PROFITABILITY AND FREE CASH FLOW
GENERATION MAINTAINED AT HIGH LEVELS DESPITE UNDER-PERFORMANCE FROM
EDS DIVISION
-
2017 Full-year sales of €1.1
billion, down -4.1%, or -2.2% in organic terms[1]
-
2017 Fourth-quarter sales down
-10.0%, or -4.4% in organic terms[2] owing to a
decline in the EDS division
-
Current operating
margin[3] of 18.2% of
sales
-
Net attributable income: €134
million up +13.2%
-
Cash flow after capital
expenditure: €149 million
-
Proposed dividend in respect of
2017: €1.70 per share
Indications for 2018
Paris, March 26, 2018
Neopost, a global leader in
digital communications, shipping and mail solutions, today
announced its 2017 annual results (for the financial year ended on
January 31, 2018). These financial statements were reviewed and
approved by the Board of Directors at its meeting on March 26,
2018.
In full-year 2017, the Group
generated sales of €1,112 million, down -4.1% and -2.0% excluding
currency effects year on year, for an organic change of -2.2%.
Fourth-quarter 2017 sales came out
at €290 million, down -10.0% and -4.8% excluding currency effects
year on year, for an organic decrease of -4.4%. The organic decline
in Group sales accelerated thus in fourth-quarter 2017, due to the
lack of large license contracts in the Enterprise Digital Solutions
(EDS) division. The 2 other divisions were consistent with the
performance reported in the first nine months of the year.
Current operating
income3 totaled €202
million in 2017, versus €216 million in 2016. Current operating
margin3 remained at a
high level of 18.2% of sales, compared with 18.6% in 2016.
Net attributable income amounted
to €134 million, up 13.2%. Net margin[4] stood at
12.0% of sales, versus 10.2% in 2016. Cash flow after capital
expenditure ended at a very high level, at €149 million versus €147
million in 2016.
Commenting, Geoffrey Godet, Chief Executive
Officer of Neopost, said: "Neopost reported a mixed trend in business activity in
2017. The pace of the downturn at SME Solutions slowed slightly,
while Neopost Shipping posted double-digit growth. The increase in
Enterprise Digital Solutions sales came to a halt at year-end, but
the division's customer base continued to grow and the share of
sales related to services and maintenance is substantial.
Enterprise Digital Solutions is thus expected to return to low
growth in the coming quarters. While I will need more time to make
a complete assessment of this business activity, we have already
revised our sales approach.
The
deterioration in sales in the fourth quarter should not mask the
high levels at which Neopost successfully maintained its operating
margin and free cash flow generation. Even though our sales will
contract further in 2018 given the decline in mail-related
activities, the Group's rigorous financial management and high
proportion of recurring sales constitute robust fundamentals.
Having recently taken up my position, I will be taking advantage of
the coming months to prepare our strategic plan for the next few
years. The plan will be presented at the Investor Day, to be held
before the end of our fiscal year. I am convinced that Neopost has
the strengths required to succeed in the upcoming phase of its
transformation."
Income statement
€ million |
2017 |
2016 |
Change |
Sales |
1,112 |
1,159 |
-4.1% |
Current operating income before acquisition-related
expense |
202 |
216 |
-6.3% |
% of sales |
18.2% |
18.6% |
|
Current
operating income |
191 |
203 |
-5.9% |
Net attributable income |
134 |
118 |
+13.2% |
% of sales |
12.0% |
10.2% |
|
Earnings
per share[5] |
3.62 |
3.17 |
+14.2% |
Diluted
earnings per share |
3.35 |
2.87 |
+12.8% |
Sales by activity and type of
revenue
€ million |
2017 |
2016 |
Change |
Change at
constant exchange rates |
Organic
change1 |
Mail solutions |
805 |
859 |
-6.3% |
-4.3% |
-4.3% |
Communication & Shipping
Solutions |
307 |
300 |
+2.4% |
+4.4% |
+3.5% |
Total |
1,112 |
1,159 |
-4.1% |
-2.0% |
-2.2% |
€ million |
2017 |
2016 |
Change |
Change at
constant exchange rates |
Organic
change1 |
Equipment and license sales |
354 |
382 |
-7.3% |
-5.2% |
-5,1% |
Recurring revenue |
758 |
777 |
-2.5% |
-0.4% |
-0.9% |
Total |
1,112 |
1,159 |
-4.1% |
-2.0% |
-2.2% |
The Group continued its business
transformation in 2017, with Communication & Shipping Solutions
accounting now for 28% of total sales compared with 26% in 2016.
Recurring revenue, down slightly by -0.9%, showed good resilience
owing to the contribution of new businesses. The share of recurring
revenue increased slightly to 68% of total Group sales.
Sales by division
€ million |
2017 |
2016 |
Change |
Change at constant exchange rates |
Organic change1 |
Enterprise Digital Solutions (EDS) |
136 |
137 |
-0.4% |
+1.7% |
-0.3% |
Neopost Shipping |
57 |
53 |
+8.0% |
+10.7% |
+10.7% |
SME Solutions |
941 |
991 |
-5.0% |
-3.0% |
-3.0% |
Eliminations |
(22) |
(22) |
- |
- |
- |
Total |
1,112 |
1,159 |
-4.1% |
-2.0% |
-2.2% |
Enterprise Digital Solutions
(EDS)
In full-year 2017, Enterprise Digital Solutions sales rose +1.7% excluding
currency effects. Restated for scope effects stemming from the
acquisition of icon Systemhaus and the disposal of DMTI Spatial,
sales declined by -0.3% on an organic basis.
The underperformance mainly
resulted from the lack of sales of large license contracts by GMC
Software for customer communications management, whereas the Group
had expected a recovery in this activity in the fourth quarter.
Yet, given the high number of large contracts signed in
fourth-quarter 2016, GMC Software recorded an organic sales decline
of -11.9% for in fourth-quarter 2017.
However, GMC Software's annual
sales grew +3.2% excluding currency effects thanks to an increase
in maintenance and service sales and to the signing of a
significant number of new small license contracts, contributing to
a continued increase in the customer base.
The underperformance from the EDS
division is also attributable to a decline in organic terms in the
data quality management business (-6.2%) and from icon Systemhaus
(-11.0%) over the full-year.
Neopost Shipping
In full-year 2017, Neopost Shipping sales rose +10.7% excluding currency
effects.
Double digit growth was driven by
the strong performances in the roll-out of Packcity automated
parcel lockers in Japan in partnership with Yamato Transport. The
number of installed parcel lockers now totals 2,600, versus 200 a
year earlier. As of today, Neopost manages a network of more than
3,000 automated parcel lockers around the world.
Growth in the division was also
driven by accelerated sales in the CVP-500 automated packaging
system whose placements reached 10 units this year versus 6 in the
previous fiscal year.
In addition, Temando is currently
preparing for the launch of its shipment module for Magento's new
e-commerce solutions platform (set for spring 2018).
SME Solutions
SME Solutions
sales in full-year 2017 were down -5.0% to €941 million and down
-3.0% at constant exchange rates.
Mail Solutions sales fell -4.3%
excluding currency effects. This business has shown more resilience
in North America than in Europe, where the decline is more marked,
confirming the trend observed for some time now.
Within this division,
Communication & Shipping Solutions sales rose +5.5%, with a
-6.0% decrease in graphic activities and a +17.5% increase in
digital communications and logistics, thus demonstrating the
division's ability to support its customers with customer
communication and parcel management software.
CURRENT OPERATING INCOME
Current operating margin by
segment
|
2017 |
|
|
|
|
|
|
2016 |
|
|
|
€ million |
EDS |
Neopost
Shipping[6] |
SME
Solutions |
Innovation[7] |
Total |
|
EDS |
Neopost
Shipping6 |
SME
Solutions |
Innovation7 |
Total |
Sales |
136 |
57 |
941 |
0 |
1,112[8] |
|
137 |
53 |
991 |
0 |
1,1598 |
Current operating income |
16 |
(13) |
207 |
(8) |
202 |
|
21 |
(11) |
214 |
(8) |
216 |
Current operating margin3 |
11.6% |
(21.8)% |
21.9% |
n/a |
18.2% |
|
15.6% |
(21.6)% |
21.6% |
n/a |
18.6% |
EDS posted a decrease in its
current operating margin3, which came
out at 11.6% of sales versus 15.6% in 2016. The decline
resulted from the contraction in the sales of licenses.
The current operating
margin3 of Neopost
Shipping6 was stable at
-21.8%. Excluding Temando and CVP-500, the margin ended at 8.2% of
sales compared with 8.8% in 2016.
The current operating
margin3 of SME
Solutions rose to 21.9% of sales from 21.6% in 2016. The savings
and optimization programs continue to produce results. In 2017, SME
Solutions' net operating expenditure was reduced by €21 million
after already being cut by €23 million in 2016. In all, Neopost has
reduced the cost base of this division by €57 million in three
years, consistent with the announced target of at least €50
million.
Innovation expense includes the
development of a web-based platform and also digital applications
for small businesses. Total innovation expense came out at €8
million in 2017, the same as in 2016.
The Group's current operating
income before acquisition-related expense stood at €202 million,
versus €216 million in 2016. Current operating margin before
acquisition-related expense was 18.2% of sales versus 18.6% in
2016.
Acquisition-related expense
totaled €11 million, compared with €13 million in 2016.
Current operating income in 2017
amounted to €191 million, against €203 million the previous
year.
Non-current items
The Group recorded a €13 million
expense for the optimization of structures in 2017, compared with
€15 million in 2016.
It finalized the disposal of its
subsidiaries in Indonesia, Malaysia, Singapore and Thailand (SME
Solutions), as well as its DMTI Spatial subsidiary (EDS). The Group
also acquired Temando's minority interests in September 2017.
Earn-out that was accounted for when Neopost took its first stake
in Temando, was canceled to take account of the new business plan
and the goodwill was depreciated consequently.
In all, income from disposals and
other operational expense totaled €12 million, against €7 million
in 2016.
After recognizing these
non-current items, operating income came out at €166 million in
2017, versus €181 million in the previous year.
Net income UP
Net cost of debt amounted to -€32
million, compared with-€30 million in 2016. The carrying costs
stemming from the refinancing transactions in 2017 (Schuldschein in
February and revolving credit facility in June) amounted to €1
million.
In 2017 the Group also recorded
currency losses and other financial items of -€2 million, compared
with -€1 million in 2016. Net financial income amounted to -€34
million in 2017, versus -€31 million in 2016.
The tax rate came to 0.6%, down
from 25.1% in 2016. This change resulted from the lowering of the
tax rate in the United States as well as the cancellation of tax on
dividends in France.
Net attributable income thus came
out at €134 million, up 13.2% on 2016, for a net margin of 12.0%
compared with 10.2% in 2016. Earnings per share stood at €3.62,
compared with €3.17 in 2016, for an increase of 14.2%.
STRONG CASH FLOW
GENERATION
EBITDA[9] totaled
€285 million, compared with €295 million in 2016. The EBITDA margin
grew slightly to 25.6% of sales, compared with 25.5% in 2016.
The change in the working capital
requirement was positive at €20 million, thanks notably to the
decrease in trade accounts receivable.
The leasing portfolio and other
financing services were down -2.8% excluding currency effects, for
a resource of €23 million. After recognizing the decline in the US
dollar, the portfolio stood at €711 million, down from €798 million
at January 31, 2017.
Investments in tangible and
intangible fixed assets amounted to €99 million versus €82 million
a year earlier. The increase was entirely due to the roll-out of
Packcity in Japan.
In total, the Group generated €149
million in cash flow before acquisitions and dividends, equivalent
to the total last year, while investments are higher in 2017.
In terms of external growth, the
Group invested €23 million, mainly for the acquisition of the
minority interests in Temando. The total was close to the previous
year's €24 million.
Strong cash flow generation and
the fall in the US dollar versus the euro led to a significant
decrease in net debt, which at January 31, 2018 stood at €675
million, versus €763 million a year earlier. The
Group would like to point out that
its net debt is fully backed by future cash flows from its rental
and leasing activities.
At January 31, 2018, shareholders'
equity was €1,169 million, against €1,139 million a year
earlier.
Gearing came out at 58% of
shareholders' equity compared with 67% at January 31, 2017. At
January 31, 2018, the leverage ratio (net debt/EBITDA) improved. It
stood at 2.4, compared with 2.6 on January 31, 2017.
DIVIDEND
The Board of Directors will submit
its proposed dividend of €1.70 per share in respect of fiscal year
2017, the same amount as for fiscal year 2016, for the approval of
the Annual General Meeting on June 29, 2018. If approved, the
balance of €0.90 per share will be paid on August 7, 2018,
following the payment of an interim dividend of €0.80 per share on
February 6, 2018. The final 2017 dividend will be paid entirely in
cash, as was the interim dividend.
INDICATIONS FOR 2018
Group sales are expected to
continue to decline on an organic basis in 2018, owing to the
following factors:
-
Enterprise Digital Solutions: low-single-digit
growth;
-
Neopost Shipping: double-digit growth;
-
SME Solutions: a continued decline in legacy and
graphics activities between -4% and -6%, and double-digit growth in
digital communication and shipping solutions.
On the basis of innovation efforts
identical to those in 2017, and continued cost-cutting at SME
Solutions, the Group's current operating margin excluding
acquisition-related expense should come out at around 18%. The
Group will continue to generate a high level of operating cash
flow.
Meeting webcast
Neopost
has scheduled a meeting in Paris on March 27,
2018 which will be webcast simultaneously starting at 9am Paris
time/8am London time. The meeting will be held in English. To join
the webcast, go to http://www.neopost-group.com/fr/finance. The recording
of the webcast meeting will be available for a period of one
year.
CALENDAR
First-quarter 2018 sales will be
published on May 31, 2018 after market close.
ABOUT
NEOPOST
NEOPOST is a global leader in digital
communications, logistics and mail solutions. Its mission is to
help companies improve the way they manage interactions with their
clients and partners. Neopost provides the most advanced solutions
for physical mail processing (mailing and folder-inserter systems),
digital communication management (Customer Communications
Management and Data Quality applications), and supply chain and
e-commerce process optimization (from point of sale to delivery,
including associated tracking services).
With a direct presence in 29 countries and more than 5,800
employees, Neopost reported annual sales of €1.1 billion in 2017.
Its products and services are sold in more than 90 countries.
Neopost is listed in compartment A of Euronext Paris and belongs to
the SBF 120 index. |
For more information, please
contact:
Gaële Le Men, Neopost |
DDB Financial |
Financial
& Corporate Communications Director |
Isabelle Laurent / Fabrice Baron |
+33 (0)1
45 36 31 39 |
+33 (0)1
53 32 61 51 /+33 (0)1 53 32 61 27 |
g.le-men@neopost.com /
financial-communication@neopost.com |
isabelle.laurent@ddbfinancial.com /
fabrice.baron@ddbfinancial.com |
Or visit our website:
www.neopost-group.com
APPENDICES:
Glossary
- Enterprise
Digital Solutions (EDS): division offering Customer
Communications Management (CCM) and Data Quality (DQ) solutions for
large companies. It includes GMC Software, Human Inference and
Satori, now combined in Quadient, as well as icon Systemhaus.
- Neopost
Shipping: division offering management solutions for shipping
and delivery; tracking of goods and merchandise for players in
e-commerce, distribution and carriers. It includes ProShip and
Temando.
- SME
Solutions: division offering Mail Solutions products and
services for small and mid-sized enterprises, the Group's
long-standing customers. This division also delivers digital,
shipping and graphic solutions for the same customer base.
- Mail
Solutions: mailing systems, document management systems
(folder/inserters for offices and mailrooms; other mailroom
equipment) and related services
- Communication
& Shipping Solutions (CSS): customer communications
management and data quality solutions, logistics solutions,
document finishing solutions and graphics solutions
Sales by division in Q4
2017
€ million |
Q4 2017 |
Q4
2016 |
Change |
Change at
constant exchange rates |
Organic
change2 |
EDS |
34 |
43 |
-20.0% |
-15.0% |
-12,2% |
Neopost Shipping |
17 |
16 |
+4.1% |
+9.0% |
+9.0% |
SME Solutions |
247 |
271 |
-8.8% |
-3.5% |
-3.5% |
Éliminations |
(8) |
(7) |
- |
- |
- |
Total |
290 |
323 |
-10.0% |
-4.8% |
-4.4% |
Sales by activity in Q4
2017
€ million |
Q4 2017 |
Q4
2016 |
Change |
Change at
constant exchange rates |
Organic
change2 |
|
Mail solutions |
210 |
234 |
-9.9% |
-4.6% |
-4.6% |
|
Communication &
Shipping Solutions |
80 |
89 |
-10.4% |
-5.3% |
-3.8% |
|
Total |
290 |
323 |
-10.0% |
-4.8% |
-4.4% |
|
Sales by revenue type in Q4
2017
€ million |
Q4 2017 |
Q4
2016 |
Change |
Change at
constant exchange rates |
Organic
change2 |
|
Equipment and license sales |
97 |
117 |
-16.9% |
-12.1% |
-11.4% |
|
Recurring revenue |
193 |
206 |
-6.1% |
-0.7% |
-0.5% |
|
Total |
290 |
323 |
-10.0% |
-4.8% |
-4.4% |
|
Sales by region in Q4 2017 and FY
2017
€ million |
Q4 2017 |
Q4
2016 |
Change |
Change at
constant exchange rates |
Organic
change2 |
|
2017 |
2016 |
Change |
Change at
constant exchange rates |
Organic
change1 |
North America |
125 |
142 |
-11.3% |
-1.6% |
-0.6% |
|
493 |
516 |
-4.4% |
-1.3% |
-0.7% |
Europe |
145 |
159 |
-9.1% |
-8.2% |
-8.2% |
|
531 |
558 |
-4.9% |
-3.7% |
-4.7% |
Asia-Pacific and others |
20 |
22 |
-8.3% |
-1.1% |
-1.1% |
|
88 |
85 |
+3.3% |
+4.4% |
+4.4% |
Total |
290 |
323 |
-10.0% |
-4.8% |
-4.4% |
|
1,112 |
1,159 |
-4.1% |
-2.0% |
-2.2% |
2017
Consolidated income
statement
|
2017
(year ending January 31, 2018) |
2016
(year ending January 31, 2017) |
€ million |
|
% |
|
% |
Sales |
1,112 |
100.0% |
1,159 |
100.0% |
Cost of sales |
(280) |
(25.1)% |
(294) |
(25.3)% |
Gross margin |
832 |
74.9% |
865 |
74.7% |
R&D expenses |
(57) |
(5.1)% |
(52) |
(4.5)% |
Sales and marketing expenses |
(280) |
(25.1)% |
(293) |
(25.4)% |
Administrative expenses |
(195) |
(17.6)% |
(197) |
(17.0)% |
Service and other operating expenses |
(100) |
(9.0)% |
(107) |
(9.2)% |
Employee profit-sharing and share-based payments |
1 |
(0.0)% |
(0) |
(0.0)% |
Current operating income before
acquisition-related expense |
202 |
18.2% |
216 |
18.6% |
Acquisition-related expense |
(11) |
(1.0)% |
(13) |
(1.1)% |
Current operating income |
191 |
17.2% |
203 |
17.5% |
Proceeds from asset disposals |
0 |
0.0% |
0 |
0.0% |
Structure optimization expenses |
(13) |
(1.2)% |
(15) |
(1.3)% |
Other operating expense |
(12) |
(1.0)% |
(7) |
(0.6)% |
Operating income |
166 |
15.0% |
181 |
15.6% |
Financial income/(expenses) |
(34) |
(3.1)% |
(31) |
(2.6)% |
|
Income before taxes |
132 |
11.9% |
150 |
13.0% |
|
Income taxes |
(1) |
(0.1)% |
(37) |
(3.3)% |
|
Share of results of associated companies |
2 |
0.1% |
1 |
0.1% |
|
Net income |
133 |
11.9% |
114 |
9.8% |
|
Minority interests |
1 |
0.1% |
4 |
0.4% |
|
Net attributable income |
134 |
12.0% |
118 |
10.2% |
|
2017
Simplified cash flow
statement
Assets
€ million |
January 31, 2018 |
January
31, 2017 |
Goodwill |
1,062 |
1,121 |
Intangible assets |
191 |
223 |
Fixed assets |
136 |
132 |
Other non-current financial assets |
60 |
53 |
Leasing receivables |
711 |
798 |
Other non-current receivables |
4 |
3 |
Deferred tax assets |
5 |
17 |
Inventories |
66 |
72 |
Trade receivables |
243 |
269 |
Other current assets |
112 |
100 |
Financial instruments |
0 |
0 |
Cash and cash equivalents |
193 |
96 |
Assets discontinuing activities |
- |
2 |
TOTAL ASSETS |
2,783 |
2,886 |
Liabilities
€ million |
January 31, 2018 |
January
31, 2017 |
Shareholders' equity |
1,169 |
1,139 |
Long term provisions |
28 |
28 |
Non-current financial debt |
846 |
753 |
Other non-current liabilities |
14 |
50 |
Current financial debt |
22 |
106 |
Deferred tax liabilities |
156 |
197 |
Non-current financial instruments |
0 |
0 |
Deferred income |
201 |
217 |
Current financial instruments |
0 |
1 |
Other current liabilities |
347 |
395 |
TOTAL LIABILITIES |
2,783 |
2,886 |
2017
Simplified cash flow
statement
€ million |
2017
(year ending January 31,
2018) |
2016
(year ending January 31, 2017) |
EBITDA |
285 |
295 |
Other elements |
(26) |
(20) |
Cash flow before net cost of debt and
tax |
259 |
275 |
Change in the working capital requirement |
20 |
(9) |
Net change in leasing receivables |
23 |
15 |
Cash flow from operating activities |
302 |
281 |
Interest and tax paid |
(54) |
(52) |
Net cash flow from operating
activities |
248 |
229 |
Capital expenditure |
(99) |
(82) |
Net cash flow after investing
activities |
149 |
147 |
Acquisition of shares and granting of loans |
(23) |
(24) |
Disposals of assets and other |
1 |
3 |
Net cash flow after acquisitions and
disposals |
127 |
126 |
Capital |
(1) |
|
Dividends paid |
(59) |
(59) |
Change in debt and other |
46 |
(51) |
Net cash flow from financing
activities |
(14) |
(110) |
Impact of exchange rates on cash |
(16) |
11 |
Change in net cash position |
97 |
27 |
[1] Full-year
2017 sales are compared with 2016 sales, with the addition of €2.7
million corresponding to the sales generated by icon Systemhaus
minus those of DMTI.
[2] Q4 2017
sales are compared with Q4 2016 sales, from which are deducted €1.4
million corresponding to DMTI.
[3] Excluding
acquisition-related expense.
[4] Net margin
= net attributable income/total sales.
5 Earnings per
share are calculated after deducting dividends paid to ODIRNANE
bond holders.
[6] Including
Temando and CVP-500.
[7] Innovation
includes the costs of developing a web-based platform and SaaS
applications for small businesses.
[8] After the
elimination of inter-company sales of €22 million in 2017 and
2016.
[9] EBITDA =
current operating income + provisions for depreciation of tangible
and intangible fixed assets.
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Source: NEOPOST via Globenewswire