Published: November 20, 2012
“We have brought the average cost of the debt down to 3.25%”
La Poste, which employs almost 270,000 people, 250,000 of whom are in France, and which had a turnover of more than €21bn in 2011, has in fact undergone huge changes in the last 10 years. Some of the more notable events include the creation of La Banque Postale, the modernisation of the postal service’s industrial resources and of post offices, the internationalisation of L’Express, new measures to improve working conditions, and, in 2010, the company’s transformation from a ‘public institution’ to a public limited company, prior to the acquisition of stock by the Deposits and Consignments Fund, whose stake will be 26.3% after the capital increase of €2.7b which is taking place between 2011 and 2013.
In addition to the two services – the postal service and express parcel service – traditionally provided by the parent company and its subsidiaries Sofipost and Geopost – there is now La Banque Postale, which is already a fully active bank centred on retail banking in France. La Banque Postale began in 2011 to lend to businesses and lending to local authorities from 2012. L’Enseigne La Poste, which runs the network of 17,000 post offices on French national territory, is in the process of developing particular areas, notably telecommunications with La Poste Mobile.
Firstly, we had to deal with a very centralised treasury – I must point out that the whole group, with the exception of La Banque Postale, is financed by the central treasury – which operates using cash pools across over 4,000 accounts, to be balanced daily, with a monthly volatility of about €600m. This is mostly due to the debits of our ‘business’ clients in several areas and to salaries and social security contributions. Another important issue concerns investments: we consistently have surplus liquid assets with a value of around €2bn which we need to invest, constrained by both counterparty risk and maximum liquidity. Finally, there is the management of a bonded debt of €5.5bn, secured with an EMTN of €7bn and actively managed through an underlying portfolio of derivatives – mainly interest rate – of €5bn. Finally, there is the management of a programme of commercial papers of €1.5bn: currently €300m have been drawn and non-drawn confirmed lines of banking credit – syndicated credit, bilateral lines of credit – amount to a total of €1.2bn.
There are 11 people in the team. Four work in the front office, responsible for cash management, market operations, investments and debt issues; five in the middle and back offices are in charge of risk management – within our ‘limit guidelines’ – project management of the treasury’s IT systems and intragroup financing, and one team member is in charge of the legal aspects and authorisation management. In addition I have created a strongly operational role. This means that I am able to project-manage large schemes such as the transition to SEPA and SWIFTNet or the development of IT systems, analysing the impact on the organisation of these big projects, writing up the procedures, processes and resulting modus operandi and acting as the link between the different sectors of the company involved in the changes.[[[PAGE]]]
This had two goals: to support the group’s development and to strengthen the balance sheet. From this perspective, in 2010 we led a bid to buy back and exchange existing bonds. In addition we looked into other solutions to reduce carrying cost. We issued an invitation to tender as a part of our search for management companies to create dedicated funds to carry to term about a hundred lignes obligataires whose expiry and interest rate structure are in line with those of our next original bond issues in 2013 and 2014. As well as classic bank investments, we put in place asset-backed treasury investments for a little less than €900m, the purpose of which was to pay back a debt of the same amount, with the same due date and same variable interest rate. This allowed us to achieve yields higher than those of the money market and to maintain a debt at a variable interest rate, all while being protected from a rise in interest rates due to the fact that the backing of these investments is also at a variable rate.
This debt of €5.5bn, which has been brought down to an average cost of 3.25% and has an average duration of about seven years, has been managed dynamically over the last few years, and has had a very positive impact on our net profit. The fact that much of our debt - 87% - has a fixed interest rate means we do not need to worry about the eventual increase in interest rates and perpetuates this impressive average financing cost. Among other things that we have done recently our syndicated credit was renewed in November 2011, with the aim of acting as a back-up line for our commercial paper programme, which was rated A1 by Standard & Poor’s. This credit, carried out as a club deal, brings together the nine banks who have gone on to become our exclusive partners in every other field.
Yes, because since then, large amounts of money have been at stake – €2bn in stable cash flow, €300m of which are in the dedicated funds that I mentioned before and €400m in very diversified negotiable debt instruments. The balance is made up of term deposit accounts and other banking products for which we have sometimes been forced to adjust our ‘limit guidelines’, after a decision made by our financial committee and a report from our audit committee. We drafted a complex matrix of numbers which takes into account limits by sector, country, types of lender, etc. As for time deposit accounts, we have obtained products with progressive margins over several years from some of our banking partners. These are very advantageous due to their yield and allow us daily or monthly withdrawals without incurring a penalty. This type of product works very well with our investment strategy, namely to have a reduced counterparty risk, strong liquidity and a satisfying risk/return ratio.
We are tackling a large IT systems project at the moment. The first stage was to launch a master plan via an invitation to tender, and we received responses from 16 candidates, whose goal was to develop our IT systems. The next step will be, if necessary, to make an invitation to tender to decide which software we should use.
More generally, everything the finance and treasury department does is working towards a high-priority goal: maximum reactivity and providing appropriate support for the group’s strategic objectives as it continues to change, as it has done over the last 10 years. We are doing this notably by keeping the treasury liquid and risk-free, maintaining our debt capacity with the banks and by keeping a careful eye on La Poste’s position in the bond market.
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