GLS Group Company presentation. June 2016, Neuenstein

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1 GLS Group Company presentation June 2016, Neuenstein

2 Disclaimer This presentation is being provided for informational purposes only and is not intended to, nor does it, constitute investment advice or any solicitation to buy, hold or sell securities or other financial instruments. None of Royal Mail, its affiliates or their respective directors, officers and employees shall accept any liability whatsoever for the consequences of any reliance upon or actions taken based on any of the information in this presentation. 2

None of Royal Mail, its affiliates or their respective directors, officers and employees shall accept any liability

3 GLS operates in an attractive but challenging growth market? In what kind of market does GLS operate? 3

4 GLS is a logistics provider mainly serving the CEP market segment Market Definition The broadest description for the industrial sector in which GLS operates is Industrial Transportation. This sector can be further segmented into Logistics Logistics include the following segments: o o o o CEP (Courier, Express and Parcels) Letter Freight Storage/ Warehousing GLS is mainly active in the CEP market segment 4

This sector can be further segmented into Logistics Logistics include the following segments: o o o o

5 Much of the growth in the European parcels sector has been driven by B2C deliveries European Parcel Market*, Split by Segment (B2B, B2C, C2X)**, Revenue Bn., Bn B2B % C2X B2C CAGR +17% -1% Expansion of ecommerce has made B2C deliveries a fastergrowing segment growing on average by +17% p.a The market segment of parcels sent by consumers has been growing by +9% p.a. B2B revenue was impacted by the period of slow economic development, resulting in an average decline of -1% p.a. Source: Apex Insight European Parcels: Market Insight Report, 2016 * Includes: DE, UK, FRA, IT, ESP, NL, BE, PL, CH, SWE, NOR, AUT, DK, GR, FIN, PT, IRL, CZ, RO, HU, SVK, CR, HR, BG, SLO, SRB, LTU, LVA, LUX, EST, BIH, ISL, ALB, MKD, MLT, MNE ** All service levels are included (time definite and deferred). Adjacent services, such as mail, pallet distribution, groupage, freight forwarding, sameday courier and contract logistics are excluded 59 +9% 5

deliveries a fastergrowing segment growing on average by +17% p.a The market segment of parcels sent by consumers has been growing by +9% p.a. B2B revenue was impacted by the period of slow economic development, resulting in an average decline of -1% p.

6 But B2B still generates the most revenue in all main European countries European Parcel Market Segment Split by Country*, % 90% 80% 70% 60% 50% 40% 30% 20% 10% 2B deliveries account for the majority of all major European markets Yet market share varies between the countries: o Italy (71%) and Poland (73%) have the highest 2B market shares o Due to its size, the German 2B market (68%) is by far the largest 2B market in Europe 0% DE FR IT ES NL PL BE Other Europe ** B2B C2X B2C Source: Apex Insight European Parcels: Market Insight Report, 2016 * Includes: CH, SWE, NOR, AUT, DK, GR, FIN, PT, IRL, CZ, RO, HU, SVK, CR, HR, BG, SLO, SRB, LTU, LVA, LUX, EST, BIH, ISL, ALB, MKD, MLT, MNE ** All service levels are included (time definite and deferred). Adjacent services, such as mail, pallet distribution, groupage, freight forwarding, sameday courier and contract logistics are excluded 6

by far the largest 2B market in Europe 0% DE FR IT ES NL PL BE Other Europe ** B2B C2X B2C Source: Apex Insight European Parcels: Market Insight Report, 2016 * Includes: CH, SWE, NOR, AUT, DK, GR,

7 Four groups of distinct parcel carriers and potentially new entrants compete in the European market Competitive Landscape European Parcel Market European networks GLS, largest European network DPD, second to DHL in the number of parcels carried in Europe Independent carriers which work in partnerships (Eurodis) Integrators DHL, overall leader across Europe FedEx, became No 2 in Europe after acquiring TNT UPS, global leader and currently No 3 in Europe Competitive Landscape National postal companies Large providers which are strong in home market Providers in Southern Europe play much smaller role in national markets Independent local services Independent / single country players which focus on niches Hermes, largest of the independent players (backed up by Otto Group parcel volume) Potential new entrants Retail companies could potentially insource some of its parcels traffic (mainly for same day delivery) and thus raise standards 7

acquiring TNT UPS, global leader and currently No 3 in Europe Competitive Landscape National postal companies Large providers which are strong in home market Providers in Southern Europe play much

8 Growing E-Commerce, further pressure on prices and growing cross-border markets shape the parcel market Three main structural Market Trends E-Commerce is main growth factor leading to convergence of parcels segments (B2B, B2C, C2C) Pressure on prices driven by large customers and pooled purchasing activities of SME who themselves suffer from consolidation and increased price pressure Cross-border market grows faster than domestic segment and suffers strongly from price pressure CEP companies create service improvements particularly on last mile delivery and communication with consignees CEP companies need improved productivity CEP market starts to form country clusters which results in (inter)national market consolidation 8

and increased price pressure Cross-border market grows faster than domestic segment and suffers strongly from price pressure CEP companies create service improvements particularly on

9 GLS covers 41 states in Europe with parcel services, the majority via own subsidiaries, others via partner companies? Who is the GLS Group? 9

10 In three phases the GLS Group of today developed out of German Parcel History of the GLS Group German and General Parcel: Laying the foundation Speed before Structure: Establishing the GLS Network Completing the GLS network Founding German Parcel (German franchise system) Founding General Parcel (European franchise system) RMG acquires German Parcel & Foundation of GLS Acquisition of companies in DE, HU, IE, DK, NL, FR, BE, ES, AT, IT, FI (100% and equity interests) Foundation of new companies in SI, PL Network partner agreements with PFWW Launch of the common brand GLS Establishment of the holding company (GLS B.V.) Acquisition of remaining equity stakes Foundation of new companies in SK, RO, PT, CZ, HR Establishment of network partner agreements in Europe and Worldwide Harmonisation of Brand, Products, Operations, IT and Quality Entering in B2C Today 10

11 Today, GLS is a leading player in the European parcel market with more than 2 bn. uro turnover Overview GLS 2016 Founded in 1999, with strong historical roots in nearly all domestic markets, GLS is one of the leading parcel service providers in Europe today > 220,000 customers* 431 million parcels (FY 2015/16) 2.2 billion turnover (FY 2015/16) * Including franchisees in Italy 11

domestic markets, GLS is one of the leading parcel service providers in Europe today > 220,000

12 GLS is generating most revenue in the parcel segment GLS Revenue Segmentation Product Types Proportion of GLS revenue (FY 2015/16) Parcel - Products & Services Parcel and package deliveries within regular transit times Value-added parcel services (Pickup, Cash etc.) 94% Express Products & Services Time Definite Deliveries Same Day Deliveries Value-added express services 3% Logistics Solutions Warehousing, Pick & Pack Value-added logistics solutions Freight, Groupage 3% 12

13 GLS covers 41 European states via its subsidiaries and partner companies in Europe The GLS Network Today GLS subsidiaries GLS Austria GLS Denmark GLS Hungary GLS Poland GLS Slovenia GLS Belgium (incl. LU) GLS Finland GLS Ireland GLS Portugal GLS Spain (incl. AD) GLS Croatia GLS France (incl. MC) GLS Italy (incl. SM, VA) GLS Romania Der Kurier (DE) GLS Czech Republic GLS Germany GLS Netherlands GLS Slovakia Network partners in Europe ACS Air Courier Service (GR, CY) Global Parcels Ltd. (MA) Itella Logistics (EE, LV, LT) Parcelforce Worldwide (UK) Schenker (SE) A2B Express (BA, ME, MK, RS, XK) Interlogistica Ltd. (BG) MNG Kargo (TR) Posten Norge (NO) Swiss Post GLS (CH, LI) 13

SM, VA) GLS Romania Der Kurier (DE) GLS Czech Republic GLS Germany GLS Netherlands GLS Slovakia Network partners in Europe ACS Air Courier Service (GR, CY) Global Parcels

14 In Europe, 41 hubs and 713 depots are connected with each other through a road-based system Business Model GLS: Key facts and figures (2015/16) The GLS Network in Europe covers 41 states via a road-based system 18 states are operated by fully owned subsidiaries To do so, GLS employs approx. c. 14,000 employees 41 Hubs and 713 Depots 1 c. 18,000 delivery vehicles c. 2,000 longdistance trucks The vast majority of delivery vehicles and trucks are sub-contracted GLS usually employs no own drivers 1 including sub-depots and depots operated by partners in those countries where GLS has a subsidiary company 14

15 Germany, France and Italy are the most important GLS countries Overview Strategy GLS Germany, GLS France and GLS Italy Germany Market Highly competitive market conditions Minimum wage legislation impacting cost base Growth in same-day segment Initiatives Profitable Growth and Excellent Services are the central objectives for the next years. Streamlined delivery processes, introduction of same-day deliveries and enhanced B2C capabilities France Market Initiatives Challenging market conditions future B2C growth expected to be lower Continue the turnaround of GLS France. Measures to promote top-line growth Break-even planned for 2017/18 Italy Market Relatively immature online marketplaces Lower B2C parcel market penetration Initiatives Ongoing selective acquisition strategy Continuing to strengthen brand awareness Develop premium 2C services 15

Streamlined delivery processes, introduction of same-day deliveries and enhanced B2C capabilities France Market Initiatives Challenging market conditions future B2C growth expected to be lower

16 The GLS Holding steers and controls the Group, the countries implement the individual country strategies GLS Group Strategy GLS Group Strategy Foster European growth and development Steer and direct the individual countries in their strategic execution Development of the organization and financial controlling Individual Country Strategies Germany France Italy Other Countries Group Strategic Goals as guideline for national strategies National strategies to: o Increase revenues and EBIT o Address specific challenges o Ensure customer proximity IT Agenda 2020 Technology Leadership 16

financial controlling Individual Country Strategies Germany France Italy Other Countries Group Strategic Goals as guideline for national

17 GLS aims to increase overall value for the Royal Mail Group Outlook: Main targets GLS Group to increase value Our biggest value increase for the Royal Mail Group can be achieved by Increasing scale and footprint of the European parcel network Focusing on B2B with selective B2C growth (Premium 2C) Technology leadership 17

Mail Group can be achieved by Increasing scale and footprint of the European

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