How low can Bpost fall?

The pivot in a series of political and financial scandals, a share price that gives shareholders headaches, and the search for a CEO who finds it hard to make himself public. Is there any direction other than the conceivable deep end for Bpost? “Everything should 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 were worth nearly three billion euros. Johnny Theijs ​​was CEO for eleven years and implemented many reforms to turn it into a modern company. But at the end of that year, he refused to extend his term, after it was decided, at PS’ insistence, to cut the CEO’s salary in half from 1.2 million euros to 650,000 euros in total.

First, successor Koen Van Gerven managed to keep growing: Bpost was valued at more than six billion euros at the start of 2018. Van Gerven focused on expanding into the parcel market and eagerly eyed PostNL for an acquisition. But that jumped. Then the American Mondial Relay was taken over. For a lot of money, according to analysts: the stock collapsed, and one year later Bpost was worth just €1.6 billion. After the scandals of the past few months, there is barely 900 million euros left.

High competition and sharp margins

Thus, the Postal Service is right in the corner where the strikes fall. “This is also due to the sector in which Bpost is active,” says Pascal Pepin, professor of banking and stock exchange at KU Leuven and co-founder of the financial blog Spaarvarkens.be. “PostNL is also having a hard time due to high competition and steep margins. Add to that the volatility caused by the corona crisis – with a lot of packages in 2020-2021 and a much quieter period after that – it’s going to be tough anyway, no matter what scandals are now emerging. “.

The fact that the government remains the largest shareholder creates additional complications. Paepen: “You have a large union presence and a lot of political fanfare. You can see that now in Audrey Hannard, who had close ties to PS. The chairman of the board should serve the company as a representative of all shareholders. That’s not the case here.”

Hannard appeared at Bpost’s shareholder meeting on Wednesday morning. There, she said, “I share your frustration.” “The misbehavior of some people has nothing to do with the vast majority of employees who do an amazing job every day.”

“Actually, the fundamentals at Bpost are fine,” says Tom Simonts, chief economist at KBC. “There is still a lot of money. Let me add the numbers: net profit of 250 million euros in 2019, 230 million euros in 2020, 130 million euros in 2022. But now there is a lot of uncertainty: what will happen to those Lucrative government contracts? Will there still be enough room to ensure growth? Investors are wondering what they are actually buying.”

Paepen: “I always advise people to stay away from it. I don’t have any Bpost shares in my portfolio either. Although, like every other Belgian, I still own 8.7 Bpost shares through the government. In the short term, speculators might be able to cash in.” Something about it, the stake now is very low. But if you want to buy stocks of sustainable companies and want to keep them in your portfolio for ten years, I wouldn’t recommend Bpost.”

“There is no analyst at the moment,” says Patrick Casselman, chief equity specialist at BNP Paribas Fortis Private Banking. “But perhaps in retrospect it turns out that this is the right time and we are now at the height of uncertainty. If all the uncertainty disappears in six months or one year, it will become clear that the price is now very low. Given its strong balance sheet, Bpost can withstand the shock, Even if you lose 300 million euros. And imagine that they lose out on certain government contracts: that can also lead to savings.

Bpost is also facing a possible fine from the European Commission for unjustified state aid. According to N-VA Member of Parliament Michael Freilich, “all fines and refunds together in the worst case amount to more than €800 million”.

Find a new CEO

Liberals strongly advocate the complete privatization of the company. Is this the solution? “Certainly not because the share price is down right now, because you as a government are ripping your clothes off,” Simontes says. The best case scenario is for someone to take charge with a strong mandate, who can clean everything up with a high pressure cleaner without the government getting involved. Then investors will know what the numbers really mean. Bpost will have to prove that it can stand on its own two feet and keep costs under control. Because it also has its strengths: Bpost has invested in parcel processing and has a good infrastructure. But now all the dirty laundry needs to be taken out.”

It will not be easy to attract an experienced CEO, given the tight salary cap. Then someone from your house? “Both options are possible,” says Casselman. “Given the operational challenges, an insider would be an advantage. But in recent years, insiders have really come into play, like Dirk Therese and Koen van Gerven. It’s not always so successful. Someone who puts things in order from the outside seems more likely to me.”

Simontes: “Who wants to risk that? A junk, like you have to climb the Col d’Izoard with a step bike. And that with tires that I don’t know if they’re properly inflated.”