Transcript of the conference call held on March, 10th 2016 10:00am CET

Interim Financial Report Fourth quarter 2015

Conference call transcript

Brussels – March, 10th 2016

Koen Van Gerven, CEO Koen Beeckmans, CFO

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PRESENTATION

Operator: Ladies and gentlemen, welcome to the bpost Fourth Quarter 2015 Results Analyst Call.

I am pleased to present Koen Van Gerven, CEO, Koen Beeckmans, CFO, Baudouin de Hepcée,

Director External Communication, Investor Relations & Public Affairs, Saskia Dheedene,

Investor Relations Manager. For the first part of this call let me remind you that all participants will

be on the listen-only mode and afterward there will be a question and answer session. I would

now like to return the conference call to the speakers. Speakers, your line is open.

Koen Van Gerven: Thank you and good morning ladies and gentlemen. I thank you for joining us

and you heard already who is here with me around the table. I imagine that you already had the

opportunity to read through the material we posted on our website yesterday evening. And Koen

and I will summarise the key messages so as to move on to the Q&A rapidly.

When we go to page 3 you can see that we posted, what I call, excellent results this quarter. We

benefitted from an improved underlying volume trend in domestic mail at -3.9% driven by a better

performance in transactional as well as advertising mail. In addition domestic parcels recorded

excellent volume growth at +13.9% for the quarter with a very strong end-of-year season in

December which was at +15.7% in volumes. Consequently the revenue increase from parcels did

fully offset the domestic mail revenue decline and probably worthwhile to mention that this is the

first time that it happens.

Nevertheless our normalised revenues at €643m declined slightly by 1.9% or €12.4m as a result,

as we know already, of the lower SGEI compensation received in 2015 and the curtailment of a

couple of low margin international mail activities. That is not new because it started already in the

first quarter of 2015. But as you know this curtailment is accretive to the all over EBIT. We

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normalised revenues for a gain on disposal of a sizeable property for an amount of €26.1m. With

all of this, normalised EBITDA was up €6.1m to reach €137.1m, thanks to our strong cost savings

at €18.5m.

Our workforce reduced by an average of 480 FTEs and interims together over that same quarter.

Because of significantly higher than expected parcel and solution volumes in the fourth quarter we

needed to employ 224 additional FTEs and interims to absorb the end of the year volume peaks.

So excluding these additional resources we needed, our workforce reduced by 704 FTEs and

interim on average. This confirms that our productivity improvements plans are still on track and

that they generate the expected results.

With this, as you can see on page 4, we – the full year results are meeting or I would say even

exceeding all metrics of our guidance. The full year 2015 EBITDA increased by €11.5m proving

that the disciplined execution of our strategy continues to bear its fruits. It allows us to propose a

final dividend per share of €0.24 to the general shareholder meeting and this brings the total gross

dividend per share based on the full year results to €1.29 which is, as you can calculate, an

increase by €0.03 or 2. 4% and results in a payout ratio of slightly below 90%, to be correct,

89.7% for the full year.

Finally, on page 5 you see the various impacts that I mentioned earlier in the fourth quarter, the

fourth quarter normalised EBITDA. The strong EBITDA uplift for the last quarter is driven by, as

you can see, the excellent parcel performance, by an improvement in underlying domestic mail

trends and finally by the continued cost discipline. And let me briefly draw your attention on the

green parcel box that fully compensates the red domestic mail box. And, as I already said, this

happens for the first time.

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Now I would like to hand over Koen to go in more detail on the financials.

Koen Beeckmans: Thank you Koen and good morning everybody. Going to slide 6, you see that

the reported results have been normalised for the sale of a sizeable building. The gain on disposal

was €26.1m and this amount has been taking out of the revenue line. We see that normalised

EBITDA is up by €6.1m and the EBIT is up €10.2m. Normalised profit before tax is up €33.4m as a

result of significantly lower non-cash financial charges related to IAS19 employee benefits because

last year was impacted by a substantial drop in discount rates compared with slight increase this

year. The normalised Belgium GAAP net profit is up €2.3m.

Let’s have a look into the different product lines. We are now on page 8 with domestic mail. Koen

already mentioned that we benefitted from a better underlying trend than the three previous

quarters at -3.9% for the quarter leading to a 5% decline for the full year. In transactional mail

we again did not see any notable acceleration in e-substitution and we benefitted from strong

stamp sales during year-end period. Advertising mail continued to improve, driven by strong

performance across all sectors in unaddressed mail and a stable trend in direct mail compared to

previous quarter. In press we noted a positive trend in newspapers while the overall volume

decline was in line with the first half year.

Parcels, on slide 9, recorded an excellent performance for this quarter, both domestically as well as

internationally, driven by strong end-of-year sales. Domestic parcels volumes were up 13.9%

while the price mix improved to -2.3%. The growth in international parcels was mainly driven by

traffic from the US which showed organic growth of €6.3m, including a positive impact of a

stronger US dollar for about €3.9m.

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On slide 10 regarding our additional sources of revenues, we note the positive impact of our value-

added services contributing €2.5m in revenues for the quarter, mainly driven by the development

of our solutions. On the other hand, we continue to see the impact of the curtailment of very low

margin activities in international mail.

Moving to costs, slide 11, you see that we managed to reduce costs by €18.5m. Payroll and

interim costs went down by €12.5m, driven by a reduction of 480 FTEs on average for the quarter.

Transport costs have decreased by €5.7m because the curtailment of some international mail

wholesales activities compensated the usual increase that we see in there related to the top line

evolution. Other SG&A increased by €9.2m, mainly driven by additional project costs, while other

costs decreased by €9.5m mainly as a result of a provision taken in Q4 2014 to cover a litigation

with another postal operator.

Moving to cash flow on slide 12, we note that cash generation from operating activities was

negatively impacted by pay-outs related to the Alpha restructuring programme. Excluding those,

we recorded a positive evolution of working capital, mainly due to positive phasing in social

security payments which were settled annually in Q4 2014 compared to per quarter in 2015, but

for which no payment has occurred in Q4 2015.

Cash flow from investing activities benefited from higher proceeds from the sale of buildings and,

as already mentioned, thanks to the disposal of a sizeable building. These elements lead to the

free cash flow being €20.2 million higher than last year. As Koen already touched on the

dividends, I’d like to end here and hand over to Koen again for some closing remarks.

Koen Van Gerven: Thank you, and before walking you through our outlook for 2016 on page 15,

allow me to summarize that Q4 was indeed an excellent quarter combining better than expected

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results in the mail, very strong parcels growth with solid cost savings. And for the full year we

booked outstanding operating results and managed to fully absorb the impact of the cut in SGEI

compensation, the expected and the unexpected, as you know, on our bottom-line. Then our

outlook for 2016 excludes the impact of the acquisition of the Belgium activities of Lagardère

Travel Retail, to which I will come back in a few moments.

So looking in 2016, we plan for a mail volume decline between 5 and 6% on an underlying basis.

As mentioned earlier, the SGEI compensation will drop by €26.8 million as a result of the new

contracts concluded with the government and those contracts run until the end of 2020. We

expect domestic parcels to post double digit volume growth, while international parcels should

continue to benefit from growth mainly coming from the United States. On the cost side, we first

of all plan for productivity improvements at the low end of our 800-1,200 range, excluding the

impact of the Deltamedia integration.

Some press volumes – and this is about Deltamedia of course. Some press volumes that we

distributed previously by independent workers through our subsidiary Deltamedia will now be

transferred to bpost, resulting in an estimated increase by 300 FTEs on average over the year

2016. Now, besides FTE savings, we will have to use a number of levers in order to offset the SGEI

hit and therefore we will have a strong focus on all cost items while cost factor will be positively

influenced by measures such as the elimination of the additional Saturday compensation and the

tax shift introduced by the federal government. And all of this should lead to a recurring EBITDA

and a dividend payment amounting to the excellent levels achieved in 2015.

Finally, we planned for a gross capex spend of €80 million, while cash generation from operating

activities will be negatively impacted by the lower compensation and change payment terms of the

SGEI for an amount of around €36 million. In addition, alpha pay-outs of course and the

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settlement on terminal dues with another foreign postal operator will very likely impact the cash

flow negatively.

Finally, I would like to come back on our recent acquisitions which are key enablers for our future

growth, and then I’m on slide 16 and 17 where you find a summary of the transaction that we

announced on February 5th. We signed an agreement to acquire 100% of the Belgian activities of

Lagardère Travel Retail in order to further diversify and grow our revenue base and to build on our

strengths in parcels. We will fully consolidate the acquired businesses after closing, of course, and

after that we got the approval of the transaction from the competition authorities. Given our net

cash position of nearly 550 million at the end of 2015, the acquisition consideration will be fully

financed by cash, while it will not impact our dividend payment capacity. The acquired businesses

generated sales for 440 million in 2014 with 3.5% EBITDA margin. 59% of the revenues are

coming from proximity and convenience distribution activities through the 220 retail shops and

through subsidiaries. The other 41% of the revenues are generated from press distribution

activities towards more than 5,000 point of sales throughout Belgium. And finally, we also acquire

the Kariboo network consisting of 735 pick-up and drop-off points and this will increase, and that’s

important to us, our network for pick up and drop off of parcels to over 1,900 points across

Belgium and, of course, it will reinforce our offer in what we call the best last mile ambition that we

have.

Our ambitions for the future are to grow sales from retail at a pace at least in line with the

projected market growth, ranging between 4 to 6% annually for the period 2015-2020. And to

that purpose, of course, we will invest in footprint expansion, and we expect opening between 30

and 45 new stores in the three to five-year period. And of course, next to new openings we will

accelerate remodeling of the existing stores. The total annual capex spend for this entire business

should, however, not exceed 10 million euro on a yearly basis.

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Besides this important milestone in our domestic market, we have also been active in the

international parcel space with two additional, what we call, bolt-on acquisitions over the fourth

quarter of 2015 and the first quarter of this year, and as you know, the aim is to further enhance

our comprehensive service offering in that area. In 2015, November we purchased 100% of a

company called Success Partners Europe, a Polish company specialized in logistics, distribution and

fulfilment across Europe, and they work mainly or almost exclusively for US retailers. And

although we speak about Europe, it’s in the first instance Central and Eastern Europe of course that

they are active in.

In January 2016, we also signed an agreement for the acquisition of 100% of FDM, which stands

for Freight Distribution Management, and that’s an Australian company specialized in the fulfillment

and distribution for US e-tailers in Australia. Australia, as you know, is a fast growing market and

a very important market in terms of e-commerce consumption, and we were already present over

there.

With these transactions, we’re able to offer now a complete service range to our US customers in

order to further build out the US market as well as to, what I would call, economize on our last

mile distribution in Australia.

So, and with all of this, I am happy to answer your questions. So I suggest that we open the line.

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QUESTIONS & ANSWERS

Operator: Ladies and gentlemen, if you wish to ask a question, please press 0 and 1 on your

telephone keypad. Thank you for holding until we have the first question.

So we have the first question from Andy Jones from RBC, please go ahead, sir.

Andy Jones: Good morning everybody. I have three questions please, if I could. Firstly on

property, could you give us a bit of a steer on how much more surplus property you might have

and how that breaks down between the large types of properties which you might need to

normalize the, kind of, gains from versus the smaller properties which turn up in the ongoing P&L.

Koen Beeckmans: Thank you, Andy, for your question, but we do not comment on future deals,

especially related to the sale of buildings. But we believe that in the next couple of years we will

be at an average pace which you have seen over the last couple of years, which is approximately

around €15 million impact on the P&L.

Andy Jones: Okay, perfect. And my second question on parcels, you mentioned you had to put

some more employees in at the peak. Are you comfortable that putting those staff in is

incrementally more profitable? I can see in the, kind of, EBITDA, the parcels and internationals,

there’s significant improvement, but it’s not clear how much of that is curtailment of the

international mail versus the parcels improvement. I mean, I guess my question is really how do

you discuss being paid for the additional staff that you’ve put in with the customers?

Koen Van Gerven: Andy, a couple of elements on that. First of all, as you know, we have an

integrated distribution with the mail and parcel business. So, additional parcels for the biggest part

of our network are worth gold as of course we can piggy-back on the mail distribution. As you

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know, in Belgium, more than 50% of the mail distribution is with motorized vehicles. So adding

some additional parcels in that still continues to work at this stage.

So I don’t have too much concerns on the additional – the good money that we earn with that.

And of course, it is very important to be able to deliver a good quality, especially in these

important, as you know, peak periods which are the end of year periods and a couple of other

moments during the year. And that’s why, probably, we’ve put ourselves somewhere at the safe

side in terms of being able to deliver good quality. So this is my first concern.

My second concern is that in terms of customer profitability, in terms of the big customers that of

course we still – we have to continue to earn money and to increase the profitability that we get

out on a customer basis, which probably doesn’t always mean that the last parcel that we deliver

for this customer is necessarily going to be profitable.

Andy Jones: Okay, thank you. And my final question was on M&A. You mentioned it becomes a

kind of a core part of your growth strategy, so would you be willing to put a number on how much

you think you’d be willing to spend per year on M&A and what does it look like? What’s the

balance between the, kind of, vertical integration like retail versus, kind of, the horizontal

acquisitions like the Australian and Polish ones? Thank you.

Koen Van Gerven: Andy, we don’t have precise figures on that. I think that you have to separate

two types of acquisitions that we can consider. And the first one is what we always call the bolt-

ons, the smaller things in order to strengthen the proposition that we have. And probably this is

something that we will continue to do in the international arena. We are very selective. We only

consider something where it can really add value somewhere in a promising environment, as we

did now with Central Europe. Because Central Europe is an area that we see as starting to

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consume e-commerce. On the other hand, Australia, it’s a little bit –it is perhaps less

straightforward but it was a nice opportunity because Australia is a very important market in e-

commerce consumption. We do have already a line going from the US to Australia in terms of flow

of e-commerce, and it grows quite well. On the other hand, we did encounter a couple of concerns

in the field of – last mile delivery and in the field of fulfilment, so we see an opportunity over there

to strengthen the proposition to our US customers. On the other hand, of course, with the

business declining – our historical core business declining, the mail business, although it still holds

more than 50%, more than 60% of our revenues, we have to prepare for the future. And the

future, probably, is going to be, in our perspective, in a couple of areas that are not completely

strange to what we do, but that are promising, and that’s how you have to see the acquisition,

what we did, on the Lagardère side, because it holds a couple of opportunities to develop and to

capitalise, not only in the short term, and there are a couple of things that we can do immediately,

but in the longer term too. And I think it’s important that we prepare the company, not only for

the next year, but from time to time, I try to reflect on how this company should evolve towards

2020 and further on.

Andy Jones: Okay. Thank you. And then, I guess developing on that point, does that therefore

mean that you kind of – and what capabilities are you looking to exploit when you go to reach out?

I mean, should we be thinking about businesses which are completely unrelated, or kind of semi-

related, like a retail business?

Koen Van Gerven: It’s – I think it’s a good question, and I’m not sure that I have the answer for

100% on that. What we did here, if you look to Lagardère, I do distinguish three capabilities that

we did acquire. First of all, it has to do with diversification and two, something which is not

completely unrelated, but it’s proximity and retail convenience. We have retail and proximity

convenience too, although the DNA of a post office is different from the DNA of the shops that we

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acquire. It’s a growing market. Within the retail business, the proximity and convenience

business, is seen as the most promising growth market in the years to come, with growth rates

between 4-6% on a yearly basis, so that’s the first thing where we want to try to diversify, and the

aim is that we grow, at least with the market. The aim is that we can improve the profitability of

this activity which is with a 3.4% EBITDA margin in our perspective, improvable, it’s too low and

we will continue to work on that.

Next to that, of course, there is the platform for the distribution of newspapers and magazines and

periodicals, which is something that we know already, but it’s a completely other ballgame. The

distribution towards the homes, and the distribution towards 5,000 shops, is different, and

probably there are a couple of synergies you can make in the short run. Eventually, with volumes

even evolving over time, probably there are other possibilities, but those I really consider outside

the scope of the business case that we tried to build for the acquisition.

Andy Jones: Okay. Thank you very much for the answers.

Operator: So we have another question from Mr. Philip Scholte from Kempen & Co. Please go

ahead.

Philip Scholte: Yes, good morning everybody. I have a first question on your volume

development, given the gradual although still fairly modest, but still, acceleration of the decline

over the last couple of years, and your guidance for 5-6% for 2016 is also a bit higher than maybe

what we’ve seen last year. Can you shed some light on your thoughts about where that is going

beyond 2016, and if that accelerates further, what are your views on how you can further react on

that, in terms of, maybe, additional cost savings? And my second question is on the Lagardère

acquisition. Is there anything you can say about the acquisition price?

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Koen Van Gerven: Thank you for both questions. As far as volume decline is concerned, to be

honest, already a couple of years ago, we stopped trying to make big forecasts on the longer

period. What we observe is it’s very important to be close to your customers, to understand what

kind of initiative they take. We want to stay close to our customers too in order to talk with them

and share with them the insight that we have on the importance of paper too, so we try to work on

that. And it brings us to the figures that we have, and we feel relatively, well, comfortable is

perhaps a big word, but it’s the best that we can get out of what customers are going to do in the

year to come, to put the figure between 5-6%. My feeling is that the big chunks, when we talk

banks, when we talk utility companies, the big plans are – I’m not going to say, are completely

behind us, because all of them will continue to work on trying to reduce the costs, and one of the

cost lines is chiselling, on the sending out of documents and paper, so that’s why we come up with

this 5-6%. I’m not sure it’s very relevant that we’re going to put figures on the period beyond

2016, because in my opinion, it would be guessing. Another observation as far as mail volumes is

concerned; this makes our life not always easier. What we observe is an increasing volatility

between quarters, so this is the first point.

Second question was about, yes, but if it goes beyond these figures, what do you expect to do?

Within the framework of our plan, we did run, as you know, a sensitivity analysis, and there we

know that indeed, if we go beyond the 6%, then we have to activate additional levers. We don’t

have a big Plan B that we can roll out. We have more a number of tools in our toolbox that we

should consider activating at the right moment, and we have still a couple of things, and they have

to do with reviewing the distribution model, as they did already in the Nordics, but therefore, you

have to review your product offering. Secondly, we can activate the price lever. We still have

possibilities over there in the regulatory framework that we know, and when I look around me, a

couple of countries started to activate that lever. Thirdly, we probably will have to go a little bit

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further on a couple of cost cutting and cost reduction programmes. So – but of course, the

compensation of decline, and this is not new, it’s a pillar of our strategy, is not only cost cutting.

The most important pillar of our strategy in order to give this company a future has to do with

develop new services, develop new products, diversify and create growth. So this as far as the

second point is concerned.

As far as Lagardère is concerned, we don’t disclose the consideration that we paid, and of course,

we will, as soon as we have, and the closing, and the clearance of the competition authority, we

will fully consolidate it, and we expect that this happens this year, the sooner the better. But when

we can consolidate it, as from this year, we are comfortable that it will be accretive to the results

as from 2017.

Philip Scholte: Thanks.

Operator: So we have another question from Mr Chris Combe from JP Morgan. Please go ahead

sir.

Chris Combe: Good morning everyone. Sorry if you covered this ground, as I had some difficulty

joining the call earlier, but a few questions. First, on mail volume, in the first quarter you’ll face a

similar comp as you did just now in the fourth quarter with respect to domestic mail volumes, and

it looks like flat working days as well. As such, do you see any reason to believe that the trend

should be any different in the first quarter?

And then second question, can you remind us how much additional pricing headroom you have

banked at the moment?

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And lastly, if we look at domestic and international parcels, can you give us some sense of what

you expect for price mix going into 2016? And how much of the growth that we saw in 2015 came

from B2B specifically?

Koen Van Gerven: Okay, thank you Chris. On the first point, we already elaborated somewhat on

that, but I think the most important thing that I should repeat is that what we observe is the

volatility between quarters becomes higher. What I did observe is that there was some similarity

between quarters between 2014 and 2015, but I’m not sure that it’s sufficient to expect or to

deduct from that that we’ve found a kind of seasonality. That was my first point.

Second point on how much do we have still in the bank in terms of potential price increase. You

know the system in Belgium; you know that we can bank something and we still have more than

5% potential increase that we can use in the years to come on the bank. And thirdly, as far as the

parcel mix is concerned, then probably Koen can elaborate a little bit on that later.

On the B2B, you know that we have the ambition to improve, or to double our market share in the

Belgium market, which was – which sounds quite ambitious but, with the market share that we

have, is probably less. The good news is that, over the year last year – which was basically the

starting year, being on the market – the results were quite positive. We did sign contracts that

generated more volume than the growth of GDP, and, as you know, there is a relation between

GDP and B2B market, which to me is a good sign, because it means that we catch up in terms of

market share.

Chris Combe: Great, that’s clear. And just one follow-up, given the high rates of domestic parcel

volume growth, and your recent investments in the single large shed in Brussels, what do you – or

how far off do you think a potential bottleneck is, in terms of daily handling capacity?

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Koen Van Gerven: We – of course, as you know, the ambition is that we – and even engineers

can discuss on that – but the ambition is that, with the machines we’re going to put in place, we

are going to more than double. And, in my opinion, if we stretch a little bit, and if we take out the

cautiousness of the engineers, we can triple that capacity. So – but of course… I feel relatively

comfortable for the years to come. Of course, if it goes faster and faster, then we will have to

consider – I don’t say reconsider – to put additional capacity, but then we only really talk about the

period nearing 2020, in my opinion.

Chris Combe: Great, that’s clear. Thank you.

Operator: So we have another question from Mr Marc Zwartsenburg from ING. Please go ahead

sir.

Marc Zwartsenburg: Yeah, thank you for taking my questions, and I had the same issues as my

other analyst. So hopefully they’re not asked, but I wanted to ask about the impact of milk powder

in 2015, and what you expect there for 2016? That’s my first question.

Then on real estate sales, what can we expect for 2016, can you update us on that one? And then

the latter one, yeah, can you – because you had quite impressive growth in your domestic parcels,

but can you share with us a bit what the competitive situation is? There is also PostNL mentioning

to gain ground in Belgium. Can you perhaps give a bit more colour on that? Thank you.

Koen Beeckmans: Thank you, Marc. On the milk powder, what we see is that the milk powder

shipment to China seems to stabilise compared to last year. We see slight increase, but not a lot,

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and as we have mentioned, last year, the – it’s – the volumes are about €33 million in 2015, which

were not that much different than 2014, okay?

Marc Zwartsenburg: Do you say €23 million?

Koen Beeckmans: No, €33 million.

Marc Zwartsenburg: Oh, €33 million, okay, yeah.

Koen Van Gerven: Then on your second question on real estate, I – well, we discussed that a

little bit earlier. Well, we don’t comment on future sales of buildings, but you can take the average

of the last years. Sometimes it will be a little bit higher, sometimes it will be lower. Last year, as

you know, with one building that we obtained a very high profit on disposal, we had to normalise,

but you can take an average year for the next years.

Marc Zwartsenburg: an average year before 2015, you mean?

Koen Beeckmans: Yeah.

Marc Zwartsenburg: Okay.

Koen Van Gerven: Okay, on the third question on competition in Belgium, it’s indeed true that e-

commerce is taking up in Belgium, and as you know, we were probably kind of in a lagging

situation. The growth last year was 15% all over, or that’s the figures that I hear and I read,

which means that even with this kind of growth, we still have to continue to make a catch-up with

other countries like Germany, the Netherlands and certainly the UK. This means that it remains an

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attractive market, and of course, everything that’s attractive attracts competition. We see

increased interest from a couple of other operators that were already present in this country, but

more in the B2B part; that’s DHL. Of course, we see that DPD is present, and we saw PostNL

arriving, firstly in the northern part of the country, and I understood that they recently announced

that they would go to the southern part of the country. Of course, it’s something that we monitor,

but more than being anxious on what they’re going to do, I think that we have to continue to work

on our own strengths, and that we have to listen carefully to the market and try to remain on top

of what we call the best last mile. We took a couple of initiatives in order to strengthen the

proposition next to home delivery, pick-up and drop-off point delivery, and there, as you know, we

had to make a catch-up. We made it, and it shows result. We continue to deploy the network of

the parcel lockers. We started with home delivery on Saturday and Sunday. We have delivery at

night. And recently, we started with the possibility, what we call click and pick up, where you can

order something with an e-tailer that has a bricks-and-mortar network too, and then the customer

can pick it up in the shop. So we will continue to work on that.

Important next to all of those initiatives is that we can mention that we don’t feel price pressure

yet, so there is no-one coming in into the market that wants to destroy the market. I’m even not

sure, if they go in that direction, that I will follow. We had already this experience once with TNT

in the 2007 period. We didn’t follow at that time and, you know, we all know what happened; they

did disappear afterwards. So indeed, you’re right. We feel the interest. They are present. I don’t

like the number of cars with – running around with the DHL and the PostNL logo, but I think that

we are sufficiently organised to get a right answer to this.

Marc Zwartsenburg: Okay. Maybe one additional question, if I may. Your guidance on your

FTEs, it seems to me that if you exclude Alpha, you’re guiding more towards, say, a reduction of

500 to 600. I can imagine that you have to invest in parcels and all that. But how do you see

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that? Is it then perhaps in a sort of cautious guidance at the low end, including Alpha, or do you

have some extra headroom there to do more? And how do you see that also in 2017 perhaps,

because you are now two years at the lower end of that range, but do you – looking at your normal

attrition you should have from people retiring, I can imagine that it can even be higher.

Koen Van Gerven: A couple of observations on that, Marc. First of all, as you know, the reduction

is not driven by retirement, as you know, because the natural attrition that we have on a yearly

basis – and there we have plans that we can – that go beyond 2016, of course, because we know

the age pyramid. But on a yearly basis, more or less 2,000 people leave the company, so this is

not the hurdle. I think there are a couple of things on why we are at that range, and I think it’s a

most correct thing that we want to put forward. There is indeed the Alpha part that continues to

play. On the other hand, what we see is the bigger-than-planned increase some years ago in the

parcels activity, so it goes – we – a couple of years ago, in our big plans, we didn’t expect to have

double-digit growth. And of course, yes, as I already said at the beginning of the call but I’m not

sure that you were in there yet –

Marc Zwartsenburg: No.

Koen Van Gerven: What is very important in this parcel area is to commit and not to fail on

quality. For example – and that’s why at the end of the year period, we boosted the employees

and we boosted – we did put additional workforce in the network, not only to absorb the volume,

but to be sure that we could absorb it with the right and expected quality, because that’s key in e-

commerce. Between us, it’s less key in mail. Nobody is waiting for an invoice. But as far as a

parcel is concerned, your new iPhone or your new Samsung, you want to have as fast as possible.

And that’s why we took into account in the outlook the expectation that we will grow again double

digit. If the double digit is not going to work, then indeed, we are on the safe side.

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Marc Zwartsenburg: But should we also expect maybe a little bit further out that the efficiencies

kick in and your new DCs come into full effect, and IT upgrades, etc., that you get some leverage

out of that?

Koen Van Gerven: Marc, we all hope of course, but we will not have our sorting – new sorting

centre up and running in 2016.

Marc Zwartsenburg: No, I said the old.

Koen Van Gerven: Yeah, so to be honest – and we currently work on an update of our longer-

term plan, because the one we have runs until 2017, so by the end of the year, we will have a

more precise idea, at least in our mind, but – on what the future brings. We will be able to make,

again, as we did in the past, a couple of sensitivity analyses, and we don’t share the plan, as you

know, but we are – we did share in the past the sensitivity on a couple of levers, and then we will

be able to go more in detail on those points.

Marc Zwartsenburg: And can you already share when the new sorting centre will be up and

running, or is it too early?

Koen Van Gerven: It will be mid-2017. As you know, we have a couple of months delay on that,

due to discussions with environmental organisations. We were chasing three birds and this was not

appreciated.

Marc Zwartsenburg: Thank you very much.

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Operator: So, we have another question from Mr Ek Schluntborn from the IDR. Please go ahead,

sir.

Ek Schluntborn: This is Ek Schluntborn from the IDR, good morning. I've got two straightforward

questions. One is: when you discussed the situation – the competitive situation in B2C parcels,

you said you were lagging. The way I understood is that it has a lot to do with the labour law

situation in Belgium which makes it – yeah – more difficult to – postpone cut-off times – sorry,

make cut-off times earlier and basically leads to higher costs, which is part of the reason why the

Belgian consumer orders products in France or in the Netherlands. How easy is it for you to drive

your vans up to Waalwijk and basically pick up the product from there and source it into your own

network? I mean, PostNL was doing exactly the opposite; they pick it up and drive into your home

territory. Perhaps you could shed some light on that and what's currently cooking in the field of

the labour laws in Belgium.

And the second question would be on Kariboo. Assuming that the takeover goes through, I

understood that Kariboo acts as pick-up points for, for example, DHL and PostNL. Now, in the

Netherlands, we have a situation whereby there is exclusivity on the side of the pick-up points, so

if you're working for PostNL, you can't work for DHL at the same time. How is that in Belgium and

will that change after you've bought – after you've been cleared to take over the unit? Thank you.

Koen Van Gerven: Thank you for the questions. To be more precise – and probably I was not

sufficiently precise on the lagging situation – actually it's the e-commerce consumption in Belgium,

which, in my opinion, has not very much to do with night work and labour laws. Because the

consumer – and that's what happens already today – the Belgian consumers, in discovering e-

commerce, buy not only in Belgium but abroad too and this is of course one of the advantages of

the digital world, the digital world is a world play. And today, almost 50% of what is bought in

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Belgium over the internet comes from abroad, first observation, which doesn't mean that I don't

agree that the rigidity that we have in the labour laws is a hurdle to develop e-commerce players in

Belgium to develop their own businesses. But it's not a hurdle for Belgians buying things abroad.

We buy from Amazon, we buy from Zalando, we buy from Vente Exclusive in France, we buy from

Coolblue and as you indicated, this is something that we do already. Coolblue being big customers

of us, we truck in the things that you order the things that you order until midnight; midnight, we

truck them in, in the early hours of the morning, from Tilburg and Rotterdam, I guess. We sort

them and we distribute them the next morning.

So, in my opinion, yes, we have to work on the rigidity but it's more on the side that should favour

the development of e-commerce businesses in Belgium, more than the consumers going to, you

know – to profit from this evolution.

Ek Schluntborn: Okay.

Koen Van Gerven: The second question on – do you want to say – Kariboo?

Koen Beeckmans: Yeah, on Kariboo, it's true. It's not an exclusive distribution network and the

intention is to keep it an open-access network, so not, of course, an exclusive bpost network, so

that's the answer on that.

Ek Schluntborn: Okay, thank you, most helpful. Thank you.

Operator: So, we have no other questions. Ladies and gentlemen, I would like to remind you that

if you would like to ask a question, please press 0 and 1 on your telephone keypad.

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So, we have no other questions. So, Mr Van Gerven and Mr Beeckmans back to you for the

conclusion.

Koen Van Gerven: Thank you very much. I don't have anything anymore to add. Thank you for

your attention and I hope it was useful to you and we probably will meet some of you in the days

and weeks to come. Thank you. Bye-bye.

Koen Beeckmans: Yeah. Thank you very much. Have a nice day, bye.

Saskia Dheedene: Bye.

Operator: Ladies and gentlemen, this concludes the conference call, thank you all for your

participation, you may now disconnect.