InPost Group achieved in Q2 2016. PLN 107 million in revenue thanks to excellent sales results for e-commerce

Rafał Brzoska, CEO of InPost Group:

InPost Group's performance in the second quarter of this year is the result of two opposing market trends and our response to them. On the one hand, we are observing further dynamic growth of the e-commerce market, which translates into excellent results of our courier-packet business. Revenues from our priority e-commerce sector in the second quarter increased year-on-year by more than 3.5 times, and their dynamics were a direct result of the continued popularity of our services dedicated to e-commerce providers and customers. More importantly, the courier and parcel segment significantly increased its profitability at the EBITDA level reaching a margin of 13.4%, compared to 9% in the first quarter of this year. For us, this is a key indicator of the correctness of the decision to focus our business on serving the e-commerce market.

There is also the other side of the coin - the traditional letter business, which since the beginning of the year has been under pressure from declining volumes and the aggressive pricing policy of Poczta Polska. Despite the restructuring undertaken, the segment's results were further degraded with no prospect of improvement even in the long term. Therefore, we took the decision to liquidate this business as of 1 August this year, and the one-off costs incurred for its closure in the amount of PLN 67 million significantly burdened the result of the letter segment and the entire InPost Group in the second quarter. In the third quarter, we expect only about PLN 15 million of negative impact from the closure of the letter business at the EBITDA level.

The solution to the letter segment problem was painful, but necessary from the perspective of ensuring that the InPost Group could continue to develop in the area of cooperation with the rapidly growing e-commerce market, which would not have been possible with the continued maintenance of the unprofitable letter business.

8,7

- 11x

EBITDA margin

-81,9%

6,2%

- 88.1 pp

Net result

-87,5

3,8

- 24x

The network of Paczkomaty® under the InPost brand belongs to the easyPack company of the Integer.pl Group. InPost's Paczkomaty® in Poland are logistically operated by InPost SA - a company of the Integer.pl Group, listed on the Warsaw Stock Exchange since October 2015.

InPost service Courier is provided to InPost Express Sp. z o.o., InPost SA provides the logistics service.

• InPost Group's revenues in Q2 2016 amounted to PLN 107 million, down 24% year-on-year. Continued very high growth of 366% y-o-y in sales of services to the e-commerce sector, which reached PLN 70 million in Q2, offset the 60% decline in revenues of the traditional letter business that was being closed.
• Among InPost Group's services, the highest growth rate was achieved by e-commerce registered letters (including InPost's Allegro Registered Letters), the volume of which increased y-o-y by 218% and reached 1.7 million letters in Q2 this year. Excellent results - higher than in Q1 this year. - were also recorded by deliveries to Paczkomaty® InPost parcel machines, with the volume of 5.4 million parcels, 89% higher y/y, and InPost Kurier services, which reached 4.0 million parcels - 44% more than in Q1 of this year.
• The letter segment continued the downward trend in letter volumes in Q2 (-59% y-o-y) as a result of the termination of the contract for the handling of court correspondence in Q1 and the decision of some corporate customers to reduce the volume of letters handled by the InPost Group. Despite the restructuring of the segment undertaken, the expected effects that would ensure its profitability were not achieved, and the Management Board decided to terminate the traditional letter business as of 1 August this year.
• EBITDA in Q2 was PLN -87.7 million, down by more than PLN 115 million year-on-year. With continued strong growth in the profitability of parcel and courier services, which at the EBITDA level reached a result of PLN 15.2 million and a margin of 13.4 per cent, the decrease in total EBITDA is due to the negative impact of the letter segment of PLN 110.5 million, of which PLN 67 million are one-off accounting write-downs of assets used in the discontinued traditional letter business.