The pivot in a series of political and financial scandals, a share price that gives shareholders a headache, and a search for a CEO who has difficulty announcing himself. Is there any direction other than the deep end conceivable for Bpost? ‘Everything will have to be cleaned with a high-pressure cleaner.’
When Bpost went public in June 2013, more than 22,000 Belgians bought shares in the postal company, which was worth almost three billion euros. Johnny Thijs had been CEO for eleven years and had implemented many reforms to turn it into a modern company. But at the end of that year he rejected an extension of his mandate, after it was decided at the insistence of the PS to halve the salary of the CEO from 1.2 million euros to 650,000 euros gross.
First, successor Koen Van Gerven succeeded in continuing the growth: Bpost was worth more than six billion euros at the beginning of 2018. Van Gerven focused on scaling up in the parcel market and looked eagerly at PostNL for a takeover. But that jumped out. Then the American Mondial Relay was taken over. For too much money, according to the analysts: the share collapsed, a year later Bpost was only worth 1.6 billion euros. After the scandals of the past few months, barely 900 million euros remain.
High competition and sharp margins
The postal service is therefore in the corner where the blows fall. “This is also due to the sector in which Bpost is active,” says Pascal Paepen, Professor of Banking & Stock Exchange at KU Leuven and co-founder of the financial blog Spaarvarkens.be. “PostNL is also having a hard time due to the high competition and sharp margins. Add to that the volatility due to the corona crisis – with a lot of parcels in 2020-2021 and then a calmer period – it would be difficult anyway, apart from the scandals that are now emerging.”
The fact that the government is still the majority shareholder creates additional complications. Paepen: “You have a high trade union presence and a lot of political fuss. You can see that now in Audrey Hanard, who had close ties with the PS. The chairman of the board of directors must serve the company as a representative of all shareholders. That is hardly the case here.”
Hanard showed up at the shareholders’ meeting of Bpost on Wednesday morning. “I share the frustration you have,” she said there. “Some people’s misconduct has nothing to do with the vast majority of employees doing a great job every day.”
“Actually, the fundamentals at Bpost are okay,” says Tom Simonts, KBC’s chief economist. “There is still a lot of cash. Let me add the figures: 250 million euros net profit in 2019, 230 million euros in 2020 and 130 million euros in 2022. But there is now a lot of uncertainty: what will happen to those lucrative government contracts? Will there still be enough room to ensure growth? Investors wonder what they are actually buying.”
Paepen: “I always advise people to stay away from that. I don’t have any Bpost shares in my portfolio either. Although, like every other Belgian, I still own 8.7 shares of Bpost through the government. In the short term, speculators may be able to earn something from it, the share is now so low. But if you want to buy shares of sustainable companies and want to keep them in your portfolio for ten years, I would not recommend Bpost.”
“No analyst at the moment,” says Patrick Casselman, senior equity specialist at BNP Paribas Fortis private banking. “But maybe in retrospect it turns out that this was the right time and we are now at the peak of uncertainty. If in six months or one year all ambiguity would have disappeared, it will turn out that the price is now too low. Due to its strong balance sheet, Bpost can withstand a shock, even if it were to lose EUR 300 million. And imagine that they lose certain government contracts: that can also lead to savings.”
Bpost also faces a possible fine from the European Commission for unjustified state aid. According to N-VA Member of Parliament Michael Freilich, “all fines and refunds in the worst case together amount to more than 800 million euros.”
Search for new CEO
The liberals are strongly advocating full privatization of the company. Is that the solution? “Certainly not because of the low stock price at the moment, because as a government you are tearing your pants,” says Simonts. “The best scenario is that someone comes in charge with a strong mandate, who can clean everything with the high-pressure cleaner without government interference. Then investors will know what the numbers really mean. Bpost will have to demonstrate that it can stand on its own two feet and keep costs under control. Because it also has its strengths: Bpost invested in parcel handling and has a good infrastructure. But now all the dirty laundry has to come out.”
It will not be easy to attract an experienced CEO, given the tight salary ceiling. Then someone from your own house? “Both options are possible,” says Casselman. “Given the operational challenges, an insider would be an advantage. But in recent years, insiders have already emerged, such as Dirk Tirez and Koen Van Gerven. That was not always successful. Someone who puts things in order from the outside seems more likely to me.”
Simonts: “Who wants to venture into that? A thankless job, as if you had to climb the Col d’Izoard with a step bike. And that with tires of which I do not know whether they are properly inflated.”
2023-05-10 16:59:32
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