Neopost: 2013: Transformation of the Group Picks up Speed

  Neopost: 2013:Transformation of the Group Picks up Speed

  *2013 Sales: 2.7% organic growth to €1,096 million^1
  *Strong 19% organic growth in CSS activities which now account for 17% of
    Group sales
  *2013 current operating margin^2,before acquisition-related costs: 24.0%
  *2013 net income up 2.1%, net margin^3 maintained at 15% of sales
  *Dividend proposed: €3.90 per share

2014 OUTLOOK

  *Organic sales growth in 2014 expected at between 1 and 3%^1
  *2014 current operating margin before acquisition-related costs forecast at
    22.5 to 23.5%

Business Wire

PARIS -- March 25, 2014

Regulatory News :

Neopost (Paris:NEO), the number two worldwide supplier of mail solutions and a
major player in the fields of communications and logistics solutions, today
announced its 2013 annual results (period ended on 31 January 2014).

In 2013, the Group grew sales 2.4% year-on-year to €1,095.5 million, or 5.2%
excluding currency effects. Organic growth was 2.7%^1.

2013 current operating income amounted to €262.5 million, before
acquisition-related costs, compared with €266.7 million in 2012. The Group's
current operating margin^2 before acquisition-related costs was 24.0% of sales
in 2013, versus 24.9% in 2012. This performance reflects a margin of 24.8% of
sales achieved in the Neopost network (Neopost Integrated Operations^4) and
12.2% in CSS Dedicated Units^4.

Net attributable income in 2013 rose 2.1% to €164.0 million, from €160.6
million in 2012, giving a stable net margin^3 of 15%.

Denis Thiery, Chairman and Chief Executive Officer of Neopost, commented: "The
transformation of Neopost Group is firmly under way. In 2013, we demonstrated
the resilience of our Mail Solutions business. We also posted very strong
growth in Communication & Shipping Solutions, which now account for 17% of
sales, despite the fact that Neopost is still in the early stages of
implementing synergies. During this period of transformation and capital
expenditure, Neopost maintains very high margins."

(in millions of euros)                            2013     2012     Change
Sales                                             1,095.5  1,070.0  +2.4%^5
Current operating income before                   262.5    266.7    -1.6%
acquisition-related costs
% of sales                                        24.0%    24.9%    -
Current operating income                          254.1    259.9    -2.2%
% of sales                                        23.2%    24.3%    -
Net income                                         164.0     161.3     + 1.7%
% of sales                                        15.0%    15.1%    -
Reported earnings per share                        4.78      4.74      +0.8%
Diluted earnings per share                        4.54     4.52     +0.4%

2013 sees a return to organic growth in sales

2013 sales rose 2.4% to €1,095.5 million, an increase of 5.2% at constant
exchange rates. Sales were boosted by the acquisitions of GMC Software
Technology (consolidated as of July 2012), Human Inference (consolidated as of
December 2013), and DMTI Spatial (consolidated as of November 2013).
Organic growth was 2.7%, excluding currency effects.

Mail Solutions' sales remained virtually stable overall in 2013, excluding
currency effects. Equipment sales for both franking machines and
folders/inserters were up, while revenues from rentals, consumables and postal
rate changes contracted compared with the prior year. Mail Solutions accounted
for 83.0% of sales in full-year 2013 compared to 87.2% one year earlier.

Communication & Shipping Solutions’ sales posted a very strong 41.7% rise in
2013, excluding currency effects. Restated for the scope effect of
acquisitions, organic growth in sales for Communication & Shipping Solutions
stood at 18.9%. Growth was recorded across all business lines: Data Quality,
Customer Communication Management and Shipping Solutions. Growth in the share
of these activities within the Group's distribution network (Neopost
Integrated Operations) outstripped that of specialist networks (CSS Dedicated
Units), illustrating the intensified commercial synergies generated to
increase sales of Communication & Shipping Solutions through the Neopost
network. Communication & Shipping Solutions accounted for 17.0% of sales in
full-year 2013, up from 12.8% one year earlier.

Sales by region

Sales rose 6.4% in North America in 2013, before currency effects, driven by
the sharp rise in equipment sales. Neopost reaped the benefits of the
successful launch of the new IN range of franking machines, and the echo
effect of the 2008 US decertification. The performance in North America also
gained from higher sales of folders/inserters, especially at the top end of
the range, as well as from the increase in revenues generated by Satori
Software and GMC Software Technology.

In Europe, Neopost grew sales 2.1% in 2013, excluding currency effects. Sales
remained strong in most countries, and especially in Germany and Scandinavia,
while market conditions were tough in the United Kingdom. Sales in France
contracted slightly, due to lower revenues from postal rate changes than in
the previous year.

The Group maintained its strong growth performance in the Asia-Pacific region,
growing sales 23.1% at constant exchange rates in 2013. This rise stems
primarily from the strong performance recorded in Australia, in both Mail
Solutions and Communication & Shipping Solutions, driven notably by the
roll-out of parcel lockers for Australia Post.

Sales by revenue type

Sales of equipment and licences moved ahead 12.7% in 2013, excluding currency
effects. This fine performance was buoyed notably by the growth in sales of
franking machines and folders/inserters, especially in North America, France
and the Asia-Pacific region, as well as by the higher licence sales by GMC
Software Technology. Equipment and licence sales accounted for 33.2% of sales
in full-year 2013, up from 31.1% one year earlier.

In 2013, recurring revenues rose 1.8%, excluding currency effects, driven up
by the contribution of acquisitions, higher leasing and service revenues,
partially offset by lower revenues from postal rate changes, rentals and
consumables. Recurring revenues accounted for 66.8% of sales in full-year
2013, versus 68.9% one year earlier.

Recent events

Development of Packcity: agreement with GeoPost

GeoPost, a subsidiary of La Poste Group and the leading French operator in the
business and consumer parcel distribution market, and Neopost reached an
agreement in January 2014 to create and operate a network of automated and
secure parcel lockers for delivering and returning parcels in France. The
agreement entails an initial roll-out of 1,500 lockers by 2016, increasing to
more than 3,000 lockers over time, to be installed by Packcity France, a
Neopost and GeoPost joint venture.

Financing needs planned within the framework of the agreement will amount to
approximately €50 million, broken down as follows: 2/3 for Neopost and 1/3 for
GeoPost.

Development of a new automated parcel packing system: CVP-500

Neopost announces the development of CVP-500, a new continuous packing system
delivering 3D optimisation of parcel size, without the need for additional
filling material. This innovation showcases Neopost's expertise in Research &
Development. The prototype installed at one of the largest e-fulfilment
professionals in the Netherlands has already produced over 200,000 packages,
including during the peak Christmas period. Initial results of the pilot show
20% labour productivity gains and up to 40% reduction in packing volume. This
new packing system has significant potential for e-tailers, e-fulfilment
professionals, carriers and companies handling large parcel volumes.

Current operating income

The change in current operating income, before acquisition-related costs,
results from the change in the current operating margin for each of the two
Group’s segments and the variation in their respective weightings:

  *Stripping out acquisition-related costs, Neopost Integrated Operations
    (€1,004 million in sales in 2013) posted an operating margin of 24.8%,
    versus 25.4% in 2012. This dip was due to lower revenues from postal rate
    changes, an unfavourable mix effect (revenue type and geography), and the
    intensified spending to prepare the launch of the platform to support the
    Software as a Service (SaaS) offering in first-half 2014.
  *The operating margin for CSS Dedicated Units (€110 million in sales in
    2013) came to 12.2%, before acquisition-related costs, as against 12.8% in
    2012. As expected, spending and capital expenditures for the development
    of new solutions by these specialist subsidiaries were stepped up.

Current operating margin by segment

(in millions of      2013                                   2012
euros)               NIO    CSS    Elimination  Total       NIO    CSS    Elimination  Total
                              DU                    2013                DU                    2012
Mail Solutions       910                      910         933    -      -            933
sales
Communication &
Shipping Solutions   94     110    (18)         186         81     71     (15)         137
sales
Total sales          1,004  110    (18)         1,096       1,014  71     (15)         1,070
Current operating
margin before        24.8%  12.2%              24.0%       25.4%  12.8%              24.9%
acquisition-related
costs

Current operating income before acquisition-related costs was €262.5 million
in 2013, versus €266.7 million in 2012. The current operating margin before
acquisition-related costs remained high at 24.0%, compared with 24.9% the
previous year.

Acquisition-related costs amounted to €8.4 million in 2013, versus €6.8
million one year earlier.Current operating income was €254.1 million in 2013,
compared with €259.9 million for the prior year.

Exceptional items

Neopost renegotiated a number of acquisition contracts, in particular the
agreement with GMC Software Technology in H1 2013. For full-year 2013, the
renegotiated terms resulted in €15.0 million in non-taxable exceptional
income.

Moreover, in the first half of the year, the Group accelerated optimisation of
its structures to further enhance efficiency in the distribution network and
across its supply chain. A provision of €12.6 million was set aside in the
financial statements as at 31 July 2013. This new organisational optimisation
should allow for more than €5 million of savings from 2015.

After these exceptional items, operating income amounted to €256.5 million in
2013 (€255.8 million in 2012).

Higher net income

Overall, net financial income stood at €(37.5) million in 2013, compared with
€(30.4) million in 2012. The net cost of debt is controlled at €37 million,
versus €31.2 million in 2012. This increase relates to the year-on-year rise
in net debt and the higher cost of finance as a result of refinancing
operations in 2012. The Group also posted €(0.5) million in losses for foreign
exchange and other financial items in the 2013 financial year, compared with a
gain of €0.8 million one year earlier.

The average tax rate declined, due in particular to non-taxable profits
generated by the renegotiated acquisition agreements. It was 25.5% in 2013,
down from 28.6% in fiscal 2012.

Despite negative foreign exchange impacts, net attributable income in 2013
rose 2.1% to €164.0 million year on year, giving a stable net margin of 15.0%.
Net income per share was €4.78, up slightly from €4.74 the previous year.

Stronger financial position

Cash flow before net cost of debt and income tax is structurally high and
strongly recurring. Cash flow amounted to €322.7 million in 2013 (€328.7
million in 2012).

Leasing receivables totalled €674.8 million at 31 January 2014 versus €645.4
million at 31 January 2013, an increase of 5% at constant exchange rates.

Further more, the Group completed the acquisition of DMTI Spatial in 2013 and
paid its shareholders the balance of dividends in respect of 2012, in the
amount of €71.9 million.

Net debt edged up slightly to €807.9 million as at 31 January 2014, from
€791.5 one year earlier.

The Group's net debt finances the equipment used by its customers, and is more
than covered by future cash flows from the leasing and rental businesses.

At 31 January 2014, shareholders' equity was €769.6 million, up from €746.6
million for the prior year.

As a result, gearing ended the period slightly down at 105% as opposed to 106%
a year earlier. The leverage ratio (Net debt/EBITDA) remained stable at 2.4 in
2013.

Banking covenants are complied with.

The Group successfully carried out a new refinancing tranche with a $50
million private placement in the United States, maturing in six years,
complementing its private placement in June 2012 for $175 million. The new
issue was finalised in October 2013 at a variable rate of 3-month Libor
+1.75%, with availability of funds effective as of 23 January 2014.

At 31 January 2014, the Group had €436 million of undrawn credit facilities.

Dividend unchanged

Backed by robust cash flow generation, the Board of Directors will submit its
proposed dividend of €3.90 per share in respect of 2013, for the approval of
the Annual General Meeting on 1 July, 2014. If approved, the balance of €2.10
per share will be paid in August 2014, following payment of an interim
dividend of €1.80 per share on 10 February 2014. The final 2013 dividend will
be paid entirely in cash, as was the case with the interim dividend.

The Group plans to maintain a high dividend in 2014 and to continue its
interim dividend policy.

2014 outlook

Neopost expects organic sales growth of between 1 and 3% in 2014, based on the
following organic growth assumptions: Mail Solutions sales remaining more or
less stable and double-digit growth for Communication & Shipping Solutions.

Turning to profitability, the Group expects a current operating margin^6
before acquisition-related costs in the range of 22.5 to 23.5% of sales. This
is based on identified and approved projects to date, which will require
significant spending and capital expenditures:

  *bringing on-stream the platform and the launch of the new hosted SaaS
    solutions;
  *rolling out the Packcity network;
  *continuing the development of CVP-500.

The Group points out that the chosen business models favour recurring revenues
which will be reflected in a gradual build up in sales.

Denis Thiery concluded, "This is a very exciting period for Neopost. We are
building a new business model on very solid foundations, backed by a highly
efficient distribution network serving 800,000 customers, combined with the
resilience of our Mail Solutions business and the significant expansion of
Communication & Shipping Solutions. The launch of our dedicated solutions for
the SMEs will accelerate the synergies generated with the Neopost network . We
are also engaged in very promising Shipping Solutions projects with both
Packcity and CVP-500. All of these initiatives are already creating or will
soon create value for the Group."

Glossary:

  *Mail Solutions: mail metering systems, document management systems
    (folders/inserters for offices, mail rooms and production; other mail room
    equipment) and related services
  *Communication & Shipping Solutions (CSS): data quality, customer
    communication management solutions, logistics solutions, document
    finishing solutions and graphics solutions
  *Neopost Integrated Operations: Neopost subsidiaries developing, producing
    and distributing Neopost products and services
  *CSS Dedicated Units: Neopost ID, Satori Software, Human Inference, GMC
    Software Technology and DMTI Spatial

Calendar

First-quarter 2014 sales will be published on 27 May 2014 after the market
close.

ABOUT NEOPOST

NEOPOST IS THE EUROPEAN LEADER and the number two world-wide supplier of Mail
Solutions, as well as an increasingly significant player in the fields of
Communication and Shipping Solutions. As a specialist provider of mailroom
equipment, Neopost supplies the most technologically advanced solutions for
metering, folding/inserting and addressing, providing a full range of
services, including consultancy, maintenance and financing solutions. Neopost
is also progressively building a portfolio of new activities to enhance its
offering and support its clients’ needs in the fields of Customer
Communications Management, Data Quality and Logistics Solutions.
With a direct presence in 30 countries and 6,100 employees, Neopost posted
annual sales of €1.1 billion in 2013. Its products and services are sold in
more than 90 countries.

Neopost is listed in Compartment A of Euronext Paris and belongs notably to
the SBF 120 index.

2013

Consolidated income statement

                                         2013                2012

€ million                               (year ended        (year ended

                                         31/01/2014)         31/01/2013)
Sales                                   1,095.5  100.0%   1,070.0  100.0%
Cost of sales                           (257.7)  (23.5)%  (238.0)  (22.2)%
Gross margin                            837.8    76.5%    832.0    77.8%
R&D expenses                             (30.7)    (2.8)%    (33.0)    (3.1)%
Selling expenses                         (272.6)   (24.9)%   (269.1)   (25.2)%
Administrative expenses                  (164.8)   (15.0)%   (165.2)   (15.4)%
Maintenance and other expenses           (97.8)    (8.9)%    (89.8)    (8.4)%
Employee profit-sharing and             (9.4)    (0.9)%   (8.2)    (0.8)%
share-based payments
Current operating income before         262.5    24.0%    266.7    24.9%
acquisition-related costs
Acquisition-related costs               (8.4)    (0.8)%   (6.8)    (0.6)%
Current operating income                254.1    23.2%    259.9    24.3%
Gain/(losses) on disposals and others   -        -        (0.1)    -
Optimisation expenses                   (12.5)   (1.1)%   (4.0)    (0.4)%
Non-current acquisition-related income  15.0     1.4%             
Operating income                        256.6    23.4%    255.8    23.9%
Financial income/(expense)              (37.5)   (3.4)%   (30.4)   (2.8)%
Income before taxes                     219.1    20.0%    225.4    21.1%
Income taxes                             (55.8)    (5.1)%    (64.5)    (6.0)%
Income from associates                  0.7      0.1%     0.4      -
Net attributable income                 164.0    15.0%    161.3    15.1%

2013

Condensed balance sheet

ASSETS (€ million)                  31 January 2014  31 January 2013
Goodwill                            977.3            978.6
Intangible fixed assets             177.8            146.8
Property, plant and equipment       134.0            138.8
Other non-current financial assets  46.1             45.6
Leasing receivables                 674.8            645.4
Other non-current receivables       2.0              3.5
Deferred tax assets                 9.9              9.3
Inventories                         69.1             68.9
Trade receivables                   219.0            203.3
Other current assets                82.4             87.2
Financial instruments               0.0              0.4
Cash and cash equivalents           186.7            158.1
TOTAL ASSETS                        2,579.3          2,485.9
                                                   
LIABILITIES (€ million)             31 January 2014  31 January 2013
Shareholders’ equity                769.6            746.6
Non-current provisions              19.7             17.9
Non-current financial debt          907.9            873.5
Other non-current liabilities       12.2             37.4
Current financial debt              86.7             76.1
Deferred tax liabilities            142.1            125.8
Non-current financial instruments   2.9              3.5
Prepaid income                      210.6            219.8
Current financial instruments       0.1              1.1
Other current liabilities           427.5            384.2
TOTAL EQUITY AND LIABILITIES        2,579.3          2,485.9

2013

Simplified cash flow statement

€ million                                         2013     2012
EBITDA                                            331.1    334.1
Adjustments to reconcile EBITDA to cash flow      (8.4)    (5.4)
Cash flow before net cost of debt and income tax  322.7    328.7
Change in the working capital requirement         (33.2)   (18.8)
Net change in leasing receivables                 (33.1)   (30.7)
Cash flow from operating activities               256.4    279.2
Interest and tax paid                             (66.1)   (72.6)
Net cash flow from operating activities           190.3    206.6
Capital expenditure                                (94.5)    (91.9)
Purchases of securities and granting of loans      (40.3)    (132.2)
Disposals of assets and other                     4.5      13.6
Net cash flow from investing activities           (130.3)  (210.5)
Capital increase                                   5.1       0.5
Dividends                                          (71.9)    (98.6)
Change in debt and other                          33.4     116.3
Net cash flow from financing activities           (33.4)   18.2
Impact of exchange rates on cash                  5.0      (28.7)
Change in net cash position                       31.6     (14.4)

^1 Excluding currency effects
^2 Current operating margin before acquisition-related costs = current
operating income before acquisition-related costs/sales
^3 Net margin = net attributable income /sales
^4 See glossary page 7
^5 +5.2% at constant exchange rates and +2.7% organic
^6 Excluding new acquisition

Audits of the full-year financial statements have been performed by the
statutory auditors. The certification report will be issued after verification
of the management report and final implementation of the required procedures
and diligences for the annual financial report publication.

Contact:

Neopost
Gaële LE MEN, Tel: 01 45 36 31 39
Investor Relations Manager
Email: g.le-men@neopost.com
or
Fabrice BARON, Tel: 01 53 32 61 27
DDB Financial
Email: fabrice.baron@ddbfinancial.fr
or
Web site: www.neopost.com
 
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