POST Luxembourg Group ended the 2016 financial year with improved results in comparison to the previous year despite a complex and difficult climate. Turnover was up 3% for turnover and operating profits (EBITDA) 9%. However, the company says that sustaining profitability remains a key priority.

POST Luxembourg, a public institution and parent company of the POST Luxembourg Group, comprises three business sectors, POST Technologies, POST Courrier and POST Finance, each of which faces its own distinct challenges. 

Notwithstanding the difficult climate for these three businesses, POST Luxembourg generated a net turnover of €728.1 million, up €22.1 million from the previous year.

At consolidated level, gross margins in 2016 rose by €10.7 million to €538.2 million, equivalent to 74% of net sales.

EBIDTA, earnings before interest, taxes, depreciation and amortisation, reached €156 million, an increase of €13.2 million. This compares to €142.8 million in the 2015 financial year.

In light of the significant strategic investments made in recent years, value adjustments stand at €127.2 million, marking and increase of €11.0 million compared to 2015. This is reflected in pre-tax earnings, which show an increase of €2.3 million. 

Thus, the Group ended the 2016 financial year with a profit of €23.5 million. With the group's share being €23 million. Due to lower income taxes (which were abnormally high in 2015), this marks a strong increase as compared to the previous year, up €13.4 million, with the group share’s reaching €12.2 million.

Results for the group have therefore improved when measured against the previous year. Nevertheless, the sustainability of the Company's profitability continues to require special attention.

In view of the 2016 results, the company draws three conclusions. Firstly, the postal business is continually affected by digitalisation. This translates into a steady decline in mail volume which is only partially offset by "parcel" activity, an area which has risen considerably compared to 2015.

Secondly, the profitability of the financial services business is suffering from historically low interest rates. This remains valid despite the development of a new long-term economic partnership model with Banque Raiffeisen.

Finally, the telecommunications business continues to be extremely competitive and affected by the progressive abolition of Roaming charges.

The outcome of the redesign of the postal products portfolio and pricing model, announced in September 2015, was witnessed in 2016, offsetting the increased decline in mail volume, down 5.8% in 2016.

Parcel activity is increasing in volume however, up 13%, and the conclusion of the partnership with Singapore Post is showing first results.

In April 2016, the closure of 35 post offices across the country generated a wide range of reactions, but POST Luxembourg remains convinced that this restructuring, together with the modernisation of its sales network and the development of new sales channels, will result in real added value for customers. As part of this new approach, new “Espaces POST” will be created this year. These are integrated sales outlets where customers will be able to obtain the whole range of products and services offered by POST in a consumer-friendly environment.

Even though the telecommunications market remains, on the whole, very dynamic, POST Telecom shows a decline in turnover. The traditional voice services (fixed and mobile) and SMS are giving way to data traffic, up 29.3% in the mobile sector in 2016, owing to the success of social networks, streaming, gaming, messaging, etc. This change in user habits has forced telecom operators to develop their products and services to remain in line with the market trends, at a national and global level.

In the retail segment, the success of the SCOUBIDO range has led to an increase in the number of post-paid customers, up 3.7% in 2016. Income from the mobile segment, which is highly competitive and under pressure from the new Roaming IV and Roaming V Regulations, has fallen when measured against 2015 figures. Customer interest in broadband Internet products continues and is reflected, among other factors, in the success of the BAMBOO triple-play offer. The "pro" market for ICT solutions and services is on the rise, with the M2M and IoT markets providing opportunities for growth.

Furthermore, it should be pointed out that heavy investment is required to further develop the 4G mobile network, the deployment of the 4G+ network, while waiting for the future 5G generation as of 2020. 

In 2016, POST Finance was confronted with an environment which remained virtually unchanged from previous years. Turnover was mainly affected by the discontinuation of the Western Union service, thus having little impact on the overall performance of POST Finance.

During the past financial year, POST Finance made a strategic shift towards digital technology and forged closer ties with Banque Raiffeisen.

In 2016, POST Luxembourg continued its diversification policy by acquiring, amongst others, a 60% stake in Elgon S.A. and Ainos S.A.

Almost all subsidiaries of the POST Luxembourg Group, including ERBC, as well as VBS, Editus and InTech, registered impressive performances in 2016. 

Efforts have been carried out to create synergies between the Group's various businesses. In particular, in the field of cyber security, where resources and skills are used internally and for the benefit of the Group's customers.

Of all the 2016 figures, it is clear that POST Luxembourg’s key objective - the stabilisation of earnings - was achieved over the year. However, this situation remains fragile: to a large extent, it has been accomplished owing to an increase in earnings in the postal segment, while the telecom business (which remains the most significant contributor to the Group) continues to suffer from lower margins across all levels.

The outlook for 2017 will be challenging, especially in view of the effectiveness of the Roaming V Regulation in June 2017, the significant impact on the wage bill due to the indexation on salaries which came into effect on 1 January 2017 and the conclusion of a new salary agreement for Civil Service and State employees.

In any case, one of the main objectives of the management of POST Luxembourg Group is to maintain the profitability, while taking into account two key factors: the decline in turnover in markets with traditionally high margins and a cost structure with low levels of flexibility, staff costs, growth in depreciation in investment programmes.

The 2016 annual report of POST Luxembourg is available at: http://www.postgroup.lu