Transcript of the conference call held on October, 9th 2017 09:30am CET

bpost Radial acquisition

Conference call transcript

Brussels – October, 9th 2017

Koen Van Gerven, CEO Koen Beeckmans, CFO

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PRESENTATION

Operator: Ladies and gentlemen, welcome to the bpost Analyst Call. I'm pleased to present Mr

Koen Van Gerven and Koen Beeckmans, CFO. For the first part of this call, let me remind you that

all participants will be in listen-only mode. Afterwards, there will be a question and answer

session. I would now like to hand over to Koen Van Gerven and Koen Beeckmans. Gentlemen, the

floor is yours.

Koen Van Gerven: Good morning everybody, and indeed I'm here with my colleague Koen

Beeckmans, who is CFO, and Baudouin de Hepcée and Saskia Dheedene of IR are in the room too.

Thank you for joining and we're pleased to be here today. The objective of the call is to update

you on the acquisition of US-based Radial that we announced this morning. We posted the

presentation on our website and we will walk through before taking your questions.

Let's flip to slide four. And there you can see that bpost has entered into an agreement to acquire

100% of the shares of Radial, a leading integrated provider of e-commerce logistics and

omnichannel technology. And with this acquisition we want to accelerate the development of our

e-commerce logistics solutions to cover the entire value chain.

If we go to slide five, there you can see that basically external growth in international e-commerce

logistics fits perfectly within our strategic pillar "We Grow". And I'm sure most of you remember

that this has been an important part of our four strategic priorities for a number of years now.

Now, the acquisition of Radial will allow bpost to become a leader in the advanced US e-commerce

logistics industry. Building upon our successful Landmark Global business we will scale our US

presence and expand our product offering to cover the entire value chain in e-commerce logistics.

And in addition to gaining an important foothold in the United States, this acquisition combined

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with our own capabilities and building blocks provides us a platform to offer an industry leading

cross border value proposition to our customers in Europe and North America.

Radial also provides us with instant scale, credibility and expertise to be a fast mover in developing

end-to-end e-commerce solutions in the Benelux region and Europe. So, all in all, we acquire in

one go a distinctive set of capabilities that would otherwise take years to develop organically or

through small bolt-on acquisitions.

Let's have now a closer look at what Radial does, and I'm on slide seven. Radial is a leading

integrated e-commerce logistics solution provider taking care of all logistics aspects of doing

business on the internet for strong American brands and retailers. The company offers the full

suite of e-commerce logistic solutions from omni-channel technology, payment, tax and fraud

protection services to fulfilment, transportation and customer care service. With clients as Adidas,

Levi's, Estee Lauder, Ralph Lauren and Godiva, Radial is ahead of its peers in terms of scale,

geographic coverage and breadth of services. The company is headquartered in Pennsylvania in

the United States.

And from here on slide eight, you can see an illustration of the full suite of solutions that I just

mentioned. Their offering is complementary to bpost’s current offering, which is of course mainly

focused on last-mile delivery and returns service, with some activity in fulfilment and customer

care.

Slide nine summarises the key figures of Radial. It can be noted that this acquisition is a sizeable

step-up compared to our past acquisitions. Radial employs 6,700 FTEs and has a nationwide

presence in the US. They operate 24 fulfilment centres globally. Radial fulfilled 306 million units in

2016 with a maximum of 1 million orders per day during peak season. Through its payment

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services, Radial processed over 6.2 billion in orders and handled 21 million customer care contacts

in 2016. In terms of outlook, Radial is expected to generate revenues between US$970 million and

US$1,020 million in 2017 with an associated EBITDA between US$65 million and US$70 million.

Let's now have a closer look at the main elements of the rationale of this transaction for bpost, and

I'm on slide 11. With this transaction, bpost builds upon one of its four strategic pillars. Indeed,

external growth in international B2C e-commerce fits perfectly into the second pillar of our strategy

"We grow". Through our parcel business, it is it is our ambition to seize the opportunity that the

accelerated e-commerce growth offers. We believe that we can create more value for our

customers if we can provide a full-fledged product offering that covers the entire value chain of e-

commerce logistics. And by acquiring a leader in this field, we can immediately inject all the

required skills and capabilities to grow in that field. The acquisition of Radial allows bpost to

deliver on that ambition, and I hope that you share the excitement that is ours.

Now, I'm sure that you have several questions in mind, and I will try to address three of them

upfront. First on slide 12, why does bpost pursue a growth strategy in integrated e-commerce

logistics? Well, the global e-commerce sector is expected to grow at 20% per year with cross

border e-commerce is expected to grow even more than this figure at 25% per year. Secondly, e-

commerce logistics is a business that is close to bpost current capabilities. For example, we offer

services on cross-border trade lanes through Landmark Global and return logistics through

DynaGroup in the Benelux, AppleExpress in Canada and FDM in Australia. Thirdly, it allows bpost

to offer simple end-to-end solutions beyond last-mile and cross-border services to the mid-market

e-commerce players. This will allow these players to accelerate the roll out and scale up of their

own e-commerce operations.

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And finally, with an integrated suite of services, it is possible to offer a seamless and high-quality

experience to customers and have access to a larger and more attractive profit pool.

Second question on slide 13 is why did we choose Radial? Radial allows bpost to build significant

presence in the advanced US e-commerce logistics market by leveraging Radial's proven client

base as well as its capabilities in IT and infrastructures. Secondly, Radial allows us to inject new

expertise and capabilities along the entire e-commerce value chain in services such as

omni-channel technology, fulfillment, payment processing, tax management or protection and

customer care. All of these are critical to scale a successful e-commerce logistics business.

Thirdly, Radial has built a track record in successfully stitching together different parts of the e-

commerce logistic value chain. And all of these elements will allow bpost to scale its e-commerce

logistic capabilities in the Benelux and Europe too.

The final question, and I'm on slide 14, is why did bpost choose to go to the United States? Well,

you all know that bpost already has a proven track record of doing business in the US through

Landmark Global. And furthermore, the United States is an advanced e-commerce market that will

continue to grow fast, and it offers the ideal opportunity to learn. We will be able to apply the

knowledge to accelerate the European e-commerce logistics sector by building on a fast mover

advantage.

A meaningful presence in the United States also provides a gateway to the global market for many

stakeholders. For example, it allows Belgian customers to shop online for US brands and retailers

and it allows Belgium companies to export globally and benefit from transatlantic trade flows. And

finally, a presence in the United States allows bpost to tap into the origin of European e-commerce

as Europe represents approximately 20% of US e-commerce export flows.

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On slide 15, you can see how the combined network of bpost and Radial will look like. Together,

the business will have strategic locations in more than ten countries worldwide, with a nation-wide

coverage in the United States.

And now I would like to hand over Koen Beeckmans for more details on the financial terms of the

transaction. Koen?

Koen Beeckmans: Thank you Koen, and good morning everyone. I'm now on page 17. bpost will

acquire 100% of the shares of Radial for an enterprise value of US$820 million. This represents an

enterprise value to EBITDA multiple of 11.7 to 12.6 based on the expected normalised EBITDA for

2017. Closing is expected to occur in the fourth quarter of this year. The acquisition will be

financed through a bridge facility at closing, but we will refinance this afterwards using our

available cash and new debt at market conditions.

The transaction is expected to be earnings and dividend accretive as of 2020. And it should be

mentioned that the dividend policy set out at the time of the IPO remains unchanged. This

acquisition will allow us to optimise our capital structure without any dilution of our current

ownership. We will maintain a strong balance sheet that will allow us to invest in future

opportunities.

In terms of Radial's financials, let me provide you with some outlook on the development of the

business and I'm now on page 18. Top line is expected to grow between 6-8% per year for the

next five years. It is expected that limited cost synergies between Radial and bpost will be

realised, but they are rather negligible. The ongoing business integration plan started already in

2016, and they will continue, and will incur integration costs of an estimated US$35 million to $40

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million, mainly in 2018 with a tail in 2019. This results in an expected high single digit EBITDA

margin percentage as of 2020. CapEx investments are expected to be between US$35 million and

US$40 million per year. Losses carried forward will positively impact the US effective tax rate for

Radial for the next three years.

And with all this, I'd like to give the word back to Koen for some closing remarks.

Koen Van Gerven: Thank you. And if we flip to slide 20 then you can find the key takeaways to

retain from this acquisition. I'm not going to walk through them. But let me say that in

conclusion, I want to share with you my excitement and my proudness on this extension of our

bpost family. This acquisition is a great leap forward for bpost. It's perfectly within our growth

strategy and allows us to strengthen our footprint in international parcels through Landmark

Global, to tap into the transatlantic e-commerce flows, and to inject a distinctive set of capabilities

along the e-commerce logistic value chain. bpost becomes a leading player in the e-commerce

logistic business in the Benelux, Europe and throughout the world, and that feels awesome.

Ladies and gentlemen, this is what we had to say at this point. In the process, we will, of course,

continue to provide information to the market as required by the regulatory authorities. Operator,

please open the lines now for our Q&As.

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QUESTIONS & ANSWERS

Operator: Yes sir, thank you. Ladies and gentlemen if you wish to ask a question please press 01

on your telephone keypad. Thank you for holding until we have the first question. Ladies and

gentlemen, I would like to remind you that if you wish to ask a question please press 01 on your

telephone keypad. We have no question, gentlemen?

Marc Zwartsenburg: Hi, it’s Marc Zwartsenburg from ING Okay, my first question is on the tax

loss carry-forwards. Can you give us an indication of how much tax loss carry-forwards are still

within Radial?

Koen Beeckmans: Yeah, Mark. The first three years should in principle be tax neutral, which

means that we estimated for the first three years – and of course it depends on the results, etc.,

but here we assume that for the first three years we will not be paying any US taxes.

Marc Zwartsenburg: So that will be a total amount of say 50 million or so in total, or a bit more?

Koen Beeckmans: We will, well make the maths Mark.

Marc Zwartsenburg: Okay. Can you also perhaps give an indication on the depreciation line,

please, and a bit more colour there?

Koen Beeckmans: Yeah, Mark, on the D&A, the D&A will be rather high for the first couple of

years. And that has to do with the fact that high CapEx amounts were invested previously in this

company. So D&A will be on the high side.

Marc Zwartsenburg: Until when – and what is high, and until when? When will that till down?

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Koen Beeckmans: Three years until 2020.

Marc Zwartsenburg: And what is high in this respect? Above the 35 to 40 million CapEx?

Koen Beeckmans: Yeah, it will be higher than the CapEx amount, yeah, for the next couple of

years.

Marc Zwartsenburg: And then it will come down quite strongly? Is then the depreciation already

coming off? Is that – what kind of number should we put in for our ROIC calculations, for

instance?

Koen Beeckmans: Well, then, afterwards, the D&A will come down to normal amounts, relatively

equal to your CapEx investments.

Marc Zwartsenburg: Okay. And then, perhaps, on the competitive position of Radial, do you

know what kind of market shares they have and how I should look to it? Because e-commerce is a

bit a winner takes all market, and in that respect, I would like to have a bit of a feel for the US e-

commerce market how big are they and who they compete with and that kind of stuff?

Koen Van Gerven: Mark, good morning.

Marc Zwartsenburg: Good morning.

Koen Van Gerven: There are a couple of good analyses that are made by Forrester. And if we

look to the US market, it’s estimated at a kind of US$400 billion market, which is of course a

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sizeable thing. In terms of what is expected in terms of growth, all over the market it’s expected

to grow within the years to come with a 20% rate. But Forrester made the distinction between the

growth of Amazon, which apparently is bigger, and on the growth of the other players. And

they’ve estimated between the other players about 8% and 13%. That’s the first piece of

information which is useful.

Now, if we look to this US$400 billion of market potential, you can slice and dice it, and basically

the sweet spot of a company like Radial is not to the very big ones, not to the Walmart or to the

Amazon’s of course, but the mid-sized market where we find, let’s call it, SMEs in e-commerce is

estimated at US$130 billion.

So this is basically the sweet spot. Now, if you do the math on which part of this US$130 billion

represents logistic-related expenses, then you end up somewhere between 20% and 25%. So in

terms of value pool for companies like Radial, we talk about €30 billion to €35 billion (note: Koen

meant USD billion). If you take then the 1 billion that they do, then more or less you come to a

market share of around 4%. So this is the second piece of information.

The third piece of information is that, of course, you have the very big one which is Amazon. And

in terms of size, Radial is the second to Amazon. So it’s the second player of the market which

indicates that there are still a lot of other players, and that the market is still fairly scattered, not

the only with other players but still a lot of companies do the thing and the logistics part of their e-

commerce business in-house. So, basically, this is how the market looks in the United States.

Marc Zwartsenburg: With that in mind, because indeed the market is still rather scattered and

consolidating, don’t you think that in a few years from now you need to, yeah, do more of these

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kind of acquisitions or some smaller but to gain in size in the US? Do you think you can play a role

in that?

Koen Van Gerven: Mark, look, I think this is a nice – a very nice piece we will start to work on.

In a nice growing market, we will make it happen and see how this market evolves over time.

Marc Zwartsenburg: And then the final question, in terms of ROIC, because I see some earnings

accretion as of 2020, can you also give an indication of what kind of returns on invested capital you

expect from this acquisition? And how does it evolve?

Koen Beeckmans: Yes, Mark, of course, if we saw that we believe it’s a good investment, and as

you know we have strict financial criteria it should deliver, first remark. Second of all, we have

provided you in the sheets all of the elements to make your own estimation of what that should

look like in – or as of 2020.

Marc Zwartsenburg: And what is your own internal condition, as you call it, where it should

deliver?

Koen Beeckmans: Well, of course, we have, as already mentioned in the past, we have strict

investments criteria that are, of course, more than our weighted average cost of capital.

Marc Zwartsenburg: Okay. And is that possible to have the message you gave because my

calculation doesn’t really get there? Am I missing a point?

Koen Beeckmans: No. I don’t think you’re missing a point, but I think – well, we believe it is.

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Marc Zwartsenburg: Okay. Alright, that’s it for me for now. Thank you very much.

David Kerstens: Good morning, gentlemen. Hi, it’s David Kerstens from Jefferies. You

highlighted some blue-chip customers. I was wondering if you could give an indication what the

customer profile would look like. You also mentioned you are a second to Amazon. Is Amazon also

a customer and how important is it? And then my second question is the revenue growth target of

6% to 8% per annum, why is it looking relatively low compared to the growth that you highlighted

in the market which is around 20% and 25% for cross-border e-commerce? Are there some

divestment effects or some customer attrition that you’re taking to account? What’s behind this

prediction, please?

Koen Van Gerven: First of all, on your question of Amazon, Amazon is not a customer to us or at

least not – I don’t exclude that somewhere there is a very small part of the business, but it’s not

an important customer. The growth rate that we did put forward, so we have to make a

distinction. 20% is including the Amazon part. And then we bring it down to 8 to 13%. What we

did take into account is that in a growing market, we will have a kind of price erosion potential and

that’s why in our own models, we did put ourselves a little bit at the safer side and that’s why we

come up with the 6% to 8%. This is about the domestic growth of e-commerce. And this is

basically where Radial is active. Next to that there is the reality of the cross-border part. And

basically, this is where Landmark Global is more active, but is a very small, small player. So we

have to make the distinction between both. But, of course, it indicates somewhere, and this is one

of the things we will have to organise, it indicates that – in one or another way – there are

eventual things that we can develop in combining both.

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David Kerstens: Can I ask a quick follow-up please? Regarding the different channels that you

highlight in the presentation, can you provide a rough breakdown of the revenue number that you

provide into those different categories, please?

Koen Van Gerven: We don't disclose this.

David Kerstens: Alright, thank you very much.

Edward Stanford: Hi, this is Edward Stanford from HSBC, I think, if I recall correctly from what

you said, you were suggesting that there is some ongoing integration activity going on within

Radial; is that true, and has it been – has it grown by acquisition a lot recently?

Koen Van Gerven: Yes, Edward, it is the merger of two big companies, called Innotrac and

eBay Enterprise. They went together in 2016, and therefore there are some – what we call

integration plans that were already decided that are fully ongoing, that are delivering and that will

have some costs in the next couple of years that we have disclosed here. And that has to do with

building scale in operations, grow the technology business and enhance the go to the market. And

those plans again have been elaborated, they are ongoing and they will further be implemented.

Edward Stanford: And I mean it's always a risk, perhaps, buying a business anywhere in the

States, and you're actually buying a business that's in the process of integration. How confident

are you that those integration plans are robust and how much due diligence have you managed to

do on that front?

Koen Van Gerven: We're fairly confident and of course we did pay a lot of attention in the due

diligence on that. You have to know that, basically, there were two different types of activities,

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where Innotrac was a global e-commerce fulfilment firm, on the one hand and then

eBay Enterprise just basically provided a variety of services, such as customer care, payment

processing and fulfilment and fraud protection. So the – part of the integration is about making, in

a very performing way, the stitching together of these activities where we know that, in stitching

them together, it will increase the value pool too. So we are quite confident that the current

management, which we consider as very solid, will be able to deliver upon the expectations.

Edward Stanford: Thank you. One final question. I think you've talked about the opportunities

of how this may assist your development in the European and Benelux parcels and logistics market.

I mean how quickly do you see the benefits from this acquisition helping you to improve your

position in Europe?

Koen Van Gerven: So there are a couple of things that we want to consider. First of all, as e-

commerce is a global, play and e-commerce is what I would call – especially for Europe, it is

somewhere in a Transatlantic space. Basically, they are in the short term, opportunities to see if

we can develop and we can make it even more accessible for European customers, so that's one

part of the thing.

Secondly, the United States – and you can see it on the figures; you'll find them in Forrester too –

the United States is a much more advanced market in terms of e-commerce than the European

continent and I don't even talk about Belgium. But there is no reason to believe that we will remain

in a lagging position in Europe. And therefore we think that it's important to have the capabilities

that you need, which means you have to have scale, you have to have other skills which you need

to build these credible e-commerce activities. So we're convinced that sooner or later – and I'm

convinced more sooner than later – we can use and we can deploy these capabilities in order to

become a sizeable player in e-commerce logistics in Europe, too.

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Edward Stanford: Thanks very much.

Mark McVicar: Good morning, it's Mark McVicar from Barclays

First of all, could you give us just a little bit of background on the company? I mean how long

has it been going, what sort of growth rates has it achieved? And I think I'm particularly interested

in why have they chosen to sell it now, and sell it to you rather than, I don't know, somebody else?

And what have you been able to do to lock the management in, because that's clearly going to be

pretty important going forward?

Koen Van Gerven: Yes, Mark. As Koen already indicated on the history of the company, so you

have on one side Innotrac, which was a global e-fulfilment firm and it was acquired by

Sterling Partners, who is the current owner, early 2014. eBay Enterprise was acquired early 2015,

and so it was in early 2016 that it was decided to merge the two activities and to make

one company to bring it together to organise a multi-year turnaround programme in order to make

them ready for the next phase of growth in this industry. So this is what they did.

The reason why, of course, Sterling Partners decided to sell off, of course, that's something that

you have to discuss with them. it is our understanding that it was in a fund that is on its way to be

closed, so they had to put it into the market. It is my understanding that there was a preference

to bring it in the orbit of an operational and an industrial partner more than a financial partner.

Mark McVicar: And the question on management?

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Koen Van Gerven: Well, we are very confident that, on the one hand, we have Belgian senior

management in the United States, and together with local management of Radial, they have the

experience to lead and to control the activities. The management teams, both at Landmark Global

and Radial, they will, for the time being, remain in place, at least until closing. And of course, as

far as bpost is concerned, we will have to review and set up an overarching management structure

because we are, of course, well aware that if you want to run a business and to control a business

in the way it should be done, that you have to pay sufficient attention, that you have to follow up

the performance, that you have to have the right KPIs, and that this is basically what is the

cornerstone of the success of bpost until now. We have the experience and we will organise this

accordingly.

Mark McVicar: Okay and then my other question was, you know, you very clearly said it's going

to be earnings-enhancing from 2020 onwards; by the time you take account of the restructuring

charges and obviously no tax but also financing charges, are you happy that it won't be dilutive

through 2018 and 2019, and if it is going to be, say, marginally dilutive, how will you treat that in

terms of the dividend?

Koen Van Gerven: Look, I think we are quite confident that in those two years, that it will not be

too dilutive and if necessary, you know, that we still have quite important distributable reserves.

You know too that we built the distributable reserves in because we wanted to be relatively

confident towards the market that if there was a small blip coming, for one or another reason –

and you remember that we already had the blip with the alpha restructuring – that we are able to

keep up the expectations of the market in terms of dividend. So we feel very comfortable with

what we have in our hands to make that statement.

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Mark McVicar: Okay, and could you just remind us – final follow-up – could you just remind us

what the distributable reserves are at, at the middle of the year?

Koen Van Gerven: At the end of last year, Mark, they stood at €140 million.

Mark McVicar: And that was post-dividend, yeah?

Koen Beeckmans: Yes. That's what is – what we were able to distribute as dividends.

Koen Van Gerven: It was post-dividend, Mark, yes indeed.

Mark McVicar: Yeah. Okay, that's excellent. Thank you very much.

Dominic Edridge: Hello, it's Dominic Edridge here from UBS. Just in terms of – can you just –

obviously post-deal you're going into a net debt position for the first time. Can you just remind us

how – your thoughts on where you're comfortable with? And I suppose just in terms of is it right

to think that, given the size and scale of this deal, that you probably wouldn't be thinking about

doing anything else for the time being and just how you see the shape of the balance sheets and –

going forwards as well? Thanks very much.

Koen Beeckmans: Yeah, well again we've said that we will not be issuing, as of this transaction,

any shares, so it will be a combination of using cash and using debt and the combination of both

will depend on the market conditions when, you know, we will be going to the market.

Dominic Edridge: And can you just say, in terms of where you're comfortable with, I'm assuming

you – I know you don't have a rating, but clearly I imagine yourself and your sort of controlling

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shareholder are obviously very keen on having as strong a balance sheet as possible. Just in terms

of generalities, I mean is it just a case of you probably – looking at the balance sheet, you

probably wouldn't want to be taking on too much further debt over and above this?

Koen Beeckmans: We had many discussions on the kind of lazy balance sheet that we have.

With this type of transaction, we will remain very solid in terms of structure. And even with this

transaction I don't exclude that we can do other transactions if the opportunity arises.

Dominic Edridge: Okay. And then just the second question, just more on the operational side. I

mean obviously it looks like, just from the sights of all the facilities, it's very much a US-focused

business. Would you say in general, would you see Europe being the highest-growth area – the

focus for you, just given, obviously, where you're headquartered, etc.? Would that be somewhere

– is it fair to think that would be where you would be aiming for in terms of maybe opening up new

centres, or the focus of growth, or would it be in the US as well?

Koen Beeckmans: Sure, our main focus, as you see, is of course the US and we need to deliver

there. But this is a transaction whereby, of course, given the fact that we are a company in the

middle of Europe, we will be using the skills, capabilities, etc., to further enhance what we already

have built up in the Benelux and then further in Europe.

Dominic Edridge: Okay, thank you very much.

Edward Donoghue: Good morning, it's Edward Donoghue at One Investments, Just on – again

on the operational side, I mean –to what degree is the existing bparcel flow taking Radial services

from a competitor at the moment and how is that substitution going to phase?

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Koen Van Gerven: As far as I know, it's a very small customer. There are a couple of services,

but it's a very small part what we do with Landmark.

Edward Donoghue: Right, okay. And then, just going back, because this is an integration of

two units and going back on eBay Enterprise, if you look at the client list that you gave, some of

those blue-chip names, do they take a total solution offered by Radial at the moment or are they

coming from one side of the operations when they – pre-merger? So –

Koen Van Gerven: It's a very good question and it's a very interesting one and the answer is it's

a mixed thing. So it's not if you go in the direction of Radial that you have to take all of it. And

what we observe in the market, that there are different solutions possible. My understanding is

because you have to talk to different partiess in the company but in general you start with

one thing and if you can perform well and you can deliver upon the expectations, then is the right

moment to start talking about the other things and this is apparently how it works in the market.

Edward Donoghue: Right. And then looking at the value-added services they would have

offered, the two different enterprises, where is the higher margin profile within those two

businesses pre- their merger?

Koen Van Gerven: We don't disclose the separate parts in the margins of the separate offerings.

The only thing that – and this we don't – not only know from Radial but we have this experience,

as I mentioned, with Dyna in the Netherlands, and partly with Landmark Global in the

United States. If you can stitch a couple of things in the value chain together then you tend to

have a higher margin than the sum of the parts.

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Edward Donoghue: Okay and then just a final one on the operation again. I mean, if you look at

Radial company flows, I mean how much do they overlap with your existing network of European

delivery partners today, and is – what is the opportunity?

Koen Van Gerven: It's very marginal. And let's take the flipside, this is one of the things where,

of course, we want to see what the opportunities are, where Landmark Global is much more in

cross-border e-commerce towards Europe, towards Canada and towards Australia. But there are

two things: the overlap is very marginal, of course. We have to be honest, we talk with Radial of

another size than what we used to talk about with Landmark Global.

Edward Donoghue: Right. And then going back to an earlier question somebody asked with

regard to the management, which is normally very key in these situations, especially as you've had

two entities that were integrated and one of those CEOs came from one of the combined group

now comes from one of the other existing businesses, how have you locked in the management

beyond the closing of the deal? Because they obviously had a full plan of growth, hence the

integration costs, so what were they looking for and will they actually be staying there?

Koen Van Gerven: Of course, we are very aware of the fluidity of management and there is a

long-term incentive plan in place to keep the existing management, of course, in the company.

Edward Donoghue: Okay, great. Thank you very much.

Ruairi Cullinane: Hello, this is Ruairi Cullinane from RBC. Could I ask one follow-up question

which is on the integration costs, which are estimated at US$35 million and US$40 million in 2018

and 2019. What is the split over the two years that you estimate?

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Koen Beeckmans: Yeah, the biggest part will be spent in 2018 and there will be a tail in 2019.

Ruairi Cullinane: Okay, so you're not able to give any more than that?

Koen Beeckmans: No, because that depends on the execution of the plans, that will take two

more years. But again, I think the ballpark of the costs should be spent in 2018.

Ruairi Cullinane: Okay, thank you.

André Mulder: Good morning, it's André Mulder from Kepler. Can you tell us how much debt is

involved in this transaction? You are talking about an EV, so can you tell us what kind of debt is

involved here?

Koen Beeckmans: No, basically, again – and that's a technicality, we will repay an existing debt

there. All costs attached to that are for the seller, and we have a bridge financing to do that at

closing and afterwards, as I said, we will look at the optimal mix between cash and another debt.

So basically, the enterprise value is debt and cash free, the one we've mentioned.

André Mulder: How come then that, for example, in 2017, without taking any of the integration

costs into account, this acquisition is still not earnings accretive, though, if you are also taking into

account zero tax?

Koen Beeckmans: Well, we will be closing hopefully before year-end. So for 2017, aside from the

typical financial indicators, we didn't say anything on that, because we assumed that it will close at

the end of the year.

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André Mulder: Okay. Then, looking forward to 2018 and 2019, there's of course the integration

cost, would you say that it will be earnings accretive pre-this integration cost?

Koen Beeckmans: Well, we don't comment on that but you can make an assumption on that, of

course it has to do with the integration cost and the D&A, as we explained earlier.

André Mulder: Okay, thanks.

Edward Donoghue: Gentlemen, it's Edward Donoghue again at One Invest, I apologise for a

follow-up. Just going back on these integration costs on the timeline that you gave. So Radial was

created as of the beginning of 2016. What were the integration costs in 2016 and 2017, bearing in

mind we have 35–40 over the next 18 months? I'm just trying to get an understanding of what

they're spending all this money on?

Koen Beeckmans: Yeah, we don't disclose the amounts that have been spent before the

acquisition. And as I said, it has to do, for example, with building scale in operations, make sure

the technology is seamless and, of course, the enhancing going to the market. So those plans

were already in place before, as of 2016, and are being implemented for the next couple of years.

Edward Edward Donoghue: I mean okay, are these of a similar magnitude over the last

two years that they're going to be, versus the forward two years?

Koen Beeckmans: I'm sorry. Could you repeat the question, because you were falling out?

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Edward Edward Donoghue: It's just to get an idea of – approximately, is this of the same sort of

magnitude, the spend over the last couple of years, from when they actually integrated in

January 2016?

Koen Beeckmans: Well, we close these amounts, and that is the past. We can only look and tell

what we know with regard to the future.

Edward Edward Donoghue: Right, so if you then take those – I mean assume there's been a

reasonable chunk of costs already, then you've got the future costs for their development

programme, again I'm a little bit lost as to why the top-line growth is at the lower end of the

spread you gave with regard to SMEs in the US market and bearing in mind you're going to be

overlaying that with your international footprint. All things being equal, one should actually start

to see sort of a slingshot developing through this and I don't see that, so can you tell me what I'm

missing.

Koen Beeckmans: Well we did say that a big chunk of the integration costs were spent already in

the past. We just said that we don't communicate on that. And the integration costs, of course,

depend on when the programmes started. Management and the new structure was put in place as

of 2016, and they're working very hard in order to make sure that they deliver. And yes, there will

be some integration costs for the next two years, of which, as we said, the biggest part will be

spent in 2018.

And as Koen said, with regard to the sales growth, well, you can make any assumptions you want

on that. As Koen said, we're trying to make sure that we will deliver on that as well – on the sales

growth. So therefore, we have given what you see on the sheet.

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Edward Edward Donoghue: Was this a company that you actually had on your radar screen and

actually had a commercial relationship, or was this brought to you by bankers?

Koen Van Gerven: It was on our radar screen when we were screening the opportunities in the

market.

Edward Edward Donoghue: Okay, thank you very much.

Marc Zwartsenburg: Hi, this is Marc Zwartsenburg, a bit to what Edward was also saying, what

was the growth rate in 2016 and 2017 of this company?

Koen Beeckmans: We don't disclose that, Marc.

Marc Zwartsenburg: But was the business already growing, say mid-single-digits or was it

already in line with what you had and you're guiding for? Any comments?

Koen Beeckmans: No, we don't disclose on that, Marc. You have to know that of course it's a

merger of a couple of different businesses, some had some other activities as well, which means

that comparing the past to the future may not be a good idea. We communicate with regard to the

future and the past is the past, Marc.

Marc Zwartsenburg: Okay, clear. Thank you.

Operator: It seems that we have no other questions, gentlemen.

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Koen Van Gerven: Okay, thank you very much for this call. If, of course, there are follow-up

questions, you can always get in touch with Baudouin and Saskia, and of course we will come back

later, in due course, with more information on this transaction. Thank you very much for now.

Operator: Ladies and gentlemen, this concludes the conference call. Thank you all for your

participation. You may now disconnect.