NEOPOST - 2018 Registration document

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Risk factors and internal control

Risk factors

Operational risks

Risks

Risk management system

Higher risks Transformation

Taking into account mail decline in its legacy business, the Group develops new activities. Transformation and the ability to move quickly are key for the Group financial result in the future.

Training is organized for senior leaders and for sales force to facilitate the move to digital. In order to speed up the process, transformatin department was created early 2019. It gathers strategic initiatives, merger & acquisition, legal & compliance as well as internal communication.

Retention, attractivity, motivation and succession plan

Intellectual and human capital is a real source of value creation and talent management has become essential. In a constantly changing employment market, it is essential to retain and motivate talents. Some positions require particular attention due to their key role in the organization and the associated specific skills.

To reduce the risk of losing key personnel, the Group has put in place retention incentives such as phantom shares and free shares. It has also implemented contingency plans for all major key positions at the level of the holding company, Neopost S.A., as well as at the level of each subsidiary. These plans are regularly updated and reviewed by the remuneration and nomination committee.

Lower risks Bigger transactions

The Group has a portfolio of about 500,000 customers, none of which accounts for more than 1% of sales. The progressive ramp up of new activities in digital communication and logistics leads to an increase in the size of transactions compared to the legacy business where the transactions are relatively small.

These deals rarely exceed 5 million of euros and are carefully scrutinized by Group management and Group financial department.

Dependence on supplier

The Group’s main supplier is Hewlett-Packard (HP) for inkjet printing heads and cartridges. HP accounted for 6.1% and 7.0% of total Group purchases in 2018 and 2017.

The top five suppliers and the top ten suppliers respectively account for 19.9% and 27.8% of total purchases in 2018 versus 26.0% and 34.1% in 2017. A disruption in supply from any one of these suppliers could significantly affect the Group’s business, despite the contractual clauses in the agreements protecting the Group against such risk. The Group has already put in place alternative solutions in case such an event should actually occur. The Group works with three OEM vendors (tier one suppliers), which assemble entry-level and mid-range machines in Asia. Production is divided between these three tier one suppliers. In the event one of these suppliers should fail, the other two could take over production. Neopost also has a choice of strategic tier two suppliers, and for each of these, a replacement supplier has been selected. In addition, the Group is the owner of all molds, specific tools and industrial design.

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REGISTRATION DOCUMENT 2018 / NEOPOST