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AUSTRIAN POST Q1-3 2017: HIGHER REVENUE AND EARNINGS

Published: November 15, 2017; 07:35 · (FriedlNews)

In the first three quarters of the current financial year, Austrian Post's Group revenue amounted to EUR 1,404.7m. Adjusted for the subsidiary trans-o-flex sold in April 2016, the revenue increase equals 2.1 %. On the basis of the good revenue development combined with strict cost discipline, operating earnings (EBIT) totalled EUR 139.9m, comprising a year-on-year rise of 3.3 %.

Corporate news transmitted by euro adhoc with the aim of a Europewide distribution. The issuer is responsible for the content of this announcement.

Financial Figures/Balance Sheet

Vienna -
Revenue increase driven by dynamic parcel growth
- Revenue up 2.1 % to EUR 1,404.7m (excl. trans-o-flex)
- Mail decline (-2.2 %) more than offset by parcel growth (+17.8 %)
Expansion of service offering and logistics structures
- Extensive Austria-wide capacity expansion in parcel logistics
- Further development of the product and service portfolio in line with current
customer needs
Earnings rise driven by the good revenue development
- EBIT increase of 3.3 % to EUR 139.9m
- Increase of earnings per share to EUR 1.57
Outlook 2017 and 2018
- Slight increase in Group revenue expected for 2017 (2016: EUR 1,895.6m)
- Targeted EBIT in 2017 at least at the same level as in the previous year
- Stable revenue and EBIT development also the goal for 2018

In the first three quarters of the current financial year, Austrian Post's Group
revenue amounted to EUR 1,404.7m. Adjusted for the subsidiary trans-o-flex sold
in April 2016, the revenue increase equals 2.1 %. On the basis of the good
revenue development combined with strict cost discipline, operating earnings
(EBIT) totalled EUR 139.9m, comprising a year-on-year rise of 3.3 %. "We are
very satisfied with the business development in the first nine months, which was
mainly driven by dynamic parcel growth. We succeeded once again in asserting our
strong market position in this highly com­petitive market due to the outstanding
quality of delivery and the broad offering of individual customer solutions. The
solid earnings development is proof that our strategy of more intensively
exploiting syn­ergies in our mail and parcel delivery operations is the right
approach", comments Austrian Post CEO Georg Pölzl.

Zwtl.: Decline in the mail business offset by parcel growth

Revenue of the Mail & Branch Network Division totalled EUR 1,054.6m in the
period under review, a drop of 2.2 % from the previous year. The downward
revenue development in the first nine months of 2017 was primarily attributable
to the ongoing trends towards electronic substitution of traditional letter
mail. The Direct Mail business showed an increase in unaddressed direct mail in
contrast to the decrease in addressed advertising mail. Total revenue of the
Parcel & Logistics Division rose by 17.8 % in the first three quarters of the
current financial year to EUR 350.0m (excl. trans-o-flex). This strong growth
was mainly due to the ongoing e-commerce trend which led to a substantial volume
increase for private customer parcels. The basic upward revenue trend in the
first nine months of 2017 is esti­mated to equal more than 10 %. Additional
revenue was generated by the launch of a new product structure featuring the
"Packet", a special product offering designed to meet the requirements of online
orders, which has been well received by customers.

Zwtl.: Resolute orientation to customer needs

Austrian Post is the undisputed market leader in the delivery of letters, direct
mail and parcels. "We will have to continuously improve our service offering and
work on our high quality standards in order to maintain or expand our
competitive edge in the future", Georg Pölzl states. Austrian Post is profiting
from dynamic market growth in the parcel business. The related competitive
intensity and price pressure will remain high. At the same time, customer
demands for quality and delivery speed are increasing. Accordingly, Austrian
Post is continuously pressing ahead with expanding its service offering on the
basis of self-service and online solutions making it even easier and more
convenient to ship and receive parcels. For example, Austrian Post is planning
to more than double the number of self-service solutions in the medium term. The
company also has a great deal to do in the field of parcel logistics. "We are
preparing an Austria-wide capacity expansion programme to enable us to handle
the strong growth in parcel volumes in the future. Sorting capacity should more
than double in the medium term to 100,000 parcels per hour", Georg Pölzl adds.
Austrian Post is also called upon to adapt its offering in the mail business to
current customer require­ments. The customer demands a wide scope of services
with extensive freedom of choice, also with respect to delivery speed. The
retail financial services business is facing a structural decline, which makes
it even more imperative to define up to date products and services tailored to
customer needs. "We are currently evaluating strategic options and potential
partnerships in the financial services busi­ness in order to design a
sustainable offering", Georg Pölzl says, adding: "We continue to consider
financial services to be an integral part of our business operations, in light
of the fact that they comprise a valuable and efficient supplement to postal
services", he states.

Zwtl.: Clear positioning: reliability and stability

The solid development in the first nine months of 2017 should enable Austrian
Post to continue pursu­ing its clear capital market positioning as a reliable
dividend stock. Austrian Post anticipates a slightly positive revenue
development for the entire year 2017, and targets operating earnings to be at
least at the same level as achieved in the previous year. "We will also strive
to achieve a stable revenue and earn­ings development in 2018 as well", Austrian
Post CEO Georg Pölzl concludes.

You will find the complete version of the outlook and detailed information
(excerpts) in the Interim Report for the First Three Quarters of 2017 below the
key figures table. The entire report is available on the Internet at
www.post.at/ir --> Reporting.

Zwtl.: KEY FIGURES

Change
EUR m Q1-3 2016 Q1-3 2017 % EUR m Q3 2016 Q3 2017
Revenue excl. trans- 1,375.5 1,404.7 2.1% 29.1 439.3 451.0
o-flex
Revenue 1,510.4 1,404.7 -7.0% -105.7 439.3 451.0
thereof Mail & Branch 1,078.3 1,054.6 -2.2% -23.7 341.6 333.7
Network Division
thereof Parcel & 432.0 350.0 -19.0% -82.0 97.7 117.2
Logistics Division
Parcel & Logistics
Division excl. trans- 297.2 350.0 17.8% 52.8 97.7 117.2
o-flex
thereof Corporate 0.0 0.1 - 0.1 0.0 0.1
Other operating 50.1 40.4 -19.4% -9.7 14.0 12.7
income
Raw materials,
consumables and -384.0 -296.5 22.8% 87.5 -97.7 -100.2
services used
Staff costs -784.8 -744.8 5.1% 40.0 -239.5 -230.4
Other operating -200.2 -206.7 -3.2% -6.5 -61.1 -80.0
expenses
Results from
financial assets 0.3 1.7 >100% 1.4 -0.3 2.4
accounted for using
the equity method
Earnings before
interest, tax, 191.8 198.7 3.6% 7.0 54.6 55.4
depreciation and
amortisation (EBITDA)
Depreciation,
amortisation and -56.3 -58.8 -4.5% -2.5 -17.8 -17.7
impairment losses
Earnings before
interest and tax 135.5 139.9 3.3% 4.4 36.8 37.7
(EBIT)
thereof Mail & Branch 197.6 200.0 1.2% 2.4 54.4 55.1
Network Division
thereof Parcel & 24.7 28.9 17.0% 4.2 7.8 10.0
Logistics Division
thereof Corporate/ -86.9 -89.1 -2.5% -2.2 -25.4 -27.3
Consolidation
Other financial -1.3 0.6 >100% 1.9 -0.8 0.7
result
Earnings before tax 134.2 140.6 4.7% 6.3 36.1 38.5
(EBT)
Income tax -33.8 -34.7 -2.6% -0.9 -9.4 -8.8
Profit for the period 100.5 105.9 5.4% 5.4 26.7 29.7
Earnings per share 1.49 1.57 5.6% 0.08 0.39 0.44
(EUR)1
Cash flow from 158.9 166.5 4.8% 7.6 49.6 57.6
operating activities
Investment in
property, plant and -56.3 -49.5 12.2% 6.8 -17.8 -21.5
equipment (CAPEX)
Operating free cash 131.3 135.2 3.0% 3.9 40.1 42.1
flow2

1 Undiluted earnings per share in relation to 67,552,638 shares
2 Free cash flow before acquisitions/securities and before new corporate
headquarters

Zwtl.: EXCERPTS FROM THE GROUP MANAGEMENT REPORT:

REVENUE DEVELOPMENT IN DETAIL
In the first three quarters of 2017, Group revenue of Austrian Post fell by EUR
105.7m from the prior-year level to EUR 1,404.7m. This revenue decrease is
attributable to the sale of the subsidiary trans-o-flex in April 2016. Adjusted
for the disposed company trans-o-flex, revenue increased in a year-on-year
comparison by 2.1 % or EUR 29.1m. Third-quarter Group revenue rose by 2.7 % from
the previ­ous year to EUR 451.0m. Dynamic parcel growth has more than offset the
revenue drop in the mail business during the period under review. Moreover, the
launch of a simplified product structure on January 1, 2017 with a mailing
offering featuring the "Packet" tailored to the requirements of the e-commerce
market positively influenced revenue development. This was in contrast to the
lower reve­nue contributions from elections compared to the previous year.
Revenue from elections in the third quarter alone was higher in 2017 than in the
prior-year quarter due to parliamentary elections.However, no major elections
were held in the first half of 2017. As a consequence, revenue generated from
elec­tions was lower in the entire period under review than in the first nine
months of 2016.
Revenue of the Mail & Branch Network Division totalled EUR 1,054.6m. Of this
amount, 54.4 % can be attributed to the Letter Mail & Mail Solutions business,
whereas Direct Mail accounted for 28.3 % of total divisional revenue. Media Post
i.e. the delivery of newspapers and magazines had a share of 9.2 %. Branch
Services generated 8.2 % of the division's revenue. In the first three quarters
of 2017, Letter Mail & Mail Solutions revenue amounted to EUR 573.4m, a drop of
1.9 % from the previous year. Third-quarter 2017 revenue in this area fell by
1.7 % to EUR 177.8m. Mix effects related to the new product structure and postal
rate adjustments for individ­ual products, for example letters with advice of
receipt, positively impacted revenue development. Fur­thermore, there were
increased one-off mailings by individual customers in the reporting period,
predominantly banks and insurance companies. The segment change of the Bulgarian
subsidiary M&BM Express OOD, which has been assigned to the Parcel & Logistics
Division since January 1, 2017, had the opposite effect of reducing divisional
revenue. Moreover, there was one working day less in the first nine months of
2017 compared to the prior-year period. The decline in letter mail volumes
resulting from the substitution of letters by electronic forms of communication
continued during the reporting period. Taking these revenue effects into
account, there continued to be a basic downward trend in traditional letter mail
volumes averaging about minus 5 % during the period under review. In the first
nine months of 2017, revenue of the Direct Mail business fell by 2.0 % to EUR
298.3m. Third-quarter revenue from advertising mail was down 3.0 %. A key factor
contributing to the revenue drop in the first nine months was the business
development in South East and Eastern Europe, where Austrian Post is
increasingly focusing on the parcel segment and gradually withdrawing from the
mail business. The direct mail revenue decline in South East and Eastern Europe
totalled EUR 3.3m, which was primarily related to the deconsolidation of the
Romanian company PostMaster s.r.l. The advertising business in Austria showed an
increase in unaddressed direct mail (mainly food retailers) in contrast to the
decrease in addressed direct mail. On balance, revenue generated from elections
during the reporting period was lower than in the previous year, although third-
quarter election-related revenue was slightly higher than in the prior-year
quarter. Media Post revenue fell by 4.9 % year-on-year to EUR 96.8m. This
development is pri­marily due to the declining subscription business for
newspapers and magazines. The third-quarter decrease in Media Post revenue
amounted to 5.3 %. Branch Services revenue at EUR 86.2m was down 1.8 % from the
previous year, and third-quarter revenue in this area fell by 0.4 %. Higher
sales of retail products were in contrast to the structural decline in revenue
from financial services.
Total revenue of the Parcel & Logistics Division decreased in the first three
quarters of 2017 from EUR 432.0m to EUR 350.0m. Divisional revenue was up 17.8 %
excluding the company trans-o-flex which was deconsolidated in April 2016 and
contributed revenue of EUR 134.8m in the previous year. The underlying upward
revenue trend in the first nine months of 2017 was estimated to equal more than
10 %. Additional revenue during the reporting period was generated by the launch
of a simplified product structure featuring the "Packet", a special new product
offering designed to meet the require­ments of online orders. Moreover, the
segment change of the Bulgarian subsidiary M&BM Express OOD, which was still
assigned to the Mail & Branch Network Division in the prior-year period, took
place as of January 1, 2017. Revenue of the Parcel & Logistics Division was up
15.3 % when adjusted to take account of M&BM Express OOD. This strong growth
resulted mainly from the ongoing e-com­merce trend, which led to a substantial
increase in private customer parcels. Generally, the Austrian parcel market is
developing very dynamically, producing double-digit growth rates. Austrian Post
has once again benefitted from this market growth in the first three quarters of
2017. Intense competition still prevails. At the same time, demands on quality
and delivery speed as well as price pressure are increasing. From a regional
perspective, 80.0 % of total revenue in the Parcel & Logistics Division was
generated in Austria in the first three quarters of the 2017 financial year and
20.0 % by the subsidiaries in South East and Eastern Europe. The business in
Austria as well as in the CEE/SEE markets showed sub­stantial growth. Revenue
rose 16.6 % in Austria in the first nine months of 2017 and 19.2 % in the third
quarter. The revenue increase in South East and Eastern Europe in the first nine
months totalled 22.8 %, with EUR 7.4m of this increase due to M&BM Express OOD,
Bulgaria, which is now assigned to the Parcel & Logistics Division. Revenue in
CEE/SEE was up by 9.8 % on a like-for-like basis in the first three quarters of
2017.

EXPENSE AND EARNINGS DEVELOPMENT
Raw materials, consumables and services used fell to EUR 296.5m during the
period under review, down from EUR 384.0m in the previous year. However, taking
into account the sale of trans-o-flex, this expense item increased, which is due
to higher costs for outsourced transport services required to handle parcel
volume growth.
Austrian Post's staff costs amounted to EUR 744.8m in the first three quarters
of 2017, comprising a drop of 5.1 %. On a like-for-like basis excluding trans-o-
flex, staff costs in the reporting period were also lower than in the previous
year. The resolute continuation of measures to enhance efficiency and improve
the staff structure succeeded in compensating for annual salary increases and
biennial pay rises. As a result, operational staff costs were slightly below the
prior-year level. 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. Total non-operational
staff costs of EUR 26.3m in the first three quarters of 2017, including changes
in provisions relating to the revised discount interest rates, were below the
prior-year level. Non-operational staff costs in the reporting period primarily
included termi­nation benefits and social compensation. In contrast, a positive
earnings effect of EUR 5.5m resulted from the adjustment of discount interest
rates for various staff-related provisions against the backdrop of the
development of the international interest rate environment.
Other operating expenses amounted to EUR 206.7m during the current reporting
period, comprising a significant increase from the prior-year level when
adjusted for the disposed subsidiary trans-o-flex. Alongside higher expenses for
IT and consulting, this increase can also be attributed to higher ex­penses in
connection with out-of-period non-wage costs. The claims related to non-wage
costs paid in previous periods were reassessed, and the corresponding provisions
were increased by EUR 8.9m.
On the basis of the solid revenue development, earnings before interest, tax,
depreciation and amorti­sation (EBITDA) rose by 3.6 % or EUR 7.0m in the first
nine months of 2017 to EUR 198.7m. This cor­responds to an EBITDA margin of 14.1
%. Depreciation, amortisation and impairment losses equalled EUR 58.8m, an
increase of EUR 2.5m from the previous year. Impairment losses of EUR 5.4m were
recognised in the period under review, compared to EUR 2.0 in the prior-year
period.Accordingly, earnings before interest and tax (EBIT) in the first nine
months of 2017 were EUR 139.9m, comprising an increase of 3.3 % or EUR 4.4m from
the previous year. The EBIT margin equalled 10.0 %.
Earnings before tax totalled EUR 140.6m, compared to the prior-year figure of
EUR 134.2m. The in­come tax expense amounted to EUR 34.7m, up EUR 0.9m from the
first nine months of 2016. After deducting income tax, the Group's profit for
the period (profit after tax) was EUR 105.9m, up from EUR 100.5m in the previous
year. Accordingly, undiluted earnings per share were EUR 1.57 for the first nine
months of 2017 (Q1-3 2016: EUR 1.49 per share).
From a divisional perspective, EBITDA reported by the Mail & Branch Network
Division totalled EUR 217.8m in the first nine months of 2017, representing a
year-on-year decline of 2.7 %. EBIT in the reporting period improved by 1.2 % to
EUR 200.0m despite a decrease in revenue. Greater synergies in logistics and the
increased delivery of the new "Packet" by mail logistics positively impacted the
division's earnings development during the period under review.
The Parcel & Logistics Division generated an EBITDA of EUR 39.5m in the first
nine months of 2017, compared to the prior-year level of EUR 33.2m. EBIT in the
period under review was EUR 28.9m, representing a year-on-year increase by 17.0
%. The high level of profitability is mainly due to the good capacity
utilisation of the logistics infrastructure in the Austrian parcel business.
The Corporate Division encompasses all non-allocable expenses for central
departments in the Group as well as staff-related provisions assigned to it. In
addition, the division also includes innova­tion management and the development
of new business models. EBIT of the Corporate Division (incl. Consolidation)
fell by EUR 2.2m to minus EUR 89.1m. The increase in the discount interest rate
for interest-bearing provisions had a positive effect on earnings in contrast to
the negative effect of higher expenses for social compensation and in connection
with non-wage costs from previous periods.

CASH FLOW AND BALANCE SHEET
The cash flow from operating activities amounted to EUR 166.5m in the period
under review, up by EUR 7.6m from EUR 158.9m in the previous year. This increase
is partly attributable to higher pay­ments in connection with provisions in the
first nine months of 2016. Cash outflows for the acquisition of property, plant
and equipment (CAPEX) amounted to EUR 49.5m in the first nine months of 2017,
below the level of EUR 56.3m in the previous year. The difference is primarily
attributable to lower pay­ments for construction of the new corporate
headquarters, which totalled EUR 18.8m in the period un­der review. The
operating free cash flow was EUR 135.2m, up from the prior-year level of EUR
131.3m.
Austrian Post pursues a conservative balance sheet policy and financing
structure. This is demon­strated by the high equity ratio, low financial
liabilities and the solid level of cash and cash equivalents invested at the
lowest possible risk. Equity of the Austrian Post Group amounted to EUR 648.1m
as at September 30, 2017, corresponding to an equity ratio of 43.3 %. The
analysis of the company's finan­cial position shows a high level of liquidity.
This includes cash and cash equivalents of EUR 259.4m and securities of EUR
61.0m. These financial resources are in contrast to financial liabilities of
only EUR 6.3m.

OUTLOOK 2017 AND 2018
Developments in the first three quarters of 2017 confirm the basic underlying
trends in the mail and parcel businesses. The company anticipates volume
declines of about 5 % p.a. in the traditional ad­dressed letter mail business,
although the volume developments in individual customer segments dif­fer. The
direct mail business strongly depends on corporate advertising budgets and the
economic environment and is thus subject to fluctuations. Parcel volumes are
developing positively as a result of the increase in online shopping. The e-
commerce trend should continue to result in double-digit volume growth of
private customer parcels. At the same time, customer demand for quality and
delivery is rising against the backdrop of increasing price pressure.
Austrian Post anticipates a slight rise in revenue in the 2017 financial year
(comparable 2016 revenue excl. trans-o-flex: EUR 1,895.6m). On the basis of the
expected revenue development combined with resolute cost discipline, the company
targets operating earnings at least at the same level as in the previous year
(EBIT 2016: EUR 202.3m). Outside the operating business, opportunities and risks
affected by spe­cial effects could either positively or negatively impact the
earnings development.On balance, opera­tional capital expenditure (CAPEX) of EUR
70-80m is planned in 2017, primarily in terms of sorting technologies, logistics
and customer solutions. Furthermore, construction work on the new corporate
headquarters was completed on schedule in the autumn of 2017.
All in all, Austrian Post forecasts an ongoing stable revenue development in the
2018 financial year. The expected business development is based on various
planning assumptions, such as a continua­tion of the basic trends in the mail
and parcel businesses. Addressed letter mail volumes will likely continue to
decline by about 5 % p.a., whereas direct mail revenue should be sustained by
further eco­nomic recovery. On a medium-term basis, Austrian Post will be
required to adjust its service and prod­uct offering in the mail segment to
current customer needs. In line with international trends, the com­pany aims to
enhance the customer's freedom of choice. In addition to the next-day delivery
of mail products, customers should also be offered the choice in the course of
2018 to select delivery within two to three working days in line with the
Universal Postal Service Obligation.
In the branch network, structurally related changes in the financial services
business are expected to continue. Therefore, the task is to define products and
services which are up to date and will also expand the future service offering
of the branch network. All strategic options for the period following the end of
the cooperation agreement with Austrian Post's current banking partner BAWAG
P.S.K. are being evaluated. In accordance with the stipulated notice period,
this partnership will be discontinued effective December 31, 2020. The financial
services business should continue to be an important part of Austrian Post's
business operations, in light of the fact that it represents a valuable
supplement to the company's offering of postal services.
Double-digit growth rates are expected in the Austrian parcel market due to the
ongoing online shopping boom. This could lead to more intensive competition,
stronger price pressure or partial delivery by individual large-volume
customers. On the basis of robust market growth and potential market share
shifts, growth rates from the mid-single digit to low double-digit range are
possible for Austrian Post's parcel business.
With respect to its earnings development, Austrian Post is pursuing the goal of
generating stable oper­ating earnings in 2018. Austrian Post is continually
optimising its structures and processes in order to further enhance the
efficiency of all its services. In spite of declining volumes, the company
anticipates good capacity utilisation of its mail logistics infrastructure,
which is now more efficiently used due to the joint delivery of letters and
parcels. In contrast, Austrian Post is faced with the challenges posed by the
structural decline in the traditional banking business and correspondingly
adjusts its product offering and capacities. On balance, these measures should
contribute to a stable earnings development in 2018.
Austrian Post will continue to resolutely make investments designed to enhance
efficiency and service quality at the customer interface. Against the backdrop
of ongoing market growth in the private customer parcel segment, measures are
being taken to expand relevant capacities and to double sorting capacity within
the next four years. As a result, increasing investments in Austrian parcel
logistics are being earmarked in the medium term. In addition to the ongoing
investments in the core business of about EUR 60m annually, additional growth
investments of EUR 40-50m p.a. on average are planned in the coming years. As in
the past, the operating cash flow generated by Austrian Post will continue to be
used prudently and in a targeted manner to finance sustainable, future-oriented
investments. A solid cash flow development continues to be expected, enabling
Austrian Post to maintain its attractive dividend policy, distributing at least
75 % of Group net profit to shareholders.

Further inquiry note:
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

end of announcement euro adhoc
--------------------------------------------------------------------------------

issuer: Österreichische Post AG
Haidingergasse 1
A-1030 Wien
phone: +43 (0)57767-0
FAX:
mail: investor@post.at
WWW: www.post.at
ISIN: AT0000APOST4
indexes: ATX
stockmarkets: Wien
language: English

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