neopost annual report 2015

113, RUE JEAN-MARIN NAUDIN92220 BAGNEUX - FRANCE

www.neopost.com Annual Report

2015

Ann

ual R

epo

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Information, mail and parcel flows are in a process of deep-seated change.

In an increasingly electronic and dematerialized world marked by non-stop growth in parcel volumes, players and users are looking both for more possibilities and greater simplicity. Yet the transition to this new world – one in which the physical and digital coexist and converge – can prove complex, especially for small and medium-sized companies.

And that is where Neopost comes in. By providing the right tools and solutions, Neopost helps companies to manage this transition and adapt their practices so as to optimize dialogue with their own customers and place them at the heart of their organization while responding to the needs and opportunities stemming from the boom in e-commerce.

EDITORIAL

Send. Receive. Connect. 3

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Sales of €1.2bn 6,100 employees

Solutions marketed in 90+ countries

Neopost is the number two global provider of mailing solutions and a major player in digital communica-

tions and shipping solutions.

Neopost provides large companies and SMEs alike with highly innovative solutions for managing their physical and digital communication and parcels. Its equipment, software and services facilitate the mana-gement of communication and goods flows.

The Group’s solutions are also adapted to the needs of supply chain and e-commerce players.

With direct presence in 31 countries and over 6,100 employees, Neopost works closely with a network of partners in order to market its solutions in more than 90 countries. In 2015, Neopost reported sales of €1.2 billion.Neopost is listed in Compartment A of Euronext Paris and belongs notably to the SBF 120 index.

ABOUT NEOPOST


TENDANCES

TRENDS18 The alliance of mail and digital communication

26 The e-commerce boom

32 The customer at the heart of organizations

RESPONSIBILITIES44 Neopost, a player in the circular economy

48 Committed teams

50 The transformation in figures

52 Neopost on the stock market

Reaching a new milestone

p.6 6 Interview with Denis Thiery

8 A majority-independent Board of Directors

10 A close-knit management team

12 Neopost’s transformation

p.16

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REACHING A NEW MILESTONE

Interview with Denis Thiery, Chairman & Chief Executive Officer

The structural decline in mail is intensifying, the digitalization of the economy is accelerating,

and growth in e-commerce is booming.

7


THE TRANSFORMATIONIS ON THE RIGHT TRACKIn this interview, Denis Thiery talks about his ambitions and reviews the most recent changes to Neopost’s range of solutions and its new organization structure.

Have there been any changes to the rationale of Neopost’s transformational approach initiated four years ago?

Very few changes have been made to the foundations of our transformation strategy. But the dynamics in place have accelerated. The structural decline in mail is intensifying, the digitalization of the economy is accelerating, and growth in e-commerce is booming. We are harnessing our fields of expertise – from multi-channel communication to logistics solutions – to support our customers by providing them with the means to manage these changes and convert them into opportunities.

How would you measure the success of the transformation achieved so far? The share of sales from digital communication and logistics solutions in total Group sales has tripled in four years, from 8% in 2011 to over 23% in 2015. We are targeting a share of 35% in three or four years’ time.

How is your offer for large companies changing?

We are integrating our data quality management solutions together with customer communication management. These activities address the same key accounts. As such, we are seeking to capitalize on the commercial wins of our GMC Software subsidiary with banks, insurance companies and public utility companies.

And do you now have a complete range of logistics solutions?Our offer was previously focused on traceability services. We have now extended it to include shipment management, e-commerce platform integrated solutions, and automated lockers for receiving parcels. We are also developing an order packing system to optimize parcel volumes, so we now cover the entire logistics processing chain.


You have changed the organization of your activities for SMEs. To what end?

In a dematerialized world, we bring our SME customers a range of integrated, physical and digital solutions. These solutions are now managed by an autonomous global division with its own resources, the aim being to optimize our costs and safeguard our competitiveness while capitalizing on our customer base, distribution network and the technologies developed by our specialized subsidiaries.

How are you leading your transformation internally? Change truly reveals the culture of a company. At Neopost, it is playing the role of a real driver. The shift in mindsets precedes the transformation rather than being subjected to it. Our agility, sense of innovation and values all stand as key strengths for the success of our project.

What are your ambitions from a financial standpoint?

We will return to growth once our digital and logistics activities have developed sufficient momentum to offset the decline in our mail activity. Neopost remains very profitable, which gives us the means to succeed in our strategy while implementing savings and optimization plans aimed at adapting the organization structure to this new mix of products and services.

What message would you like to convey to your shareholders? While our transformation is on the right track, it is part of a long-term process. Our stock price has been impacted by the stronger than expected decline in our mail business, as well as by the necessary reduction in our dividend, even though we continue to generate strong returns. So I would like to thank our shareholders for their trust in us and their patience.

In August 2016, Neopost will move to a high environmental quality

building in Bagneux.


A LARGELY INDEPENDENT

BOARD OF DIRECTORS

Neopost’s Board of directors approves the Group’s strategic directions. The Board members contribute with their expertise

in diverse areas and are involved in major decisions, such as launching new projects and acquisitions.

* Independent director 1 Member of the remuneration committee, chaired by Catherine Pourre

2 Member of the audit committee, chaired by Éric Courteille3 Member of the appointments committee, chaired by Agnès Touraine

Readers are invited to refer to the 2015 registration document for more detailed information on corporate governance:www.neopost.com/en/annual-reports/2015-registration-document

GOVERNANCE


http://www.neopost.com/en/annual-reports/2015-registration-document

9

Denis THIERY is Chairman & Chief Executive Officer of Neopost, having served as CEO from 2007 to 2010, and as chief financial officer from 1998 to 2007. Prior to joining the Group, he was CEO of Moorings and held various positions with Wang France and PricewaterhouseCoopers.

Jacques CLAY*2 spent most of his career with Hewlett-Packard, in Europe and the United States, notably in charge of the PC division.

Éric COURTEILLE*2 is Chief Executive Officer of La Redoute. He previously held a variety of positions in finance in groups such as PPR, CFAO or Redcats.

Cornelius GEBER3 acted as consultant to senior management of the German post office and was Chairman of the Board of Kuehne + Nagel.

William HOOVER Jr* spent 30 years as a senior partner at McKinsey and is a specialist in high technologies, telecoms and industry.

Composition as of 31 January 2016

Vincent MERCIER*1,3 was President of the supervisory Board of Roland Berger Strategy Consultants after having run its French and Chinese operations.

Catherine POURRE*1,2 was deputy executive director, and then member of the supervisory Board of Unibail-Rodamco, following 10 years as a partner at PricewaterhouseCoopers.

Isabelle SIMON*2 is legal and finance director, and member of the executive committee of Thales group after having worked at Cleary Gottlieb Steen & Hamilton, Goldman Sachs, Publicis and then Monte-Carlo SBM.

Agnès TOURAINE*1,3 manages Act III Consultants, a growth strategy consulting company. Most notably during her career, she headed up Vivendi Universal Publishing.

Jean-Paul VILLOT 1,3 was Chairman & Chief Executive Officer of Neopost from 1996 to 2007 and Chairman until 2010, having held management positions at Bull, Schlumberger and Océ in France and abroad.


A CLOSE-KNIT MANAGEMENT TEAMThe new composition of the management team reflects Neopost’s decision to organize its operations around three business units so as to optimize the value added created for its customers.

Denis THIERY

Chairman & Chief Executive Officer

GOVERNANCE

The streamlined executive committee brings the necessary

flexibility and reactivity for transformation


Thierry LE JAOUDOUR

Technology & Innovation

Henri DURA

Enterprise Digital

Solutions

Jean-François LABADIE

Finance & Legal

Dennis LESTRANGE

SME Solutions

Gilles WOZELKA

Human Resources

Nikolaus SCHOLZ

Strategy & Communication

An international team

Sharing the same vision and developing our commitment

together at all levels of the Group

Alain FÉRARD

Neopost Shipping


NEOPOST’S TRANSFORMATION To respond to the digitalization of communication and information flows as well as the growth in parcel volumes, Neopost introduced a transformation plan in 2012 focused in particular on extending its range of solutions.

Customer needs are changing, be they SMEs or SMIs, key accounts, carriers, logistics companies or e-commerce firms. To best address those changes, Neopost is expanding its activity beyond the supply of mail management systems and proposing solutions in the fields of digital communication and parcel management. In parallel, Neopost continues to adapt its organization structure.

Growing share of digital communication and logistics solutions

The transformation of Neopost will have reached a key milestone when sales from the digital communication and logistics businesses exceed 35% of total Group sales. Once that level is attained, the strong growth in these new businesses should begin to offset the structural decline in traditional physical mail businesses.

Total Group sales

Share of digital communication and logistics solutions as a % of total Group sales

Mid-term objective

€1.003bn

€1.070bn

€1.095bn

€1.113bn

€1.190bn

STRATEGY


13

Becoming a benchmark partner in Shipping Solutions In today’s fast-growing market, Neopost is harnessing its know-how in logistics and extending its offering with a view to providing innovative and high-performance solutions at each link in the parcel processing chain. A long-standing partner of carriers, postal operators and logistics firms, Neopost is expanding its role as a parcel facilitator with e-commerce companies, parcel shippers and recipients.

Reinforcing the Group’s leadership in Enterprise Digital Solutions Building on its position as a leader in customer communication management and its expertise in data quality, Neopost is working to integrate these solutions intended for key account customers. The Group is also pursuing its strategy on innovating and extending its business to vertical markets such as banking, insurance and public utilities.

Supporting the digital transition of SMEs Neopost continues to develop its offering to the needs of SMEs, which account for the largest part of its traditional customer base. In addition to mail management systems, Neopost brings SMEs simple and accessible solutions to help them take up the challenge of integrating digital technology in their communication and information flows.

NEOPOST’S STRATEGY IS FOCUSED ON THREE KEY AREAS3

key areas

The Neopost group is adapting its organizational structure around the world to bring all its customers solutions that match their size and needs. For its business with SMEs, the Group has decided to create an autonomous global division with its own resources, notably in research and development, production, and distribution. The aim is to equip the new division with all the resources needed to step up the deployment of digital and logistics solutions while adjusting and optimizing its structures.

Staying agile

Sales by geographical

region2015

Current operating margin1 in 2015

of sales

of sales

1 Current operating margin before acquisition-related expense = current operating income before acquisition-related expense/total sales.2 Net margin = Group attributable net income/total sales.

Net margin2

19.7 %

11.2 %

Europe50 %

North America

43 %

Asia-Pacific and other

7 %


HOW ARE CUSTOMER EXPECTATIONS

CHANGING

Large companies and organizations want to be able to communicate and interact with their customers in the right manner at the right time and via their preferred channel.

We enable our customers to implement an omni-channel communication strategy (physical, digital and mobile) using a single technological platform while ensuring

the optimal quality of the customer data that they use.

Tamir Sigal - Marketing Director, Enterprise Digital Solutions

TESTIMONIALS


HOW ARE CUSTOMER EXPECTATIONS

CHANGING

In today’s world, businesses need to leverage digital as well as physical communications to secure maximum engagement from their customers. To send or receive mail,

packages or digital invoices, delivery options are now so diverse, complex and powerful that they need expertise to help them chose the best solution for their company.

Solving these new business problems, this is what is expected from us. Alain Fairise - President Neopost North America

Digitalization is a source of performance and competitiveness. And numerous small companies agree, but they are held back by the complexity of the tools themselves and the complexity of integrating

them in their specific IT environments. Everyday use is the key factor for these customers. They want simplicity, easily accessible tools, autonomous users and a limited financial commitment.

Xavier Neboit - Head of Marketing, SME Digital Solutions

Given the increase in parcel volumes stemming from the strong expansion of e-commerce, shippers are looking for more efficient solutions in automated shipping and tracking. At the other

end of the chain there is strong demand for new services. Carriers are looking to simplify parcel delivery, while recipients want more options for selecting their carrier and receiving their parcels.

Gérard Azé - Marketing Director, Neopost Shipping

Large companies and organizations want to be able to communicate and interact with their customers in the right manner at the right time and via their preferred channel.

We enable our customers to implement an omni-channel communication strategy (physical, digital and mobile) using a single technological platform while ensuring

the optimal quality of the customer data that they use.

Tamir Sigal - Marketing Director, Enterprise Digital Solutions

15


17

Very few changes have been made to the foundations of our transformation strategy. But the dynamics in place have accelerated.Denis Thiery


THE ALLIANCE OF MAIL AND DIGITAL

COMMUNICATION


Small and medium-size enterprises form the traditional customer base of Neopost, which has long provided them with its franking and mail management systems. Today’s wide array of communication channels

and growing volume of communication flows are a source of major complexity for these companies, which cannot be expected to invest in resources specifically for information systems. Yet succeeding in the challenge of integrating mail and digital communication is vital to efficiency and productivity.

INTEGRATING DIGITAL TOOLS IN SME PRACTICES

The Neotouch solutionNeopost brings customers a hybrid mail solution called “Neotouch”. Launched in France, the apps available on the Cloud manage the distribution of documents by mail, fax, email or SMS and then store them electronically. The offering is currently being launched in the United States and will subsequently be rolled out widely.

Enriched offeringAlongside its range of mail processing solutions, Neopost is introducing supplementary tools allowing companies to develop true multi-platform customer communication and optimize parcel management. The development of solutions provided in SaaS mode will make it even easier for SMEs to adopt new tools.

Intelligent mail solutionsNeopost’s franking and document management systems automate all stages of mail flows, from production, optimized folding and inserting into envelopes, weighing and postal rate calculation to applying postmarks on envelopes. Processing costs are reduced and the sender may be eligible for preferential postal rates.

Neopost’s broad range of equipment, software, financing and related services brings each company a need-adapted mail flow management solution whatever its size, business, mail volumes and the nature of the correspondence, whether transactional or promotional.

THE ALLIANCE OF MAIL AND DIGITAL COMMUNICATION


22MILLIONPAGESprocessed by the Neotouch hybrid mail solution in 2015

Prepaid mail or digital mail, complementary options

Sender RecipientsLegal storage

Printin

g

Folder

/inse

rter s

yste

ms

Frank

ing

Electro

nic

signa

ture

Email

Shipm

ent

Electronic billing is expanding as a result of regulatory change but requires the use of solutions that factor in constraints on traceability, security, legal storage and electronic signatures.

Drawing on its experience in the development of solutions approved and certified by the relevant authorities, as is the case with franking machines, Neopost is now providing SMEs with SaaS/Cloud solutions for on-demand mail distribution and for electronic invoicing in France and in Germany.

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SMEs are now firmly on the path towards digitalization. In 2012, 35% of the companies surveyed1 said they had yet to form a plan on integrating digital technology in their communication practices. That proportion fell to just 13% two years later.

But in that second survey2, 46% of them said they had yet to initiate a plan, reflecting the size of the potential market for Neopost. Indeed, only 16% said they had equipped themselves with an entirely digital system.

The digital move of Neopost customers

1 2012 - Survey carried out in collaboration with ReD Associates with 3,200 companies in eight countries: Canada, Denmark, Finland, France, Germany, South Korea, the United Kingdom and the United States.

2 2014 - Survey carried out in collaboration with CVA 2014 with 4,000 companies in four countries: France, Germany, the United Kingdom and the United States.

3%16%

62% 25%

46%

35% 13%

2012 2014

Fully digitized

Steady state reached

On the agenda

No plan to digitize


The degree of digitalization of Neopost customers


The use of digital technology in marketing campaignsWith its personal touch and affinity dimension, mail remains a preferred and effective medium for targeted communication. Technological evolutions are making it increasingly intelligent and providing high value-added services such as traceability, address quality and enhanced content.

For example, QR codes combine print and digital in marketing campaigns, with recipients encouraged to find out more about a sales offer on a website by scanning the code printed on their mail item with their smartphone.

23

Multi-channel communication accessible to SMEsThe tools provided by Neopost in addition to its mail management systems enable customers to develop true multi-channel communication. The centralized output management software OMS-500 uses expert technology developed by GMC Software that has been simplified and adapted to the Group’s SME customers.

The software takes the preferences of each user into account and sends the right mail to the right person at the right time via the right distribution channel, be it mail or email.


Because it understands the needs of SMEs, Neopost is the ideal partner for supporting them in their digital transition and changing needs. By bringing them digital and shipping solutions in a format adapted

to their specific needs, the Group offers solutions that supplement physical mail management.

Further extending the digital experience

In one year in the United States, over one million parcels have already been shipped using NeoShip, Neopost’s dedicated software.

From flat mail to parcels

In several countries, Neopost brings SME customers, small parcel volume senders, solutions for managing shipments online and comparing prices negotiated with Neopost partner carriers.

In the United States, Neopost has successfully launched its NeoShip software that allows customers to use franking machines to print USPS-compliant labels valid for parcels. The innovation means users can qualify for attractive rates.



Neopost Business AppsTo take things even further, Neopost has developed a special platform for receiving professional apps in a broad array of fields including finance, accounting, customer relations management and human resources. The platform is already up and running in the United Kingdom and the United States.

Calendar

Invoices Marketing email

Employees Recruitment Settings

Contacts CRM/Sales

Surveys

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At the heart of the start-up ecosystem

The creation of Neopost Labs illustrates the Group’s intention to structure its open-innovation policy. Neopost Labs was designed to position Neopost as the large-scale industrial partner of business accelerator investors and innovative start-ups in technologies, business models, working or marketing methods. Neopost can therefore better spot the new trends that will lead to future products and services, notably intended for SMEs.

Neopost LabsIn early 2015, Neopost had invested €5 million in Partech Entrepreneur II, the largest seed capital fund for Tech and Internet start-ups in Europe. The fund is managed by Partech Ventures and is set to invest between €300,000 and €1 million per start-up.

NEWS


THE E-COMMERCE

BOOM


The e-commerce boom is generating sweeping change in the parcels market. Volumes are increasing, the online activity of retailers is expanding, recipients are getting more and more demanding and the issue of last-mile logistics

is getting tougher than ever. The needs of shippers, carriers and recipients are in continuous flux as they are looking for ever greater flexibility, visibility and productivity.

STRONG MOMENTUM IN PARCELS MARKET

Software solutions for parcel shipping Shipping management solutions serve the needs of shippers and carriers. To bring these players an increasingly cutting-edge service without their having to make development and maintenance investments, the solutions on offer are operated and hosted by Neopost Shipping. They take the form of either customized web solutions or multi-carrier/multi-service delivery web services. The shipping services are managed in full compliance with the protocols of each carrier. The processes of preparation, pricing and labeling, the generation of transport documents and the transfer of information to carriers are handled in their entirety.

Facilitating parcel managementNeopost has built up substantial expertise in managing parcels logistics with dispatch, tracking and reporting solutions originally developed for carriers and postal operators. These solutions facilitate the combined management of physical flows and the corresponding information flows. Drawing on this know-how, the Group has succeeded in strengthening its offering and positioning itself as a facilitator of parcel management in the space of a few years, providing solutions tailored to all the players in the value chain and adapted to the new needs stemming from the rise of e-commerce.

parcels processed every month by Neopost Shipping solutions.

THE E-COMMERCE BOOM

30MILLION


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Solutions for large shippersIn the United States, the solutions of ProShip, a company acquired by Neopost in 2014, are certified by the leading carriers and adapted to the needs of the leading players in traditional and online retailing, logistics companies and distributors, which ship an average 50,000 parcels a day.

MARKET EVOLUTION LINKED TO THE E-COMMERCE BOOM

The boom in e-commerce is generating sharp growth in parcel volumes. Carriers are shifting their business models from B2B to B2C. Long-standing postal operators are developing their parcel business. The market, long focused on carriers, is increasingly turning in to the needs of retailers, shippers and consumers.

In January 2016, Neopost Shipping signed a new three-year contract with Royal Mail, its biggest customer. Neopost will provide Royal Mail and its express parcel division Parcelforce Worldwide with shipping and tracking solutions including the supply of software and IT equipment along with the provision of services. The new contract will respond to the strong growth in the parcel business of Royal Mail and Parcelforce Worldwide.

Neopost also works with other large postal operators including Australia Post, Chronopost and Singapore Post.

NEWS


In 2015, seeking to ensure logistics excellence for

its customers, La Redoute, the French e-commerce leader in fashion and homeware, selected Temando’s solution for its flexibility in terms of the choice of carriers across Europe, the quality of its tracking and traceability functions, and for its scalability.

Neopost Shipping continues to extend its offering and introduce innovative technological solutions for the needs of the supply chain and parcel processing. In 2015, Neopost followed through

on large-scale projects in e-commerce, last-mile management for parcel collection, and traceability.

Leading-edge technologies for logistics flows and parcel processing

NEWS

THE E-COMMERCE BOOM

An intelligent platform for e-commerce players In March 2015, Neopost acquired a majority stake in Temando, an Australian firm specialized in software solutions for managing multi-carrier shipments for the e-commerce sector. Its platform connects all the logistics resources involved (carriers, warehouses, shops, stocks, etc.) to provide e-retailers and their customers with a seamless delivery solution. They can use the platform to prepare quotations in real time with numerous carriers, calculate the total transport cost, including taxes and duties, schedule shipping, check inventory and the location of stock, and offer the most economical routing options according to the end customer address. Temando’s platform will be launched in France, the United Kingdom and the United States in 2016.


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In 2015, working together with Capgemini and BearingPoint,

Neopost Shipping finalized the roll-out for the French Defense Ministry of an information system for managing the shipment and traceability of military material and equipment using RFID technology.

NEWS

NEWS

Bespoke traceability solutions

Neopost provides bespoke traceability solutions. The solutions are implemented by the Group, which is then responsible for operational monitoring. The solutions cover all the key links in the supply chain, from shipment through to the delivery of goods and parcels. They are based on the collection of information via systems using barcode scanning or RFID technology. Neopost handles the analysis and storage of the data, to which it ensures real-time access through a Track & Trace database hosted on Neopost servers.

parcels have already been packed by the four Neopost packing machines in the pilot phase.

2MILLION

Automated lockers for parcel collection

In France, Neopost has created a joint venture with GeoPost to develop Packcity, a network of automated lockers implemented in public places with high footfall (including train stations, shopping malls and city centers) and used for the collection of web orders. Users receive email or text notification when the parcel is ready for pick-up at the locker of their choice, with a secure access code. Neopost’s automated lockers also meet the needs of specialist Click & Collect retailers and large companies keen to offer their employees a concierge service.

In January 2016, Neopost announced a partnership project

with Yamato Transport for the implementation and management of a network of automated parcel lockers in Japan.

Innovation for parcel optimization

Neopost has developed a continuous wrapping system, called CVP-500, which optimizes parcel size in three dimensions and automates production. By adapting the parcels on a customized basis to the shape and volume of their content, the system avoids the need to use filling material and reduces parcel bulk. The technology of the concept has been validated and four prototypes are currently in operation in Benelux. A fifth machine will soon be installed at Cdiscount, a major French e-commerce player. In a favorable environment of volume-based pricing by carriers, Neopost is evaluating the business model of CVP-500.


THE CUSTOMER AT THE HEART OF ORGANIZATIONS


Solicited on all fronts, over-informed and mobile, customers are becoming increasingly demanding. They expect rapid interaction, immediate answers and easy access to the

information they need on their various screens.

THE GOLDEN AGE OF THE CUSTOMER

Customer Communication Management tools are used to create, disseminate and store all customer communications, regardless of the nature of the exchange – sales, promotion, regulation or accounting. They can also be used to manage the various distribution means.

What is Customer Communication Management (CCM)?

Creating the bases of an optimal customer experienceCompanies are placing the customer at the heart of their organizations. Faced with growing demand for selective information and instant exchanges, companies are developing adapted, customized and interactive communication via the various channels covering the entire customer experience. To boost their effectiveness and responsiveness, they are adopting practices that allow them to establish lasting relationships with their customers while constituting a true performance lever.



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GMC Inspire™, the Neopost solution

Inspire™ is the software suite developed by GMC Software, a Neopost subsidiary since July 2012. It is a unique solution for customer communication management, compliant with ISO standards and international quality standards. Using its preview, approval and distribution functions for printed and digital documents, companies can optimize all of their customer interactions, whatever the form or communication media, from call centers, mobile phones, and tablets to SMS, web, email and print.

In 2015, for the third consecutive year, in its analysis of the customer communication management software market, Gartner ranked GMC Software in the leading quadrant and number-one in terms of vision. GMC Software is also recognized as a leading solution by Forrester Research.

1 ,600 CUSTOMERS & PARTNERSSUPPORTED WITH GMC SOFTWARE

A LEADER


GMC Software is the partner of large companies looking to employ digital resources to boost their customer relations. Backed by the world’s largest research and development team in the market of customer communication,

GMC Software keeps a close eye on changes in the needs of its users. In June 2015, GMC Software launched the R10 version of Inspire™. Meanwhile, the continued integration of mobile and Cloud technology is opening up even more new avenues for the development of its platform.

Innovating and satisfying users


Who uses Inspire™ ? GMC Software is a long-standing preferred partner of print service providers, a market in which it holds a 60% share with its leading product, Inspire™ software. GMC Software has successfully launched Inspire™ in vertical markets over the last few years. The company today boasts a large user base in banking and insurance as well as in telecoms, public utilities and healthcare. In 2015, a full 53% of sales were made in these new markets, compared with 30% in 2012.

GMC continued to develop its business with financial services and insurance companies. In 2015, attracted by its omni-channel operating mode and ease of use, 37 such companies chose Inspire™, convinced of its key contribution to their customer loyalty strategies and appreciative of the benefits for recipients in receiving pleasantly laid out documentation whatever the distribution channel used.

new customers for GMC Software in 2015.


“ The support team is highly responsive, replying quickly to each one of our requests ”Manager, Financial Services, France.

“ Long-term relationship, professionalism, services ”Head of Desktop Publishing, Financial Services, United States.

“ GMC products cover virtually all our needs ”Desktop Publishing Manager, Financial Services, Germany.

“ Easy to use ”Manager, Insurance, China.

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Listening to the market

In 2015, GMC Software commissioned an independent market research company to survey 390 customers around the world (China, France, Germany, the United Kingdom and the United States).

The survey showed that three-quarters of the customers surveyed have been committed to a relationship with GMC Software for more than three years.

INSPIRE TM

USERS TALK

the survey revealed a record level of overall customer satisfaction.

98%


Quality data is key to the effectiveness of a company’s communication with its contacts, customers and prospects. Missing or erroneous information leads to breakdowns in customer communication management. With Neopost’s data quality offering, customers

can work on the basis of reliable, relevant and up-to-date information. For example, the address quality software captures, checks and updates customer data consistent with postal standards in the company’s databases or on its website, be it at the time the data are entered or while they are being used.

Reliable data for effective communication


VISIONARY

In 2015, Gartner ranked Neopost in the quadrant of visionaries in its market analysis of data quality.


When top-quality data means top-quality communicationA source of additional costs and dysfunctions in relationships with stakeholders, the influx of unmanaged data and a lack of information checks can pose a threat to the health of companies. The experts at Neopost’s specialized subsidiaries, including Satori Software in address quality, Human Inference in customer reference databases and DMTI Spatial in geolocation data, develop tools that guarantee the quality, integrity and intelligence of data.

Complementary fit between data quality and customer communication offers

In 2015, the Inspire™ platform was extended to include an address quality module supplied by Satori Software. The new functionality has already been launched in the US market.

39

organizations of all sizes use Neopost address quality solutions.

PREVENTING DATA MADNESS!

“ I have too much data to manage .” “ We don’t know who is who .” “ Too many shipments came back to us undelivered.” “ Duplicated data? We even have quintuplicated data! ”

NEWS

OVER

000,


CUSTOMER TESTIMONIALS

We wanted to take the human element out of our mail preparation as much as possible for compliance purposes. For Claim Eazy, quality and accuracy of documents are vitally important

to us as a business, as we are working towards ISO 9001.

Commenting on Neopost’s mail processing solutions.James Treacy, Co-Founder, Claim Eazy, claims management company for individuals, United Kingdom.

We don’t have to try to support the old homegrown systems. We’re now letting ProShip, the expert, do what it does best and support the systems for us.

Tom Spoke, IT Global Distribution Manager, Trek Bicycles, designer and manufacturer of bicycles and related products, United States.

Sending invoices by email rather than by post ensures they are delivered to the right person through their preferred media and this also means we get paid in time.

Commenting on OMS-500, a version of GMC Software’s Inspire™ software adapted for SMEs.Marcin Rutkowski, Office and Administration Manager, Ranson, bakery products supplier, United Kingdom.

TESTIMONIALS


CUSTOMER TESTIMONIALS

We wanted to take the human element out of our mail preparation as much as possible for compliance purposes. For Claim Eazy, quality and accuracy of documents are vitally important

to us as a business, as we are working towards ISO 9001.

Commenting on Neopost’s mail processing solutions.James Treacy, Co-Founder, Claim Eazy, claims management company for individuals, United Kingdom.

We don’t have to try to support the old homegrown systems. We’re now letting ProShip, the expert, do what it does best and support the systems for us.

Tom Spoke, IT Global Distribution Manager, Trek Bicycles, designer and manufacturer of bicycles and related products, United States.

Sending invoices by email rather than by post ensures they are delivered to the right person through their preferred media and this also means we get paid in time.

Commenting on OMS-500, a version of GMC Software’s Inspire™ software adapted for SMEs.Marcin Rutkowski, Office and Administration Manager, Ranson, bakery products supplier, United Kingdom.

41


Our values and commitments guide the day-to-day conduct of Neopost,

a responsible Group.Denis Thiery


ESP NS IB LITIE S

RO I

43


RESPONSIBILITIES

Fully mindful of environmental issues, Neopost is a responsible company committed to sustainable development. In terms of the environment, the Group has taken advantage of regulatory

constraints by preparing for them ahead of time and transforming them into a competitive advantage.

NEOPOST, A PLAYER IN THE CIRCULAR ECONOMY

Ecodesign at the root of productionFrom the product design phase through to end-of-life dismantling, Neopost takes all environmental aspects into account. Be it in the choice of materials, the number of components, the ratio between product mass and packing volumes, sound emissions or energy consumption, ecodesign determines the technical specificities in production, in the equipment in use, and in recyclability conditions so as to limit environmental impacts.

The 3 R’s ruleThe Group applies the 3 R’s rule of repairing, reusing and recycling to its ecodesigned products. Because the durability of the product is an essential component in ecodesign, the product has to be able to be dismantled, repaired and reused, and the non-toxic materials recovered must be easily recyclable.

For example, thanks to an automated standby function, a DS-35 folder/inserter, an entry-level model for office use, consumes seven times less electricity than the previous-generation equivalent model.

The circular economy is an economic concept tying in with sustainable development. The aim is to produce goods and services while limiting the consumption and waste of raw materials, water and energy sources at each stage in the life cycle of the product or service.

What is circular economy?


45

Reusable components

Energy

Raw materials + energy

WasteWaste

Waste

Maintenance + energy

THE EQUIPMENT LIFE CYCLE

Production Remanufacturing

Distribution

Use

End of life

All of Neopost’s franking machines comply with the specifi cations of the US certifi cation Energy Star.


Recuperation of franking machine (end of contract…)

and expedition to remanufacturing site

New contract and set-up of franking machine

Distribution to new client

Machine testing and packing

Wear parts changed,

re-assembly

New production order

Disassembly and added to stock

Reception and technical diagnosis

Machine to remanufacture

REMANUFACTURING PROCESS OF A NEOPOST MACHINE

NEW CYCLE

WASTE AVOIDED

RESPONSIBILITIES

1

2

3

4

5

Optimizing repairNeopost favors remote repair work, which limits travel on the part of technicians and the environmental impact of the distance traveled. Today, over 50% of repair jobs are carried out remotely. The percentage rises to a full 90% for the IS-280 entry-level franking machine. Standard exchange is possible for entry-level and mid-range franking machines that cannot be repaired without the direct intervention of a technician. In this case, a new machine is sent to the customer within 24 hours. The original equipment is returned and integrated in the recycling process. In addition to the savings generated in terms of maintenance costs, this system improves both customer service and the quality of the machines in circulation, which will require less maintenance in the future. The standard exchange system has thus far been rolled out in Benelux, France, Germany, the United Kingdom and the United States.

Remanufacturing for a second life

Neopost has been developing remanufacturing for entry-level and mid-range machines since 2012. Remanufacturing involves refurbishing equipment based on a combination of parts and sub-assemblies from machines recovered at the end of the leasing or rental contract or standard-exchange machines. Nevertheless, some products and components are systematically replaced to ensure the same high levels of quality, reliability, functionalities and appearance as a new product. In 2015, about 30% of franking machines placed to Neopost customers were from remanufacturing.

Franking machine to recycle


47

Reduced environmental impactFactoring in the entire life cycle of equipment (production, transport and use), refurbishing serves to significantly reduce Neopost’s carbon footprint.

By increasing the share of refurbished machines in its installed base, the Group shrank its carbon footprint by 25% in 2014 and expects to reach 30%* reduction in 2016.

Contributing to job creation

Refurbishing is also a way for Neopost to safeguard activity and jobs at its production site in France. By doing so, it has protected 20 direct jobs and six indirect jobs at Le Lude.

* Neopost estimates on the basis of a carbon footprint of under 37% for refurbished machines.

The ecodesign process ensures a 75% recycling potential for franking

machine components, notably thanks to the elimination of metallic inserts and the use of the same plastics. This ratio exceeds the thresholds set out in the WEEE directive.

In 2015 Neopost achieved an actual recycling rate of 85% with the waste

from its franking machines range.

The environmental footprint of franking systems

New

pro

duc

t

Rem

anuf

actu

red

pro

duc

t

37%environmental gain

Raw materials end of lifeProduction of raw materials LogisticsUse

15% 15%

5% 5%

75% 40%

100

63

5%

3%


The commitment of employees is essential to the Group’s responsible approach. As such, Neopost rolls out initiatives aimed at fostering the key principles

and ethical standards informing behavioral rules relative to stakeholders.

COMMITTED TEAMS

Breakdown of employees by activities(at 31 January 2016)

RESPONSIBILITIES

FOSTER TEAMWORK

Headquarters and central functions: 1 %Neopost Shipping: 5 %Enterprise Digital Solutions: 13 % SME Solutions: 81 % (o/w Supply chain: 15 %)


49

DiversityNeopost is a global employer. It is proud of the diversity of its employees and encourages them to create, innovate and work together. To this end, the Group has also established high ethical standards to uphold the dignity and respect of its employees.

Skills development The commitment, motivation and development of employees are vital to the success of Neopost. The Group is determined to develop the employability of its staff, foster internal mobility and safeguard the balance between personal and professional life.

Freedom of expression Neopost favors dialogue and relations with its employees. Each Group entity is responsible for initiating communication with its employees and the conditions for constructive dialogue with them. In addition to its locally implemented initiatives, every two years the Group carries out a global commitment survey that gives each employee a chance to voice his or her opinions anonymously.

Involvement in local communitiesNeopost respects local cultures and customs and supports the communities in the operating countries of its subsidiaries. Each Group entity is encouraged to play a role in social and community activities aligned with its values.

The Group contributes to socio-economic development through employment, through partnerships with local educational institutions and participation in charity initiatives, and by signing contracts with local suppliers as much as possible.

PROMOTE INNOVATION

DRIVE TO SUCCEED

FOCUS ON CUSTOMERS

OUR VALUES

The integration of new businesses and the new strategic direction taken by the Group in the last few years have led it to redefine its values so as to best reflect its identity.


RESPONSIBILITIES

THE TRANSFORMATION IN FIGURES

The extension of Neopost’s offering is reflected in a change to its business model. Mail processing solutions generate income stemming from the sale of equipment along with recurring

revenues. Neopost’s new activities are mainly software solutions provided in customer/server mode or accessible in SaaS/Cloud mode, which generates transaction-based income.

Trend in sales (In € million)

Mail SolutionsCommunication & Shipping Solutions

1, 003

2011

2012

2013

2014

2015

923

80

933

137

910

186

885

228

912

278

1 ,070 1, 096 1, 1131 ,190

In 2012, Neopost initiated a deep-seated transformation of its business by developing high-performance and relevant solutions in digital communication while extending its shipping solutions offering. The strong growth in these digital and logistics activities has made a substantial contribution to sales, which have increased 18.6% in four years. Excluding currency effects, this represents annual average growth of 1.9%.


51

1 Before acquisition-related expense

2 Excluding an extraordinary VAT payment of €37 million in the United Kingdom

1 CSS = Communication & Shipping Solutions

Strong growth in new businesses

Whether digital and logistics activities are proposed to key accounts at Enterprise Digital Solutions and Neopost Shipping or to Neopost’s traditional customer base, mainly SMEs, their total sales have achieved substantial annual growth rates in the last four years.

In 2015, Neopost successfully maintained a current operating margin before acquisition-related expense of 19.7% of sales. Net income was stable, representing a net margin of 11.2% of sales.

Restated for an extraordinary VAT payment of €37 million in VAT in the United Kingdom, net cash flow from operating activities increased by 18%.

Neopost, a highly profitable group generating strong cash flow(In € million)

Current operating income1

Net income

Net operating cash flow

2014

2014 20

14

2015

2015

2015

2

245 134 158234 134 187

Average annual organic sales growth rate 2012/2015

Average annual growth rate 2012/2015 excluding currency effects

Enterprise Digital Solutions

Neopost Shipping

CSS1 business within SME Solutions

+11%+15%

+19% +21%

+30% +30%

Average annual sales growth rate


RESPONSIBILITIES

To fully raise awareness on the objectives of Neopost’s transformation, the Group leads a policy of transparent and

informative financial communication both with equity investors and institutions holding bonds and credit lines.

In 2015, it organized nearly 400 meetings with the financial community. It has also entirely redesigned the financial section of its website to make information searches quick and easy.

NEOPOST ON THE STOCK MARKET

Shareholding structure as of 31 January 2016

Gaële Le MenInvestor Relations Officer

Institutional investors 83.6 %Individual shareholders 13.7 %Directors, management and employees 2.3 %Treasury shares 0.4 %


53

Financial Communications Schedule

Share price(as of 30 April 2016)

Dividend per share in respect of 2015

1.70€

Net income per share

€3.72

31 January 2016 Closing of 2015 accounts

5 February 2016 Ex date for the 2015 interim dividend

9 February 2016 Payment of the 2015 interim dividend: €0.80 per share

29 March 2016* 2015 full year sales & results

30 March 2016 Information meeting

1 June 2016* 2016 Q1 Sales

1 July 2016 General Meeting of shareholders

9 August 2016 Payment of the balance of the 2015 dividend

27 September 2016* 2016 half-year sales & results

28 September 2016 Information meeting

1 December 2016* 2016 Q3 sales

31 January 2017 Closing of 2016 accounts

End of March 2017* 2016 full year sales & results

* Publication after the closing of the Premier Marché of Euronext Paris

Neopost (price per share - €)SBF 120 index (rebased)

1 Feb

. 2013

10

20

30

40

50

60

70

1 Jan

. 2014

1 Jan

. 2015

30 A

pr. 2016

1 Jan

. 2016


CREDITS

Editorial and writing: Neopost - DDB FinancialCreation, graphic design, illustrations and production: Futurama Links - Futurama

PDF enhanced by Goodbye [static] PDF / Publishing for Good

Photos: P. Boulanger (p. 5, 6, 10, 11 et 52)Neopost (p. 7, 18 et 48) Samot / Shutterstock .com (p. 5, 32)Denis Vrublevski / Shutterstock .com (p. 19)Connel / Shutterstock .com (p. 26)Moustache Girl / Madiz / Naypong / Shutterstock .com (p. 27)Baranq / Shutterstock .com (p. 33)

The Neopost 2015 annual report is printed on Satimat Green paper produced from 60% recycled fi bre.Compared to non-recycled paper, this choice reduces the impact on the environment by:

Source�: Carbon footprint data evalated by Labelia Conseil.Virgin fi bre paper data from latest European BREF data.

By using Satimat Green rather than a non-recycled paper, the environmental impact was reduced by:

790kg of landfill

18 538litres of water

91kg CO2 and greenhousegases

1 704kWh of energy

913km travel in the averageEuropean car

1 283kg of wood

Source : Carbon footprint data evaluated by Labelia Conseil. Virgin fibre paper data from latest European BREFdata.

1 / 1

By using Satimat Green rather than a non-recycled paper, the environmental impact was reduced by:

790kg of landfill

18 538litres of water

91kg CO2 and greenhousegases

1 704kWh of energy

913km travel in the averageEuropean car

1 283kg of wood

Source : Carbon footprint data evaluated by Labelia Conseil. Virgin fibre paper data from latest European BREFdata.

1 / 1

NRA_2016_CREDITS.indd 2 26/05/2016 10:51

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113, RUE JEAN-MARIN NAUDIN92220 BAGNEUX - FRANCE

www.neopost.com Annual Report

2015

Ann

ual R

epo

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