Good evening, everyone. Welcome to Quadient's first half 2026 results presentation. I'm Laura Paxton, Quadient's Head of Investor Relations. Today's presentation will be hosted by Geoffrey Godet, our CEO, and Laurent du Passage, our CFO. The agenda for today's call is on slide three. As usual, there will be an opportunity to ask questions at the end of the presentation. You can either submit your questions in writing through the web or ask questions live by dialing into the conference call. Thank you very much. With that, over to you, Geoffrey.
Thank you, Laura. Good evening, everyone. Let me remind you, to get started, of the strategic direction that we set at the beginning of the financial year, since everything else follows on from it. The pivot to digital is not new for Quadient, as you know. We've been preparing it for years. Demand for digital automated business and financial communication keeps building up. Artificial intelligence is accelerating it. The digitalization of financial workflows is also accelerating. So are the invoicing mandate coming across Europe. We set a clear objective. Digital becomes Quadient's largest and most profitable solution by 2030. This is where the growth is. This is where our capital and our focus belong. We reinforced the Executive Committee with four digital business leaders at the beginning of the year, and I personally took over direct leadership of the Digital business.
Additionally, this year, on 20th of July , we announced that we were conducting a strategic review of our Lockers business. This review, I'm happy to report that it is now complete, and I will take you through the outcome on the next slide. First of all, let's look at what the locker team has built. Moving back to 2018, Lockers was small, we would say, around 2,000 lockers and around EUR 6 million in revenue. Then quickly after that, as we set our strategy, we acquired Parcel Pending, a U.S.-based company in 2019. From there, progressively, we expanded across the U.S., Canada, Japan, the U.K., and France. We also made another acquisition called Package Concierge, another U.S.-based company, to consolidate the U.S. market in 2024. In 2025, as a summary, the business delivered EUR 114 million of revenue.
Just as a quick reminder, this represented a 22.4% growth versus 2024 on a reported basis, and represented also 11% of Quadient revenue. The EBITDA margin was 5% last year, which was up 4.4 points, after already passing the break-even point in 2024. If I was to summarize, in seven years, we multiplied 19x the revenue and around 14x install base of location of lockers worldwide. We could say that we have today a mature asset, profitable and at scale. The number one position in the U.S. and in Japan, and a U.K. network that scale actually very fast in the last three years. We could say that this business has delivered on its promise. Just take the opportunity to thank, obviously, all our partners and our customers, and most importantly, the Quadient Lockers team that built up this business for us.
This is the context in which we ran the strategic review this summer. The time is right to consider what is next for Lockers. Let's look at the outcome. Going to slide six. In conclusion, I think the review produced two major outcomes, and you can see them on the left. The first, following a competitive process, we have signed an agreement to sell our U.K. operation, our open network, to a company called IDS for EUR 65 million. The second outcome is that we also have launched the sale process for the rest of our locker business. As a result, the locker solution is now presented in accordance with the accounting rule called IFRS 5 in this presentation and in our first half financial statement. Consequently, 2025 figures have been restated on the same basis. Laurent will take you through all those changes and their impacts.
Let's start with the sale of the U.K. open network to IDS, which, as a reminder, is the owner of Royal Mail and also importantly is an affiliate of a company called VESA Equity Investment, which is a shareholder of Quadient. Let me come back to the price. The price is EUR 65 million. I would highlight a few key points. The U.K. was the least mature of our three key geographies with an expected 2026 revenue, a little bit more than EUR 10 million. It was doubling. We had a fast growth. We were doubling in size versus 2025 as we were in the ramp-up period of getting more and more usage. Given this early stage of development, because our locker investments are usually on a 10-year cycle, so it's the first three years, it was naturally the most capital-consuming of our open network bases.
Getting that price on that stage, on that maturity of the development provide us with a very strong return. The agreement, I want to stress this, came out of a competitive process that was run, obviously, with the advisors that we mentioned to you at the beginning of July. We had a chance to consider multiple offers that we have received. Naturally, after reviewing them, the Board of Quadient concluded that this offer delivered the best value for the U.K. network and was in our corporate interest and its stakeholders, all our shareholders, and therefore approved the transaction unanimously yesterday. We expect this transaction, after the signing yesterday, to close before the end of 2026, hopefully even sooner. Let's move to the next point that I want to talk to you about the consequence on leverage for Quadient.
We expect the proceeds to take our leverage ratio target, which exclude leasing from 1.5x , which was our previous guidance, to 1.2x . Let me be precise on this one. These improvements come from the U.K. transactions alone. It assumes nothing about the rest of the process and nothing about the CapEx, which is my next point. If I step back a little bit on our capital expenditure at the Quadient level, to be clear, we focus on the locker business as a whole. Even though the U.K. represented a large portion of the CapEx of the Lockers, it more or less now will remove around EUR 120 million of Lockers CapEx over the next five years. EUR 120 million that are no longer required, and it's a capital that we can now redirect to new priorities and focus.
My next point is that we expect, obviously, additional proceeds from the sale of the rest of the locker business, and this is in addition to the proceeds from the U.K. This includes, obviously, for the rest of the locker, a Japanese base and a North American operation, to cover what we have. These are our largest and much more profitable locker networks. They hold a leading position, the number one position in their respective markets. We are currently engaging with potential buyers. Like we are doing right now in the U.K., we will update the market in due course as we make progress. Put all of this together, and we have what we could say now, a strategic and financial flexibility that we simply did not have six months ago. Let me now hand it over to Laurent for the first half financials. Laurent.
Thank you, Geoffrey. Good evening. Before going into the numbers, a word on presentation. Just following the strategic review, as mentioned by Geoffrey, the Lockers business is reported in accordance to IFRS 5 in our half year financial statement. The European private locker network, which we are retaining as they are largely managed through Mail employees, has been reclassified within the Mail segment. All 2025 comparatives shown today have been restated on the same basis, except if explicitly mentioned, so that the figures you see are fully comparable. This reclassification strongly benefits to our EBITDA and EBIT at group level, as Lockers are dilutive to the Quadient margin. It brings about 130 basis points on EBITDA and about 230 basis points on current EBIT margin. On the revenue side, as you can see on the slide, the transition post IFRS 5 is very straightforward.
Digital scope remains unchanged, and Mail sees about EUR 3 million of revenue for the private locker network being added into H1 2026. On that basis, Quadient delivered EUR 448 million of revenue in the first half of 2026, representing a 2% organic decline compared to the same period last year. Digital confirmed its growth momentum at 6.7% organically at EUR 146 million, while Mail was down 5.7% at EUR 302 million. From a geographic perspective, North America, our largest region, was essentially flat at EUR 254 million. Many European countries were down by 4.4% at EUR 165 million with, as usual, we will see that further later, a stronger Mail underlying decline in the geography. International is down by 4.9% at EUR 29 million, mostly driven by Mail. Turning now to profitability. As just mentioned, total EBITDA margin is improved post IFRS 5 due to the dilutive EBITDA from Lockers.
EBITDA at Digital and Mail level are impacted by some lockers transit cost and dyssynergies reallocated to both solutions and impacting EBITDA margin by about 0.6 points. On top of which you have a small dilutive private network impact on the Mail side for 0.5 points. Group EBITDA margin stands at 21.5%. It is down 0.8 points compared to last year, mostly due to the erosion on Mail side and unfavorable mix effect. Digital margin was stable at 14.5% despite the implementation costs linked to the French e-i nvoicing go-l ive, and of course, the Forex. Current EBIT for the period came in at EUR 57 million, a 5.9% organic decline due to Mail. Let us now turn to the revenue bridge on slide nine. Starting on the left is EUR 465 million restated revenue for last year, H1.
This bridge shows the continued rebalancing of our portfolio. Digital contributed EUR 9 million of additional revenue, partially offsetting the EUR 19 million of organic decline in Mail. The scope effect added EUR 2 million from the acquisitions of both Serensia in June last year and CDP Communications on December 25. On the right-hand side, currency had a EUR 10 million negative impact, and it is all coming from Q1, meaning on Q2, no currency impact on the bridge. All-in reported revenue decline of 3.7% and by 2% on an organic basis. Moving now to the current EBIT bridge on slide 10. From the EUR 64 million we stated current EBIT last year, Digital EBITDA growth of EUR 3 million, partly offsets the EUR 6 million decline in Mail EBITDA, and you have an additional EUR 1 million of organic increase in depreciation and amortization, notably tied to Digital R&D.
Currency accounted for EUR 3 million of negative impact on the current EBIT, while the scope effect was relatively neutral at the EBITDA level. As a result, current EBIT for the first half stands at EUR 57 million, down 5.9% on an organic basis. Let us now move into the details of the performance by solution and starting with Digital. On slide 12, before reviewing specifically the half year, let me put our Digital performance into a longer-term perspective and note that these figures are prior to the application IFRS 5, that are due to the recurring business for the sake of the consistency of these figures across the long time period.
On the bottom left chart, our annual recurring revenue has grown from EUR 109 million in 2019 to EUR 264 million at the end of July 2026, a compound annual growth rate of about 15% per annum with a remarkably regular improvement over the period. The chart on the bottom right now shows the same story on quarterly revenue, with subscription-related revenue growing at 16% compound annual growth rate since 2020. A logical similar trend compared to the ARR, and now represents 87% of Digital revenue at the end of H1 2026. At the top left side, you can see the profitability trajectory with EBITDA rising from around EUR 20 million over a 12-month period at the beginning of the chart and to more than EUR 50 million if you take both H2 last year and H1 this year for the past 12 months. Over to you now, Geoffrey, on slide 13.
Thank you, Laurent. I mentioned at the beginning of the call that our focus is on our Digital solution. I think we could say that we have built a comprehensive and differentiated B2B platform centered around business and financial communication. We are bringing it all together in one connected experience, customer communication management, invoicing, account payable, account receivable, payment, and cash visibility. Once a customer is on the platform, every module, every product offers an opportunity for upsell, making our solution stickier for the customer. Compliance with the regulatory or financial is the entry point. It is not the destination. Every change in the regulations offers new opportunities to us. The invoicing mandate in Europe is a case in point. This is a clear regulatory catalyst that offers significant growth opportunities for Digital solutions. Take the example of France. It just went live with its invoicing mandate on September 1st.
Germany follows in 2027, the U.K. 2029, and the broader European framework in 2030. Every one and each one of those deadlines extends our addressable base market by market over several years. This is not a single event in one country. It is a sequence for which we have been preparing for, in which we reinforce the synergies between our Mail and Digital activities. Our Mail solution brings a large installed base of business customers who will have to digitalize their financial processes. What goes through a franking machine and folders inserters are mainly invoices, which will have to find the delivery electronically in the future. We are therefore ideally positioned to support our Mail customers into their digital transformation. Moving on to the next slide, let me give you the facts on invoicing in France, where the go- live happened on September 1st, so barely three weeks ago.
Since that day, every business must be able to receive electronic invoices. Large and midsize companies must issue them. The issuance obligation extends to SME in September 2027, which is a year from now. End of 2028 will be the first full year of the widened scope. Now, where do we stand? As of September 21st, just a few days ago, more than 950,000 entities were registered with Serensia by Quadient. 950,000, so we are a little bit short of 1 million entities. That also includes entities registered with our partners. Because as a reminder, we go to market directly and through white label. For a business we acquired 15 months ago, this is a strong commercial success as we currently are one of the largest platform in term of registered entities.
Now, there are two different categorization based on SIREN or on SIRET numbers of companies or entities. Slightly less than 50% of the companies and entities in France have registered with an invoicing platform to date. For the one that have registered with the companies or entities, we can estimate that we currently have between 13%-19% market share. A market share that is now much bigger than we have ever anticipated. Contracted annual invoices now stand at around 350 million. This is to be compared to a total nationwide number of invoices that we estimate from the French government between 2 billion-2.5 billion of B2B invoices exchanged annually. We have a commercial momentum that is very strong. E- invoicing booking in France grew elevenfold year-on-year in the second quarter. Let me just repeat this. E-invoicing booking in France grew elevenfold.
This includes a multi-million euro white- label agreement. Now, let us go on actual volumes. I want to be measured. We processed in the last few weeks, in the last three weeks, only 700,000 invoices. We expect the ramp-up to remain slow and probably slow until the end of the year, as there are only a few platforms fully operational in France, limiting the digital exchange of invoices. Somebody registered with us, they would like to send an invoice to a company that is not yet registered, but the exchange cannot happen digitally still. We need the entire market to be able to come together. There will be an exponential acceleration progressively, but we are still in a slow ramp-up phase. Market is just in its first few weeks. Many receiving platforms are still coming online.
A lot of the different platforms that had obtained their registration are not live yet, and they will likely come in the next few months. Adoption will take time. What matters at this stage is the following: we are certified, we are live, we are fully operational, and I would add that we are part of a limited number of fully functioning platforms. We are operating without any incidents, and we have secured an already significant number of customers, so the volume will continue to follow. On monetization, the model is a subscription structured by deal type plus the monetization of the usage, number of transactions of invoices. If I focus on our direct go- to- market, where we sell directly to companies, we offer a subscription fee plus an invoice volume commitment.
If I now focus on our white label customers, we offer them a subscription covering a committed volume that will be guaranteed revenue for us. In both cases, invoices above the commitment will be billed per invoice. Invoicing is way more than just processing invoices. For us, it's a fantastic upsell opportunity within our Digital platform. Let me explain to you why by turning to the next slide. The invoicing mandate brings customers to us in France, but also in other European countries as we build a proven track record of delivery and reliability. The opportunities around this initial invoicing service are what drives customers' retention in the long term and what helps grow our relationship with them. On our Digital platform, e-invoicing is embedded with account payable automation. The customer gets approval and purchase order matching. He's got an ERP-integrated workflows.
He's got payment control and compliance with EU reporting. They move from being just compliant to actually improve how they work. The benefits are tangible. Our published figure shows 5x average return on investment on those solutions. Invoice processing time cut by half, approvals 56% faster. From there, we connect account payable with accounts receivable, and that gives a real-time view for a CFO of both sides of the cash cycle. In June, if you remember, we launched our AI-powered Cash Dashboard, which support now better forecasting and better working capital decision for those modern CFOs. Each new module deepens the relationship, and each one of them increase the value of the platform, which in turns for us into more upsell.
Looking ahead, and to give you a sense of the proportion for the opportunity from e-invoicing, we're expecting revenue from e-invoicing to increase at a very fast pace from now to 2030. In terms of upsell into the financial automation, we expect the invoicing and financial automation solution combined to represent close to half of our European Digital revenue by 2030. Another key point that I'd like to stress with you is our solutions are recognized obviously externally and such across our customer journey. If I take a few example, during the period, Quadient was named a Leader by QKS Group in the SPARK Matrix for account payable automation for the third year running. In the same SPARK Matrix for account receivable application, and this time for the fifth time running, in both cases, specific recognition for AI-driven capabilities. Moving to the next slide.
I do not want us to lose sight of customer communication management. It remains the foundation of our Digital business, and this ties together the financial automation and e-invoicing to the rest of Quadient offering. Our performance remains very solid for our CCM business, especially in the U.S., where we have signed up several large deals in H1. Let me give you a few examples. We had a long-standing U.S. financial services customer that signed a multi-year agreement to expand from a point solution to a full CCM platform. This is a multimillion-dollar commitment. I will give you another example. A major healthcare customer expanded volumes by 75%, from 4 billion to 7 billion pages, and they consolidated onto Quadient, displacing competing solution again. Both of these are expansion within our existing enterprise or larger enterprise customer base, right? In both cases, we are replacing somebody else.
It was a competitive win. For me, that is still the clearest evidence that this platform delivers at enterprise scale. Why do customers choose us? I will give you five top main reasons: unified platform, flexible deployment, governance, compliance, and enterprise at scale. Similarly to the financial automation product, Quadient was also named a Leader by the QKS Group in the SPARK Matrix for customer communication management for the sixth year in a row. We sit at the top right of the leader band on both customer impact and technology excellence. With that said, Laurent will now take you through the Digital numbers.
Thank you, Geoffrey. Digital revenue reached EUR 146 million in the first half of 2026. It is up 6.7% organically. Annual recurring revenue increased further to EUR 264 million, representing an underlying organic growth of 12.9% compared to the end of January 2026. It was driven by the momentum of bookings. It is up 20% in Q2 versus last year, related to French invoicing and by a solid performance in North America and CCM. It includes around EUR 5 million of contractually committed components related to invoicing. It also absorbs EUR 1 million of negative currency effect compared to January 2026. Subscription-related revenue continued to show a sustained growth. Non-recurring revenue improved markedly in Q2 compared to Q1, thanks to a more moderate decline in professional services revenue. On the right-hand side, EBITDA reached EUR 21 million, up 17% year-on-year on an organic basis, with an EBITDA margin stable at 14.5%.
It is a solid outcome given the increase in implementation costs tied to the French invoicing go-live, and we expect margin progression over the full year. On an organic basis, margin has increased by 130 basis points. Moving to Mail on slide 18. The structural trend in Mail is well- understood, and it has not changed. What I want to show you here is different. Mail is not simply declining business that we manage for cash. It is an asset that is actively supporting the digital transition. In Europe, cross-sell of digital financial automation solutions to Mail customers grew fourfold ahead of the French mandate. The Mail base is doing exactly what we said it would do. It gives Quadient privileged access to business as they digitalize their financial processes. At the same time, we keep investing where customers ask us to.
We launched the iX-9, a premier mailing system in France, which extends our leadership at the high end of the market. We secure the major U.S. public sector deployment for Certified Mail. Our DS-67iQ folder inserter is now rolling out globally. We also continue to create intelligent devices by adding complementary software to our mailing solution globally. To date, we have rolled out our intelligent solutions to almost 80,000 customers globally, reinforcing the value of our mailing hardware. We continue to add capabilities to this solution with [S.M.A.R.T.], e-Certify, ability to print and manage all certified and tracked mail, and digital stamps coming in November this year in the U.S. The customer relationship remains strong. Satisfaction was above 96% globally and 98% in North America, our largest market.
Quadient was also named the Leader in the IDC MarketScape for worldwide mailroom solutions and services in its 2026 Vendor Assessment. Let's now move to the number for Mail on slide 19. Mail revenues stood at EUR 302 million in the first half. It's down 5.7% organically. The two factors explain this performance. First, it's a slower subscription-related revenue, reflecting the gradual contraction of the installed base after the lower placement of recent periods. Second, software hardware volume in Europe, partly offset by the resilience in North America. Q2 was down 6.4%, a weaker sequential performance, which mainly reflects the expiry at the end of Q1 of a service contract in the U.K. Excluding this specific impact, the underlying trend was stable over the two quarters. On the right-hand side, Mail EBITDA came in at EUR 75 million.
It's down 6.6% year-on-year on an organic basis, with an EBITDA margin of 24.9%, down only by 0.6 points despite the top-line performance. This resilience reflects our continued cost discipline, U.S. tariff reimbursement, as well as the commercial productivity gains achieved with Digital in connection with the ramp-up ahead of the invoicing mandate in France. Moving now to Quadient financials. First, let's review on slide 21 the P&L. As you can see in this slide, the 2025 comparatives are shown both as published and restated for the application of the IFRS 5 to the Lockers business. Starting from current EBIT of EUR 57 million, optimization expenses and other operating income amounted to EUR 7 million, essentially restructuring Mail. This brings EBIT to EUR 50 million. Net financial expenses stand at EUR 23 million, slightly above last year. Income before tax is therefore EUR 27 million, with an income tax charge of EUR 7 million.
This charge benefits from the release of EUR 5 million tax provision. Net income from continuing operations comes out at EUR 21 million, and net income from discontinued operation is a EUR -11 million, and that reflects the measurement of the Lockers asset at fair market value, less cost to sell in the Europe outside of the U.K., plus the loss of the business over H1. All in net income for the pay is under EUR 10 million, of which [EUR 9 million] attributable to shareholders. Moving now to slide 22 and the cash flow. We are up to a very strong free cash flow, standing at EUR 34 million for the first half. It's significant improvement compared to the EUR -4 million we had last year at the same date.
Starting from an EBITDA at EUR 96 million, other items represent a EUR 10 million outflow, bringing cash flow before net cost of debt and tax to EUR 86 million. The change in working capital required is a EUR 25 million outflow. It is a normalized level compared to H1 2025, reflecting our business model and leading specificity. Last year, if you remember, this working capital was particularly affected by the additional inventory we had built at the end of January 2025, and it was paid over the first half of 2025. The change in this receivable contributed to a EUR +29 million, reflecting the continued decline in our install base. Interest and income tax paid amounted to EUR 31 million, which is well below last year, so it is EUR 52 million, which included, as we mentioned last year, one-off impacts of the bond refinancing as well as the big tax and the sweet equity tax payments.
Cash flow from operations therefore reaches EUR 59 million and after capital expenditure of EUR 25 million, continues to reflect the low level of CapEx in Mail, free cash flow comes out at EUR 34 million. Cash flow from discontinued operation represents an outflow of EUR 12 million. It is higher than last year due to the EUR 5 million + increase in CapEx in the U.K. Moving now to slide 23 to give you some details on the CapEx. The capital expenditure presented here excluding IFRS 16 stands at EUR 25 million for the first half, down from EUR 28 million last year, mostly due to the lower placement in Mail. This mainly reflects a reduction of Mail CapEx in line with lower frontline machine placements while investment in Digital is growing also due to acquisitions.
As you can see in the published figure from 2025, look at the content for a very large share of total CapEx with about 30% in H1 2025 against a revenue that represented at the time about 10% of the company. Moving now to slide 24 and focusing on the net debt and the leverage. The debt stands at EUR 683 million. That includes IFRS 16 at the end of July 2026, is broadly stable compared to the end of January. And in reality, it hides the forex adverse to the debt at EUR 15 million, between the two dates. It is offset by the cash generation during the period. At the end of H1 2026, it breaks down into EUR 435 million of net financial debt for leasing and EUR 216 million of non-leasing debt, as well as the EUR 32 million of IFRS 16 debt.
All leverage I show excluding leasing is stable at 1.6x EBITDA, even if when removing EBITDA from Lockers and cash held by Lockers [audio distortion], which is EUR 7 million, the leverage at group level stands at 3.1x including leasing. Please note that the H1 ratios reflect the application of IFRS 5 while prior periods have not been restated on this graph. Both ratios continue to stand well below our covenant levels, and as mentioned by Geoffrey, the sale of U.K. open network is expected to bring the leverage ratio extremely lean down to around 1.2x by the end of the financial year. Moving now to slide 25 and our financial structure.
Our liquidity position at the end of July was still strong, EUR 123 million in cash, EUR 300 million of undrawn credit facilities, maturing in 2030, and a customer leasing portfolio at EUR 522 million, contributing to future cash flow visibility with maturities well spread over the coming years. Subsequent to the period end, in August, we carried out two transactions, the issuance of a EUR 100 million Schuldschein loan, and a German private placement, and the early repayment of EUR 65 million of our existing Schuldschein, covering the tranches maturing both in November 2026 and May 2027. This confirms both our access to diversified sources of financing and our discipline in managing a balanced maturity profile. Let's now move to conclusion on page 26 and 27. We are confirming our guidance for the full year on a basis that now excludes Lockers. You can see the translation on this slide.
Our previous guidance for fiscal year 2026 was organic revenue change of -2% to +2%. EBITDA margin above 20% in Digital, above 25% in Mail, and above 10% in Lockers. The leverage ratio excluding leasing of 1.5x . Now take Lockers out and that translates mechanically organic revenue change of -3% to +1%. EBITDA margin above 19% in Digital and above 24% in Mail. These are the figures we confirm for the full year. We stress this is a technical translation. It's not a change in our view of the business. The margin step- down reflects the reallocation of locker [storage] cost and synergies across Digital and Mail. For Mail, it does reflect the utility effect of the European private network. We have private locker network we are keeping.
On average, the same transition takes out our deleveraging targets from 1.5x to 1.6x because Lockers EBITDA comes out. Then we apply the proceed of the U.K. sale, and that takes us to the 1.2x at the end of the financial year, comforted with the strong free cash flow generation at the end of H1. That assumes the sale completes before year-end. Finally, moving to slide 28. The same logic applies to our 2030 ambitions. Here I want to be explicit about what we are doing. 2030 revenue ambition, if you remember, by solution are unchanged. It's around EUR 550 million for Digital and around EUR 500 million for Mail.
On profitability, take Lockers out and the ambition we announced in March would mechanically come down as well, around 29% for Digital instead of 30%, and a range of 19%-24% for Mail, instead of 20%-25%. We expect to absorb that impact in full, so we are maintaining around 30% for Digital and 20%-25% for Mail by 2030. On the restated scope, that is in a grade. It is our commitment to absorb around 1 point of margin over five years through the growth we are building in Digital. Taking Lockers out does not dilute the ambition we set, and Digital is on track to become Quadient's largest and most profitable solution by 2030. A Digital business growing with strong regulatory and structural tailwinds behind it.
A Mail business that is resilient and that is actively feeding the digital transition, and with financial flexibility to act. Thank you. With that, I think we are ready to take the questions.
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All right. We can pass to written questions. Thank you, everybody. First question: What is the expected timeline and valuation range for the remaining assets? The U.S. and Japan businesses where Quadient holds leading market positions. Do you expect the transaction to be completed by the end of FY 2026? Would you pursue a single buyer for the entire business or separate transactions by geography?
Well, it's a good question. I think what is important is to do the process right and maximize the value for Quadient. That's really our guiding principles. The U.S. market is a market we probably have close to 1/3 or 40%, 1/3 of the market share. We're definitely number one. It is an at-scale business. It's probably representing 85% or 90% of the rest of the revenue. This is really the primary asset in term of value creation. It is a profitable base. It is cash- generative. We have obviously a lot of things for us to look for. In combination to the strong position, we also have the Japanese base, where we have 7,000 lockers. Obviously, a little bit less than half the base in the U.S. It's a more mature base, strongly cash- generative.
We have probably 60%, 65%, 70% market share left there. I would call them definitely premium assets with respect when comparison to the lower maturity of the asset that we just sold in the U.K. We do have, obviously, global players that are operating throughout the U.S. and Japan in different areas that are interested by those assets because they obviously play into the locker themselves, use lockers, invest in lockers, potentially also use their own lockers. We also have local or country-specific interested parties. I would say it will take as long as it needs. The rest of the lockers will obviously be a bit more complex than the U.K. We have several entities across several countries, spanning from France, U.K., U.S., Canada, Japan, et cetera, with a bigger scope of the business.
Aside that we'll do what we think is the right thing to do. We have obviously communicated this announcement publicly, so it's also in our best interest to move diligently and as efficiently as we can on that. I'm not going to commit to any particular timeline. We obviously just want to make sure we are doing the right thing, but we are definitely focused on it now that we have completed the U.K. sale.
Thank you, Geoffrey. What is the return on investment of the Lockers business?
On this question, I can take it. I'm not sure if the return on investment is you're looking to the divested part or the existing part. I think we've been quite clear when we are presenting the investment in Lockers that we're expecting, notably in Japan, we discussed for that, but notably in U.K., that we were expecting an internal rate of return that was significantly above a WACC, whatever the region of the world is. I think the divestment of the Lockers in the U.K. is an example of divestment where we've been achieving those goals in terms of return.
It's the same that we see today in the Japanese base. When we look at the future cash flow, as mentioned by Geoffrey, it's also the rest of the locker network and its quality that we expect to produce a stronger payback, which I remind you, is already significantly positive in term of the EBITDA on the regions that are Japan and North America.
Thank you. Will the EUR 120 million of Lockers- related CapEx that is expected to be freed up over the next five years be reallocated to accelerate the investment in the Digital business? Over what timeframe does management expect to eliminate the EUR 2 million-EUR 3 million of stranded costs?
A few parts here. I could talk a little bit about the strategic allocation of our capital, and maybe you could specify some stranded costs that are probably a little bit more complex than what was mentioned in the question. From a capital allocation perspective, I think we've been in our last Capital Markets Day pretty specific about how we intended to allocate the CapEx, the leverage of the company, debt reduction, shareholder returns. We looked at the dividend, also share buybacks, and obviously where we think it was needed also to invest into the business, and potentially at times also doing some smaller acquisition as we've done with Package Concierge and we've done more recently with Serensia. I think we've been also very clear as it is to what is our focus and our strategy, right?
Our decision to sell the Lockers business is only to be able to focus even more on our goal, which is to make Digital the largest activity naturally of the group and seize the momentum that we see with investing in Europe. As a reminder, to achieve our goal for 2030, this is an organic plan and does not require, does not necessitate any inorganic investment or allocation of capital. From that perspective, we just remain opportunistic. Right? Now that I have shared that context, I think it's important that we complete the U.K. sale, we finish the divestment of the rest of the lockers. Once we have received those proceeds, it will be time, probably around after our full financial communication for the full year. Then that would be a good time to reset the expectation, I think, for the coming years.
As part of that, obviously to be able to share with you what the Board of Quadient will have decided in term of allocation of those resources and capital. From a business strategy, I think we are pretty clear and pretty focused on what we need to do.
Thank you, Geoffrey. Could you remind us what the revenue and EBITDA from the U.K. open network was and what multiples do the EUR 65 million represent against these?
I think Geoffrey mentioned the revenue being expected more than EUR 10 million this year and EBITDA being expected breakeven this year.
Thank you. Is it safe to assume that the U.S. and Japan will be sold to two different buyers?
No. It's not safe to assume that. We have a business that has a common platform, a shared R&D. It's one platform. It's the same platform that is being used by the U.S. consumers, the multifamily residents in the U.S. as the one that is being used in Japan or Canada or other parts of the world, by the way, even in the U.K., which is with a pretty different interest to specify. We sold the U.K. base, but we did not sell the IP of Quadient, right? The platform is. The ownership of the platform and the technology and the R&D with the hardware or software is retained by Quadient. It's really what we're selling is the distribution entity of the locker base in the U.K., and we retain that IP, and that IP is necessary to sustain both the U.S. and Japanese base notably.
There's, I think, a legitimate case for a buyer that would be interested by the entire IP. That being said, we obviously, this is the purpose of the process, will remain open to see if there are various interests as part of the business, and if it makes sense and it creates more value, then it's something we could also consider.
Thank you. How does Quadient intend to use the disposal proceeds? Debt reduction, enhanced share buyback program, a special dividend, or reinvestment in the Digital business?
I think it's a similar question from the one we had before. I think I could just use the difference on the short-term basis. We do expect to receive the cash of the EUR 65 million of the U.K. divestment before the end of the year. Laurent explained to you that based on that, we will be able to deleverage the company much further than what we had anticipated in our guidance. From the 1.5x to the 1.2x at minimum, obviously. That's a short-term deleverage, and I think it will be great that the full year result to be able to come back to you and set a new expectation as we move forward in line with our business strategies, which is obviously to focus on our Digital business and shareholder return.
Could you give us an overview of the criteria on which the transaction was done?
Yeah. On that front, I think we have a very open process, we have received obviously multiple bids, because also the quality of the assets, we reviewed it independently, I would say, on different aspects. Obviously, price is one of them. Speed of execution. Also the quality of the partnership, because I remind you that we didn't sell the IP here, just the distribution. So what does it mean for the coming quarters, for the coming months in terms of software, for example, in terms of support, services, et cetera? All those elements, obviously, the IDS offer has been the best offer we received.
Could you give us some more color on the involvement of VESA in the Lockers, Mail, and Digital business?
None whatsoever. VESA, and we are very grateful to have them as our first shareholder, but they are not at the Board, so they have no board representation. Therefore, they are not part of the deliberation, evaluation, reviews of the different stage of the offers we have received for the U.K. sale, neither as part of the decision and the making of the decision about which offer to select and which deal to make. After that, I will not speak on behalf of any of our shareholders about anything else that they may think or have expressed, unless they have expressed it publicly.
What are your expectations regarding the cash proceeds from Lockers divestitures? Leverage is already under control and 2030 goals are organic.
That is a good comment and statement. It is logical. I think with Laurent we have been very clear and being supported by the Board that, for us, this year was the year where we needed to get shareholder return and being focused on the return to our shareholders. We have made, in the last few years, significant investment to transform the company. We felt that it was time also to be able to provide a return to our shareholders. Now, that could be different ways, right? The share price, the dividend, the share buybacks. It is true that unless there was something significant that would come, we can achieve our 2030 ambition without that. A big part of the analysis between what is expected as a fair deleverage, the interest rates are also increasing, or they have not been as low as they used to be.
We need to also anticipate how the market condition could evolve. There is always a case for a bit more deleverage. After that, we have many other options, I think, to create the shareholder return. Dividend is part of our policy. We have been increasing it steadily year- on- year. Now if we have exceptional proceed, I think that will also be something we could review. Obviously, there is also a legitimate evaluation of the opportunity of doing a share buyback, especially when we have a share price that is low. That is part of what the Board is reviewing on a regular basis, and have made decision on a regular basis to augment or initiate a different program in the past. I think it is in that light that I am sure we will review those expectations and set a new course for the beginning of next year.
Thank you. IDS Holdco is owned by EP Group, Mr. Křetínský, who is also more than 26% shareholder of Quadient through VESA. How was the conflict of interest managed in the transaction? Were there any competing third-party offers for the U.K. open network? Did the Board obtain an independent fairness opinion confirming the EUR 65 million valuation?
This was a very competitive process. We had received several multiple offers at various stage of non-binding, and obviously preliminary LOI, level of indication of interest before we could select the right party for us. We had independent advisors with Société Générale, and also our legal advisors, Darrois Villey, that has supported us in the process to make sure we could have a good and fair valuation of the different terms and condition that was presented to us. I think on just the merit of the competitive offer, I think for the Board, which is an independent board, Mr. Křetínský or his entity do not participate at the Board of Quadient, right? It's really the Board has been able to review those without any interference from anybody else.
I think we made the decision that was in the best interest of Quadient based on a very competitive process.
Thank you. There is a provision for the European parcel network. On which country? What would be the remaining equity for the European p arcel network? Is there specific explanation versus other areas where parcels are strong? Is the European parcel network to be sold in the medium term?
I will take that one, Geoffrey. The rest of Europe, in terms of balance sheet, in terms of size, is relatively small. Basically, the level of equity is limited outside of the private network that is now part of the Mail division. There is not much left, I would say, in the book value of Europe. Obviously, the biggest part is obviously Japan, to a certain extent North America, and also all what we call the IP that stands in France and that is part of basically the scope to be sold.
Thanks, Laurent. Are your expectations to sell at a premium versus the U.K. price, the U.S. and the Japan Lockers business?
It is very difficult to know at this stage. We obviously have, I think, a very competitive price for the U.K. I think we need to go through the process and look at what the market will tell us on the rest of our Lockers business, which again, I think has significant difference both in terms of maturity, scale, and leadership position in those respective markets versus the U.K. And we look forward to it.
How much profit is expected on the EUR 65 million divestment of U.K. household?
It's a EUR 65 million divestment. I would say, really don't go to the detail of by country, what's the equity of each locker. I suggest we end, we wait for the closing, and we see eventually at the end of the year, what is the net impact on the specific IFRS 5 line and how much upsides there's been against the equity value.
I think it's just principally the, without equity, we have a little bit of tax naturally to pay.
Absolutely.
There is nothing special.
Absolutely. The bulk of it will be the net between whatever the purchase price is, minus the tax and minus equity, which is mostly the tangible assets that are the lockers, the 3,000 lockers.
How will customer data and accounts be migrated and managed as part of the divestment?
The customer data is part, obviously, of the platform itself. It's how we operate a network. I think we need to differentiate the data, the operational data, the customer data to run the business versus the back office, the CRM, ERP, and the financial system they need. We have established a TSA agreement with the buyer to be able to support them in that transition and making sure that we focus on the customer satisfaction at every moment during that transition, and making sure there's be no disruption, and allowing them sufficient time to be able to migrate the back office system, generally speaking. As part of the process too, as Laurent mentioned, the software is owned by Quadient Lockers, and we will now become a software vendor for this buyer.
We will be like we do for many other carriers and entities, and we will obviously maintain and support and upgrade the system, so there will be no disruption on the data and no need for migration on the short term. The new buyer obviously will set his new course, a new strategy, and we'll be happy to support them in case they elect at some point to change and migrate to another system if they elect to.
Thanks, Geoffrey. Is it your ambition to sell the rest of the Lockers business at a price at more than EUR 20,000 per locker? That price would be consistent with premiums versus U.K. deal.
I will take that one, Geoffrey. It is a bit of a simplest view to price, I think, to value a business just based on number of lockers. It is depending on much more, what is the usage of this locker? In which market are we in? Do we have the ownership of this locker? Is it on our balance sheet? Again, if you remember, Japan and U.K. are mostly open network and sitting on the balance of Quadient, where North America is mostly sold lockers. I do not think we can take this shortcut of EUR 20,000 per locker. It is going to depend, again, how much is the usage? What is the maturity of this base as well? What is the remaining value of these assets? What is the future growth? Obviously, what is the expected margin? Here we mentioned that we sold U.K., but it is the distribution part.
We also have all the IP and the royalties that have been captured in France. This also brings an additional layer of margin that needs to be also assessed in the future cash flow.
Thanks, Laurent. You mentioned enterprise value of EUR 65 million for the open network disposals in the U.K. What was the equity value?
I think we mentioned that already, 3,000 lockers, that is the bulk basically of the net book value is the tangible assets, which is 3,000 lockers. We know there is a range between EUR 10,000 -EUR 20,000, depending on the size of the locker, basically.
Thank you, Laurent. Could you just remind us what is the cost of one locker?
That is just what I mentioned. It is okay.
Perhaps, moving on to Mail.
Yeah.
How much was the tariff refunds in H1?
We got about EUR 3 million back on the tariff refund. We got a little bit more, in fact, but part of it was tied to Lockers, so it has been classified as well. It is about EUR 3 million.
Thank you. Is there a share buyback program ongoing at the moment?
We are not currently buying back shares, but obviously, it is part of the consideration of capital allocation in the future. Whenever we sell, obviously, and we get the cash first and sell the rest of the Lockers as well.
Thank you. Beyond the acquisition of the U.K. Lockers business, do you have any visibility on VESA or EP Group's intentions regarding its shareholding in Quadient? Is a shareholder agreement or standstill arrangement being considered?
Obviously, we are not going to speak on behalf of our shareholder. We can refer to their last declaration when I think they passed the threshold of 25% of ownership and the intent that they had. I think they have been pretty clear that they were supporting the strategy and that they had no intent to ask for a board position. Therefore, there is no basis to have a standstill or any other type of agreement that would be a shareholder agreement at this stage.
Thanks, Geoffrey. When selling the U.K. fleet of lockers, have you kept some intellectual property on the technology with future royalties to be received?
Absolutely. As I was mentioning, you need to be distinguishing the distribution part, which is the distributing legal entity with [audio distortion] U.K. in this particular case, that is buying those lockers from our supply chain that owns the IP, both of the hardware and the software, and pays royalties based on the usage and based on the access to the software for each locker. So the IP has not been sold, and that is why I was mentioning that the whole project of the buyer was also included in the evaluation and that they have the ability to continue supplying IP.
The EUR 65 million purchase price do not include the services to maintain the technology that we will obviously commercialize on an arm's length basis with anybody that uses our technology, including the new buyer, until they elect to do otherwise.
Okay. Thank you both. I think that's all the questions, so we can conclude the call. Thank you everyone for attending and for asking all your questions. Our next call will be on the 1st of December for our third quarter sales release. In the meantime, we look forward to seeing you, some of you, in the coming days during our Roadshow. Thank you very much, and have a wonderful evening.
Thank you, Laura. Thank you, everybody. Thank you, Laurent.
Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.