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Österreichische Post AG / AUSTRIAN POST H1 2017: Higher Revenue and Earnings

Published: August 10, 2017; 07:29 · (FriedlNews)

In the first half of the current financial year, Austrian Post's Group revenue amounted to EUR 953.7m. Adjusted for the subsidiary trans-o-flex sold in April 2016, the revenue increase equals 1.9 %. Revenue in the mail business was down only slightly from the prior-year level although the trend towards electronic substitution of traditional letter mail continued.

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Mid Year Results

Vienna -
Revenue increase driven by dynamic parcel growth
- Revenue up 1.9 % to EUR 953.7m (excl. trans-o-flex)
- Mail decline more than offset by parcel growth Quality leadership in Austria
- Further development of the product portfolio in line with customer demand
- All-time high customer satisfaction
- Optimisation of delivery synergies and capacity expansion Earnings rise due
to the good revenue development
- EBIT increase of 3.6 % to EUR 102.2m
- Continuing focus on efficiency enhancement and cost discipline
- Increase of earnings per share to EUR 1.13 Outlook 2017
- Stable or slightly higher Group revenue forecast for 2017 (2016: EUR 1.9bn)
- Targeted EBIT at the same level as in the previous year

In the first half of the current financial year, Austrian Post's Group revenue
amounted to EUR 953.7m. Adjusted for the subsidiary trans-o-flex sold in April
2016, the revenue increase equals 1.9 %. Revenue in the mail business was down
only slightly from the prior-year level although the trend towards electronic
substitution of traditional letter mail continued. In turn, the parcel business
generated substantial growth. Austrian Post profited from dynamic market growth
and the ongoing online shopping trend. On the basis of the solid revenue
development combined with strict cost discipline, operating earnings (EBIT)
totalled EUR 102.2m, comprising a year-on-year rise of 3.6 %. "We are very
satisfied with the revenue development, which was primarily driven by dynamic
parcel growth. In the first half-year, we have once again succeeded in
asserting our strong market position in this highly competitive market due to
our outstanding delivery quality and a broad offering of individualised
customer solutions. Moreover, the new product portfolio enables an even more
efficient leveraging of synergies in the delivery of letters and parcels",
comments Georg Pölzl, Chief Executive Officer of Austrian Post.

Mail decline compensated by parcel growth

Revenue of the Mail & Branch Network Division fell by 2.2 % to EUR 720.9m
during the period under review. The downward revenue development in the first
six months of 2017 was primarily attributable to the ongoing trend towards
electronic substitution of traditional letter mail. Direct mail revenue has
also decreased in the second quarter mainly due to the lack of impetus from
elections. Mix effects related to the new product structure and increased one-
off mailings by individual customers, predominantly banks and insurance
companies. Revenue of the Parcel & Logistics Division increased in the first
half-year 2017 by 16.7 % to EUR 232.7m (excl. trans-o-flex). This strong growth
resulted mainly from the ongoing e-commerce trend, which led to a substantial
rise in private customer parcels. The basic upward revenue trend in the first
six months of 2017 is estimated to equal somewhat more than 10 %. Additional
revenue was also generated through the launch of a simplified product structure
featuring the new product, the "Packet", a special product offering designed to
meet the requirements of online orders. Intense competition still prevails. At
the same time, demand for quality and delivery speed as well as price pressure
is increasing.

Quality leadership in the core business

Austrian Post remains the undisputed market leader in the delivery of letters,
direct mail items and parcels. "We must continue to work on our high quality
standards in order to maintain and enhance our competitive edge in the future",
states Pölzl. The most recent customer survey demonstrates that customers
acknowledge Austrian Post's ambitions. "Our customer satisfaction index is
currently at an all-time high, and the image trend also shows a positive
development. However, we will not rest on our laurels. The results are actually
an incentive for us to work resolutely on further expanding our customer
solutions", Pölzl adds. Austrian Post continued to press ahead with investments
in innovative customer solutions and efficient logistics in the first half of

2017. An extensive, Austrian-wide capacity expansion programme is in the works
and will enable Austrian Post to handle strong growth in parcel volumes
in the future and maintain high quality standards.

Clear positioning: reliability and stability

Solid development in the first half of 2017 should enable Austrian Post to
continue its commitment to a clear capital market positioning as a reliable
dividend stock. "Reliability and predictability for shareholders and other
stakeholders of our company continue to be the focus of our strategic
activities, and we aim to continue along this path in the future", Pölzl
concludes. Accordingly, Austrian Post anticipates a stable or slightly positive
revenue development for the entire year 2017 and targets operating earnings at
least at the same level as achieved in the previous year.

The entire version of the outlook as well as detailed information (excerpts)
from the Half-year Management Report can be found below the key figures table.
The Half-year Financial Report 2017 is available at www.post.at/ir [http://
www.post.at/ir]--> Reporting.

Key Figutes

Change
EUR m H1 2016 H1 2017 % EUR m Q2 2016 Q2 2017
Revenue excl. trans-o-flex 936.3 953.7 1.9% 17.4 466.6 465.0
Revenue 1,071.1 953.7 -11.0% -117.4 478.3 465.0
thereof Mail & Branch Network 736.8 720.9 -2.2% -15.8 366.3 348.5
Division
thereof Parcel & Logistics 334.3 232.7 -30.4% -101.6 112.1 116.5
Division
Parcel & Logistics Division excl. 199.5 232.7 16.7% 33.2 100.3 116.5
trans-o-flex
thereof Corporate 0.0 0.0 0.0 0.0 0.0
Other operating income 36.2 27.7 -23.4% -8.5 12.7 13.0
Raw materials, consumables and -286.3 -196.3 31.4% 90.0 -103.1 -96.4
services used
Staff costs -545.3 -514.4 5.7% 30.8 -258.8 -251.4
Other operating expenses -139.1 -126.7 9.0% 12.5 -61.9 -64.4
Results from financial assets
accounted for using the equity 0.6 -0.8 <-100% -1.3 0.5 -0.2
method
Earnings before interest, tax,
depreciation and amortisation 137.2 143.3 4.5% 6.1 67.8 65.6
(EBITDA)
Depreciation, amortisation and -38.5 -41.1 -6.7% -2.6 -20.2 -17.7
impairment losses
Earnings before interest and tax 98.6 102.2 3.6% 3.5 47.6 47.8
(EBIT)
thereof Mail & Branch Network 143.2 145.0 1.2% 1.7 71.7 71.0
Division
thereof Parcel & Logistics 16.9 19.0 12.2% 2.1 9.2 9.6
Division
thereof Corporate/Consolidation -61.5 -61.8 -0.4% -0.3 -33.2 -32.7
Other financial result -0.5 -0.1 81.7% 0.4 -0.3 0.0
Earnings before tax (EBT) 98.1 102.1 4.0% 3.9 47.3 47.9
Income tax -24.4 -25.9 -6.3% -1.5 -12.2 -12.1
Profit for the period 73.8 76.2 3.3% 2.4 35.1 35.8
Earnings per share (EUR)* 1.09 1.13 3.4% 0.04 0.52 0.53
Cash flow from operating 109.3 108.9 -0.4% -0.4 49.3 47.1
activities
Investment in property, plant and -38.5 -28.0 27.3% 10.5 -21.4 -13.2
equipment (CAPEX)
Operating free cash flow** 91.2 93.2 2.2% 2.0 39.1 38.0
* Undiluted earnings per share in relation to 67,552,638 shares ** Free cash
flow before acquisitions/securities and before new corporate headquarters

Excerpts from the Group Management Report:

REVENUE DEVELOPMENT IN DETAIL In the first half of 2017, Group revenue of
Austrian Post fell by EUR 117.4m from the prior-year level to EUR 953.7m. 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 1.9 % or EUR 17.4m. Second-quarter Group
revenue was down 0.3 % to EUR 465.0m (excl. trans-o-flex). On the one hand, the
diverging quarter-on-quarter revenue development was due to seasonal effects.
The first quarter of 2017 featured two additional working days, whereas the
second quarter had two fewer working days. On the other hand, second-quarter
revenue showed a somewhat weaker development in a year-on-year comparison, in
light of the fact that additional revenue was generated from elections in the
comparable period of 2016. In contrast, 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 has positively influenced
revenue development.

Revenue of the Mail & Branch Network Division fell by 2.2 % to EUR 720.9m
during the period under review. The downward revenue development in the first
six months of 2017 was primarily attributable to the ongoing trend towards
electronic substitution of traditional letter mail. Direct mail revenue has
also decreased in the second quarter mainly due to the lack of impetus from
elections. On balance, elections contributed EUR 11.5m in additional Mail &
Branch Network revenue in the second quarter of 2016 but had no substantial
revenue effect in the respective period of 2017.

In the first half of 2017, Letter Mail & Mail Solutions revenue amounted to EUR
395.5m, a drop of 2.0 % from the previous year. Second-quarter 2017 revenue in
this area fell by 4.8 % to EUR 189.2m. 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 in the reporting period on
the part of individual customers, 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, substantial revenue
contributions were generated by elections in the second quarter of the previous
year. 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 minus 4-5 %
during the last quarters. In the first six months of 2017, revenue of the
Direct Mail business fell 1.5 % to EUR 203.1m. First-quarter revenue from
advertising mail increased whereas second-quarter revenue was down 5.9 %. This
diverging development is primarily attributable to seasonal effects. The number
of working days was distributed differently in a quarterly comparison. In
addition, the weaker advertising phase occurred in the second quarter due to
the late Easter holidays in the reporting period. Furthermore, elections in the
second quarter of 2016 increased revenue, whereas there have been no
substantial revenue contributions from elections so far in 2017. Generally
speaking, the direct mail business benefitted from an increase in unaddressed
mailings (mainly food retailers) in contrast to the decrease in addressed
direct mail volumes. Media Post revenue fell by 4.7 % year-on-year to EUR
67.1m. This development is primarily due to the declining subscription business
for newspapers and magazines. The decrease in Media Post revenue was reduced to
1.4 % in the second quarter of 2017. Branch Services revenue at EUR 55.2m was
down 2.6 % from the previous year, and second-quarter revenue in this area fell
by 6.0 %. Higher sales of retail products were in contrast to the structural
decline in financial services.

Total revenue of the Parcel & Logistics Division decreased in the first half-
year of 2017 from EUR 334.3m to EUR 232.7m. Divisional revenue was up 16.7 %
excluding the company trans-o-flex which was deconsolidated in the previous
year and contributed revenue of EUR 134.8m in the first half of 2016. The
segment change effective January 1, 2017 of the Bulgarian subsidiary M&BM
Express OOD, which was still assigned to the Mail & Branch Network Division in
the prior-year period, had a positive impact on revenue development. Revenue of
the Parcel & Logistics Division was up 14.1 % 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 once again benefitted from
this market growth in the first half of 2017. The basic upward revenue trend in
the first six months of 2017 is estimated to equal somewhat more than 10 %.
Additional revenue was generated through the launch of a simplified product
structure featuring the new product, the "Packet", a special product offering
designed to meet the requirements of online orders. Intense competition still
prevails. At the same time, demand for quality and delivery speed as well as
price pressure is increasing. From a regional perspective, 80.1 % of total
revenue in the Parcel & Logistics Division was generated in Austria in the
first half of the 2017 financial year and 19.9 % by the subsidiaries in South
East and Eastern Europe. The business in Austria and in the CEE/SEE markets
showed substantial growth. Revenue rose 15.3 % in Austria in the first half of
2017 and 15.0 % in the second quarter. The revenue increase in South East and
Eastern Europe in the first six months totalled 22.6 %, with EUR 5.1m of this
rise due to M&BM Express OOD, Bulgaria, which is now assigned to the Parcel &
Logistics Division. Revenue in CEE/SEE was up by 9.0 % on a like-for-like basis
in the first half of 2017.

EXPENSE AND EARNINGS DEVELOPMENT Raw materials, consumables and services used
fell to EUR 196.3m during the period under review, down from EUR 286.3m 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 to handle parcel volume growth.

Austrian Post's staff costs amounted to EUR 514.4m in the first half of 2017,
comprising a drop of 5.7 %. On a like-for-like basis excluding trans-o-flex,
staff costs in the reporting period were somewhat 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 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 including
changes in provisions relating to the revised discount interest rates in the
first half of 2017 totalled EUR 23.4m, down EUR 5.7m from 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 4.2m 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.

On the basis of the solid revenue development, earnings before interest, tax,
depreciation and amortisation (EBITDA) of Austrian Post rose by 4.5 % or EUR
6.1m in the first half of 2017 to EUR 143.3m, corresponding to an EBITDA margin
of 15.0 %. Depreciation, amortisation and impairment losses equalled EUR 41.1m
in the first half of 2017, an increase of EUR 2.6m from the previous year. The
current reporting period included an impairment loss for goodwill recognised
for Weber Escal d.o.o., Croatia, in the amount of EUR 2.7m, whereas an
impairment loss on goodwill of EUR 2.0m was reported in the previous year for
PostMaster s.r.l., Romania. In addition, the first half-year of 2017 included
other impairment losses totalling EUR 2.7m. Accordingly, earnings before
interest and tax (EBIT) in the first six months of 2017 were EUR 102.2m, an
increase of 3.6 % or EUR 3.5m from the previous year. The EBIT margin equalled
10.7 %.

As a result, earnings before tax amounted to EUR 102.1m, compared to the prior-
year figure of EUR 98.1m. The income tax expense equalled EUR 25.9m, up EUR
1.5m from the first half of 2016. After deducting income tax, the Group's
profit for the period (profit after tax) was EUR 76.2m, up from EUR 73.8m in
the previous year. Accordingly, undiluted earnings per share were EUR 1.13 for
the first six months of 2017.

From a divisional perspective, EBITDA reported by the Mail & Branch Network
Division totalled EUR 158.0m in the first half of 2017, representing a year-on-

year decline of 2.2 %. EBIT in the first half-year improved by 1.2 % to EUR
145.0m despite a drop in revenue. Negative interest rate effects for staff-
related provisions reduced prior-year earnings, in contrast to the positive
impact on earnings from the intensified logistics synergies and the increased
delivery of the new "Packet" by mail logistics.

The Parcel & Logistics Division generated an EBITDA of EUR 27.0m in the first
six months of 2017, compared to the prior-year level of EUR 22.5m. EBIT in the
period under review was EUR 19.0m, representing a year-on-year rise of 12.2 %.
EBIT in the first half of 2016 included a slightly positive accounting effect
related to the disposal of trans-o-flex.

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 0.3m to minus EUR 61.8m. 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.

CASH FLOW AND BALANCE SHEET The cash flow from operating activities of EUR
108.9m was EUR 0.4m below the prior-year level. Higher payments for provisions
in the first half of 2016 were in contrast to the increase in receivables in
the period under review, which reduced the cash flow. Cash outflows for the
acquisition of property, plant and equipment (CAPEX) amounted to EUR 28.0m in
the first half of 2017, below the level of EUR 38.5m in the previous year. This
development is due to lower payments for construction of the new corporate
headquarters, which totalled EUR 11.1m in the first half of 2017. The operating
free cash flow was EUR 93.2m, up from EUR 91.2m in the first half of 2016.

Austrian Post pursues a conservative balance sheet and financing structure.
This is demonstrated primarily by the high equity ratio, low financial
liabilities and the solid level of cash and cash equivalents invested with the
least possible risk. Equity of the Austrian Post Group amounted to EUR 614.1 m
as at June 30, 2017, corresponding to an equity ratio of 42.4 %. The analysis
of the company's financial position shows a high level of liquidity. This
includes cash and cash equivalents of EUR 206.9m and securities of EUR 75.6m.
These financial resources are in contrast to financial liabilities of only EUR
5.7m.

OUTLOOK 2017 Developments in the first half 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 significantly. The direct mail business strongly depends on corporate
advertising budgets and the economic environment and is thus subject to
fluctuations. Moreover, revenue development is also impacted by election
effects. Additional revenue was generated from elections in 2016, especially in
the second and fourth quarters, whereas election-related revenue contributions
are expected in the third quarter of the current financial year due to early
parliamentary elections on October 15, 2017. Parcel volumes are developing
positively as a result of the increase in online shopping. The e-commerce trend
should continue to enhance strong volume growth of private customer parcels. At
present, the parcel market in Austria shows an extremely dynamic development
with volume growth of more than 10 % p.a. At the same time, customer demand for
quality and delivery is rising against the backdrop of increasing price
pressure. Austrian Post expects to be able to maintain its leading competitive
position and participate in market growth. Volume trends relevant to the
company's business development in recent quarters should continue assuming that
the predicted economic upswing persists. On this basis, Austrian Post
anticipates a stable or slightly higher revenue development for the entire year
2017 (comparable 2016 revenue excl. trans-o-flex: EUR 1,895.6m).

In order to ensure its long-term success, Austrian Post focuses on
strengthening its quality leadership in core markets and further developing
postal services to meet current customer requirements. In addition, the company
is exploring opportunities in growth markets such as transnational mail
volumes. It is also essential to tailor the offering of financial services to
meet the challenges posed by the structurally-related decline in retail
banking. The contractual agreement with Austrian Post's banking partner BAWAG
P.S.K. is valid at least until the end of 2020. With regard to the medium-term
future, Austrian Post is currently evaluating how its financial services
business can be structured in a rapidly changing retail banking environment. At
the same time, Austrian Post will continue to focus on enhancing efficiency and
investments at the customer interface to improve service quality. Against the
backdrop of strong market growth for private customer parcels, measures are
being taken to correspondingly expand capacities. On balance, operational
capital expenditure (CAPEX) of EUR 70-80m is planned in 2017, primarily in the
fields of sorting technologies, logistics and customer solutions. Furthermore,
construction work on the new corporate headquarters is moving ahead on
schedule, and will be concluded in the autumn of 2017. Higher medium-term
investments are foreseen in the growth area of parcel logistics in Austria.
Based on the expected revenue development and resolute cost discipline combined
with efficient services Austrian Post targets operating earnings at least at
the same level as in the previous year (EBIT 2016: EUR 202.3m).

Further inquiry note:
Austrian Post
Ingeborg Gratzer

Head of Press Relations & Internal Communications

Tel.: +43 (0) 57767-32010
ingeborg.gratzer@post.at
Austrian Post
Harald Hagenauer

Head of Investor Relations, Group Auditing & Compliance

Tel.: +43 (0) 57767-30400
harald.hagenauer@post.at

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

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