adjusted for Weber Escal d.o.o., divisional revenue was up by 9.1%.
This strong growth in the parcel business resulted mainly from the ongoing e-
commerce trend in Austria. Austrian Post benefitted from this market growth
during the reporting period, with national revenue showing a basic upward trend
of 10% in the first three quarters of 2018. Intense competition still prevails.
At the same time, the demand for quality and delivery speed as well as price
pressure are increasing. From a regional perspective, 80.0% of the total revenue
in the Parcel & Logistics Division was generated in Austria in the first three
quarters of 2018 and 20.0% by the subsidiaries in South East and Eastern Europe.
The business in Austria showed revenue growth of 11.3% in the first nine months
of 2018. Revenue in the highly competitive South East and Eastern European
region was up by 12.0% during the period under review, with EUR 8.3m of this
increase due to the segment change of Weber Escal d.o.o., Croatia.

EXPENSE AND EARNINGS DEVELOPMENT

The largest expense items in relation to Austrian Post’s Group revenue are staff
costs (53.4%), raw materials, consumables and services used (22.1%) and other
operating expenses (14.9%), which is in contrast to other operating income.

Austrian Post’s staff costs amounted to EUR 756.9m in the first nine months of
2018, comprising a year-on-year increase of 1.6%. The included operational staff
costs for wages and salaries were largely stable compared to the previous year.
Steady efficiency improvements and structural changes made it possible to offset
salary increases mandated by collective wage agreements. In addition to
operational staff costs, staff costs of Austrian Post also include various non-
operational costs such as termination benefits and changes in provisions, which
are primarily related to the specific employment situation of civil servants at
Austrian Post. Non-operational staff costs including changes in provisions and
various parameter adjustments in the first three quarters of 2018 were higher
than in the previous year. Provisions in the amount of EUR 21.6m allocated for
the redimensioning of financial services comprised the largest share of these
costs. Moreover, there was a negative effect in the amount of EUR 9.2m, which
resulted from the adjustment of the calculation basis for the actuarial
valuation of provisions for jubilee benefits. In contrast, lower expenses for
social plan models had the opposite effect.

Raw materials, consumables and services used were up by 5.7% to EUR 313.3m,
which is primarily related to higher costs for outsourced transport services
required to handle the increase in parcel volumes. Other operating expenses
increased by 2.2% to EUR 211.3m. This rise is mainly due to higher IT and
maintenance costs.

Other operating income amounted to EUR 73.9m in the first three quarters of
2018, compared to the prior-year level of EUR 43.2m. This includes one-off
income of EUR 20.1m representing the lump sum compensation by the banking
partner BAWAG P.S.K. for shortening the duration of the contractual agreement.
The results of the financial assets accounted for using the equity method
included proportional profits for the period of joint venture

Austrian Post
Harald Hagenauer
Head of Investor Relations, Group Auditing & Compliance
Tel.: +43 (0) 57767-30400
harald.hagenauer@post.at
Austrian Post
Ingeborg Gratzer
Head of Press & Internal Communications
Tel.: +43 (0) 57767-32010
ingeborg.gratzer@post.at

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