THE WORLD IS CONNECTED 2016 ANNUAL REPORT

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1 THE WORLD IS CONNECTED 2016 ANNUAL REPORT

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3 Receive Connect Send

4 EDITORIAL Neopost has successfully reinvented itself and we are today positioned to help our customers manage their digital transition. 4

5 Simplify the communication between companies, their customers or partners, make the information flow more relevant and easier to manage, facilitate parcel processing and tracking To pursue its mission in an increasingly connected world, where mail is becoming electronic and parcel volumes grow in line with the growth in e-commerce, Neopost has made a firm shift to digital. Our offering now includes far more than smart machines to process traditional mail. We have gained recognition for our tailored solutions and software whether dedicated to digital communications management or aimed at facilitating parcel processing. Neopost has successfully reinvented itself and we are today positioned to help our customers manage their own digital transition. The success of this transformation is due to a combination of strategic choices, targeted acquisitions, and our high profitability level, which gives us the resources to continue to invest for the future. But, above all, this success is down to our agility and the commitment of all our employees who are dedicated to offering simpler and more efficient solutions to our customers, thus creating more value for all our stakeholders. Denis THIERY Chairman & Chief Executive Officer 5

6 CONTENTS 8 Global footprint 9 Neopost divisions 6

7 12-17 ENTERPRISE DIGITAL SOLUTIONS Managing customer communications A responsible group NEOPOST SHIPPING Facilitating parcel processing SME SOLUTIONS Guide SMEs through their digital transition Governance Strategy and performance 7

8 GLOBAL FOOTPRINT An international group 90+ Sales by region 6, billion euros in sales countries where Neopost solutions are distributed North America 45% 7% Asia-Pacific and others 48% Europe employees in 32 countries 8

9 NEOPOST DIVISIONS Neopost activities are structured around three divisions, each focusing on the needs of a specific customer category: large corporations for which Neopost provides digital communication solutions; firms involved in the logistics chain, from e-commerce players to transport companies; and SMEs, its main legacy customers for traditional mail. Enterprise Digital Solutions The market leader in the management of customer communications and data quality expert, the Enterprise Digital Solutions division serves major clients in financial services, insurance, telecommunications, utilities, healthcare, as well as print service providers. Neopost Shipping A long-standing partner of carriers, postal operators and logistics firms, the Neopost Shipping division has expanded its offer not only to e-commerce companies but also to parcel shippers and recipients to become the only global company in the market to cover the entire logistics chain. SME Solutions The number two global supplier of mail solutions (mailing systems and folders/inserters), the SME Solutions division also helps its customers to make the switch to digital by offering Cloud-based software solutions developed by Neopost s two other divisions and available in SaaS mode. 9

10 ANTICIPATING FUTURE NEEDS, DELIVERING NEW SOLUTIONS

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13 ENTERPRISE DIGITAL SOLUTIONS MANAGING CUSTOMER COMMUNICATIONS Loyalty Quality Customization Interactions 13

14 ENTERPRISE DIGITAL SOLUTIONS Smart customer communications Through its GMC Software subsidiary, Neopost is the partner of choice for large companies looking to employ digital resources to build lasting relations with their customers and optimize their communications efficiency. GMC Inspire is the multi-channel customer communications management solution developed and marketed by GMC Software. It facilitates the creation and production of personalized documents, adapting them automatically for distribution through all media and for access from multiple devices. It is the first solution on the market to allow users to preview content as it will actually appear on the media during the design stage: on paper, , SMS, websites, and social networks. Thanks to its intuitive interface, Inspire is intended for end users in many company departments and for customer communication specialists alike, without the help of programmers or developers. A long-standing preferred partner of print service providers, GMC Software has, for the past five years, successfully placed Inspire with banks, insurance companies, healthcare companies and in other vertical markets. In 2016, the share of sales made in these vertical markets reached a full 63%, compared with 30% in July 2016 February 2017 June 2016 GMC Software ranked as one of the world leaders for CCM by Forrester Acquisition of icon Systemhaus GmbH, the German CCM solutions leader September 2016 GMC Software, the only CCM specialist included in Gartner s guide to providers of mobile app development tools GMC Software positioned as a Leader in the Gartner magic quadrant for CCM for the fourth year in a row 14 CCM : Customer Communications Management

15 1,600+ GMC Software customers throughout the world GMC Software captures award for the application deployed at BMO - Bank of Montreal GMC Software was awarded the 2016 Xplor International Application of the Year Award for its Inspire platform implemented at BMO - Bank of Montreal. BMO opted for the Inspire Interactive portal and Inspire Designer software to offer its customers an enriched and innovative experience. 70 % share of the 30 leading German insurance companies that use icon Systemhaus For example, BMO s customers can use their mobile phone to open an account in a record eight minutes without having to go into a branch in person or print out any documents. The software has streamlined the account opening process, cutting by half the number of steps required, and BMO expects to save 92 million printed pages in the personal banking division alone. The Enterprise Digital Solutions division around the world The Enterprise Digital Solutions division is present in America (Brazil, Canada and the United States), Asia (China, Hong Kong, India, Singapore, South Korea and Taiwan), Europe (the Czech Republic, Denmark, France, Germany, Hungary, Italy, the Netherlands, Poland, Spain, Switzerland and the United Kingdom), and Oceania (Australia). It has a workforce of 984 employees, 284 of whom work in Research and Development in seven centers throughout the world (Arnhem, Hradec Králové, La Crosse, Olomouc, Ostrava, Seattle and Toronto). 15

16 ENTERPRISE DIGITAL SOLUTIONS Innovation and compliance with the strictest international standards GMC Software has the largest CCM-dedicated R&D team in the world. Innovation is a constant in the company with an unprecedented rate of software update releases as it keeps pace with developments in communication technologies. Compliance with the most stringent international standards gives GMC Software a competitive edge and contributes to ensure a high level of customer satisfaction. It is certified ISO 9001 (Quality Management System), ISO (Information Security Management System), ISO (Environment Management System) and CMMI (Capability Maturity Model Integration). Neopost combines GMC Inspire TM and Satori Ignite for Royal Neighbors of America Royal Neighbors of America, one of the largest womenled life insurers in the United States, was seeking a process to automate the creation of its business documents, and ensure discounted postal rates. Connecting GMC Inspire and Satori Ignite achieved this goal. This integration made it possible to replace inefficient manual methods with a streamlined workflow that can process documents in a single file for print and insert, cleanse addresses for improved deliverability, and meet USPS requirements for maximum postal discounts. Royal Neighbors reports process and cost efficiencies equivalent to the hours of one full time employee and $5,200 in savings from reduced return mail. In total, including a 25% increase in bulk mail discounts, the company has realized postage savings of more than $50,000 since implementation. 16

17 3 QUESTIONS FOR HENRI DURA COO Enterprise Digital Solutions What underpins the success of customer communication management solutions? Companies relations with their customers have changed dramatically in the digital era. Consumers are mobile and demanding; they expect immediate responses and a constant access to information round the clock on any media. From digital to paper, we give companies the tools to handle their customer relations across all channels. How did the July 2016 icon Systemhaus acquisition benefit the division? The value of the icon Systemhaus acquisition is that it strengthens our positions, especially in Germany, where it is the leading provider of customer communications management solutions with a deep penetration in the insurance industry. icon also gives us a mainframe solution for former IBM customers to migrate their document creation systems. What are the complementary features of the data quality offering? For customer communications to be effective, data has to be reliable, relevant and up to date. A proliferation of uncontrolled or unchecked data generates extra cost and causes dysfunction in companies. To counter this problem, we added, for instance, an address quality module to plug into our Inspire platform. Towards Customer Experience GMC Inspire TM Customer Journey Mapping is the only tool available in the Cloud to map all physical and digital contact points and all companycustomer interactions. The package gives visibility on all customers experiences, in person and online, from a single interface. 17

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19 NEOPOST SHIPPING FACILITATING PARCEL PROCESSING Automation Performance Easiness Flow management 19

20 NEOPOST SHIPPING Optimized parcel management Neopost Shipping facilitates parcel management. It is the only global operator present from end to end of the logistics chain, from preparation, through to dispatch and delivery. Expanding from its historical customer base of parcel professionals, carriers, postal organizations and logistics firms, Neopost Shipping now also serves retailers and e-commerce players. Neopost Shipping has built up substantial expertise in dispatch, tracking, and reporting solutions. Originally developed for carriers and postal operators, these solutions facilitate the integrated management of physical and information flows. Data are captured by Neopost using different technologies, such as barcodes and RFID. Neopost then handles the analysis and storage of the data, to which it ensures real-time access through a Track & Trace database hosted on its servers. Neopost works with large postal operators, including Australia Post, Chronopost, and Royal Mail. The division s new solutions allow Neopost to also address the needs of retailers and e-tailers such as La Redoute, Cdiscount, Fnac or Mason. May 2016 January 2017 April 2016 Magento Commerce chose Temando as its preferred technology partner Yamato Transport and Neopost Shipping formed Packcity Japan June 2016 Cdiscount, the first French e-retailer to select CVP th CVP-500 in the world commissioned 20 CVP-500: automatic tailored packing system

21 Shipping services 11 millions de goods marchandises monitored suivies by par Neopost les outils Shipping de traçabilité track and de trace Neopost tools Shipping on average en moyenne every month par mois OSS Cyberstation is a web-based multi-carrier order fulfillment solution. Operated and hosted by Neopost Shipping, it provides the link between carriers and their shipping customers. It is designed to help senders manage their shipments, label their parcels, produce and digitize shipping documents. Services are offered in SaaS mode so that customers have the benefits of access to the latest solutions without needing to invest in development and maintenance resources. OSS Cyberstation is available as a white-label solution for carriers and postal operators that want a turnkey solution for their order fulfillment customers. The solution is entirely personalized to the specific requirements of the carrier s brand. Neopost Shipping throughout the world Neopost Shipping has a footprint in Europe (France, the Netherlands, Spain and the United Kingdom), the United States and in the Asia-Pacific region (Australia and Japan). It employs more than 400 people, half of whom work on developing products and technology. Research and development in software and logistics solutions is coordinated between the centers in France (Cavaillon), the United States (Milwaukee) and Australia (Brisbane). The CVP-500 automated packing system was developed and is assembled in Drachten in the Netherlands. 21

22 NEOPOST SHIPPING Online ordering made easier The Group has successfully leveraged its established expertise and made acquisitions to bolster its offering (ProShip in 2014 and Temando in 2015) to position Neopost Shipping as the partner of choice for parcel shippers and e-tailers. Neopost Shipping s software has the capability to manage multiple carriers in a single system, facilitating the customer s access to a range of different prices. Neopost Shipping solutions also manage the delivery methods available on the e-commerce site (48-hour home delivery, next-day or same-day delivery; delivery to parcel lockers, pick-up points, or collection in store) according to rules that can be configured to minimize shopping cart abandonment rates due to high delivery and shipping costs or unsuited delivery options. Temando s shipping solutions connect e-tailers to carriers and e-tailers to their end customers. ProShip, on the other hand, caters to companies with large-volume shipping needs. La Redoute manages its deliveries with Temando La Redoute, the French e-commerce leader in fashion and homeware, assigns around 50,000 packages daily to more than a dozen carriers. It selected Temando s solution for its dispatch management (preparation, labeling and traceability), return shipments, and the range of delivery choices on its retail site. Its new order preparation center is the most efficient in Europe for preparation lead times and capacity to handle a large number of product references. Its management platform is based on Temando s solution. It operated at full capacity during the peaks of 2016 Christmas period and 2017 winter sales. 22

23 3 QUESTIONS FOR DANIEL MALOUF COO Neopost Shipping How did Neopost enter the shipping market? Neopost has been providing carriers and logistics companies with shipping management software, mobile delivery tracking solutions, and logistics traceability solutions since Our in-depth expertise in these technologies combined with targeted acquisitions has positioned us to extend our offer to shippers, retailers and e-tailers. What are the major trends in today s parcel market? The e-commerce boom is generating sweeping change in the parcels market. Online shopping and parcel volumes are growing at an exponential rate. Shoppers want a bigger choice of delivery and tracking methods. These developments create new challenges and opportunities for supply chain operators. How does Neopost Shipping s range address these new needs? Our range is unique in the comprehensiveness of the needs we address. Indeed, we cover every aspect of the logistics chain, from the online choice of delivery options through to collection, including parcel preparation, dispatch and tracking. Some of our customers already use several of our solutions, a clear sign that our product range is complementary. 50+ million parcel shipments managed by Neopost Shipping software on average every month 23

24 NEOPOST SHIPPING Innovative equipment for logistics and e-commerce Neopost offers solutions for parcel drop-off and pick-up at automated parcel lockers. Its systems are designed to optimize delivery and returns two potential impediments to online shopping. A joint venture was formed with GeoPost in France to develop Packcity, a network of automated lockers in public places with high footfall (train stations, city centers, etc.). Neopost s automated lockers also meet the needs of specialized retailers for their Click & Collect offer, and companies keen to offer their employees a concierge service. 600 automated parcel lockers installed in France and Japan In Japan, Neopost and Yamato Transport, the leading parcel delivery provider in the Japanese market, formed a joint venture to operate an open network of automated and secure parcel lockers. The system opened for business in mid-may 2016 in Tokyo metro stations, in cooperation with the East Japan Railway Company. French retailer, Fnac, offers pick-up of online purchases at automated lockers Fnac is the leading French retailer of cultural, leisure, and electronic products to the general public. It sells its products across its network of over 200 stores and online, Fnac being the third largest e-commerce site in France. Since January 2017, Fnac provides its customers with the option to pick up online shopping purchases from automated lockers located at the entrance to its stores as early as the following day from ordering. One of the features of Fnac s chosen solution is the sharing of the parcel lockers, allowing customers to also pick up purchases from other brands delivered by Relais Colis. This is further increasing footfall and potential buyers to its stores. 24

25 Mason Companies selects CVP-500 to optimize parcels 500 parcels per hour packed by the CVP-500 American e-commerce operator Mason Companies sells a wide range of consumer goods. Already a Neopost customer, it sends out between 10,000 and 50,000 orders a day using Neopost s ProShip multi-carrier shipping software. Won over by CVP-500 s potential to take warehouse operating efficiency to the next level and improve customer service, Mason Companies placed an order for the packing system. It aims to have the system up and running at full capacity for its peak period in summer CVP-500, a novel automated packing system Neopost Shipping innovation capabilities are also used to design parcel optimization solutions. Its CVP-500 continuous packing system customizes the parcels to the three-dimensional shape and volume of their content, avoiding the need to use filling material and reducing parcel bulk by as much as 50% compared with standard packages. It has received numerous awards for its positive impact on the environment. Following the commissioning of the first machines in various European countries, Neopost started to target the American market to take advantage of the carriers favorable pricing structure based on parcels volume. The CVP-500 therefore offers customers the opportunity to optimize transport costs. 25

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27 SME SOLUTIONS GUIDE SMEs THROUGH THEIR DIGITAL TRANSITION Simplicity Efficiency Competitiveness Cost management 27

28 SME SOLUTIONS Mail equipment and software Guiding its legacy customers, helping them to optimize the processing of their communications, while also to handle the increase in the parcels business, Neopost provides them with a range of simple and effective solutions - combining equipment and software. While physical mail volumes continue to decline, sending out items by post remains time-consuming and franking is still a significant cost for a lot of companies. With its extensive range of digital and connected mailing systems and folder inserter systems, Neopost has simple and efficient mail solutions for the smallest to the largest organizations across all industries, suitable for all volumes and content types, from transactional to marketing. Neopost also provides a suite of related services, including equipment leasing and, in some countries, postage financing. From desktop machines to mailroom equipment For very low volumes, Neopost has compact and easy-to-use desktop machines. Systems to handle large volumes are more sophisticated. They are designed to automate mail flow production from insertion of content into envelopes, weighing, calculating postage to franking. Processing costs are optimized, manual tasks are minimized, franking is calculated accurately, and shippers can generally take advantage of preferential postal rates. 28

29 20+ countries in which Neopost operates directly through the SME Solutions division s commercial network Castelan Group modernizes its document management and franking systems Castelan Group specializes in household equipment warranties. It is a long-standing customer of Neopost in the United Kingdom. As part of its equipment renewal it decided to beef up its document management system and expand it to include incoming mail. The comprehensive solution it opted for comprises a smart IS-6000 franking machine, a DS-90 folder inserter with OMS-500 for document management and a Data Capture Solution to digitize the content of incoming mail. SME Solutions supply chain organization Neopost has assembly centers in France (Le Lude) for high-end mailing systems, in the UK (Loughton) for high-end folder inserter systems, and in the Netherlands (Drachten) for mid-range folder inserter systems. A team based in Hong Kong manages subcontractors that assemble entrylevel machines in Asia. Its center in Memphis (United States) is dedicated to customizing products for the North American market. 29

30 SME SOLUTIONS Paperless systems and hybrid mail Electronic invoicing is increasingly common, driven by regulatory changes. Electronic invoicing requires integrated systems that provide traceability, security, legal archiving and electronic signature functions. Drawing on its experience in the development of solutions approved and certified by the relevant authorities, Neopost now provides SMEs with SaaS/Cloud electronic mail solutions. Neotouch is Neopost s solution for dematerialization. Available in the Cloud, the application manages the dispatch of documents by mail, or SMS. There is also a certified electronic signature function as well as an archiving function. Already available in France, the application will be launched in the United States and the United Kingdom in It is also intended to launch the solution in other countries. Data Capture Solutions (DCS) in the UK offers a comprehensive range of software and services enabling customers to have a truly digital mailroom, which can digitally capture documents, automate the processing of information and document flows and manage the electronic storage. DJO France goes paperless with Neotouch Neotouch s user-friendly interface and wealth of functions won over DJO France, the local branch of DJO Global, a world leader in orthopedics and sports medicine. It selected Neopost to outsource and digitize its customer invoicing. The Neotouch solution was rolled out in less than a month. DJO France s target was to send out 50% of its 32,000 monthly invoices electronically in the first year. Three months on from deployment, it was at 75%. DJO France is currently looking into installing the Neotouch solution in the marketing department for carrying out mail campaigns. In the medium term, it also aims to optimize and automate invoice processing for its suppliers using the Neotouch solution. 30

31 3 QUESTIONS FOR DENNIS LESTRANGE COO SME Solutions What role does mail play in managing a company? Increasingly digital, mail is essential to business life. It is used to communicate with customers, prospects, suppliers and administrative authorities. Interactions are many, varied and complex: sending, receiving, connecting, invoicing, canvassing, targeting, informing, digitizing, storing, etc. How do you fulfill the needs of your longstanding customers? Our long-standing customers are mainly SMEs and we provide them with franking and folder inserter systems. They are not experts in digital communication. We know our customers well and are best placed to offer them the right solutions to manage the transition from paper to digital. How do you switch from equipment sales to the world of software? We introduced an in-house program called Transform & Grow to manage and accelerate this process of change, since the SME Solutions division plays a pivotal role in Neopost s transformation. Above and beyond the value of the new solutions we offer, the key to success lies in our teams ability to make these products and services both simple and appealing. 37 million pages processed by the Neotouch hybrid mail solution in 2016 versus 22 million in

32 SME SOLUTIONS Expert technologies for SMEs In addition to mail processing systems, Neopost brings SMEs solutions that are easy to implement and affordable. This is the case, for example, of OMS-500 software, which is designed for small businesses to manage their customer communications. Leveraging its know-how in parcel tracking and management, Neopost is also expanding its range in this area to take advantage of Cloud hosting. The model means that businesses no longer have to pay license and installation fees for new software. To optimize parcel dispatch costs, a shipping platform accesses real-time information on the delivery services available, up-to-date rates, functions to select and confirm recipients addresses and print certified address labels, as well as a set of track and trace tools (track transactions, check delivery status, monitor costs, etc.). In North America, franking machines also include an option to use postal operators franking and shipping services for parcels. Customer communications management at SMEs Built on GMC Software s expert technology, the OMS-500 software is tailored to the needs of SMEs. It enables creation of physical and digital communications, taking into account the preferences of each customer. It then sends the right mail to the right person at the right time via the right distribution channel, whether physical mail, or another channel. 32

33 Neopost helps SMEs take full advantage of digital technologies, without the need to invest in cumbersome and costly information systems. In this respect, we have developed a range of apps offered in SaaS mode that are easy to implement, to use and update. Simplifying the digital transition Neopost helps SMEs to tackle the challenge of integrating digital in their practices to improve the efficiency and productivity of mail, document management systems, and preparation and tracking of parcels. These solutions are hosted on and accessible from MyNeopost, a dedicated platform allowing companies to manage their account, view information and subscribe to other Neopost apps at any time, from any device. The platform is already up and running in the UK and the United States. Nikolaus Scholz Chief Strategy & Digital Officer Vitamix selects Neopost for mail and parcels A Neopost customer in the United States, Vitamix sells high-end kitchen appliances to private and professional clients. When it decided to renew its franking machines, Vitamix extended its specifications to a solution that would also reduce its parcel shipping costs. The Neoship solution offered a convincing set of functions: address confirmation, traceability, allocation of expenditure by department and, above all, generating and printing barcode labels that comply with the standards of US postal operator USPS. As a result, Vitamix has been able to reduce its shipping costs by up to 50% thanks to access to USPS preferential rates. 33

34 ACTING RESPONSIBLY IN LINE WITH THE GROUP S VALUES

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36 A RESPONSIBLE GROUP Sustainable development policy Keenly aware of its impact on the environment, Neopost is actively committed to its corporate social responsibility policy, in place for over ten years. At first, this policy primarily focused on environmental and social issues. In 2016, Neopost revamped its Group values in conjunction with its transformation. It also drew up the best practices it intends to promote among personnel and external stakeholders alike, and extended their reach to ethics and procurement. Focus on customers A dedicated unit The company s Corporate Social Responsibility (CSR) policy is managed by a dedicated unit, headed up by the Chief Technology & Innovation Officer, who is a member of the senior management team. The unit consists of the Health, Safety and Environment managers from all Group entities, the Chief People & Transformation Officer, and the Financial & External Communications Director. The mission of the CSR unit is to promote the integration of CSR issues in every aspect of the Group s operations and to provide coordination between its various activities. Promote innovation 36

37 Neopost values reaffirmed In an ever-changing world where Neopost is adapting its offering and organization, we have redefined our core values and related behaviors. The new reference framework is the product of an international collaborative process between the divisions. Central to our transformation, these values are currently being rolled out in the Group to shape our team culture and foster employee engagement. Foster teamwork The Neopost Code of Conduct was drawn up jointly by our divisions based on these values. Scheduled for publication in 2017, it sets out the guiding principles of our business conduct and provides the framework for our social, ethical and environmental practices. Gilles Wozelka Chief People & Transformation Officer Drive to succeed 37

38 A RESPONSIBLE GROUP Committed teams Employee involvement, diversity of talent, upskilling to meet the requirements of new activities, and the onboarding of teams joining Neopost through acquisitions are central to the responsible approach of the Group. A global employer, Neopost continues to build on initiatives to boost employee engagement, provide training, identify and manage talent, improve working conditions, and raise awareness of expected behavior with stakeholders. A number of charters or collective agreements on diversity, equal opportunity and disability have also been signed. The Group maintains and fosters regular dialog with its employees and staff representatives. In accordance with Neopost ethical principles, each Group company is responsible for establishing communication with staff and assuring the conditions for constructive dialog, above and beyond their legal obligations. Neopost s values are also reflected in various community initiatives in the Group s host countries around the world. All entities are encouraged to play an active role with charitable organizations in their community. Employees 6,000+ employees worldwide 32% of women 68% of men Workforce by division Headquarters and central functions 1% Neopost Shipping 6% Enterprise Digital Solutions 16% SME Solutions 61% SME Solutions Supply Chain 16% 38

39 Employee engagement survey: a key tool for dialog For the past ten years Neopost has conducted every two years a global employee engagement survey among all staff. The survey aims to assess the level of involvement within the company and measure the engagement rate. It also identifies motivation factors and opportunities for organizational improvements. Participation was very high in the 2016 survey, with 89% of employees taking part (versus 70% in 2006). Despite the major changes in the Group s organization and businesses in the past few years, the engagement rate has remained at the same level as in The entities have received the results and started preparing action programs to directly address the expectations and needs of their employees The Group has decided that it will intensify the employee engagement survey process and therefore conduct from now on monthly surveys in a new format, a pace that is best suited to the transformation Neopost is going through. Make a wish The 2016 employee engagement survey also included a charitable component: for each questionnaire completed, 1 euro was donated to Make a wish, the international organization working to grant the wishes of children with life-threatening medical conditions or disabilities. Workforce by region Workforce by age bracket Training Asia Pacific 5 % Under 25 years 25 to 35 years 3% 23% 74% of employees attended at least one training session in 2016 North America 31 % 64 % Europe 36 to 45 years 46 to 55 years 56 years and over 29% 30% 15% 26 training hours per employee in 2016 (on average) 39

40 A RESPONSIBLE GROUP Proactive environmental protection policy For ten years or more, Neopost has been committed to stepping up its actions to protect and preserve natural resources. Introduced in 2004, the policy was focused initially on the environmental impact of Neopost products and industrial activities. All Group sites and several distribution subsidiaries are certified ISO 9001, ISO and OHSAS Regulatory rules requiring the collection for recycling of some franking machine components were anticipated by the Group and turned into a competitive plus. Neopost built these new requirements into its green design policy, which dates back to 2006, and is an integral part of the Group strategy. Lastly, as part of its remanufacturing activity, Neopost organizes the return of products when contracts expire and optimizes the use of recovered parts. 99% of industrial waste routed to recycling and recovery facilities in ,851 remanufactured machines in 2016 from equipment returned at the end of the contract -2.5% reduction in direct greenhouse gas emissions in 2016 from

41 Waste End of life Reusable components Production Remanufactering Raw materials + energy ISO Group companies, including all industrial sites, are ISO certified Waste The equipment life cycle Waste Use Distribution Maintenance + energy Energy All Neopost franking machines meet the specifications of the American Energy Star label Holistic vision of the products environmental efficiency Neopost s approach consists of taking account of the environmental impact of a product from end to end of its life cycle, from design through to end-oflife dismantling. Green design defines the technical specifications for production, for equipment in use and for the recycling of equipment. The green design policy also determines the choice of materials, the number of components used, the ratio between product size and packaging, noise emissions, and energy consumption. 41

42 A RESPONSIBLE GROUP Responsible production and procurement Neopost introduced its remanufacturing concept in 2012 for entry-level and mid-range machines. The remanufacturing process involves reconditioning machines using a combination of parts and components from machines recovered at the end of the lease or rental contract, or machines exchanged as part of the standard exchange policy. Nonetheless, some products or components are replaced systematically to guarantee the same level of quality and efficiency, and to offer customers the appearance of a new machine. Remanufacturing is also a means for Neopost to maintain activities and employment at its production site in France, with twenty direct jobs and six indirect jobs maintained at the Le Lude site as a result since % reduction in the environmental footprint of a remanufactured product, compared with a new machine October 2016 June 2016 Confirmation that Neopost s share is part of the Ethibel EXCELLENCE Investment Register Neopost ranked first in the Gaïa index, an EthiFinance affiliate specializing in the extrafinancial rating of listed French and European small and mid caps October 2016 B rating by the Carbon Disclosure Project November 2016 CVP-500 wins the Sustainable Innovation Logistics Strategies Award in the Eco-solutions category and the Pack Experts Innovation Award 42

43 Neopost has been engaged in a proactive corporate social responsibility policy for more than ten years. Evaluations by third parties, extra-financial rating agencies, or specialist bodies such as the Carbon Disclosure Project, also contribute to enrich our approach. One year on from inclusion in the Gaïa Index, which evaluates the environmental, social and governance practices of French companies, Neopost was ranked top of the 2016 index. The award recognizes all our actions in this area, including the certification of our industrial sites and some distribution subsidiaries, green design and remanufacturing of products, and labor relations initiatives, such as employee engagement surveys, the focus on improving working conditions, and the charters and collective agreements signed. Thierry Le Jaoudour Chief Technology & Innovation Officer Sustainable development in procurement Neopost is extending the sustainable development approach to its procurement policy. To be selected by the Group, major suppliers must be in a position to describe their environmental policy. ISO certification and annual environmental reporting are required for OEM (original equipment manufacturer) suppliers. To give even more visibility to its commitments to CSR in its procurement policy, the Group is also working on developing a Code of conduct for suppliers and subcontractors that will ensure compliance with very precise rules across its supply chain. December 2016 Green Supply Chain Award for the CVP-500 for significantly reducing shipping volumes 43

44 SHARING A VISION, IMPLEMENTING THE STRATEGY

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46 GOVERNANCE A strengthened governance With a majority of independent members, the Neopost Board examines and approves the strategic directions taken by the Group and ensures that they are implemented. Many matters are regularly put to the Board and it is directly involved in all major policy decisions, such as new projects, investments and acquisitions. Diversity of expertise among the directors combined with the international scope of their careers enriches the exercise of the Group s governance. In the year ended January 31, 2017, the Board of directors met nine times with an attendance rate of 89%. Neopost continued to strive towards better corporate governance practices in An outside firm conducted a formal evaluation of the Board and a lead director was appointed (see opposite). It was also decided to restrict to four the number of successive three-year terms of office for independent directors. The proposed appointment of a fourth female director to replace an outgoing director who is not renewing his term of office, will be put to the Shareholders meeting on June 30, The change will bring the composition of the Board into compliance with the French Copé-Zimmermann law. COMPOSITION OF THE BOARD AT JANUARY 31, 2017 Denis THIERY Chairman & Chief Executive Officer Chief Financial Officer, Chief Executive Officer, then Chairman & Chief Executive Officer of Neopost since 2010 Vincent MERCIER* Lead director Former Chairman of the Supervisory Board of strategy consulting firm Roland Berger Éric COURTEILLE* Chief Executive Officer of La Redoute Virginie FAUVEL* Member of the Executive Committee of Allianz France, responsible for digital and market management Cornelius GEBER Former Chairman of the Board of Kuehne + Nagel 46

47 The Board of Directors is supported in its work by three specialist committees. Appointment of a lead director The Neopost Board decided to appoint a lead director to comply with best practice and give additional guarantees to the existence of a well-balanced and controlled governance. Vincent Mercier was appointed lead director on March 29, His role is to ensure the effective operation of governance bodies and avoid conflicts of interest, as well as ensuring that shareholder concerns are adequately taken into account in corporate governance. Audit committee Eric Courteille, Chair Catherine Pourre, Isabelle Simon Three independent members (100%) Three meetings during fiscal 2016 Average attendance rate: 100% Remuneration committee Catherine Pourre, Chair Vincent Mercier, Jean-Paul Villot Two independent members (67%) Four meetings during fiscal 2016 Average attendance rate: 88% Appointments committee Vincent Mercier, Chair Virginie Fauvel, Cornelius Geber, Jean-Paul Villot Two independent members (50%) Three meetings during fiscal 2016 Average attendance rate: 92% William HOOVER Jr.* Former senior partner in McKinsey Catherine POURRE* Former Management Board member of Unibail-Rodamco Richard TROKSA* Consultant, former Vice-President of Hewlett-Packard Enterprise Software Jean-Paul VILLOT Former Chairman & Chief Executive Officer of Neopost Isabelle SIMON* 1 General Secretary and a member of the Executive Committee of Thales * Independent director, in accordance with the independence criteria set out in the French Afep-Medef code. 1 Following the resignation of Isabelle SIMON, the Board decided to coopt Hélène BOULET-SUPAU as an independent director on 27 March

48 GOVERNANCE A tight-knit management team Gilles WOZELKA People & Transformation Henri DURA Enterprise Digital Solutions Nikolaus SCHOLZ Strategy & Digital Thierry LE JAOUDOUR Technology & Innovation 48

49 Denis THIERY Chairman & Chief Executive Officer Daniel MALOUF Neopost Shipping Jean-François LABADIE Finance & Legal Dennis LESTRANGE SME Solutions The senior management team around Denis Thiery, Chairman & CEO, includes managers from each of the three divisions and from the four main support functions. This is a small close-knit management team with extensive international experience. Its members are united in their determination to successfully transform the Group against a complex background, from the steady decline in traditional mail to the emergence of opportunities generated by the dematerialization of exchanges and the robust growth in parcel volumes. 49

50 STRATEGY AND PERFORMANCE On course for a successful transformation Neopost introduced a transformation plan in 2012 to benefit from opportunities arising from the dematerialization of exchanges and the increase in parcels volumes. The main thrust of the strategy is to strengthen Neopost digital communications offering, stand out as a partner of choice for solutions that facilitate parcel processing, and help SMEs to shift their communication and information flow to digital. This strategy has started to gradually reduce Neopost s dependence on declining physical mail flows. To succeed in its transformation, the Group has built a portfolio of digital communications and logistics solutions for large corporations. In parallel, Neopost also offers simplified and tailored versions of some of these solutions to the hundreds of thousands of companies SMEs for the most part that make up its traditional customer base. In all, these new businesses, whether solutions marketed directly to large companies or to SMEs, accounted for 26% of Group revenue in 2016, up from only 8% five years earlier. Share of new activities in Neopost total sales 8% 13% 17% 20% 23% 26%

51 Three strategic priorities Strengthen Enterprise Digital Solutions leadership Neopost can build on the recognized technological advances of its customer communications management solutions and its expertise in data quality to extend its commercial successes to new major account customers in financial services, insurance, utilities, and healthcare. In 2016, the Enterprise Digital Solutions division reported sales of 137 million euros. 35% Position Neopost Shipping as the preferred partner for logistics chain operators A long-standing partner of carriers, postal operators, and logistics firms, the Neopost Shipping division has expanded its offering from its initial traceability services. Truly global, its offering now covers the entire parcel processing value chain: shipping management, packing systems to optimize parcel volumes, integrated solutions for e-commerce platforms, and automated lockers for parcel pick-up and return. In 2016, the Neopost Shipping division reported sales of 53 million euros. Addressing the needs of SMEs digital transition with SME Solutions In addition to mail management systems, Neopost brings SMEs simple and accessible solutions to address the challenge of integrating digital technology in their communication and information flows. Neopost draws on its customer base, distribution network, and on the technologies developed by its two specialist divisions. In 2016, the SME Solutions division reported sales of 991 million euros, of which 13% related to new activities. medium-term target The increasing proportion of digital communications and logistics solutions in Neopost revenues is the real marker of the success of its transformation. The point at which these new businesses represent 35% of total revenue will be a significant milestone. When this point is reached, the strong momentum generated by digital and logistics businesses should offset the structural decline in the legacy activities in physical mail and return Neopost to organic growth. 51

52 STRATEGY AND PERFORMANCE Performance in line with strategic objectives Digital Communications and Logistics generated a compound annual growth rate of 22% in the period from 2012 to In 2016, they account for 26% of Group sales from 8% five years earlier. This change in Neopost s profile has had a slightly dilutive impact on current operating margin 1, since the new businesses have yet to deliver their full profitability potential. Nonetheless, Neopost remains very profitable with a current operating margin 1 of 18.6% in The Group is committed to maintaining this margin at 18% or higher throughout the period of transformation, with a target of more than 20% in the medium term. To achieve this goal, the Group has implemented cost savings plans and restructured the organization of its SME Solutions division in line with its business mix, with a goal of reducing annual operating costs by at least 50 million euros in 2018 compared to Savings in 2016 already totaled 36 million euros. Current EBIT margin Mid-term ambition +22% Enterprise Digital Solutions Neopost Shipping 15.6% 8.8% 2 20% 15% new activities compound annual growth rate SME Solutions Neopost group 21.6% 18.6% 22% > 20% 1 Current operating income before acquisition-related expense / Total sales. 2 Excluding Temando. 52

53 Healthy, tightly managed financial position During the transformation phase, one of Neopost s objectives was to maintain net operating cash flow generation as high as possible to finance growth investments, without compromising the Group s ability to make acquisitions and pay out a dividend of 1.70 euro per share. In 2016, innovation-related expenditure reached a record high. It covers expenses to develop the web platform and related SaaS applications specifically for small businesses, the development of the CVP-500 automated packing solution, and the operating losses posted by the Temando subsidiary. Yet the Group posted strong growth in net operating cash flow generation, after capital expenditure, reflecting tight control over cash. Neopost enjoys extremely sound financials. On the back of strong operating cash flow generation in 2016, our net debt was down by more than 50 million euros and continues to be fully backed by our leasing portfolio. Our net debt to equity ratio improved from 76% to 67%, while our net debt to Ebitda ratio was steady at 2.6. Investor confidence in the success of Neopost s transformation and in our credit quality meant we successfully completed a 215 million euro private placement in February 2017, under particularly favorable conditions. Jean-François Labadie Chief Financial & Legal Officer Net operating cash flow generation after capital expenditure 64 million 147 million

54 STRATEGY AND PERFORMANCE Share price rebound Neopost s transformation strategy was welcomed by the financial markets, but the Group s share price suffered in 2014/2015, driven down by the steeper than expected fall in mail revenues and the necessary adjustment to the dividend policy. The early signs of success of Neopost s transformation however start to be visible: 2016 fourth quarter sales returned to organic growth, while the operating margin of the SME Solutions division was stable. These first signs are promising but have yet to be confirmed in the coming quarters net income per share Since the end of 2015, the Neopost share price more than doubled from its lowest level. At 1.70 per share, the dividend remains attractive for investors as it offers a return of 4-5%. Nonetheless, with a dividend payout rate of a little over 50% of net income, Neopost still has sufficient flexibility for investments dividend per share in respect of 2016 Share Price as at 30 April 2017 Neopost (share price, in ) SBF 120 index (rebased) March 2016 June 2016 September 2016 December 2016 March

55 Transparency, education and dialog are the guiding principles underlying our financial communication policy. At a time when the Group is radically transforming its business model and developing new business activities to return the company to growth, it is crucial that we maintain open, active and constructive dialog with the financial markets. Accordingly, we are greatly increasing our contacts with financial analysts, shareholders, and with the financial institutions that hold our debt. We are constantly striving to expand our shareholder base by meeting new investors. In this spirit, we held almost 350 meetings with the financial community in Gaële Le Men Financial & External Communications Director 2017 financial communications schedule Closing of 2016 accounts 31 January 2017 Ex-date for the 2016 interim dividend 3 February 2017 Payment of the 2016 interim dividend ( 0.80 per share) 7 February full year results and fourth quarter sales 28 March 2017 Information meeting 29 March first quarter sales 1 June 2017* Annual General Meeting 30 June 2017 Ex-date for the balance of the 2016 dividend 4 August 2017 Payment of the balance of the 2016 dividend 8 August half-year results and second quarter sales 26 September 2017* Information meeting 27 September third quarter sales 4 December 2017* Closing of 2017 accounts 31 January full year results and fourth quarter sales End-March 2018 * Published after closing of the Euronext Paris Premier Marché. Shareholding structure as at 31 January 2017 Institutional investors Individual shareholders Directors, management and employees Treasury shares 87.7% 10.0% 2.0% 0.3% Readers are invited to refer to the 2016 registration document which is available at: 55