4 ACTIVITY REPORT 2018 bpost

Message from the Board of Directors

Deep roots, strong wings

As our ecological footprint is important, bpost has a trailblazing role in sustainability. In 2018, the International Post Corporation named bpost the world’s greenest postal operator for the sixth year in a row. Between 2007 and 2017, we reduced our CO2 emissions by nearly 40%, following the replacement of our mopeds with 3,500 electrical bikes and the installation of 33,000 solar panels. In 2018, we set our new target: reducing the CO2 emissions generated by our operations by 20% by 2030, in spite of the expected growth in parcels. In doing so, bpost will contribute to the realisation of the Paris COP21 climate targets.

The focus and organisation are based upon bpost’s strategic ambitions

In 2018, we enlarged our focus and organisation around three strategic ambitions:

• remaining the preferred provider of mail, retail and public services in Belgium;

• becoming a major player in last-mile parcel delivery in Belgium and the Netherlands and in e-commerce logistics in Europe and Asia; and

• further developing Radial as a successful player in the important US e-commerce logistics space.

Towards a new last mile distribution model in Belgium

Given e-substitution, the volume of traditional letters, given e-substitution, fell by 5.8% in 2018. Market research shows that customers use other media to convey urgent messages and find it acceptable that their regular mail takes a little longer to arrive. That observation is a convincing sign that we can move towards a new distribution model under which we will alternately deliver regular mail. Parcels and newspapers will be delivered on a daily basis. This new way of working is not only more efficient, but also environmentally friendlier. It will also enable us to safeguard the long-term economic viability of the universal service. The introduction of Prior and Non Prior stamps from 2019 is the first step in this direction.

bpost welcomes the new Postal law offering regulatory stability, and hopes to conclude shortly the management contract with the Belgian State for the provision of universal services in Belgium for the next five years.

2018: a challenging year given the disruption in the industry2018 was a tough year for bpost. The operational results (EBIT) fell by 20.2% and the net results by 18.4%. These were caused by the letter volume decline and a general rise in costs, particularly payroll costs in Belgium. This was not sufficiently offset by the increase in tariffs and the strong growth in parcel volumes. Nevertheless, turnover was up 27% (to EUR 3,850.2 million in 2018).

The Board of Directors met eleven times in 2018, to do everything within its power to respond to the disruptive changes in the postal industry, by steering bpost’s strategy, improving its operating model, and broadening its business portfolio into e-commerce logistics.

The General Meeting of Shareholders approved for 2018 the payment of a gross dividend of EUR 1.31 per share, which is the same as in 2017.

Post is a people business

The postal business is a people business. Our employees are our biggest asset. bpost aims to continue to be an attractive employer in a highly competitive market. The new collective labour agreement, entered into for 2019-2020, will contribute to this.

bpost ACTIVITY REPORT 2018 5

Parcels continue to grow strongly

In 2018, we noted new record volumes for domestic parcels. On average, bpost handled 235,000 parcels per day, an increase of 23% compared to 2017. During the year-end holidays, volumes peaked at a record 417,000 parcels per day.

In 2018 we launched “The Benelux Couriers”, a partnership between bpost and DHL. It means that Belgian consumers can count on next-day delivery by bpost of their orders made at Dutch online stores the evening before.

We want to make it more convenient for our customers to receive their parcels. That is something we worked hard on in 2018. We already know how a million customers want to receive their parcels if they are not at home. With the integration of the kariboo! spots, we now have a network of 2,300 pick-up points, the largest in Belgium. We also introduced an innovation, with a pilot in which we deliver parcels inside people’s homes, based on an app that allows recipients to open their front door remotely.

In 2018, we also brought our organisation in line with the operational demands connected with the delivery of large parcels with the opening of dedicated parcel centres.

Enlargement of e-commerce logistics services

bpost aims to be an important provider on the growing e-commerce logistics market in Europe and North America. The acquisition of the US company Radial made the foundation of the e-commerce logistics strategy of bpost. Radial is a top five supplier in a highly fragmented industry. In 2018, the focus was on improving the commercial organisation and increasing the customer centricity.

In 2018, we continued to develop our e-commerce logistics expertise in Europe with a majority stake in Active Ants. This company uses robots in the fulfilment process and is highly automated. With the acquisition of Leen Menken, we also gained a customer base and know-how in food deliveries, in chilled as well as in frozen form. We are firmly committed to develop and further expand the e-commerce logistics activities in Europe.

People, talent, culture, innovation and technology will be key drivers of our success

The Board of Directors and the Board committees have been working hard in 2018, and will continue to do so in 2019 by providing strong support to bpost’s management. In this respect, the Board and the Board committees will

be increasingly involved in key projects which have an impact on the longterm future of bpost. Key priorities will include developing top talent and engagement of employees to create a culture of innovation and addressing the disruptive trends in the industry by offering innovative solutions using technology.

We will ensure that bpost realizes its three strategic ambitions: to remain the universal service provider for mail in Belgium, to become a major player in last-mile parcel delivery in Belgium and the Netherlands and a global e-commerce logistics player, anchored in Belgium. The long term strategic focus is the best guarantee to create lasting value for the shareholders and the stakeholders at large.

bpost would also like to thank all its employees for their engagement and commitment, and its shareholders and stakeholders for their confidence. We are convinced that we have the right strategy to reward them while also serving society at large.

François CornelisChairman of the Board of Directors

Koen Van GervenCEO