bpost has released a statement to say it is faced with cost pressures of around €80 million this year, mainly to improve working conditions through the hiring of 1,000 additional FTE’s (adding 3% to headcount). This has put the stable dividend at risk
“We have cut EPS estimates by 24-36% and now estimate FY19E EBIT will fall 28% to €308m, vs. previous guidance for a relatively more stable result of around €390m at last summer’s CMD. As a result, we estimate bpost’s EBIT margin will fall to 8.0% this year, in line with the average of the European postal sector, versus >20% only two years ago.
“Beyond FY19E, we are projecting a gradual further decline in EBIT, with increasing mail volume pressure of up to 9%, driven by accelerating e-substitution and the new operating model for mail, partly offset by a recovery of Radial’s profitability beyond FY19E from 28% customer churn post acquisition.”
“The stable FY18E dividend of €1.31 with a yield of 16.5% does not look sustainable in view of an estimated free cash flow cover in the range of 55%-75%. As a result, we assume the dividend will be cut by 60% this year, based on a pay-out ratio of 75% of free cash flow, resulting in a sector-average yield.
4Q18E results on March 19th are expected to reflect a steep 30% EBITDA recovery, after an 18% decrease in 9m18, driven by (Radial) seasonality and cost phasing effects, as well as a €7.9m book gain on the sale of the old Brussels X sorting centre for €25m on December 21st.