Neopost: First-Quarter 2014 Financial Information BUSINESS NEARLY STABLE IN FIRST-QUARTER 2014 *Sales rose 0.3% at constant exchange rates (organic^1 growth: - 0.4%) FULL-YEAR 2014 OUTLOOK UNCHANGED *+1% to +3% organic growth in sales expected for 2014 *2014 current operating margin before acquisition-related costs^2 forecast at 22.5% to 23.5% Business Wire PARIS -- May 27, 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 consolidated sales totalling €257.4 million for Q1 2014 (period ended on 30 April 2014). Taking changes in foreign exchange rates into account, sales declined 2.6% compared with first-quarter 2013. At constant exchange rates, sales were up 0.3%. Organic growth was slightly negative at -0.4%. Denis Thiery, Chairman and Chief Executive Officer of Neopost, commented: "Although we knew that the start of the year would be challenging, Neopost delivered a modest performance in the first quarter. This is largely due to a high basis for comparison related to a number of large deals concluded last year, the end of the decertification echo effect in the US market, and the completion of the postal locker roll-out in Australia. Commercial activity is sustained for Mail Solutions and our growth outlook for Communication & Shipping Solutions remains intact. We are confident in our capacity to resume the pace of growth to match up to our ambitions in the course of the next quarters. " Change in sales by business line Change Q1 Organic Q1 Q1 change^1(at € million Change at 2013 constant 2014 2013 constant exchange exchange restated rates) rates Mail Solutions 212.3 222.0 -4.4% -2.1% 222.0 -2.1% Communication & Shipping 45.1 42.3 +6.7% +12.5% 44.1 +7.8% Solutions Total 257.4 264.3 -2.6% +0.3% 266.1 -0.4% (Unaudited data) Mail solutions During the first quarter, sales of Mail Solutions were down 4.4%, i.e. -2.1% at constant exchange rates. This decline reflects both a slight contraction in recurring revenue and a decline in equipment sales, notably for folders/inserters, after particularly robust performances by Neopost for mid and high end equipment in Q1 2013. In the US, mailing systems sales were impacted by the end of the echo-decertification. Mail Solutions sales accounted for 82% of Group sales in Q1 2014. Communication & Shipping Solutions Communication & Shipping Solutions posted a 6.7% rise in Q1 14 sales, increasing +12.5% at constant exchange rate. Restated for the scope effect relating to the acquisition of the Canadian DMTI Spatial company (consolidated as of fourth-quarter 2013), organic growth in sales for Communication & Shipping Solutions was 7.8%. This organic growth performance exceeded 12% however if one eliminates the difference in revenues due to the installation of the automated parcel lockers for Australia Post. This deployment was in full-swing in first-quarter 2013 and is now complete. The quarter saw particularly sustained growth in Customer Communication Management, notably in direct sales by GMC Software Technology and sales through the European subsidiaries of the Neopost distribution network. Growth was also positive, if modest, for Data Quality. Stripping out the completion of the roll-out of parcel lockers for Australia Post, growth was very sound also in Shipping Solutions. In all, Communication & Shipping solutions accounted for 18% of Group sales in first-quarter 2014. Change in sales by region Q1 Q1 Change at € million Change constant 2014 2013 exchange rates North America 97.5 105.0 -7.1% -1.8% Europe 143.6 139.6 +2.9% +2.6% o/w, France 55.5 56.8 -2.2% -2.2% Asia-Pacific 15.4 18.8 -18.3% -5.6% Other 0.9 0.9 -6.5% -0.9% Total 257.4 264.3 -2.6% +0.3% (Unaudited data) North America Sales in North America were down 7.1%, or -1.8% at constant exchange rates. This quarter saw the end of the boost to sales of mailing systems provided throughout the 2013 financial year by the echo-decertification in the US market. Moreover, the first quarter of 2013 constituted a high basis for comparison, due to a number of large deals of high-end folders/inserters and GMC Software Technology licences sold by the Neopost network. Sales of equipment and licences are expected to increase: during Q1 2014, the sales teams rebuilt their pipeline, while a high volume of leasing contracts are set to mature by the year-end. Besides, recurring revenue contracted somewhat in the first quarter of 2014, compared with the first quarter of 2013. Lastly, Neopost benefited from the integration of DMTI Spatial. Europe In Europe, Nepost recorded a 2.9% increase in sales, i.e. +2.6% at constant exchange rate. With the exception of France, the Group recorded solid growth in almost all European countries. Neopost saw a substantial recovery in equipment sales in the United Kingdom, and very robust growth in Mail Solutions in Scandinavia. The UK and Germany, together with several other countries in Europe, all posted very good performances in Communication & Shipping Solutions. Asia-Pacific Sales in the Asia-Pacific region declined 18.3%, or -5.6% at constant exchange rates. As expected, results in the region reflected the impact of the end of deployment of the automated postal locker network for Australia Post. Stripping out the difference in revenue linked to the installation of these lockers, sales in Asia-Pacific showed positive growth. Change in sales by revenue type Q1 Q1 Change at € million Change constant 2014 2013 exchange rates Sales of equipment & licences 81.4 83.3 -2.2% +1.1% Recurring revenue 176.0 181.0 -2.8% -0.1% Total 257.4 264.3 -2.6% +0.3% (Unaudited data) Sales of equipment & licences Sales of equipment and licences decreased by 2.2%. At constant exchange rates, sales were up 1.1%. The picture was a contrasting one in Mail Solutions as sales of mailing systems were down in North America and France, but rose significantly in the United Kingdom and Scandinavia. This result also reflects the decline in sales of folders/inserters at the top end of the range and the impact of the completion of the postal locker roll-out in Australia. As regards Communication & Shipping Solutions, sales of software solutions continued their upward trend. Equipment and licence sales represented 32% of sales in Q1 2014. Recurring revenue In first-quarter 2014, recurring revenue rose 2.8% and remained practically stable at constant exchange rates (-0.1%), reflecting the positive contribution of Communication & Shipping Solutions revenues. As regards Mail Solutions, Neopost once again reported growth in services, maintenance, leasing and financing revenues, while rentals and consumables were down. Recurring revenue accounted for 68% of sales in Q1 2014. Other highlights of the quarter and recent events Kick-off of the operational phase of Packcity Following a successful pilot phase launched in November last year, Neopost and its partner GeoPost have started the operational phase of the Packcity project, which will see the roll-out of some 1,500 secure automated lockers in France for pick-up and return of parcels by 2016. In recent weeks, Neopost and GeoPost formally agreed the terms of their partnership, created the legal structures, selected the parcel locker terminal provider and established a dedicated Packcity team. Meanwhile, a number of partners, including Monop’ and real estate companies Klépierre, Altarea Cogedim and Immochan, indicated or confirmed their interest in locating the terminals in their shops or shopping centres. The first lockers will be installed and the first parcels delivered by GeoPost before the end of the second quarter. Acquisition of DCS Neopost is announcing the acquisition of Data Capture Solutions Ltd (DCS), a leading UK supplier of document management software and service solutions targeted at improving business efficiency. DCS offers notably document capture solutions. DCS revenue stood at £3.7m in 2013. DCS will be fully consolidated in Neopost accounts as from May 2014. Acquisition of SPSI Neopost has also recently announced the acquisition of SPSI, a leading American provider of high-volume multi-carrier parcel shipping solutions. SPSI sells and supports several supply chain and logistics systems. ProShip®, its leading solution, ranks among the top 5 volume shipping software in the US and is the fastest performing solution on the market today, capable of managing millions of shipments per day. SPSI’s customers are large retailers, e-retailers, pharmaceutical distributors and third-party logistic providers. SPSI’s average customer volumes stand at 50,000 packages per day, with several customers above one million. SPSI enjoys strong relationships with the largest carriers, being certified by DHL, FedEx, UPS and USPS, among others. SPSI is based in Brookfield, WI, with offices in Chicago, IL. It currently employs about 50 people. SPSI posted revenues of US$ 10 million in 2013, growing at a double-digit rate versus 2012. SPSI, recently renamed ProShip Inc., will be fully consolidated in Neopost accounts as from May 2014. Overview of the Group’s financial position Results Current operating margin in the first quarter developed in line with the Group’s expectations for full-year 2014. Financial position The Group’s financial position is sound. Debt is related solely to financing equipment leased or rented to customers. Outlook unchanged Despite the modest performances in first-quarter 2014, Neopost confirms its expectation for organic growth in sales in 2014 of between +1% and +3%, 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 earnings performance, the Group confirms its expectation of achieving a current operating margin^3 before acquisition-related expenses of between 22.5% and 23.5% of sales. Denis Thiery concluded: "We are confident in our ability to achieve the guidance we announced for the full year. The performance delivered by Mail Solutions will improve, especially in the United States. We will also benefit from the start-up of Packcity, our automated locker network in France in the second half of the year. Meanwhile, opportunities for commercial synergies across our business lines are increasing. The acquisition of SPSI marks a new stage in the expansion of our Communication & Shipping Solutions portfolio. SPSI is set to become the cornerstone of growth strategy for all our Shipping solutions in the US. " Calendar The AGM will be held in Paris on 1 July 2014. Second-quarter sales will be published on 4 September 2014, after market close. ABOUT NEOPOST NEOPOST IS THE EUROPEAN LEADER and the number two worldwide 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 31 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. Appendix: Sales by distribution network Sales Q1 2014 (in € million) NIO CSS DU Elimination Total Mail Solutions 212.3 - - 212.3 Communication & Shipping Solutions 22.6 26.9 (4.4) 45.1 Total sales 234.9 26.9 (4.4) 257.4 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, Human Inference, GMC Software Technology and DMTI Spatial, ProShip.. ^1 Q1 2014 sales are compared with Q1 2013 sales, with the addition of sales generated by DMTI in Q1 2013 (amounting to €1.8 million). Organic growth is calculated at constant exchange rates. ^2 Current operating margin before acquisition-related expenses = current operating income before acquisition-related expenses as a percentage of sales. ^3 Excluding new acquisitions. Contact: Gaële Le Men, Investor Relations Officer Tel: +33 (0)1 45 36 31 39 E-mail: email@example.com or Fabrice BARON, DDB Financial Tel.: +33(0) 1 53 32 61 27 Email: firstname.lastname@example.org Or visit our website: www.neopost.com
Neopost: First-Quarter 2014 Financial Information
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