InPost SA
AEX:INPST
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InPost SA
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Good morning to everyone, and thank you for joining us for our Q3 2021 trading update conference call.I am Sherief Bakr, Head of Investor Relations at InPost.And I'm joined today by Rafal Brzoska, Founder and CEO of InPost; Adam Aleksandrowicz, Group CFO; and Michael Rouse, CEO of International. Following our prepared remarks, we'll be happy to take your questions.As a reminder: Today's call is being recorded. And a replay will be made available on InPost's investor relations website at www.inpost.eu/investors/announcements, where you will also find an accompanying set of slides. Now before we get started, I'd like to remind you that today's call includes forward-looking statements and expectations that are subject to risks and uncertainties, and it is possible that actual results may differ materially from the matters discussed today.Now with that behind us, I'd like to turn the call over to Rafal.
Thank you, Sherief. Thanks for joining us today. I hope you guys and your families are staying safe and healthy.So I'm going to provide a brief overview of the market environment, headline of the Q3 financials; and touch on the progress we continued to make in the third quarter. Then I will highlight how we continue to outperform the overall market in Poland and what gives us confidence that this will continue in Poland and be replicated internationally. Also I'd like to spend some time taking you through the flywheel how we are continually enhancing our value proposition, also highlighting some of the proof points that already support our growth strategy both in Poland and our other markets. So also I'm delighted that Michael is joining us for the call. And he will update you on our international operations, which now of course includes [ Mondial Relay in there ]. Adam will take you through the financial revised 2021 outlook and preliminary view on 2022. And of course, happy to take questions later on.So maybe let's start with the first page. Slide #4 provides some of the key highlights for the quarter. As mentioned, we continued to outperform in Q3, something that we have consistently already demonstrated over the last several quarters.So I think the -- while the market growth in Q3 was slower than expected, we significantly grew our market share in Poland, and that was mostly driven by increasing consumer preference and usage of our APMs. Just in Q3 alone, our overall share of the Polish B2C e-commerce markets rose from 40% to a record of 44% just within 1 quarter. And despite the growing inflationary pressures that, of course, impacted the broader macroeconomic environment, we delivered another quarter of operating leverage and, in our opinion, an exceptional profitability in Poland with 670 basis points of year-on-year margin expansion.So while the near-term market -- the acceleration and the primary driver -- is the primary driver of our revised full year outlook because that's completely out of our control, we remain fully focused to ensure we continue to outperform on all key metrics we controlled. So what we control, we deliver or we overdelivered: network deployment; growing the market share; improving the InPost user experience and NPS; and of course, delivering strong profitability. That's in our control. That's where we impacted -- where we've been impacted by the slowdown of the market that's, of course, a different story. So the same, we continued to strengthen the tailwinds for InPost. For instance, the lowest-cost last-mile deliveries, [ as it is ], that became more relevant over the last few months. And we have accelerated our investments in the APM network, so that's visible, that already we overdelivered by 35% our initial plan for the network deployment.I think, later on, Adam also will take you through the financials, but high-level view: We delivered 111% year-on-year revenue growth in Q3, or 35% excluding Mondial Relay, with more than 50% growth in the underlying EBITDA. And from the strategic perspective, we've made also the excellent progress across and to multiple steps to accelerate the execution of our plans. We closed the transaction with Mondial Relay. Michael will give you more details about that, but also we deployed in Q3 a record number of APMs in a single quarter, historically, more than 2,300.So very quick view in terms of the Polish market. We have extended the leadership position; as I said, 4% market share growth on the market that has slowed down. That said, we massively increased the penetration among the end users. So we deployed more than 15,000 machines, so far. More than 5,000 new merchants in Q3, including the new giants entering the Polish e-commerce market, like Shopee, for instance. More than 7.4 million active mobile app users, with again increased NPS score to [ 75% ]. Moreover, you will see that later, our competitors, they were down with their NPS. And of course, in the U.K., Michael will tell you more about really starting to see the flywheel accelerate and step up in the overall momentum and consumer adoption. We've accelerated, again, the APM rollout, as this is in our control. And we announced new partnerships with big players like Tesco and eBay.So maybe turning to the next slide, where we want to focus how we significantly are outgrowing the market, how we accelerated the flywheel effect in Q3 and how we again strengthened our competitive position and extended our industry-leading NPS. So on Page #6, you see clearly how we have consistently outgrown the B2C market in Poland, delivering more than [ 70 points ] of outgrowth over just the last second quarter. So as I mentioned, we estimate that we gained [ 4 points ] of share in Q3 despite the largest marketplace in Poland, heavily promoting [ through those ads ]. So many drivers behind this. That's underpinned by our flywheel, some of them listed on the right side of the slide. And then next few slides will highlight the progress we've made, so far.So Page #7. You'll remember that, during the IPO and also since then, we've consistently referred to our APM flywheel. So everything is about the consumer. The end consumer centricity of the ecosystem is key here. Just over the course of 2021, we have not only accelerated that, but we've seen even stronger alignment with all the sides of the flywheel. So if you look at the consumer's, merchant's adoption; and also the ESG credentials, that's something what is literally reassuring us that this is the right thing to do. So we offer the best-in-class unique -- and unique consumer experience, best service at lowest cost. And of course, more and more visible for the end consumers that we are really green. In the recently conducted survey, especially the younger generation 15 to 25, we see that -- 61% of them choosing InPost lockers not because it's cheaper, not because the network [ it stands ], not because it's convenient. They've chosen because, at first instance, they refer to that ESG angle; and that they know that we are saving CO2 emissions. So we want to strengthen that trend massively in coming quarters. And we have also strong conviction that this applies to all our markets as the world is changing across the geographies.So maybe a few things just to highlight about the flywheel. So greater convenience, we know that. As people go back to work, this becomes even more relevant versus to-door delivery, as people don't face a failed delivery. So we still continuously give the consumers the ability to control the delivery option at the time that suits them best. That strong sustainability angle, as I said; massive increase, as mentioned, in dimensions of sustainability but also amplified by the recent COP26 conference that like shaped -- but also Evening Standard's article where the London-based think tank encourages the local authorities to help build 10,000 of click and collect/locker network just to resolve the problems with the market's growth/volume growth/traffic and CO2 emission growth related to this.And of course, something worth very important, the rising scale economies versus to door. As you remember, our structural 25%, 30% cost advantage becomes even more powerful today given the current inflation and labor market trends. We see problems with the drivers. Just a quick reminder: 1 driver of InPost replaces traditional 12 drivers for door to door, so that gives additional tailwind for our growth.Slide #8, quickly. This is the progress. We have accelerated all 4 elements of the flywheel in Poland. So starting at the top left: We have deployed more than 280,000 lockers in Q3. And over just last 5 quarters, we have doubled the capacity to more than 2.2 million of single boxes; looking at it another way, 55% of the Polish population now within a 7-minute walk. And compared, a year ago, it was 49%. And we also continued to enhance the user experience by strengthening our mobile app, reflected in 7.4 million active users and, on average, up to 200,000 more new users every single month and, again, with best-in-class Net Promoter Score.Point number three, we've added more than 5,000 merchants to our ecosystem in Q3. That gives us around 80% coverage of the e-commerce market. And again, just mentioning Shopee, the new entrant, very aggressive player that from day 1 started a collaboration with us. And we perceive that this will be [ another ] boost for the whole e-commerce market adoption. And the last point, we continued to benefit from the economies of scale. That's driving ongoing unit cost reduction and all those productivity gains as well as the structural labor cost advantages of our delivery model versus to door. The gap is even expected to widen.And Page #9. As mentioned, consumers is in the center of what we do. We have completely redefined the last-mile delivery experience, outperforming the market. And here, how much we outperformed, you can see a few reference points. Our colleagues from Allegro said the market growth was 12%. We delivered 35% growth, so 3x the market. If it's closer to what we feel, which is 15 to 19, it's still almost doubling the growth rate. So the key metric, NPS, again in our control. We have increased by 4 percentage points. I'm looking at our peers, the logistics group. Their NPS has declined in the same time.So looking at some of the drivers of our NPS. Of course, on the bottom left, tricky dynamics to highlight, technology oriented, most convenient and most sustainable delivery service, all those 3 key elements that -- in the head of our value proposition. So looking also on the digital last-mile experience: as I said, mobile app users number going up again. Recent Kantar study concluded that 91% of consumers in Poland see our APMs as the most preferred form of delivery. So we are close to 100% already. And this is so unique that I couldn't find any other example of any service across the world with such a score. So finally, on the bottom right, you can see how we are seeing the increased usage of our service with really already half of them, 45% of users, being hard or super hard users compared to a little over 1/4 in 2019.So overall very pleased with our execution and how we continued to position InPost for our long-term sustainable growth in Poland. That's now I'm happy to turn the call over to Michael to take you through our international segment and how it ties into our pan-European strategy.Michael?
Rafal, thank you. Good morning, everyone. I'm delighted to be joining this trading update this morning.I'm Michael Rouse, the CEO of International at InPost.And I must say our scope of operations over the last quarter has been transformed since the acquisition of Mondial Relay at the beginning of Q3, so I'm very excited about what I've seen now and what we see as the broader market opportunity and the potential to bring the InPost differentiated consumer experience to all of our markets but with a particular and increasing focus on the U.K. and France.So starting with the U.K. on Slide 11. I'm very pleased with the momentum we have seen in the U.K. We're starting to continue to see a real acceleration of the flywheel in effect; seeing driving stronger consumer usage, merchant adoption and increasing brand recognition with the landlord relationships that we are establishing. To reflect on the U.K. market overall and the trends that we are seeing, 3 things really come to mind as we see the opportunity for InPost to continue to accelerate. Firstly, the continued challenges for capacity in the traditional to-door last mile compounded with weaker service and the economics that are going on within the industry really gives the -- a real competitive advantage for InPost's sort of unique solution. Two, the consumer itself is looking for more convenient methods of delivery, as a consequence. And thirdly, Rafal touched upon this, but this becomes a pan-European opportunity where we see an increasing retail or a consumer demand for -- looking for sustainability and greener options. And that is consistently reflected in the U.K. business and the dialogue that we're seeing with retailers on a daily basis. So we really feel these are all areas that we can address. And we aim to position InPost at the center of this unique customer experience and be the expansion of brands for our merchant partners.Looking at the slides from a deployment perspective. As you can see on the top left, we have another record quarter of performance; and step-up in the size and density of our network, focused on the 3 major cities of Greater London, [ Birmingham and ] Manchester. We've now deployed 13x more machines in Q3 2021 -- in 2021 than we did in the prior quarter of the previous year. Just again to give an anecdote: Our location density in these 3 locations now -- from a coverage point of view, now it sort of outpaces, and there's even greater coverage than, the local post office establishments in those regions, to give you a scale of what we're building from a network point of view.So we continue, on the top right, to see continued strong merchant adoption. We have added 31 large enterprise brands in Q3. And really we continue to focus on building our retailer share of checkout. As you can see on the top right, as we continue to build out the density of our network, we're actually seeing increasing performance in share of checkout for the new APMs versus the previous like-for-like cohorts, demonstrating consistently we're seeing [ consumer ] adoption and retailer growth and focus on this -- in this new method of delivery in the market. We're also very proud of what we're seeing from the volume ramp-up as we see on the bottom left. You can see the acceleration as we continue to put the new APMs in the ground, what impact that is having and the step change that we've seen in performance of volume growing over 140% in Q3 versus Q2 and almost 5x what we've seen in Q1.And then finally, quite excited also to announce -- I mean you will have seen in the press releases that we've done the new partnership that we signed Tesco. We are well underway with our deployment with Tesco tracking. We're really targeting 500 stores by the end of this month and similar to other new cohort developments, as we really see encouraging utilization trends with these new locations [ going in ]. So overall very pleased with the progress that we're making and looking forward in this quarter actually to launching the InPost app that we've seen tremendous success with in the Polish business to enhance and further develop our consumer experience.So let me then turn to sort of the Mondial Relay opportunity. And let's remind everyone, on Slide 12, why we raised -- why we made this acquisition. 4 key reasons to remind you of the opportunity: firstly, that -- really the largest -- third largest e-commerce market in Europe at a EUR 42 billion opportunity of retail sales value and really a really exciting opportunity for us to enter this market; two, the significant out-of-home penetration that we see in France that we estimate between 35% and 38% of the overall market and far higher that -- we see in other, our Western European markets.On the bottom left. We bought a market leader. And really what they're bringing to the market in terms of coverage and already presence in out of home, the opportunity for us to really build and add the further elements in digitizing the last-mile consumer experience and offering the best service at the lowest cost really gives us a unique advantage to continue to accelerate and develop the overall proposition in the French market in particular. And finally, we've also been able to create immediate access to a pan-European network with really the coverage that Mondial Relay provides not just in France but in Spain, Portugal, Belgium, Netherlands and Luxembourg to add to our already present operations in Italy and the U.K. and Poland.So -- and as Rafal mentioned, for us, we only took acquisition at the beginning of Q3. And we've been operating really at pace to really start to capitalize on these unique opportunities, so as you will see on Slide 13, our focus in the last 100 days has really been confirming our assessments and rebuilding our convictions for the future growth potential of Mondial Relay. Overall we've made strong progress in building the foundations for accelerating the growth, as you can see on the right-hand side of the slide. As part of that 100-day process, we've completed a detailed value creation plan to how we want to prioritize our investments into the future growth and acceleration of the business, such as enhancing our existing PUDO capacity to really ensure we're delivering the right quality and service to our retail partners and consumers and also including investments in new logistics facilities to improve and really enhance the network quality. Secondly, to drive automation throughout the value chains, we've started to deploy our first APMs, and this has also been quite exciting. We've been able already to [ achieve ] 200 APMs in November from a deployment perspective, but you can see on the left-hand side what is even more exciting is that actually these APMs are ramping up faster than actually the PUDO shops that we're opening. So you can see already the consumer preference [ from a small base ] is really strong and really gives us confidence as we start to build out the network and add the APM solution to the overall French proposition. And finally, as we think about the development, is really we want to invest enhancing the brand and overall consumer experience and focusing how we develop the retailer partnerships as we start to grow the overall footprint.So to give you confidence and how we think about this: We're proceeding at pace. There's no surprises really as we come out of our first 100 days. In fact, what we feel even now is even more confidence in terms of deploying the InPost flywheel to the Mondial Relay business. It's that we can see the potential that -- of really driving a differentiated experience in the out-of-home proposition within France.So that's really an overall summary from the international business. And I will now hand over to Adam to take you through the financial results.
Thank you very much, Michael. Good morning, everyone.Let me give you a couple of highlights on the Q3 financial performance. We'll then move to the full year outlook and early view on 2022.So starting with Page 15, first remark. I think you will have noticed, for the first time, we're consolidating the financials of Mondial Relay for the third quarter of this year, as we've closed the acquisition on 1st of July. For transparency, you see the stand-alone view of the InPost group without [ Mondial Relay ] so that you can have a clear view on the organic performance of the group and then with the contribution of Mondial Relay to the numbers for the quarter.So starting with InPost. I think it has to be acknowledged that Q3 was a very, very solid quarter when it comes to the numbers and financial performance; growth much ahead of market, 33%, with APM segment growing well in excess of 40%. So as Rafal mentioned, we continue to dynamically take share in the market and, despite significant market slowdowns, are outperforming it. On a channel basis: You have seen Allegro report. So if you take there 20%, roughly, just about 20%, of the GMV growth in Q3, it's quite obvious that we expand the market. We continue to dynamically grow outside of Allegro channel. And I think that's also an important strategic [ notice ] when we then think about 2022, that actually the newcomers, the new players that come into the market are actually positive for us. And they actually improve and increase our market opportunity.U.K. also posted a solid growth in Q3 in terms of top line, close to 300% year-on-year in Q3. Obviously, in terms of margin expansion, very strong performance in Poland, 670 basis points of margin expansion. If you go back to our early-year guidance in terms of the mid-term outlook for the EBITDA margin for Poland, you will have noticed that we have got to the territory we've guided for much earlier than we thought. So we're guiding to anywhere high 40s to low 50s in the midterm. We are well at high 40s right now, so I think, from the operational excellence perspective; and how we can translate that operational excellence to numbers but also how well we progress with the network development, network density, user adoption, et cetera, that's clearly a great headway into our strategy.In terms of Mondial Relay, Q3 was a slight decline on volume side. And obviously that's on the back of very, very challenging comp in Q3 of the previous year. The overall market has softened quite a bit. Our view is Mondial Relay has kept their market share in the French market, but obviously Q3 was much softer all across the board for the whole of the e-com. Also, when we look at the margins, you will have noticed a dilution in the EBITDA margin in Q3, compared to the first 2 quarters, of Mondial Relay, essentially 2 elements to call out. So first one is, as you remember, when we discussed strategic rationale for the acquisition, the PUDO capacity constraint was one of the key reasons why we said it makes all the sense in the world actually for the APM proposition to strengthen and complement the current Mondial Relay PUDO model, but in the short term, obviously the buildup of the PUDO capacity is quite critical actually to continue to grow and to be able to cope with increased volumes. And that's exactly what's been happening across this year. So there's been a significant investment into PUDO capacity. That obviously means that, in the short term, you see a dilution in the utilization. And it does translate into profitability, especially on the gross profit level.So that short-term margin dilution is a function of PUDO capacity build-out. And then secondly, as you see that callout box on the bottom of the page, roughly 130 basis points of the margin is that -- of the margin compression actually or contraction is actually driven by the early start-up costs of rollout of the APM network in the French market. So it's setting up the expansion teams. It's signing up the landlords. It's inspecting the sites. And it's really preparing the pipeline for the -- pipeline of the locations for the next year's dynamic rollout.So this is, in a nutshell, Q3. Moving on to the next page, [ taking you ] for the 9 months year-to-date. I think that just underlies the strong performance on a year-to-date basis, especially in Poland with 46% growth. So again we think we've been growing well ahead, close to double the market. And solid margin expansion of 640 basis points on a year-to-date basis. Likewise, if you look at the Mondial pro forma 9 months, very, very solid growth. And that's why we think the competitive position on Mondial Relay in the French market still holds. Market shares are solid and are being maintained at this point in time. And we do believe it's a solid platform to accelerate growth in -- from next year.Moving on to revised 2021 outlook. So we've referred a couple of times to the market growing slower, especially in H2 compared, to our expectations, to our views from early in the year. That normalization is quite visible across the board, and obviously it's not only Poland. It's the whole of the world. I see that's coupled also, and we see that quite clearly also, by the supply chain constraints and some shortage of products across some of the verticals. That's clearly impacting ability to transact and have direct implications for the GMV levels in the market and number of parcels, but high level, obviously as Rafal mentioned, the key metrics that are within our control, so APM network deployment and profitability, were -- actually revised the guidance towards the top end of the range. So we're guiding towards 19,000 to 19,500 roughly APMs all across the network. And also, in terms of adjusted EBITDA margin, we have raised the midpoint of that guidance, so we're now guiding for 42%, 43% of EBITDA margin compared to 41%, 43% previously.So fundamentals in terms of financial performance still hold. The profile is very strong, very attractive. Where we obviously see a downgrade and we guide below the bottom ends of the previous guidance is parcel volumes and the resulting revenues. There is also an impact on the cash conversion. Here the mechanics is pure math. So despite the fact we revised CapEx slightly down and -- better profitability on the back of lower revenues implies lower absolute EBITDA, and therefore it has an impact on the lower cash conversion. It's not very material, but nevertheless we moved from low 40s to high 30s in terms of EBITDA cash conversion for the whole group for 2021.If we move to the next page, we look at Poland, very consistent picture to what I've already covered for the whole of the group. So you see here that for the APM network, as Rafal was mentioning, we're actually outperforming our expectations. We're moving very, very fast with network deployment. Despite the tensions and challenges in the supply chain, we've managed to keep our supply chain intact. The manufacturing is all under control. We expect to end the year around 16,000 or just about 16,000 -- above 16,000 of APMs in Poland. Both APM parcel volumes but, more notably, to-door volumes, revised down compared to the previous guidance. The EBITDA margin range tightened up, so we're right now moving towards the top end of our previous guidance, as you can see.Moving on to the next page, in terms of international, again consistent picture: volumes behind the previous expectations, I think, most notably for the U.K. And that is to a large extent a function of third-party volumes. So as Michael has covered, we are very positive in terms of the new APM ramp-up profile, how the utilization builds, how are own end-to-end volumes. So the volumes we carry for the merchants build up and continued to increase. Where we have a significant shortfall is third party or, how we call them sometimes, rental volumes from the third-party carriers who use our lockers for their own parcels. These volumes have been much, much lower than expected.So that's pretty much -- and maybe Mondial Relay. Mondial Relay, slightly lower in terms of parcel volume but, I think, in terms of profitability, as I said, other than us, moving faster than expected on the APM network. And then taking -- that's taking an effect on the dilution of the margin, the underlying fundamentals for Mondial Relay. And this year's financial performance, operational financial performance, is very, very strong and in-line actually with expectations or even slightly ahead of those.So that's in terms of the revised outlook for 2021. And moving to the next page, the first very, very early look in terms of how we think about 2022.So obviously there is a couple of elements to be called out. First one is, as we have mentioned a couple of times, we expect the growth rate in terms of broader e-com market to normalize in 2022, so come back closer to the pre-COVID [ annual growth rates ]. In terms of consumer confidence, we're all aware of the inflationary pressures all across the global economy. They're more notably visible in Poland. We -- as you're probably aware, the next year's outlook for most of the market, or the consensus, is somewhere around 7% for the CPI; and some of the indices for the inflation being even materially ahead of that. That clearly has an impact on consumer confidence. That clearly will have an impact and implication for the disposable incomes and might potentially translate to the volume of transactions. Clearly, global supply chain challenges we're all aware of are quite likely to continue into -- across the first half and into the second half of 2022, so remains to be seen how that impacts the availability of stock and impact on the overall trading GMVs, but clearly some headwinds there as well.I think what's in our favor, what plays in our favor -- and it's a strong tailwind. Clearly the cost-efficient deliveries and more sustainable and ecofriendly deliveries are the theme now, and the increasing awareness of both end consumers and merchants is clearly coming across more and more. So we think that will favor the out of home and mostly the most efficient locker form of delivery as taking more and more share or at least gaining more and more visibility and really building a very positive link with the consumer sentiment.In terms of how that translates to our kind of early view on 2022, separately for Poland and international. So Poland, we're pretty confident, will continue to outgrow the market, obviously APM being still the key growth engine. As you have seen, our growth rates for to-door have come down quite significantly, but we think APM is where we are really maintaining or actually increasing our competitive advantage. Last but not least, as I mentioned, the new emergent and marketplace entrants are a net positive for us. They actually contribute to us getting more visibility, more share. And literally each and every new major player that comes into the marketplace starts with us being their major delivery platform, so we see the dynamics continuing into the second half of this year and early next year or probably even longer than early -- that will definitely be a net positive.Cost inflation that we'll see -- or are witnessing and we'll see to continue both on the fuel side but also on the energy and labor side of things, we expect them to be largely offset by productivity improvements given our -- the underlying strength of our model. So much less labor-intensive, much less fuel-intensive form of delivery; and therefore us being able to withhold those headwinds much better than our competitors and than traditional to-door model. What that means, with relatively stable pricing, we are increasing our attractiveness [ as an ] alternative form of delivery. And therefore, we think that the increase of the pricing gap will actually play to our benefit in terms of our ability to gain more share and grow faster than the market. And those structural cost advantages, we think, will actually imply that we maintain our EBITDA margins broadly stable next year.In terms of international, expect to leverage InPost's playbook across the international markets, so for both Mondial Relay and U.K.; and continue to develop the APM network quite dynamically. In Mondial Relay, 2022 is going to be an investment year, so it's not only the deployment of the APM network but, as you remember, a lot to be done around the density, quality and capacity of the overall logistics network. That means therefore sorting hubs automation that we need to put there to increase productivity and efficiency. These will result in the short-term margin dilution in [ 2022 ], but as was expected, this is building of foundations and platform to actually grow much more dynamically and ahead of the market in 2023 and onwards, so really a realization of our value creation plan that was a foundation of our hypothesis for the acquisition.In terms of the U.K., as mentioned, we'll continue to develop the network. The target is to almost double the size, that we expect to be 3,000 APMs by end of this year.So this is in a nutshell. Clearly we're very early in the planning process still, but we will share more detail early next year, just to give you a flavor how we see the dynamics.And now handing over to Rafal for the summary and closing remarks. Thank you.
Thank you, Adam.Very briefly, the kind of closing comments before we take questions. So I will say that, despite a more challenging near-term market environment, we remain very focused on the -- on capturing the significant long-term opportunity here; extending the leadership position in Poland; delivering our pan-European growth strategy, offering literally the most sustainable form of last-mile delivery service; and creating shareholder value. And I think we've demonstrated strong execution of the strategy. We are outperforming in areas under our control, and this is what you should continue to expect from us. On the other hand, on APM deployment, the midpoint of our revised guidance is 35% higher than our initial 2021 target, extending the leadership in Poland but also securing first-mover advantage and accelerating the scale and density in the U.K.And we have significantly outgrown the market, investing in our consumer-centric service; adding more merchants; and driving, of course, higher usage of our APMs. This resulted in higher NPS score, [ still like ] expanding the gap between us and all other couriers. And of course, this inflationary environment, we expect the structural cost advantage of our delivery model to become even stronger driver for our competitive advantage. And finally, that will lead to strong profitability, margin performance, as we have demonstrated this year with very strong margin expansion in Poland.So that's the kind of summary. Now I will turn the call over to the operator for your questions.
[Operator Instructions] We'll now move to our first question over the phone, which comes from David Kerstens from Jefferies.
I've got 3 questions, please. First of all, on the volume momentum in the fourth quarter in Poland, I think your guidance implies growth of about 30% in Q4. I think Allegro's gross sales guidance implied high-teens volume growth, so still substantial market outperformance but not to the same extent as you highlighted in the call of up to 3x. What's driving that? And what is the impact of supply chain disruptions and product scarcity impacting the growth in the fourth quarter? The second question is on Mondial Relay. I was a bit surprised to see the big difference in performance in the first 9 months and in Q3. Your guidance is on a pro forma basis with Mondial Relay included for 12 months. I was wondering if you could indicate what the seasonality is that will be realized in the second half of the year given that you only owned the business from July 1.And then finally, on the U.K., you highlighted the London think tank initiative are suggesting 10,000 APMs in Poland. And with that background, I was wondering if you could please provide an update on the competitive landscape in APMs in the U.K. Who else is adding capacity? What is your share of the APM segment? And how important is the APM segment of the current delivery market?
Okay, thank you, David. So answering your first question, Q4 in Poland. You're right. We are actually expecting to outperform in Q4 as we have for the first 9 months. Our -- it's expectation of our growth decelerating, so coming down a couple of percentage points compared to Q3, but nevertheless, Q-on-Q, we expect, as you can kind of do your own math, growth of -- in excess of 30%. So yes. I mean I think we would be probably in agreement with Allegro guiding in terms of GMV growth, but we think the -- all the elements that contribute actually to our outperformance. So the new entrants to the market, the bigger coverage from the APM network, the rollouts were -- actually played to our benefit. And we're quite confident we'll be well above the market. So this is really the view we take. In terms of product shortages, as I mentioned, it's probably going to be quite acute in Q4. I think it's across some of the verticals, most notably, I think, fashion and electronics, where we see that. And what we hear from the merchants is they are -- actually are struggling, so it will have an impact on the overall quarter, but to what extent, very difficult to judge. We are just before the Black Friday and the high season. Let's see how people cope but definitely some headwinds from that side, for sure. In terms of commenting on the U.K., I'll hand over to Michael.
David, just to give you a view on the U.K. just so I clarify, U.K. competitive landscape. When we look at the U.K. relative to other carriers or solutions in the market, the only real other, if you want to call it, competitive player is Amazon. If you actually compare on the tracking that we do and you look at the deployment pace of Amazon right now versus us on a week-by-week basis, actually our deployment rate is twice as fast as Amazon, when you actually look at the pace of our deployment. They have got more APMs in the ground in the U.K. So relative to others in the market, there is really nothing else [ from a ] solution point of view. And so obviously, as the first-mover advantage component, I think it's quite important, one -- for 2 reasons. One, we're the only open network, whereas Amazon is a closed network. So clearly what we're doing is providing a solution to the rest of the other retailer market. And secondly, I would probably treat it as a complement, that Amazon continues to invest in APMs relative to, obviously, [ encouraging ] the market offering. And the rationale clearly -- is clearly the same reasons that we see, which is sustainability, CO2 emissions and capacity in the current last-mile solutions within the U.K. So again I think that sort of really fits into sort of our strategy and the first-mover component, and we continue to invest in that. And really the -- from our point of view, it's really to ensure we have the capacity for our own retailers as we develop those relationships...
Thanks, Michael...
Yes. [ And do you have share ] in terms of Amazon versus yourselves?
In what context?
Number of machines?
[ Like ] total number of APMs on the ground.
Yes. It's around 5,000 in the U.K., whereas we are targeting, as we guided, 3,000 end of the year with the accelerated pace of the new deployments. So I think we are really [ good in that ]. So we continue to invest more into the local [ networks. For next year ], as we already estimated, again 3,000 new deployments, which will be additional acceleration to 2,000 we deployed this year.
Yes.
Yes. And David, back to your question -- sorry. Do you want to follow up with [ Mondial still ] with U.K.?
No, no. I just was asking about Mondial Relay and if...
Yes, yes. That's what I wanted to come back to. Thank you. So yes. So with the dynamics of this year's market development, clearly the whole seasonality was distorted very strongly and is unlike any other year in terms of quarterly seasonality. So definitely second half is going to be a weaker half compared to the first half of the year, where remember Q1 was still a COVID quarter, if we can call this, with all the lockdowns and restrictions in place, et cetera. That clearly has an impact. What we see right now is it's coming down to more normal levels of growth but also different seasonality, so second half probably being closer to 45% of the total [ annual ], as opposed to the normal year being well above of 55% to 60% [ even ]. Now having said that, as we compare ourselves quarter-on-quarter or year-on-year, with some of the people taking a view that it's quite reasonable to actually compare this year's performance to 2019 performance to eliminate all the kind of lockdown and distortions of the performance, if you look at Q3 of Mondial Relay, it's been in excess of 30% growth vis-a-vis Q3 of 2019. So I think, fundamentally when we look at it, how the business is performing in the midterm and what's the perspective for the midterm going forward, the growth is actually quite solid, [ yes ].
And we'll now move on to our next question over the phone, which comes from Lotte Timmermans from ODDO.
I've got a question on pricing. I see that it was marginally up quarter-over-quarter for both the APM and to door in Poland. And I know that there's price increases in these framework agreements with Allegro. Could you say anything on what extent and what it is based and what you have in framework agreements with other clients?
Yes. So essentially 2 things, I think. Allegro, as you might remember, price increases will not kick in before the second anniversary of the long-term deal. So that's really November 2022, so no impact from that side on the year-to-date pricing or Q3 pricing dynamics. With most of the customers, when we discuss price revisions, it's really for us a discussion price versus share of checkout. And as we typically prefer to take bigger share and more volume rather than increase prices -- because again given the embedded productivity improvements in our model, more volumes, obviously, for us means we benefit on the margin side quite significantly. We tends to keep pricing relatively stable. If we can agree with the customers, they make us a preferred delivery method. We get more share of checkout. That's been the case, so really the price increase [ on the blend ] that you've seen in Q3 is more a function of customer mix, right? So as you know, large customers definitely enjoy better price points than the small or the new entrants. Really it's the size of the customer in Poland. So you would say new entrants typically don't have that price advantage yet before they have built their volumes. And likewise, the mid- and long-tail customers that are lower -- higher price points. So it's really a mix effect. That's how you should read it.
Sounds very fair. And to follow up on the new entrants -- or actually the large entrants: Do they have some -- is it expected to have some dilutive impacts on 2022 when their volumes increase as well? Because I assume that they are, I mean, in lower-priced agreement as well.
Yes. I mean essentially our view on 2022, as a principle or as a matter of policy, we will wants to keep the prices relatively stable, so really not to translate -- or not to translate the inflationary pressures to the customers, but when it comes to the full year effects from the new entrants and impact on pricing, obviously there will be a benefit in terms of average price step-up. Just obviously it remains to be seen how it plays on the overall volume mix and, to that end, especially how Allegro grows versus the non-Allegro channel, I think. That's the main component of what drives our average price, especially on the APM side.
We'll now move on to our next question over the phone, which comes from Sathish Sivakumar from Citi.
I've got 3 questions to start off with. So when you say, in Slide 21, normalization of growth, could you just actually give some color? Like what do you expect the normalization to be in terms of percentage? Like is it like mid-teens? Or you're still looking like close to 30% given the e-commerce penetration in Poland. And what does -- normalization would look for APM versus [ straight to door ]. So that's my first question. And then secondly, on market share of APMs in Poland, if you could just again give some color between Q2 and Q3. And what is your exposure to Allegro, say, in Q3? And how that's changed versus [indiscernible].And then the third one, on guidance. If you could share any color on how should I be -- think about D&A, interest and interest expenses going forward into '22 and '23.
Thank you, Sathish. So basically, in terms of the -- what we think about the growth normalization, I think the pre-COVID market growth was low to mid-teens. And this is where we think the market will come back to next year. So that's [ at least started ]. In terms of APM versus to-door share, as you have noticed, APM is dynamically increasing share. That's basically -- if you think about the Allegro GMV growth versus our APM volume growth, that clearly shows we're rapidly increasing share outside of the Allegro channel, whereas on Allegro our take is we've been relatively stable across the year, with some fluctuations quarter-to-quarter but essentially unchanged as of end of Q3. That's how we read that. So that's our view. And we would expect that to be similar dynamics actually in '22. The third question -- sorry. I didn't quite get that. If you can repeat, please.
The third one is actually on guidance related to D&A and interest, how should we think about going into next year.
D&A...
D&A guidance. [ I mean ] we're not guiding precisely for D&A number, so -- and we never have actually; more in terms of CapEx, if that's any kind of proxy for you to think about the D&A evolution. And we're still finalizing our strategy in terms of what's the priority of APM network rollout across various markets, clearly overlaying on this our ability to meet certain ambitions when it comes to manufacturing, supply chain management, et cetera. That's why we hold back a little bit at this point in time in terms of guiding for the total CapEx number that will come with the full year -- detailed full year guidance.
So sorry. Just to follow up on that, all right? Since you've actually accelerated the APM rollouts both in Poland and international this year versus the start of the year, could we expect that your CapEx [ kind of peak at least ] in Poland for this -- in 2021? Going forward, it should be trending below 2021.
For Poland, definitely yes. I think the dynamics we were trying to paint for you earlier in the year was, this year, Poland will -- is probably in peak year in terms of CapEx. That should start coming down next year and very visibly 2023 and where we will switch the -- our focus in terms of CapEx is definitely international, most notably Mondial Relay. And again just to repeat what I've said earlier: It's 2 elements. It's the APM network rollout and the logistics network investment to increase coverage and increase capacity. So yes, those proportions will be changing over time with international taking more weight and Poland become lighter.
[Operator Instructions] We'll now move to our next question over the phone, which comes from Henk Slotboom from the IDEA!.
I've got 2. First of all, earlier this year, you told us that you had secured the delivery of steel and computer components and that sort of things, all the stuff you need for APMs, thanks to deals you've done with all sorts of suppliers and thanks to prepayments. You were referring, in your outline on the third quarter results, to logistic problems. And to what extent is -- are logistic problems, [ as ] steel supply, computer chips, whatever, hindering you or depressing the speed of the APM rollout? And how do you look at that going into 2022? Will that -- could that be a factor that depresses or influences the rollout of your APMs in any way? And is it affecting to your competitors? Are your competitors more affected than you? That's my first question.The second question relates to Mondial Relay. Well, you've made good progress in France by installing 200 APMs. What I was wondering: Since the announcement that you took over Mondial Relay, you're a real parcel logistics company and whereas the former owner, Otto, was yes, in fact a mail order catalog which was doing [ these on the side ]. Has it led to any changes in the competitive behavior in the French market? Could you perhaps shed some light on that?
So let me start with the first one. I'll hand over to Michael for the Mondial Relay question. So just for clarity, right? As you have seen, we're ahead of our deployments plan in terms of APMs. We're guiding towards or even slightly above the top end of our previous guidance. That clearly, I think, tells you we're very much in control of the supply chain and manufacturing process, et cetera. And as we said, we've secured supply chain earlier in the year, and that's clearly playing to our benefit right now and it's very visible. A little bit difficult for us to comment on the competition, what's slowing them down, whether that's the supply chain, whether it is other factors, difficult to say, but clearly you can see they're moving much slower than they were towards or materially slower. So there's definitely a difference, I think. In terms of 2022 and how we think of our ability to deploy: Supply chains are very, very unstable right now as we speak. And it's all -- across all the industries who source electronics, chips, et cetera. So far, we should say we don't see any kind of black clouds in the horizon. We're still effectively managing those pressures, but it's a very dynamic environment and things might be changing quarter-on-quarter. So, so far, no warning signals. That's how I'd summarize this. And Michael, if you can tackle the...
Yes. I think, back to your question, if I understood it, one, sort of what changes: "Or what impact do you see from the historical ownership to now?" And what does that do to the competitive landscape? Firstly, if I start with the competitive landscape, firstly, as I've mentioned on the call, Mondial Relay is a market leader in out of home. And therefore, if you actually look at its performance and its growth and its continued growth, I feel like there is no legacy from the previous ownership. In fact, Mondial Relay has really built a very strong relevance in the French market as an alternative offer to 2-door delivery. And clearly its retail base and its coverage in the market have been very strong, as you can see from the previous results. I think, when we look at the opportunity now to add the APM business to complement already the existing strong coverage that we see with PUDO business, when I look at the offer, I think our existing pan-European landlords [ and pan-European ] retail relationships that we have from both [ Holland and ] the U.K., as an example, really gives us strong relevancy to the dialogues that we're having. And we're in already the early engagement where they're really encouraged by sort of our coming into the market and the opportunity to deploy APMs. I think the confidence we see just in the early deployments, as I flagged, is the actual ramp-up. And the utilizations of the actual machines already even from this early phase are ahead of anything we've seen in previous markets, even in Poland, so we feel really encouraged by that. And I think the final comment I would make is actually the landlord discussions [ and themselves ] probably reflect our experience and our expertise because they're really encouraged by our credibility to really execute on this plan and really have proven credibility with us in other markets. And so that, I think, gives us a strong position as we continue to focus and deploy, whereas other carriers in the market, I would probably add, it's not their core focus. And it's not what they're there to execute upon. Obviously others have made comments and press releases, but frankly, we don't see the competitive pressure at this point, more that we see we're providing an alternative solution. And we'll continue to focus in our strengths as we roll out the solution in France.And I think the final comment I'll make, which I put on the presentation, is actually one of the structural things we've made very quickly in these first 100 days is really to concentrate the Mondial Relay management team on the French market. Obviously there was other markets as part of the coverage. And we are really dedicating our focus and really putting in new leadership positions to really support the execution plan as we go forward. And then as we look at the other markets, we're able to, yes, complement that with our existing international business that we've been putting in place over the previous 6 months.
Okay. Can I perhaps squeeze in another question? And that's -- and then hopefully -- [ well, a little bit -- and on ] basis of what you say. You've got your acts pretty well together in France. You made it very clear, at the time of the Mondial Relay takeover, that the focus will be primarily on France in the beginning. Is it -- well, in the meantime, we see that the PUDO network in Belgium and in the Netherlands has increased quite notably. Is that a step you plan to make with APMs as well in the foreseeable future?
Yes, I think clearly all those markets represent an opportunity, but clearly our focus right now is in France. I think the unique opportunity, which I touched on -- I can't remember which slide it was, but obviously one of the key reasons we also invested into Mondial Relay was the pan-European network. We see a significant growing demand from our existing retailer relationships as well as developing retail relationships to really -- as I frame it, the ability to deliver a parcel from [ Valencia ] to Amsterdam. And really that pan-European network becomes quite critical. And that's really what's driving, in effect, that growth in PUDOs in those markets to really complement and offset sort of the focus we're putting in France in the APMs, but yes, we would not rule out in the future and certainly see the opportunity to put APMs in the ground as we work with our pan-European landlords and a multi-geographic [ base ].
We have time for one final question, which will come from Marco Limite from Barclays.
So I have one follow-up question on Mondial Relay, where I see that volumes in Q3 were flattish year-on-year, if not slightly down. So I'm just wondering that -- if you are confident that you're not -- you haven't lost market share [ in industry. It's just ] the seasonality and it's just market trends in France. And also when do you think -- the synergies you announced, you were talking about when you announced the acquisition of Mondial Relay, when do you think those synergies will start to become visible? And a second question, on the U.K. division. So you clearly have reduced expectation of -- for volumes this year quite materially. You explained the reason behind that. Can you just explain a little bit better, what do you need? What is -- what needs to happen for you in order to get to breakeven in the second half of 2022? So I'm more interested about what sorts of level of utilization you need to get to breakeven, what sorts of absolute number you're expecting next year in U.K. based on your deployment plan.
Okay. So in terms of the Mondial Relay market share and market performance and overall market dynamics, I think I mentioned earlier that we -- our view is we're maintaining market share at this point in time. The market has been coming down a little bit across Q2, Q3, especially in the summer. It's picking up right now. And it's obviously seasonality, the usual seasonality, in the market, but in line with all the other markets, the growth is normalizing. And we -- yes. I think we -- as I said, we remain confident that, in terms of the strength of the model, coverage, brand equity, quality of service, this is a strong platform for us to create value. And then bridging this to your next question, which is are we confident that we still will see the same value creation opportunity in terms of mid-term outlook for growing volumes and increase our EBITDA by EUR 100 million to EUR 150 million as we have guided you originally: Nothing has changed actually. As Michael was explaining, we've -- we're continuing with our value creation plan; and implementation of the basics of that plan, the fast start of the APM network rollout being just one. We're already contracting and designing new depots. We're setting up new team structures to be able to effectively go to market, secure locations, secure landlords, grow PUDO network, increase density of our logistics network. So nothing has really changed. I think, if we try to draw conclusions from 1 quarter performance, whether there is any growth implication for the mid-term outlook and the fundamentals of the business, the answer will be there's nothing that's happened or we see that would be different to what we thought before the acquisition, actually the only difference being, first half of this year, performance was much stronger than we expected. Obviously that's not something we consolidate to our results, but as we speak about the fundamentals of the business and the competitive position, I think that clearly showed us that actually Mondial Relay is a very good asset. So it's -- so nothing is changing there.In terms of the U.K. and outlook for next year, ambition. We -- our ambition is to roughly double the APM network, and I think that's the key, right? So it's coverage. It's density. It's convenience for the end consumer. We will continue to add new merchants. We will continue to work with the current big brands that we have signed in Q3, that we're signing right now. And basically the scale and density, so the core elements of the flywheel, is what will -- what should drive us to EBITDA breakeven by end of next year. Now if you ask about utilization, the one thing that we can say is, when we're looking at the utilization by cohort, clearly the new cohorts and the way they ramp up is very, very encouraging actually. So we think better ramp-up. It's driven actually by 2 things. It's driven by our active promotions with some of the leading brands, but it's also the fact, as we have revised our network deployment strategy and signed a couple of strategic landlords, including Tesco, the new locations that we launch are much better [ footfall ] locations. And therefore, we'll see those locations ramp up much faster and actually show much better utilization. So already when we look at this year's cohort versus previous year's cohort, despite the fact last year we had lockdowns, COVID -- and you would expect last year was actually much stronger year in terms of utilization. That's true for the mature network, for example, in Poland, but if we compare, the cohorts in the U.K. is just the opposite, which is clearly showing the adoption is hugely improving. And then last but not least, we'll continue to improve the overall ecosystem of the model. We're just launching, as we speak, the mobile app into the U.K. market. That clearly will be a catalyst for increased and improving adoption and improving consumer satisfaction. And I think all those elements are simply step by step the elements of implementing the InPost flywheel's playbook and building the comprehensive -- product ecosystem for the U.K. market.
Ladies and gentlemen, that does conclude today's question-and-answer session. I would like to turn the call back over to today's speakers for any additional or closing remarks.
Thank you, guys. So once again, thank you very much for your participation in today's call. As always, Sherief is ready to answer any other questions, taking it offline. We are ready as well to meet and discuss our Q3 results and the outlook for 2021 and 2022.Thank you very much for the call, and see you soon then.
Thank you very much.
Thank you.
Thank you.