QUADIENT - 2020 Universal Registration Document

4 RISK FACTORS AND INTERNAL CONTROL Risk factors

Risks

Risk management system

Mail volume decline

Mail volumes are down in all countries where the Group operates. Quadient expects a better than (5) organic CAGR revenue decline over the 2021-2023 period. The Group’s Mail Related Solutions activities are linked to mail volumes. These activities were down by (5.3) in 2015, by (4.6) in 2016, by (4.3) in 2017, by (3.8) in 2018, by (3.0) in 2019 and by (10.1) in 2020 due to COVID-19 crisis ((6.3) in Q3 2020 and (7.1) in Q4 2020).

To mitigate this decline, the Group continues to innovate to gain market share and develops complementary activities which enjoy strong growth. Quadient has announced its new strategy for the three coming years in January 2019. Named "Back to Growth". Main orientations are described in the section "Transformation" below. As part of this strategy, Quadient shut down Temando (shipping solutions). The Group also sold ProShip (shipping solutions) and Quadient Oceania (mainly graphics activities in Australia and New Zealand) in February 2020 and January 2021 and acquired YayPay (AR automation) and Beanworks (AP automation) in July 2020 and March 2021. The Group’s strategic and marketing department regularly analyze the competition and this topic is discussed during the Board meetings and during the management team meetings at least once a year. Regarding new activities, the Group has access to market studies made by renowned research firms.

Increasing competition in new activities

Quadient has two main competitors in its legacy business (Mail-Related Solutions): world leader Pitney Bowes and Francotyp Postalia, No. 3 in the world. Pitney Bowes is listed on the New York Stock Exchange. Its main market is North America. Francotyp Postalia is listed on the Frankfurt Stock Exchange. Germany is its main market. Regarding its new activities (Intelligent Communication Automation and Parcel Locker Solutions), the Group operates on markets where the competitive landscape is different from Mail-Related Solutions. Quadient’s competitors in these new markets are more numerous and could have greater financial resources than the Group, which might affect the Group’s competitiveness. Finally, according to market research and consulting firm IDC, Quadient is number two worldwide in the customer communications management software market and is also considered as a market leader in AR automation software. Quadient unveiled in January 2019 its new strategy for the 2019-2022 period. Named “Back to Growth”, this strategy aims at expanding and growing the Group while accelerating its transformation. To achieve this strategy, the Group seized selected bolt-on acquisition opportunities which, together with organic growth in selected business segments, have contributed to scale up the Group’s major offers. In this context, the Group acquired Parcel Pending in January 2019, YayPay in July 2020 and Beanworks in March 2021. These acquisitions, as do all acquisitions, bring about uncertainty as to the consolidation of the acquired teams, and on the capacity to develop appropriate products and generate synergies within Quadient’s historical distribution network.

Acquisitions

All project are thoroughly analyzed and then presented to the investment committee and to the Board. Strict financial criterias are applied during the analysis of the target and in terms of return on investment. Ability of integration is also a key topic. These acquisitions are then included in the three major solutions: Mail-Related Solutions, Intelligence Communication Automation and Parcel Locker Solutions, and in the four main regions (North America and main European countries: France/Benelux, United Kingdom/Ireland, Germany/ Austria/Switzerland/Italy).

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UNIVERSAL REGISTRATION DOCUMENT 2020

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