InPost SA
AEX:INPST
Earnings Call Analysis
Q3-2023 Analysis
InPost SA
In the recent period, the company has successfully solidified its position as a distinguished second player in the French market while simultaneously expanding its network and maintaining significant market inflation costs. The strategy to focus on building market share and fostering consumer and merchant adoption of Automated Parcel Machines (APMs) is contributing positively to the company's growth in market share. Alongside progress in France, the UK segment has turned profitable for the first time, driven by a surge in capacity from network density and expansion, creating efficient operating leverage.
Financially, the group experienced a substantial 22% year-on-year revenue growth in the third quarter. The 9-month performance also showed strong momentum with a 26% revenue increase. These impressive results outpaced volume growth, signaling a successful strategic pricing approach and an optimized product mix. EBITDA saw robust growth, with a 40% year-on-year increase in the third quarter, outperforming the previous quarter's growth rate. The adjusted EBITDA margin has notably expanded, showing effective cost management and margin recovery efforts.
Poland, one of the company's core markets, saw a 13% year-on-year volume growth in Q3, despite a deceleration relative to the first half of the year, owing much to a slower September particularly in the fashion segment. This trend was reversed in October, indicating sustained positive momentum. Profitability in Poland also improved, bolstered by repricing effects and inflation cost management. Adjusted EBITDA margin increased by 250 basis points compared to Q3 of the previous year. Mondial Relay's business maintained stable profitability with a slight year-on-year revenue increase despite volume softness in Q3, showing resilience amidst price dilution and increased investments.
In Italy, revenue grew almost sixfold compared to the same period last year, significantly reducing the adjusted EBITDA loss, suggesting improvement trajectory for future periods. This, combined with the UK's revenue per parcel increase by 6%, and the market's transition to profitability before the introduction of B2C offerings, positions the company well for further expansion and scale.
The company has generated strong free cash flow before M&A expenses, marking an improvement in free cash flow to EBITDA conversion rate in Poland. Despite a slight increase in gross debt, effective EBITDA growth and cash management resulted in a reduced net leverage ratio. Capital expenditure was more strategically managed, reflecting disciplined investment and revenue growth, particularly in Poland and the international segment.
Management maintains a witness outlook unchanged for e-commerce market performance in its key geographies for the entire year, with expectations of volume growth surpassing market growth rates especially in Poland. However, cautiousness is advised given the uncertain consumer sentiment which makes the prediction of strong November and December volumes challenging. The company aims for continued investment in technology and expects to generate positive cash flow while maintaining modest CapEx.
The company anticipates potential margin compression as it decides to absorb costs rather than pass them on. This decision is aligned with the strategy to gain a competitive edge in both the consumer and merchant spaces, which is essential for driving B2C growth. The recent October trading rebound has led to strong volume growth year-on-year, and while the company plans to remain conservative in its peak season expectations, it acknowledges numerous upside drivers and recovery effects in its main markets despite the impact of external events like the lockdown in China on global supply chains.
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Good morning. My name is Gabriela Burdach, and I'm the Investor Relations Director at InPost. Welcome to InPost Q3 2023 Earnings Call.
A quick disclaimer, today's call includes forward-looking statements that are subject to risks and it is possible that the actual results may differ materially. The call is being recorded, and it will be available at IR website -- at our IR website shortly after the call. After the slides, we will have a Q&A session. And today, presenters are Rafal Brzoska, CEO; Michael Rouse, CEO International; and Adam Aleksandrowicz, CFO.
I am now pleased to hand over to our CEO. Rafal, over to you.
Good morning. Thank you, Gabi, and thank you all for joining us this morning.
Let me start with the broader perspective. We are operating in 9 European countries and have significant exposure to the largest e-commerce markets in the region: the U.K., France and Spain. On the slide, you can see data as of the end of the third quarter. However, currently, we have already deployed over 33,000 APMs in Europe, 36% of which are situated outside of Poland. Including our PUDO points, we have over 62,000 locations across Europe, which makes us 1 of the leading out-of-home delivery companies in Europe.
Moving on to the next page, I'm thrilled to share with you some of our impressive Q3 2023 highlights. On the group level, despite a still-challenging macro backdrop and pretty soft September, in Q3, we achieved a very strong volume growth of 18% year-on-year and revenue of almost PLN 2.1 billion, corresponding to a 22% increase compared to Q3 2022. The growth in volume, which underpinned our operating leverage, together with the continuous improvements in our logistics and our repricing strategy, helped us achieve a fantastic 40% growth in adjusted EBITDA at the group level. The positive free cash flow and adjusted EBITDA growth led to a decrease in net leverage ratio to 2.6x compared to 3.2x at the end of last year.
In Poland, we witnessed a substantial 24% year-on-year revenue growth, together with a 13% year-on-year increase in parcel volumes. This impressive performance led to an EBITDA margin of 46%, which exceeded last year's result. On the other hand, in our international markets, volumes and revenues increased by 28% and 20%, respectively. We continue to expand our international network, increasing the number of out-of-home points. And in the U.K., we are now the #1 APM network, and for the first time, we have achieved a positive adjusted EBITDA, thanks to the strong demand for our services and delivery on strategy.
During our Q2 earnings call, I highlighted that we had delivered a very important goal that we had for this year, which consisted in addressing the logistics bottleneck in the U.K. This quarter, we have achieved an additional goal, a massive achievement, in my opinion, reaching profitability in the U.K. This was accomplished with a market offering that is still partially limited as the B2C segment in the U.K. is still to be launched. Next page, please.
As you can see in these 3 charts, in our main geographies, we are still outperforming the overall e-commerce market. This means that we are continuing to expand our market share. This is still the case in Poland as well, where we deliver half of the e-commerce parcel in the market and we continue to outpace our competitors in terms of growth. We are continuing gaining market share in Mondial Relay markets as well. And in the U.K., our volume growth [ start ] an impressive 182% (sic) [ 128% ] while the market contracted by 5%. Next page, please.
As you may have already seen in the media, we have announced that in 2024, we will be the official partner of the legendary Tour de France cycling race. Where did the idea for this partnership come from? We share the same values: Ecological transport, passion for competition, and of course, speed. We also share a passion for innovation, focus on performance and a commitment to caring for the local communities and the environment. At InPost, for many years, we have been encouraging the use of 0 emission means of transport, such as bicycles. Moreover, the partnership with Tour de France is a great opportunity for us to increase our brand awareness among European consumers, especially those in France.
Let's jump into the business update about Poland. We can have a look each geography in more detail, but let's start with our most important market. In Poland, as you know, we are the market-leading e-commerce delivery provider. We have the most widespread and convenient network for our customers, and over 60% of the Polish population already live within a 7-minute walking distance to our lockers, increasing to 87% in urban areas. We provide easy access to our services for customers and, of course, are available when and where they need us. What's even more impressive is that our new APM utilization rates have steadily increased post-installation and remained very high in line with the utilization rate trends of our older machines. This is a strong indication that our continuous effort to improve convenience have resulted in growing adoption as well as utilization. This also continues to prove that our APM network in Poland can still expand at attractive utilization and ROI levels.
On the next page, more details about our engines of growth in Poland. Our mobile app has over 11 million users, almost 20% more than a year ago. We have a growing and loyal customer base of over 17 million APM users in Poland. 90% of our total volume is attributable to our most loyal users, those that receive 13 parcels or more a year. These customers drive InPost growth and contribute to our outperformance of the Polish commerce market compared to most of Europe.
Recent third-party studies confirm our data. As you can see in the chart on the right-hand side, customers in Poland favor parcel lockers to other delivery methods and have a clear preference for InPost versus other providers. When shopping online, 93% of customers that use APM's delivery choose InPost. We significantly stand out compared to our competitors.
Another third-party market research we have received just recently is showing how our APM's record Net Promoter Score of 80 points, a much higher level than our to door competitors. This grew from 78 we showed on our last earnings call. Simply, InPost lockers are unbeatable solution for customers.
I will now hand over to Michael for a short update on our international business. Thank you.
Thanks, Rafal. Good morning, everyone.
Now let's go through our international business update, starting with a snapshot of all our international markets. Our international business is gaining momentum. 60% of the group's total out-of-home delivery points are now located outside of Poland. Our international PUDO points have grown by 20% in Q3 2023 compared to the same time last year, and our international APM network has now increased by 60% year-over-year.
In terms of volumes, 1/3 of the total group volume is now generated by our international markets, and these are growing faster than Poland with a 28% increase year-over-year in Q3. All our geographies are important, however, we're not going to look more specifically in the U.K. market and Mondial Relay as these are our primary focus in terms of network expansion, CapEx allocation and growth potential within the international segment.
So let's start with Mondial Relay. Our key priorities for Mondial Relay remain the same: expanding our APM network and merchant base, as well as focusing on improving the quality of our service as we strive to build a [ D+1 ] service covering all of France. As we presented during the Capital Markets Day, these investments will underpin our growth, driving our B2C market share forward, and encouragingly, we continue to observe positive flywheel traction and momentum with further market share gains in a weakening market.
The increase in number of APMs in the Mondial Relay markets has already allowed us to gain market share. Over the past year, our APM network has grown by nearly 3,000 machines. In France, 1/3 of the population live within a 7-minute walk from an InPost location with significant headroom for density expansion. The volume delivered by Mondial Relay APMs in Q3 was 3.5x higher than the previous year. Impressively, APMs accounted for 17% of total Mondial Relay volumes, underscoring their growing importance in our delivery network. This KPI grew significantly every quarter, demonstrating the continued adoption of the French shopper to the automated PUDO alternative.
The volume growth in the last quarter was driven all by B2C, up 24% against the declining B2C market segment. This is highly encouraging and aligning perfectly with our strategic objectives. What's even more remarkable is that a substantial 40% of the total volume growth was attributed to B2C deliveries via APMs as our merchants start to differentiate APMs in their checkouts, and with the successful launches of major new clients such as Zalando, Tmall and [indiscernible] in Q3.
To further emphasize, our strategy has differentiated [ Mondial ] as a significant #2 now in the French market and created a gap to the nearest #3 player. We are investing in quality and scaling the network whilst absorbing significant market inflation as we've made a conscious choice to not pass this through. [ A sticky ] market share and creating consumer and merchant adoption to APMs is at the forefront of changing market dynamics. We're not at the critical masses yet in location density and France is a much larger geography to serve D+1, but we're on track and growing our share.
Now moving on to the U.K. market. We have some exciting news to share, and building on Rafal's earlier comments, I'm thrilled to announce that in the last quarter, we have achieved a coveted position of being the #1 APM network in the U.K. Our network is already the largest, but we're not stopping there, with ambitious plans to deploy even more APMs to meet the growing demand we're seeing in this market. And to couple with this announcement, we've also launched our partnership with the Royal Mail to offer nationwide locker-to-door in Q3 to complement our successful locker-to-locker solution that has been live since Q3 last year. As you can see on the left-hand side chart, our number of out-of-home points increased by almost 60% year-over-year. And in core cities, we have over half of the population within a walking distance to the nearest APM.
Secondly, in Q3 '23, for the first time ever, the U.K. segment has become profitable. This was made possible by our unique and high-quality service, the increased capacity unlocked by our logistics and network density and expansion, but most critically, creating the right effect of operating leverage as we've now scaled to nearly 6,000 locations. The charts at the center of the slide and on the right-hand side show the effect of this on volumes and growing utilization of our APMs.
I'll now hand over to Adam to talk about the financials in more detail. Thank you.
Thank you, Michael.
Good morning, everyone. As usual, I'll take you through our financial performance, and we'll then wrap up with an update on outlook for the full year.
So moving on to Page 16, you can see the summary of our group P&L for the 9 months of 2023 as well as for Q3. At group level, in Q3, we recorded a revenue growth of 22% year-on-year, while over the 9 months, revenue grew by 26%. In both periods, the revenue growth was significantly higher than the volume growth due to repricing effect as well as change to the product mix. Volumes have decelerated a bit in Q3 versus Q2 of this year driven by much softer September, especially in Fashion segment, which was very visible in the broader retail market across all European geographies.
At the same time, in Q3, our EBITDA line growth has visibly accelerated Q-on-Q, largely thanks to significant margin improvement in International segment. Our adjusted EBITDA grew by 40% year-on-year in Q3 and 37% over the 9 months. That is to compare to 35% growth rate in Q2 of this year. Adjusted EBITDA margin for the group has expanded by 390 basis points to almost 31% in Q3 of this year, and year-to-date adjusted EBITDA margin improved by 250 basis points to 30.4%, up from 27.9% a year ago.
In terms of CapEx, similar to previous quarters of this year, CapEx as percentage of revenue was notably lower in Q3 compared to the same period of last year and stood at 11.6%. I'll speak in more detail on the drivers later in the slides.
Net leverage stood at 2.6x, with 0.6x decrease compared to the end of last year as a result of combination of EBITDA expansion, strong free cash flow generation in Poland and gross debt remaining broadly stable.
Moving on to Poland's performance. Year-on-year volume growth in Q3 was at 13%, driven by increased sales in marketplaces and new agreements with small and large-scale merchants. This was a deceleration in the growth rates versus H1 of this year, which we largely attribute to much softer trading in September, driven by weather anomalies that impacted the whole online fashion segment across our European markets. Looking at October trading, though, we have seen a rebound in volume dynamics.
Revenue growth in Q3 stood at 24% year-on-year, 11 percentage points higher than the growth in volume. As you can see, the business has continued to reflect the strong positive effects of the repricing. Our adjusted EBITDA grew by 31% year-on-year. The adjusted EBITDA margin was up by 250 basis points compared to Q3 of 2022, reflecting the positive impact of repricing combined with an effective management of inflation-induced cost increases. As part of our objectives for 2023, we have promised a recovery of our margins in Poland, which the business has been consistently delivering quarter after quarter.
In conclusion, in Poland, Q3 has proven to be the continuation of a positive trend already reported in Q1 and Q2 across all key metrics, with delivery of strong financial performance for both Q3 and the 9 months of the year.
Now, let's look at Mondial Relay performance. In the third quarter, the business delivered a 10% growth in volumes year-on-year with growth across all Mondial Relay markets. Again, there was some softness on the volume side that was visible here towards the finish of the Q3, reflecting the shape of the broader e-commerce market. The volume increase was the result -- especially the result of particular strong B2C parcel volume growth, where we continue to focus our commercial efforts.
On the revenue side, Mondial Relay reported a 4% year-on-year growth. Growth rate was impacted by price dilution that we already observed in the first half of the year as we continue to observe the same trends, mainly faster growth of domestic volume versus cross-border and prioritization of the out-of-home volume over to-door, both shifting volume structure towards lower price point products.
Adjusted EBITDA remained broadly flat in Q3 versus same time last year at PLN 60.8 million, despite the price dilution and despite continued accelerated investment into logistics infrastructure and into SG&A as well as continued inflation in the labor space. The adjusted EBITDA margin was also broadly stable versus Q3 of last year.
Now on to the next page, a snapshot of our U.K. and Italian markets. As already mentioned before, in Q3, we have crossed the mark of turning EBITDA positive in the U.K. for the first time, earlier than we originally planned. A combination of factors have led to this, which we already highlighted partially on the Q2 results call.
First of all, new logistics partnership has allowed us to unlock our locker capacity, provided us with ability to improve utilization, and as a result, provide better overall cost to serve by creating operating leverage. At the same time, we have continued to deploy APMs and to drive network coverage and better service convenience. This together has unlocked our ability to grow in a profitable manner.
But as you can see, it is not only U.K. that has contributed to the International segment performance improvement. Revenue generated by Italy increased almost 6x compared to the same period last year, and this growth has facilitated a significant reduction in adjusted EBITDA loss. The improvement in U.K. and Italy suggested EBITDA was partially offset by an increase in the international overhead expenses, primarily investment into our tech platforms that is going to continue as we now accelerate growth in those businesses and also seek to offer a unified product offering on the cross-border side across all of our markets. Having said that, the entire International segment had a visible positive impact on the group margin improvement in Q3, and is on track to continue to bring positive contribution to the group's EBITDA profit line next year.
Moving on to Page 20, we are now going to look at the unit economics evolution in the U.K. You've seen this chart already. You're familiar with it. As already mentioned, the U.K. has seen a strong volume uptake in the second and third quarter of this year. At the same time, our revenue per parcel has increased by 6% versus Q3 2022, reflecting the different product mix and locker-to-locker gaining a larger share of the total volumes. Our ability to unlock volume, the favorable changes in product mix as well as the optimization of logistics costs resulted in a positive adjusted EBITDA in the U.K. market. The adjusted EBITDA per parcel improved from a loss to a profit of PLN 0.8 per parcel. On top of this, it is worth to mention that all of this was achieved in the U.K. ahead of starting our B2C product offering, which generally gives us more confidence in our ability to expand in the U.K. going forward.
Let's now look at the items below adjusted EBITDA on the next page. You see here the usual [ bridge ]. I would probably want to call out 2 points.
First of all, on the adjustment line, which in Q3 was nominally higher than in the first 2 quarters, there is a one-off related to the acquisition costs of Menzies distribution. Secondly, interest expenses continued to increase, growing by over 40% year-on-year, driven by higher interest rates and higher quantum of credit facilities utilization. At the same time, there has been yet another swing in the foreign exchange rates, impacting currency translations of financial debt.
I remember a question being asked at the Q2 results call, whether we expect this item to change a lot during second half of the year. And indeed, foreign exchange rates have reversed versus Q2 and an PLN 83 million unrealized foreign exchange loss in Q2 has now turned into a PLN 3 million unrealized gain in Q3. Yet still, the impact of those foreign exchange differences for the 9 months was negative at PLN 110 million versus same period of 2022.
Other than this, the IFRS 16 lease costs and depreciation costs continued to grow in line with network scale. This has allowed us to expand EBIT margin to almost 16%, up by 260 basis points versus 9 months of 2022, and deliver an impressive 50% EBIT growth year-on-year. As a result of all this, the net income for the 9 months of this year amounted to PLN 494 million, a 15% increase year-on-year.
Now let's look at the cash generation for the 3 quarters of the year. Our free cash flow generation before M&A expenses in the first 9 months of the year stood at PLN 521 million, including acquisition of 30% stake in Menzies, our free cash flow reached PLN 266 million. The free cash flow to EBITDA conversion rate in Poland improved to 47%, up from 30% for the same period last year, driven by margin expansion. Free cash flow conversion rate before expansion CapEx was at 67% in Poland, showing the great resilience and underlying strength of the business that we have built.
Moving on to the next slide. Let's look at the group CapEx in more detail. As already mentioned, in the first 9 months of 2023, our CapEx reduced by 16% compared to the same period of 2022. This is mostly driven by reduced scale of investment into Poland APM network compared to last year and also different phasing of the U.K. network deployment. Looking specifically at the CapEx intensity ratio, this has decreased in Poland and in the International segment due to a slight reduction in CapEx spend, but more importantly and especially true for International, more as a consequence of strong revenue growth. In Mondial Relay, CapEx slightly increased, driven by the higher investments into APM deployment compared to the same period of 2022.
Now let me provide insight into the net debt and leverage. So our gross debt as of end of September '23 was slightly higher than at end of 2022 as a result of higher utilization of the revolving credit facility. Our EBITDA growth and improved cash position were partially offset by an increase in gross borrowings and lease liabilities, which led to marginally-increased net debt position. Nevertheless, we brought our net leverage down to 2.6x EBITDA, down from 3.2x compared to the end of last year and compared to 2.7x at the end of Q2 of this year. We still expect to marginally delever towards end of this year.
And finally, let me end with 2023 full year outlook update. In terms of volumes, our outlook for the broader e-commerce market performance in key geographies for the full 2023 remains unchanged, as you can see on the page. Our expectations are that the Polish e-commerce market volumes will grow by high single to low double digits for the full year. Combined Mondial Relay markets are expected to stagnate around 0 growth while the U.K. is expected to see a mid-single-digit decline in parcel volumes year-on-year. At the same time, we are confident that our own volume growth will be well ahead of the market, especially in the U.K. where we are somewhat disconnected from the market trends given our still relatively small scale. And in Poland, where our strong market leadership is allowing us to still outperform the broader market.
Looking at our key objectives for the full year and our ability to deliver, they look as follows. We will deliver volume growth well above the market growth rate in Poland, and we'll have expanded our EBITDA and EBIT margins. In Mondial Relay, we'll have significantly expanded our network footprint and increased market share in B2C. As a result of our investment into scale and of absorbing the cost inflation, we will experience price and margin dilution but expect to capitalize on the scale of operations in the near term as we'll drive APM adoption and build operating leverage to optimize our economies. In the U.K., while we have delivered on our breakeven guidance ahead of time, we will continue to focus on growing our APM network footprint to drive scale of our operations that will support us winning improvements in profitability into 2024 and beyond.
We will also balance our priorities so that we can continue the deleveraging of the business to well under 3x EBITDA by year-end, in line with our initial guidance. In that context, we expect total CapEx to amount to circa PLN 1.1 billion, that is excluding M&A expenditure, and expect to deliver positive free cash flow.
Now to give a little insight into Q4 trading regarding volume growth at group level. In Q4, we expect similar volume growth dynamics to what we have seen in Q3. The start of Q4 in terms of October volume has been encouraging in this respect. And as always, we'll publish our trading update on volumes in the first few days of January.
That is all from my side. Thank you all, and over to Rachel for the Q&A session.
Thank you, Adam. We will now take questions from the telephone and then from the webcast. [Operator Instructions].
I will now hand over to Saskia, our conference call operator.
[Operator Instructions] Our first question today comes from Sathish Sivakumar from Citigroup.
I got 3 questions here.
So firstly, on the U.K. growth, obviously, you have good progress on that. Can you share some color, like how London is performing versus the other cities? Just to get a sense like what's happening? Is it because of the Menzies partnership that's actually driving this improvement? Or you actually build a density within London that's actually driving? So any color how the trends are within London versus the other cities in terms of profitability, that would be helpful.
And secondly, on the Mondial Relay. Obviously, you did flag the product mix as [indiscernible] the dilution. How should we think about this dilution impact evolve in the coming quarters? Because as you gain more and more B2C volumes, this should be, obviously, expect to get worse before you start to see pricing come through.
And then the third one, this is, again, around the Mondial Relay. If you look at last year, you had to like ramp up the operations because there was more demand than initially thought into the Q4 peak season, and that has led to the margin compression. How should we think about this year? Where are you actually in terms of investments for peak season, both in Mondial Relay as well as U.K.?
Satish, Michael here. Maybe I take the first couple, and maybe, Adam, you may want to comment on the thought around the outlook.
Just when it comes to the U.K., I don't think you should look at it from a [ city, Pacific ] demographic or economic picture. If you are -- if we look at our growth, it's fairly -- it's concentrated really where the lockers have been, which is historically and still very much across Manchester, London and Birmingham. Clearly, London has a stronger population and clearly has a more heavy weight on the volume, but when you look at the distribution, it pretty much flows between those sort of key locations and where our density is.
What we have seen is, clearly, demand for the product has increased beyond those core geographies. I mentioned on the previous call, we have expanded our footprint now into other cities both with APMs. But also short term, as we scale the network, we've been launching PUDOs, which you can see across the numbers, and therefore, the distribution of the volume continues. Clearly with Menzies, what Menzies has allowed us to do is unlock the volume bottleneck because clearly, we were not getting operating leverage as a consequence because volume was constrained. So clearly, demand and utilization has accelerated across the whole network.
And then furthermore, I made a comment on the call, is really we've launched the Royal Mail partnership. And really, what that had unlocked is really scaling of a new product, which is locker-to-door. So you can drop a parcel off at a locker and send it to anywhere in the country now. So clearly, where we don't have current footprint or coverage, we can offer the alternative delivery, but obviously using the locker as the starting point of the parcel journey. And that also demonstrates that we're seeing demand for usage in a multi-geographic coverage in the U.K., so not specific to a single one.
Coming back to your Mondial Relay question, can you just repeat the last one, please? Just -- I didn't capture it. Just was a breakup.
So on the dilution in the current quarter, you did say that product mix has resulted in the dilution pricing. Obviously, you just -- at the start of the cycle of B2C ramp-up in Mondial Relay, we should expect this dilution in the coming quarters. How should we think about in terms of evolution?
Yes. I mean I'll ask Adam to comment further. But when we look at 2 things, one, I think you asked the question on preparation for Q4. We -- this year, really, what we've done is really make sure all our new openings and new locations have already been ramped up pre going into peak. And two, sort of our staffing requirements and volume forecast for customers have been well managed in advance. In terms of relative to last year, we saw demand. I think we'll keep a stricter control this year, albeit linked to how we see the network evolution already.
We've already seen B2C ramp up. I think there's a number of factors contributing to the B2C ramp-up that we've been speaking about. One, the actual network coverage itself and APMs is now getting to a meaningful number of over 4,000. Clearly, this is a critical juncture where somewhere between 6,000 and 7,000 lockers, we'll start to see what I would feel is the operating leverage and density requirements similar to what we've seen in the U.K. in the last 2 quarters and what we predicted similarly. Because clearly, France being a much larger geography, we're only at about 1/3 of the density we need to be in terms of 30% coverage when we need to be around about 40%, 50% density coverage. So clearly, we're working towards that, and that's why increasing the locker coverage we'll do that. But even with the current locker coverage we have, we're starting to see B2C traction. And really, that's sort of really becoming meaningful over the last quarter, and we expect that to continue. What you have seen is, clearly, our C2C ship has stabilized. And really as a segment growth, we're focused now is really on the B2C and expanding that.
So when it comes to margin dilution, we have said -- I think Adam commented, we'd expect some compression mainly because we're going to absorb the costs. We're not going to pass it through at this point. And really, we really want to make sure we're winning both the consumer mindset and the merchant mindset to get APMs presented correctly in the checkout, which is also what's unlocking the B2C growth in the last quarter.
And we're moving on to our next question, which comes from Pavel Kirjanovs from Bank of America.
Pavel Kirjanovs from Bank of America. Two questions from my side, please.
You already spoke about this on the call and in the release, but can you give us some more color on the trends you've seen between September and October? And perhaps you could also talk about what you saw in France that led you to decrease your volume growth expectations for this year?
And then my second question is on EBITDA in U.K. That has [ been ] positive this quarter, but from the footnote, it seems that it was ex overhead costs. Should we assume that if we include that, U.K. EBITDA number was negative? And maybe you can quantify how much those were? And if we think about '24 guidance of U.K. EBITDA being positive on a full year basis, is that also ex these overheads?
Would you like to take that, Adam, or will I?
Yes, yes. No, I'm actually not sure I -- the interpretation of the footnote is correct.
So I think the international overheads, which are kind of part of the International segment, are not specifically U.K.-related. They're kind of related to the overall international operations. That also includes Italy, but that also includes Mondial Relay markets where we built a common tech platform, we built a uniform product proposition, and therefore, these are not costs which you can allocate to a single specific market.
So all the U.K.-related SG&A, such as sales, marketing, admin, finance, et cetera, which pertain to the U.K. market are obviously in the U.K. numbers and they are part of the reported U.K. EBITDA just for clarity, right? So from that perspective, U.K. is a stand-alone market with all the G&As relating to that market that can be allocated to this market has broken even and been profitable in Q3, just for clarity.
And maybe commenting on the dynamics. So as you know and you realized most probably, looking at the e-commerce performance in September and also other players delivering parcels in September was September was very soft because of the -- mostly because of the fashion retailers underperforming because of the weather. But October was clearly a catch up above our expectations, but it's very hard to look at it from the perspective of the full Q4. As you may imagine, the peak is going to start literally in coming days. So that will be the real test if the consumer sentiment across the board, across the markets has improved, or literally October was just the counterreaction to very soft September. So that's why how we said in the guidance that we expect at least on performance on the Q3 level, but of course, might change as I saw October already was a surprise, a positive surprise. So let's see how it evolves.
But in this current volatile market and consumer sentiment-driven market, it's super hard to have 200% conviction that November and December will be similarly strong or stronger than we expected like October. That's why we try to be cautious here.
Well, any comments on France specifically? Or not really?
No. I mean this is across the board. I mean, in all the markets, we saw a catch-up versus September. And now we look at coming days, the entry to the peak season, how it may evolve again across the markets we operate.
And next, we have Marco Limite from Barclays.
The first question is a follow-up question on the trading environment. So you are guiding at group level for Q4. Just wondering if you're willing to give a bit more color on what to expect or what's the guidance at single country or unit level? So if the flattish Q4 and Q3 is valid across the geographies? Or there are different trends going on?
And the second question is on the U.K., and whether you can better explain the partnership with Royal Mail? And really, who is running the business? So you are running the business as though Menzies, and Royal Mail is just, let's say, switching on the offer on their platform? Or how does that work?
Yes. So let me maybe answer the first one, which is the dynamics across the markets without maybe being very specific on a single market. I think that the general comment that we expect broadly same growth dynamics in Q4 is relevant for all the individual markets. There obviously might be a swing in 1 or the other market, 1 or 2 percentage points up or down. But in total, we don't expect any single market to materially diverge from the Q3 trend.
Let me take the second question, Marco.
Today and historically, we have 2 products live in the U.K. Firstly, we have had [ labelless ] returns live, which we launched 2 years ago. And last year with, predominantly Vinted, we launched our locker-to-locker service for C2C. We've not really had a competitive or a national coverage solution for what we call send or locker-to-door. And what we have today with Menzies is clearly now an operator, that can really call out our lockers on a daily basis and on a multiple basis to really service both collection and delivery to those lockers. But what we also have seen in demand and in terms of test of product service is the ability for someone to want to send a parcel through a locker as an alternative to using the post office as an example. And clearly, 1 of the endpoints of that would be to a home delivery because today, we may not have a locker coverage or a PUDO coverage in a certain geography.
And therefore, what we've now done is activate that product offer, but we've now done it in partnership with Royal Mail. And obviously, what Royal Mail has given us is full national coverage of being able to provide that solution. Menzies service the lockers and Menzies basically collect from the lockers in that basis, but clearly, Royal Mail then does the last mile, in this instance, for delivery to door. I think it's an important footstep because also what it now does is give further usage and demand for using lockers and builds further consumer attraction for utilization of the lockers in the U.K. And clearly, it's also been an important part of the growth in Q3 as we continue to expand.
And can I ask if the next step of this partnership is actually the other way around? So Royal Mail collecting and Menzies delivery to lockers? So yes, InPost basically helping Royal Mail to do [ it ]?
Yes. It's not obviously on our current road map at this point, but maybe a question better for the Royal Mail at this point.
And now, we have David Kerstens from Jefferies with our next question.
I have 3 questions, please.
First, can you update us on the pricing in the [ Lidl ] channel? And how accretive do you expect it to be to profitability in the fourth quarter and next year?
Second question for Michael, on the launch of the B2C product offering in the U.K., what do you expect -- or how will you proceed with this launch? And when and what will be the impact on volume and on the mix? So we expect something similar as you have seen in Mondial Relay.
Then final question for Adam, you talked about CapEx coming down by 6 percentage points to 11%, mainly driven by Poland, now at 10% of revenue. What do you see longer term as an optimal CapEx level for Poland? And maybe from Mondial Relay and similarly for the U.K., maybe just to update those assumptions which you had from the time of the IPO?
Happy to tackle the first point, then passing to Michael, and at the end, to Adam.
So as you learned already after our Q2 results, the level of the repricing with our client -- main client, Allegro, is set like on a double-digit level. But the difference is in 1 point a year ago, the -- haven't been any discussions and talks about how we may strengthen our partnership around our repricing date. This year, such discussions are taking place. I, of course, can't disclose any details because nothing has been agreed. But if you track our joint activities, we launched cross-border to foreign markets for our friends from Allegro. Now, we enlisted our PUDO points on Allegro Smart options as well, so you may read that as a kind of friendly win-win kind of discussions. And let's see.
Has the price increase already been implemented? Or are you still in talks with Allegro?
No, it hasn't been implemented yet because the date for the implementation is, I guess, end of November.
Okay. Okay. So a bit later than last year.
Correct me, Adam, if I am if I'm wrong, but I think it was November.
That's correct. That's correct.
Great.
On the B2C question, David, and thank you, and building on the point that Marco raised. You'll see that actually from our current performance in U.K., utilization of the lockers is super strong. Well ahead of expectations. And clearly, that was reflected in our volume and overall distribution of growth across the country. I'm going to come -- I think it's an important point because when it comes to the B2C element, clearly, we want to be make sure we have the full capacity and density, as I keep stressing, to ensure we have the convenience to deliver the product.
As it stands right now in the U.K., I think the balance is continuing to focus on quality. The existing product set is really driving the growth. We have launched with 2 clients, a test product on B2C, but it's a very small volumes, really, as we iterate on the product and the flows and the demand working with the retailer in the checkout, as we have done historically in France because getting all the ingredients right, not just launching B2C but working with the retailer to present lockers in the checkout correctly. Really working in terms of the logistics to really ensure the servicing and there, thirdly, making sure the network has the right capacity and density to really service it. And clearly, these are a number of steps.
So I wouldn't expect any significant change, certainly in the near term, of the B2C product mix within the U.K. business because clearly, we want to continue to invest in the capacity. And also the U.K. market relative to France is nearly 3x the size, so the B2C demand is obviously quite higher. And really, we need to make sure we can service that well, but we are testing. There is incoming demand for our services, but we have to make sure we have the quality of product. But at the same time, we have already got enough demand with our current capacity as we continue to expand.
So we have a good situation developing, but really, we will build the product carefully. And clearly, as you've seen in France in the last quarter, we took a very similar approach. Even when I look at France today, just to sort of iterate on a point, really, we've only got about 60% of the top 50 merchants live on our product when it comes to sort of servicing. And today, we're still predominantly servicing a D+ 2 product as we currently build the network and capacity as well. So not only is there room to improve the product mix to D+1 as we continue to invest in the network, but also there's the opportunity to continue to expand in terms of merchant coverage which clearly, in the last quarter, we brought on brands like Zalando, Lidl that have launched the B2C service and [ Tmall ], to name a few. Really, as we start to expand that offering because we're now starting to approach a meaningful locker coverage, albeit still need to improve on density. So these factors all need to come together to really build a winning product.
So clearly, very pleased with the results, but I would not expect the U.K. mix to change in the near term.
Yes, and let me pick up on the CapEx question.
So obviously, Polish CapEx intensity is gradually coming down. It's part of the structural element of where the business is and where the market is, and how mature the business is. So I think a good feel for it would be midterm. This is high single to low double-digit CapEx intensity for the market of Poland. Whereas in the international, broad international, both France, U.K., even more so Italy, Spain, we are at a relatively early stage of development. And therefore, I think high teens or even high teens plus is the right expectation for the years to come.
As right now, obviously, the dynamic is very much [ descending ] in terms of U.K. being on the very steep revenue development curve. But in general, our ambition in terms of network development and also the market potential definitely justifies keeping that CapEx intensity at high teens for the next couple of years probably.
And you said that Poland's a high single digit, low double digits? So it can pick up again as well, you think?
High single to low double, yes.
And we're moving on to Henk Slotboom from The Idea for our next question.
I've got 3.
The first 1 relates to the partnership with Royal Mail. I'm a bit surprised to see that name popping up because you're referring to quality as well. And well, sometimes I read some thinking about Royal Mail, and delivery quality is not exactly their main strength. So I would like to hear your views on that? And to what extent that could undermine the reputation of impose in the U.K.?
Second question relates to Italy. You'll be making a far better progress there than I had dared to hope. Is it conceivable that Italy will reach breakeven or slightly above in the course of 2024? And then perhaps you can clarify the first bullet point on Slide 23 of the presentation, where you say that there was a temporary slowdown in the U.K. deployments and delayed procurement of some depots in Poland and France. What exactly do you mean by that? Those were my questions.
Maybe I'll take the first question on the Royal Mail. I think like any contract partner such as this that we go into, we set very strict standards around our quality and [ SLAs ]. And I'm very pleased in terms of what we've been able to agree with the Royal Mail. And I think already, as we have entered into the relationship after a couple of months, the service quality and delivery has been super strong. So very pleased, and really, what it has allowed us to do is expand our product offering for more consumers, and clearly, we're working to those results. So understand the feedback, but I would say, obviously, we're monitoring that. And clearly, any quality challenges, we're very quick to address.
When it comes to Italy and breakeven, I don't think we're guiding at this point in terms of that future. But clearly, the progress of the market is doing really well. We're really seeing a good product mix and, really, traction with the development of the network across that country. So remain optimistic, but not guiding on anything relative to breakeven at this point.
Adam, do you want to cover the last point on the bullet point?
Yes, sure. Happy to.
So what that means is if you look at the CapEx for the 9 months, you clearly a spend reduction, point number one. Point number two, if you take an average quarter run rate for the first 3 quarters when you look at our full year outlook, you will notice that we expect some acceleration of the CapEx spend in the fourth quarter. And what that means is simply, we will catch up with some light CapEx for the first half of the year. And especially when we refer to the depot procurement, the time to market is relatively long. The space is very competitive. That's typically third parties delivering the procurement, and you sometimes experience some delays in delivery of those facilities and that's exactly what we experienced, especially in France. We expect to make up for this in Q4 and therefore step up a little bit in the CapEx spend to meet our guidance of circa PLN 1.1 billion spent for the full year.
As far as the procurement problems are concerned, this is a temporary phenomenon? This is not something structural?
Well, I'd say that's something that you see in the broader market. I don't think it's only Poland or France-related, or it's something that specifically relates to us. I mean, I think in a post covered e-commerce logistics space, the competition for capacity has been massive. The [ disbalance ] of the demand versus supply has been quite significant. I think the market needs a couple of years to normalize, and therefore, you -- also the people who deliver basically those facilities to the market also struggle with capacity. Their capacity is very much also driven by the location pipeline that they have, or actually, convenient and suitable locations pipeline, I should say. And therefore, I think it's a [ disbalance ] of the market that's happened post-COVID driven by the demand, which is kind of phasing out and balancing out as we speak.
Our next question comes from [ Sam Bland ] of JPMorgan.
I've got 2, please.
First 1 is on Slide 6. You just see the outperformance in volumes in Poland versus sort of the market narrowing a little bit. Would you attribute that to anything in particular?
And the second 1 is sort of another 1 on CapEx [ relating to ] capital allocation. We're seeing your leverage come down quite fast now. What do you think the thoughts are around maybe next year? Or capital allocation is basically -- can you find more good projects to spend more CapEx on? Or happy to let leverage keep on coming down? Or look at dividends or whatever else?
Happy to answer the first question.
I think it's nothing unusual. I think in Q2 last year, also the difference between the market growth and the growth of our share in terms of volume was even lower. It was the difference about the 2 percentage points, if I remember correctly. On the other hand, I think it was already commented. Having half of the market, having set of potential competitors trying to win something, we are continuously proving we are gaining the market share irrespective of our current market share, which is already very high. So even if it's 0.5 percentage points, we will be super happy that still, we get a new client. We get the new stake in the -- a higher stake in the market, and also we are gaining more new users.
I just want to flag 1 topic that maybe was missed is the number of clients shopping online is around 25 million clients. Our client share is increasing to almost 18 million. Still, we have to win around 5 million to 6 million clients [ herds ], and we will do so. But in terms of the adoption perception of the brand and the first choice, we are massively outfitting the -- outperforming the rest of the market. So we will continuously work hard on gaining the market share and winning customer herds. But yes, it will be quarter by quarter, I think, looking slightly differently. But it's it's our main focus to bring the best NPS to our end users.
And in terms of the CapEx spend or the free cash flow generation, I would love to pass to Adam.
Yes. Yes. Thank you, Rafal.
So, Sam, the cash generation and the deleveraging, I think, is very much progressing in line with our expectations. And therefore, I think our priorities in terms of capital allocation remain unchanged. As long as we see the market potential and the potential for the return on capital that we can generate in our core geographies, by far, priority #1 will be to continue to invest in organic development in the core geographies and stay very consistent in delivering those.
Secondly, I think if balance sheet permits, we will also be looking for kind of M&A opportunities but remain opportunistic on this, i.e., if an attractive and value-adding opportunity comes across, we'll probably look at it. But again, stick to key geographies and make sure we consolidate our footprint in those geographies and simply potentially accelerate the trajectory to building a solid footprint in those markets. And these by far will be the 2 key areas, I think. Any capital distribution back to shareholders would probably be lowest priority. And I think, again, we remain consistent on this for many quarters since IPO.
Our next question comes from Roman [indiscernible] of Goldman Sachs.
Just a quick one.
Could you please also update on your plan for repricing in France and the U.K. in the near term? Do you have any plans?
Roman, I can take those questions.
There is no plans for any repricing in the U.K. in the near term. We're too early in our development. I'm very much focused on building and investing in the network and expansion of that. I think in France, I think we've absorbed quite a significant amount of market inflation specifically in the last 12 months, but clearly, we're focused on the operating leverage. I think looking forward to '24, I think there may be opportunity to start to consider some of that. But at the minute, it's too early. And really, the priority is still very much about taking building and investing in scale and taking market share. So very much it's under evaluation, but the strategy still remains very much to continue to invest in scale.
And we have a follow-up from Marco Limite of Barclays.
And sorry to come back to the Q4 outlook. Are you willing to clarify how stronger was October compared to Q3 average? And what is your assumption basically for November and December that you mentioned being kind of conservative at this point in time given the limited [indiscernible]?
Marco, I'll stick to what we said for the full Q4. I think, again, bear in mind, [ peak ] is a significant swing factor in terms of absolute quantum of volume I think any expectation of what November or December is going to be, given there is some flexibility in terms of how the volumes flow and especially how they are delivered, Black Friday versus early December, and how people shift their kind of purchasing habits between November and December. I think a good example is Poland. You look at Poland 2 years ago. The peak was really 10 days pre-Christmas, whereas it's shifting more and more towards November, Black Week or even pre-Black week. So I think sticking just to saying Q4 broadly expected to repeat the growth dynamics of Q3 is where we would leave it.
Okay.
And maybe also a follow-up question on capital allocation, given that you are deleveraging quite fast. Am I right in assuming that beyond deleveraging, buying out the minority stake [ on Menzies ] priority in terms of your capital allocation?
Well, I'd say subject to us being pleased with Menzies performance, which is obviously the case right now. I'd say, yes, it is a priority, which is probably reflected in the fact us securing that [ call ] option for buying out the remaining 70% of ownership is clearly a reflection of us thinking of Menzies acquisition as 1 of the capital allocation priorities. Definitely is.
As there are no further telephone questions, I'd now like to hand the call back over to Rachel for any questions from the webcast.
Thank you, [ Saskia ].
Our first question is from [ Ryzad ] from [ Insignis ]. He wants to know what should 1 expect regarding the development of the business in Italy, both regarding the new additions of APMs and the profitability? And then a follow-up question is, what is the outlook for the overhead position in the EBITDA line? And should it stabilize at the current level? Or should we expect to increase going forward?
I think it was in a big part already answered by Michael, especially referring -- regarding IT -- sorry, Italy. So obviously, we would refrain from giving any specific guidance for Italy, especially at this stage. I think we would guide for 2024 and potentially beyond early next year.
What we can say is, obviously, if you look at Q3 results, you can see a very significant improvement. It's not only scale, it's also unit economics. So improvement in the overall shape of Italy business is very visible, and we're not a million miles away from breaking even in this market as well. Now whether that happens next year, I would not want to state that. But clearly, we are very happy with the traction we have in Italy both in terms of growth, but also in the improvement of the shape of the business in general and specifically unit economics improvement. So that's definitely a positive in the overall development.
And in terms of international overheads, we would still expect them to increase next year. It's both -- we all know tech is a competitive space. Competition for talent is very, very fierce. We are not -- a couple of years ago, we're only hiring in Poland, in that space right now. We are very internationalized. So we have teams across Europe and definitely, that's going to increase our cost next year.
Thank you, Adam.
The next question is from [ Paul Johnson ] from [ Haldar ]. It's regarding InPost Pay. What can you share about development and your perceived potential of it on business fundamentals?
Happy to answer that question.
So maybe some of you may notice, we started our better version of InPost Pay, which is now proliferated among more and more shops. Better version means a limited number of functionalities to test and measure the impact on the share of checkout. And here, we see clearly that first merchants who deploy that already on their baskets, they are visibly, day by day, trending in terms of the share of checkout of our payment. One of the examples went up from 0 to 5% share of checkout with our InPost Pay among 7 other payment providers, and that happened within a week. Of course, this is just 1 of the examples that give us strong conviction that once we start [ marketizing ] that solution, which is going to happen in coming days, running a big lottery program for all the end users to acquire them and add them to the mobile app with InPost Pay embedded within the mobile app of InPost, we will see much stronger response rate and we may then assume as well the potential business impact and quantify it also for 2024.
So as for now, this is -- and I was several times saying that, but I can repeat that once again. This is the most innovative solution we launched within InPost since our first APM. So the priority for that service is absolutely critical, and our belief that this is a game changer on the payment market is also very strong. So of course, we are starting from Poland because the proliferation of mobile app is the highest, but I think we will quantify the potential impact, and we are more than happy to share that with the market pretty soon, which will put us into another league from just being a logistics service provider enabler on that field to being also a super enabler on the GMV-driven processes. So very intrigued, very happy to share more details once we collect more data from the pilot with the better version.
Thank you, Rafal.
The next question is from [ Paul Johnson ] from [ Hela ] again. How do you plan to take advantage of the ability to deliver on Sundays in the U.K?
I'll take that question.
I think, firstly, today, we already see the weekend as being 1 of our busiest days for our returns products. So really, where we're already operating with key e-commerce merchants such as [ ACES ], [ boohoo ], [ JD Sports ], et cetera. So it's quite obvious now that actually now, looking at a 7-day a week product from a delivery point of view is clearly a natural turn. One, because the consumers are quite actually open to using the lockers and are quite popular to use at the weekends. And clearly, this becomes an attractive point for the B2C merchants as we start to consider the product.
So it's very much a core pillar, but obviously, it's a pillar that's already being utilized in terms of drop-off, and will continue to be a focus as we think about the B2C rollout and creating a core competitive advantage amongst the competitive set.
Great. Thank you, Michael.
The next question comes from Andre from [ Ceres ]. Can you see the Vinted volumes increase as the e-commerce segment is going to be more and more popular regarding ESG-conscious growth as well, especially in fashion?
Yes, I can take that question as well.
I think it's important -- firstly, I'm not going to comment specifically on an individual customer's volumes in this context related to Vinted. But I will highlight that clearly, e-commerce itself is actually really probably the fastest-growing segment, that's really what's highlighted here, across all markets. And we can see it historically in France, where probably it's been the strongest in Europe initially. But now we've seen it expand across both Spain, Italy and the U.K. in the last 12 months. And really, both fitting into what are not just the ESG consciousness, but also cost efficiency in terms of reselling of second half items and the consumers being more aware of what the purchasing habits are.
So there's a number of factors that are really doubling into this segment. And clearly, the final part here is clearly the reselling economy is really being driven by individual consumers, not websites. So actually, a locker proposition really fits strongly to really provide an offering here, so in terms of both convenience, cost effectiveness and sustainability to cover together. So really, it's a fast-growing segment, if not the fastest, and a segment really where our business is core and resonating with in multiple geographies. And we'll continue to partner and grow not just with companies like Vinted but others that are operating and developing into this segment.
Thank you, Michael.
The next question is from Andre from JMS Invest. He says, what is your midterm EBITDA margin target for the U.K.?
Again, this is the question which pops up quite often. I think we're consistent with our expectations and with our outlook for the midterm, which is we've been saying it's in the territory of high 20s, 25% to 30%. And yes, I think the current traction that we see is probably supporting that expectation.
But obviously, that said, that will require us to significantly increase our network footprint. And that also assumes, obviously, that we continue to grow our volumes in the U.K. quite dynamically over the next 3 years at least.
The next question is from Andre from [ Ceres ] again. Can you please comment on the Mondial Relay Relay takeover versus cooperation with Menzies? It seems the French market is very demanding versus the U.K. one.
I think I understand the context of the question. But I think, firstly, I'd say both markets are super competitive, but the entry points for both markets are very different from an InPost point of view. Clearly, with Mondial Relay, we bought an existing business with legacy infrastructure and also legacy product offer. With Menzies, we've obviously entered into a cooperation in sort of [indiscernible], but we've really bought capacity and availability. But clearly, there's still investment in product and development because today, Menzies predominantly are not operating within the e-commerce segment whereas Mondial have had a legacy PUDO structure. So we're coming up the operational side from 2 different angles on the development of the network. And furthermore, in the U.K., we had a well-developed locker network already, whereas in Mondial, we're having to invest in that network in parallel as well as invest in the operations to really build the coverage.
I think the final thing I think which -- I think we highlighted in the Capital Markets Day. But for others who may have not seen so obvious looking from the outside, it's just the geographic side from the market. E-commerce in the U.K. has concentrated predominantly into 3 cities, from Manchester, Birmingham and London. If you take France, the actual population distribution in France, 55% of the population don't live in cities in France. And actually, the distribution between the markets is different so density comes in a different wave. And actually, you're building a different type of network of which clearly Menzies solves 1 solution, but Mondial Relay needs investment to build another.
So really important to understand that both markets are competitive, but both come with different context in terms of starting point and evolution to reach the endpoint.
Thank you, Michael.
The next question comes from [ Paul Johnson ] again from [ Help]. What obstacles are there for reaching the 50% capacity and coverage in France, which are necessary for the B2C offering? And then a follow-up question, what's the time line and CapEx needed for reaching this?
Yes. I think really to comment, I think I've already covered some of this in terms of what we're trying to get to. As I said, it's 50% capacity, it's 50% density coverage. We're at about 30% today.
I think I said, look, really, we're looking to a tipping point between 6,000 and 7,000 locker locations, but really building that coverage in key areas in terms of ensuring with the right density footprint to do that. And really, therefore, we can then offer a compelling B2C product. But also in France, we're having to invest in the last mile depot network to service that because just of the geographic footprint different to the U.K. in terms of what that offering is.
When we started the journey in Mondial Relay, we had 26 locations. At this point, and now we're up to 46, 47. So we've already doubled our footprint. I'd say there's still a journey to go. We need to be probably near about 55 to 56 locations. And clearly, we still need to nearly increase the locker network from where it is today by another 2,500 to 3,000 locations. So that's probably still another 12 months time line of that type of development, but already, we're getting coverage. So that's sort of the picture of it [indiscernible] at this point to give a steer.
Thank you, and thank you for all your questions today. I would like to hand over to Rafal for closing remarks.
Thank you very much for all the questions, guys.
So very quickly, a kind of comprehensive summary. Q3 in Poland, I would say, continuous growth with increasing client base. Adoption, NPS, loyalization, hard users shift irrespective of the competitors trying to enter into that markets, trying to go into that flywheel on themselves. But we are not slowing down. We are not sleeping. We are not just sitting and waiting. We are developing new features like InPost Pay, like other tools embedded within our mobile app to strengthen our position to create more hustles to literally not slow down and bring even better results for Poland in in coming quarters.
On the other hand, every other country we are playing with, we've beaten the market performance. Excellent results in the U.K. Fast-growing adoption of APMs in France, which wasn't the case, like an obvious thing when we invested into Mondial Relay. This was our biggest question mark. Will APMs work on the market dominated by PUDO points? And now quarter-by-quarter, the share of the APM's volume is increasing. So clearly, the thesis that this is the market for APM is right, was right. What we invested is right today when we see and observe the volume. Fast-growing B2C adoption in France. Mondial, they didn't exist in B2C space. And now, as Michael clearly has shown, it's the booster for our volume growth and market share adoption.
Fast-growing network across all our markets. Great traction in Italy, Spain, Belgium. Of course, still a lot of challenges, but it's a marathon, as I always said, not as sprint. And the U.K. is the best example. We reached our breakeven after 10 years. And now U.K. is, I strongly believe, a very strong engine for our growth. Maybe it will be the most important market in [ among ] our 9 markets we operate. And this is a marathon, not a sprint. Although I'm telling you, when you compare our global competitors, the big brands, global brands, [ they're ] built their volumes and market positions for decades. And us building our international footprint just in the last 2 years, since we are running in a super sprint, not in a marathon, looking at our achievements versus how much time it took them to build their presence, especially in Europe.
So keep your fingers crossed for us. We are not slowing down, we are ambitious, we are hard working and we are fully dedicated to really build a global brand that people love like they love in Poland. Thank you very much to the audience, and have a great day and great rest of the week.