(in PLN '000)	Note	3-month period ended 31-03-2016	3-month period ended 31-03-2015
Revenues from sales	5.1	131 404	129 390
Other operating revenues	5.5	284	1 013

Amortisation and depreciation		2 202	3 549
Materials and energy consumption		2 021	1 515
External services	5.4	104 341	91 451
Taxes and charges		217	264
Payroll	5.4	25 855	20 790
Social security contributions and other benefits		5 188	3 826
Other expenses by type		415	501
Cost of merchandise and raw materials		301	584
Other operating expenses		892	184
Total operating expenses		141 432	122 664

Operating profit		(9 744)	7 739

Financial revenues	5.6	490	479
Financial expenses	5.6	1 050	1 194

Profit before tax		(10 304)	7 024
Income tax		(1 777)	1 247
Net profit from continuing operations		(8 527)	5 777

Net profit		(8 527)	5 777

Other comprehensive net income		-	-
Total comprehensive income		(8 527)	5 777

Net profit attributable to
Parent company shareholders		(8 527)	5 777
Non-controlling shares		-	-

Comprehensive income attributable to
Parent company shareholders		(8 527)	5 777
Non-controlling shares		-	-

Earnings per share	21
Basic		(0.74)	0.51
Diluted		(0.74)	0.51

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS (in PLN '000)	Note	31-03-2016	31-12-2015	31-03-2015
Fixed assets		103 782	100 376	95 654
Goodwill	8	38 445	38 444	38 444
Other intangible assets	9	34 448	34 510	32 298
Tangible fixed assets	9	16 720	17 119	8 790
Investments in subsidiaries	10	-	-	91
Other long-term financial assets	11	2 918	2 856	6 340
Deferred tax asset	12	5 913	1 534	3 838
Other fixed assets		5 338	5 913	5 853
Current assets		156 359	170 595	154 119
Inventory		1 210	1 762	1 096
Other financial assets		393	644	554
Trade and other receivables	13	129 887	131 649	109 675
Income tax receivables		47	292	72
Other current assets	14	3 292	7 761	20 270
Cash and cash equivalents		21 530	28 487	22 452
Total assets		260 141	270 971	249 773

EQUITY AND LIABILITIES (in PLN '000)	Note	31-03-2016	31-12-2015	31-03-2015
Equity capital
Share capital		11 558	11 558	11 558
Supplementary capital		95 918	95 918	95 918
Retained earnings		13 726	22 254	18 562
Capital attributable to parent company shareholders		121 202	129 730	126 038
Non-controlling shares		-	-	-
Total equity		121 202	129 730	126 038

Long-term bank credits and loans	16	-	-	7 720
Other long-term provisions		491	518	391
Government grants		769	852	1 107
Deferred tax provision		-	3 231	1 395
Long-term financial liabilities	15	5 326	5 857	1 463
Total long-term liabilities		6 586	10 458	12 076

Trade and other payables		105 792	118 733	88 374
Short-term bank credits and loans	16	13 032	2 400	12 591
Government grants		338	346	364
Current tax liability		9 706	5 061	7 408
Short-term provisions		1 397	1 952	2 245
Short-term financial liabilities	15	2 088	2 291	677
Total short-term liabilities		132 353	130 783	111 659
Total liabilities		138 939	141 241	123 735
Total equity and liabilities		260 141	270 971	249 773

CONSOLIDATED STATEMENT OF CASH FLOWS

(in PLN '000)	Note	3-month period ended 31-03-2016	3-month period ended 31-03-2015


Cash flows from operating activities
Profit for the year		(8 527)	5 777
Adjustments for:
Tax expense recognised in profit or loss		(1 777)	1 246
Finance costs recognised in profit or loss		322	256
Depreciation and amortisation of fixed assets		2 202	3 549

Changes in working capital:
(Increase)/decrease in trade and other receivables		2 171	45 501
(Increase)/decrease in inventory		552	(637)
(Increase)/decrease in other assets		5 044	(1 018)
(Decrease)/increase in liabilities (excluding loans and borrowings)		(13 882)	1 212
Increase/(decrease) in provisions, deferred income and grants		(673)	(2 165)
Cash generated from operating activities		(14 568)	53 721

Interest paid		(215)	(342)
Income tax paid		(944)	(360)
Net cash from operating activities		(15 727)	53 019

Cash flows from investing activities
Interest received		8	7
Cash flows from loans granted		223	(62)
Payments for tangible fixed assets		(261)	(113)
Payments for intangible assets		(1 097)	(301)
Net cash (spent)/generated in connection with investing activities		(1 127)	(469)

Cash flows from financing activities
Cash flows from loans from related entities		-	(46 144)
Cash flows from bank loans		10 632	1 410
Cash flows from finance lease contracts		(735)	(262)
Net cash used in financing activities		9 897	(44 996)

Net increase in cash and cash equivalents		(6 957)	7 554
Cash and cash equivalents at the beginning of the period		28 487	14 898
Cash and cash equivalents at the end of the period		21 530	22 452

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (in PLN '000)	Note	Share capital	Supplementary capital	Retained earnings	Attributable to parent company shareholders	Attributable to non-controlling interests	Total equity
As at 1 January 2015		11 270	85 406	22 519	119 195	1 066	120 261
Total income		-	-	5 777	5 777	-	5 777
Issue of shares in connection with the acquisition of InPost Finanse Sp. z o.o.		288	10 512	-	10 800	-	10 800
Settlement of the acquisition of minority interests of InPost Finanse Sp. z o.o. including:		-	-	-	-	-	-
- Value of minority interests on acquisition		-	-	1 066	1 066	(1 066)	-
- Transfer of results		-	-	(10 800)	(10 800)	-	(10 800)
As at 31 March 2015		11 558	95 918	18 562	126 038	-	126 038

As at 1 January 2015		11 270	85 406	22 519	119 195	1 066	120 261
Total income		-	-	9 468	9 468	-	9 468
Issue of shares in connection with the acquisition of InPost Finanse Sp. z o.o.		288	10 512	-	10 800	-	10 800
Settlement of the acquisition of minority interests of InPost Finanse Sp. z o.o. including:		-	-	-	-	-	-
- Value of minority interests on acquisition		-	-	1 066	1 066	(1 066)	-
- Transfer of results		-	-	(10 800)	(10 800)	-	(10 800)
As at 31 December 2015		11 558	95 918	22 253	129 729	-	129 729

As at 1 January 2016		11 558	95 918	22 253	129 729	-	129 729
Total income		-	-	(8 527)	(8 527)	-	(8 527)

As at 31 March 2016		11 558	95 918	13 726	121 202	-	121 202

1.2. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF INPOST CAPITAL GROUP

1.3. Basic information and history of the Group1.4.General Information

InPost Spółka Akcyjna (further also "Parent Company", "Company"), with its registered office in Cracow, was established under a contract on 27 November 2012 under the name of Nowoczesne Usługi Pocztowe Sp. z o.o. The Company was registered on 28 November 2012 in the Register of Entrepreneurs kept by the District Court for Kraków Śródmieście in Cracow, 11th Commercial Division of the National Court Register, under entry no. 0000442032. The Company is an indirect subsidiary of Integer.pl SA. Since 13 October 2015, the company has been listed on the Warsaw Stock Exchange (further also "WSE").

On 2 June 2014, the Company changed its name from Nowoczesne Usługi Pocztowe Sp. z o.o. to InPost Sp. z o.o., while the company InPost Sp. z o.o. , functioning to that day, which remained after the separation of the postal operations, changed its name into InPost Paczkomaty Sp. z o.o.

On 29 December 2014, along with the change of the KRS number (entry in the National Court Register), the Parent Company was transformed into a joint-stock company (spółka akcyjna). Since that date the Company has been operating as InPost SA. Following the change of legal form, the share capital consisted of 10 million series A shares of a nominal value of PLN 1 each.

On 30 December 2014, the Extraordinary Meeting of Shareholders of the Parent Company adopted a resolution on the increase in the share capital from PLN 10 000 000 to PLN 11 270 000 through the issue of 1 270 000 shares of a nominal value of PLN 1 (one zloty) per share and the total nominal value of PLN 1 270 000, excluding the pre-emptive right of existing Shareholders. The new shares were acquired in the following manner:

ˇ 916 122 series B shares were acquired by Integer.pl SA in exchange for a cash contribution in the amount of PLN 34 303 066.78;

ˇ 353 878 series C shares were acquired by Badenhop Holdings Limited, based in Nicosia, Cyprus, in exchange for a cash contribution in the amount of PLN 13 230 933.22.

On 17 March 2015, series A shares contributed by the existing shareholders (Integer.pl S.A. and InPost Paczkomaty Sp. z o.o.) as an in-kind contribution to Integer Inwestycje Sp. z o.o. Consequently, on 17 March 2015, Integer.pl Inwestycje Sp. z o.o. acquired 100% of series A shares.

On 23 March 2015, there was another increase in the share capital. The Extraordinary General Meeting of the Shareholders adopted a resolution on the issue of 288 000 of series D shares, with a nominal value of one zloty and the total nominal value of PLN 288 thousand. All series D shares (at a unit issue price of PLN 37.5 per share) were acquired by Integer.pl SA in exchange for a contribution in-kind of the value of PLN 10 800 000, in the form of 49.98% of shares in InPost Finanse Sp. z o.o.

On 20 May 2015, significant changes took place in the shareholding of the company through a share capital increase of Integer.pl Inwestycje Sp. z o.o. by PLN 58 487 250 through the creation of 1 169 745 indivisible shares with a nominal value of PLN 50 each, which were acquired as follows:

- 904 054 shares with a nominal value of PLN 45 202 700 were acquired by the existing shareholder - Integer.pl in exchange for a contribution in kind in the form of 916 122 series B shares and 288 000 series D shares in InPost SA,

- 265 691 shares with a nominal value of PLN 13 284 550 were intended to be acquired by the company Badenhop Holdings Limited in exchange for a contribution in kind in the form of 353 878 series C shares in InPost SA.

On 11 September 2015, the Polish Financial Supervision Authority approved the prospectus of InPost SA, thereby allowing for the public offering of shares of InPost SA. The sale of shares took place through subscription.

In connection with the Public Offering, the shareholding structure was changed and as of the date of these Condensed Consolidated Financial Statements was as follows:

Share capital	Number of shares	Nominal value of one share	Nominal value (PLN)	% of share capital
Integer.pl Inwestycje Sp. z o.o.	6 703 640	1	6 703 640	58.00%
European Bank for Reconstruction and Development (EBRD)	970 872	1	970 872	8.40%
Other shareholders	3 883 488	1	3 883 488	33.60%
11 558 000	11 558 000	100%

1.5.Identification details of the company

Business name: InPost SA (formerly: InPost Sp. z o.o.)

Registered office: Kraków

Address: ul. Malborska 130, 30-624 Kraków

Regon: 122726260

NIP: 679-308-76-24

KRS: 0000536554

Share capital (as at the date of statements): PLN 11 558 000

Telephone number: +48 12 619 98 00

E-mail:biuro@inpost.pl

Website: www.inpost.pl

Auditor: (Auditor for 2016 has not yet been selected)

Company's duration: Indefinite

The composition of the Management Board of the Parent Company as at 31 March 2016 and as at the date of the preparation hereof.

President of the Management Board: Sebastian Anioł

Deputy President of the Management Board: Marcin Pulchny

Member of the Management Board: Krystian Szostak

The supervisory body of the Company is the Supervisory Board, acting in the following composition:

Chairperson of the Supervisory Board: Rafał Brzoska

Supervisory Board Member: Wiesław Łatała

Supervisory Board Member: Maciej Filipkowski

Supervisory Board Member: Grzegorz Pilch

Supervisory Board Member: Zofia Dzik

1.6.Composition of InPost SA Capital Group

The Condensed Consolidated Financial Statements include InPost S.A. as a parent company and entities composing InPost Capital Group, according to the following list:

No.	Name of the Group's unit	Registered office	Type of business	Business segment	Parent Company's share in the share capital
1.	InPost S.A.	ul. Malborska 130, 30-624 Kraków	Postal activities	Letter and courier segment
2.	InPost Finanse Sp. z o.o.	ul. Malborska 130, 30-624 Kraków	Financial activities	Letter segment	100%
3.	Polska Grupa Pocztowa SA	ul. Żupnicza 17 03-821 Warsaw	Postal activities	Letter segment	100%
4.	Bezpieczny List Sp. z o.o.	ul. Malborska 130, 30-624 Kraków	Postal activities	Letter segment	100%

1.7.Scope of activities

Due to the profile of the activities of InPost Capital Group and the provision of various services to institutional and individual customers the following areas of operations may be distinguished: Postal services - provided on a national scale to institutional and individual customers based on own network of branches, Customer Service Points and own postmen, carried out by InPost SA - the largest independent postal operator in the country, as well as by Polska Grupa Pocztowa SA ("PGP SA")and Bezpieczny List Sp. z o.o.

Financial and insurance services provided to mass (institutional/business) and individual customers, as well as mobile payment and e-document services based on the Group's own customer service centres and a franchise network, provided by the subsidiary company InPost Finanse Sp. z o.o.

Courier and parcel machines services - provided on a national scale by InPost SA to InPost Express Sp. z o.o. and InPost Paczkomaty Sp. z o.o., related within Integer.pl Capital Group, consisting of transport and delivery of parcel machine and courier items for the e-commerce, institutional and individual clients on the basis of: a network of own branches, Customer Service Points and the network of PaczkomatyŽ.

1.8.The scope of information included in the Condensed Consolidated Financial Statements

The Condensed Consolidated Financial Statements include data for the period from 1 January 2016 to 31 March 2016 of the aforementioned entities composing the Group and comparative data covering the period from 1 January 2015 to 31 March 2015 of the following entities:

1.9. Reporting currency

These Condensed Consolidated Financial Statements are stated in Polish zloty (PLN). Polish zloty is the Group's reporting currency. Data in the financial statements are presented in thousands of PLN, except where greater accuracy is required.

1.10. Basis of preparation and statement of compliance of the financial statements

Basis of preparation

These Condensed Interim Consolidated Financial Statements were prepared in accordance with International Accounting Standard ("IAS") 34 - Financial Reporting ("IAS 34") and in accordance with the relevant accounting standards applicable to financial reporting endorsed by the European Union, issued and effective at the time of preparation of these Condensed Interim Consolidated Financial Statements.

These Condensed Interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of InPost SA Capital Group for the year ended 31 December 2015, prepared in accordance with International Financial Reporting Standards ("IFRS").

Amendments to existing standards and interpretations applied for the first time in these Financial Statements

The following amendments to existing standards and interpretations published by the International Accounting Standards Board (IASB) and approved for use in the EU enter into force for the first time in these Financial Statements:

ˇ Amendments to IFRS 11 "Joint Arrangements"- Accounting for the acquisition of shares in joint operations - approved in the EU on 24 November 2015 (effective for annual periods beginning on or after 1 January 2016),

ˇ Amendments to IAS 1 "Presentation of Financial Statements"- Disclosure Initiative - endorsed in the EU on 18 December 2015 (effective for annual periods beginning on or after 1 January 2016),

ˇ Amendments to IAS 16 "Property, Plant and Equipment" and IAS 38 "Intangible Assets"- Clarification of acceptable methods of depreciation and amortisation - endorsed in the EU on 2 December 2015 (effective for annual periods beginning on or after 1 January 2016),

ˇ Amendments to IAS 16 "Property, Plant and Equipment" and IAS 41 "Agriculture"- Agriculture: Bearer Plants - endorsed in the EU on 23 November 2015 (effective for annual periods beginning on or after 1 January 2016),

ˇ Amendments to IAS 19 "Employee Benefits"- Defined benefits plans: employee contributions - endorsed in the EU on 17 December 2014 (effective for annual periods beginning on or after 1 February 2015).

ˇ Amendments to IAS 27 "Separate Financial Statements"- Equity Method in Separate Financial Statements - endorsed in the EU on 18 December 2015 (effective for annual periods beginning on or after 1 January 2016),

ˇ Amendments to various standards "Improvements to IFRS (2010-2012 cycle)"- amendments made as part of the annual IFRS improvements process (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) and focusing primarily on the areas at inconsistency or clarification of wording, endorsed in the EU on 17 December 2014 (effective for annual periods beginning on or after 1 February 2015),

ˇ Amendments to various standards "Improvements to IFRS (2012-2014 cycle)"- amendments made as part of the annual IFRS improvements process (IFRS 5, IFRS 7, IAS 19 and IAS 34) and focusing primarily on the areas at inconsistency or clarification of wording - endorsed in the EU on 15 December 2015 (effective for annual periods beginning on or after 1 January 2016).

The aforementioned amendments to existing standards and interpretation did not have a material impact on these Financial Statements.

Amendments to existing standards already issued by IASB and endorsed by the EU but not yet effective

In approving these Financial Statements, there were no amendments to existing standards that have been issued by IASB and approved for application in the EU but are not yet effective:

New standards and amendments to existing standards issued by the IASB but not yet approved for use in the EU

IFRS as currently endorsed in the EU do not differ significantly from the regulations issued by the International Accounting Standards Board (IASB), with the exception of the following standards, amendments to standards, which have not yet been approved for use in the EU as at 16 May 2016 (the following dates of entry into force refer to the standards in their full version):

ˇ IFRS 9 "Financial Instruments" (effective for annual periods beginning on or after 1 January 2018),

ˇ IFRS 14 "Regulatory Deferral Accounts"(effective for annual periods beginning on or after 1 January 2016) - the European Commission has decided not to initiate the process of endorsement of this interim standard for use in the EU until a final version of IFRS 14 is issued,

ˇ IFRS 15 "Revenue from Contracts with Customers"and subsequent amendments (effective for annual periods beginning on or after 1 January 2018),

ˇ IFRS 16 "Leases" (effective for annual periods beginning on or after 1 January 2019),

ˇ Amendments to IFRS 10 "Consolidated Financial Statements", IFRS 12 "Disclosure of Interests in Other Entities" and IAS 28 "Investments in Associates and Joint Ventures"- Investment units: application of the exemption from consolidation (effective for annual periods beginning on or after 1 January 2016),

ˇ Amendments to IFRS 10 "Consolidated Financial Statements" and IAS 28 "Investments in Associates and Joint Ventures"- Sales or transfers of assets between the investor and the associate or joint venture and subsequent amendments ( entry into force has been postponed until the completion of research on the equity method),

ˇ Amendments to IAS 7 "Statement of Cash Flows"- Disclosure Initiative (effective for annual periods beginning on or after 1 January 2017),

ˇ Amendments to IAS 12 "Income Taxes"- Recognition of deferred income tax on unrealised losses (effective for annual periods beginning on or after 1 January 2017).

Detailed analysis of the impact of the above changes to IFRS has not yet been completed. The Parent Company's Management Board expects that in the future the application of IFRS 15 and IFRS 16 may have a significant impact on the amounts and disclosures presented in these Financial Statements. However, it is not possible to present reliable estimates on the impact of IFRS 15 and IFRS 16 until the Management Board carries out a detailed analysis in this respect.

According to the Group's estimates, the above standards, interpretations and amendments to standards, except for IFRS 15 and IFRS 16, would not have had any significant impact on these Financial Statements if applied by the Group as at the reporting date. In addition, the principles of hedge accounting applied to the portfolio of financial assets and financial liabilities, which have not been endorsed for use in the EU still remain outside the EU regulations.According to the reporting entity's estimates, the application of hedge accounting to the portfolio of financial assets or financial liabilities in accordance with IAS 39 "Financial Instruments: Recognition and Measurement" would not have had any significant impact on these Financial Statements if these principles had been endorsed for use as at the reporting date.

1.11.Seasonality and cyclicality of activities

Due to the division into segments servicing various customers the following seasonal variations may be noted:

Courier segment, due to handling mainly e-commerce sector, notes the increased demand in the fourth quarter, before Christmas. This results in an increased volume of handled Paczkomaty parcels and courier parcels, on average from 40% to 60% compared to other quarters (based on historical values for the last 2 years).
Letter segment is characterized by low seasonality and its impact on the disturbance of the Group's results in individual quarters is not significant.

1.12. Significant events in Q1 2016

End of service for courts and public prosecutor's offices

On 28 October 2015, Polska Grupa Pocztowa SA submitted a tender in the procedure for the provision of services for Courts and Public Prosecutor's Offices of gross value of PLN 475 578 thousand. These services were provided by the Group continuously from 1 January 2014 on the basis of an earlier tendering procedure. On 10 December 2015, Polska Grupa Pocztowa SA was notified by the Judiciary Purchases Centre ("the Ordering Party") that the bid submitted by Poczta Polska SA in the public procurement for the "provision of postal services with respect to reception, transportation and delivery of postal items and return of undelivered items to courts" had been selected as the most advantageous. In effect, the Group ceased to provide these services on 29 February 2016. However, based on the agreement of 27 November 2015, the Group continues to provide postal services in terms of reception, transport and delivery of postal items and the return of undelivered items to public prosecutor's offices. Services will be provided until 31 December 2016 or until the amount of gross remuneration (i.e. PLN 15 791 thousand) is exceeded.

Conclusion and termination of a material agreement

On 15 January 2016, the Management Board of InPost SA and KAR-TEL sp. z o.o. sp. k. (further "KAR-TEL") concluded an agreement on cooperation for providing terminal sets and the IT system ("Agreement") needed to support a network of customer service points ("CSP"). On 4 March 2016, the parties concluded an annex to the agreement.

Under the agreements concluded:

in February 2016, KAR-TEL leased 7 000 Terminal Sets to InPost, for the amount of PLN 143 570
in March 2016, KAR-TEL leased 7 000 Terminal Sets to InPost, for the amount of PLN 371 070

Until the date of these Condensed Consolidated Financial Statements, InPost and KAR-TEL did not concluded other agreements and annexes.

The parties currently conduct discussions on a new annex which, based on the knowledge of the Management Board at the date of these Consolidated Financial Statements, should be based on the following parameters:

InPost will lease 7 000 Sets Terminal for a further period of 46 calendar months, starting on 1 April 2016, on the following conditions:

a) InPost will pay the lease fee for April 2016 in the amount of PLN 1 744 977.90 net;

b) InPost will pay PLN 371 070 net per month for the first 22 months of the lease period starting from 1 May 2016;

c) from 1 March 2018, for the next 23 months of the lease, lease payments will amount to PLN 185 535 net per month

d) after the expiry of the lease, together with the payment of the last rental fee, InPost will acquire ownership of all Terminal Sets for a total amount of PLN 185,535.00 (say: one hundred eighty-five thousand five hundred thirty-five zloty), representing the last instalment of rent for the month of January 2020.

KAR-TEL undertook to provide InPost with IT system from 1 February 2016 throughout the term of the Agreement, i.e. until 31 January 2020, by ensuring the functioning of the KAR-TEL Central System, providing communication interconnector, granting a license for the System Terminal Set System and developing the IT System to the extent specified in the Agreement. Payment due to KAR-TEL on this account will amount to PLN 206 430 net for each calendar month for the period from 1 February 2016 until 31 January 2020.

1.13. Revenues and expenses1.14.Revenues from sales by product

After Q1 2016 and 2015, the sales structure according to the classification by products was as follows:

	3-month period ended 31-03-2016	3-month period ended 31-03-2015
	3-month period ended 31-03-2016	3-month period ended 31-03-2015
- regular and express mail	24 931	39 118
- registered mail	47 878	63 215
- Paczkomaty parcels	16 088	12 011
- courier parcels	34 095	-
- stamps	1 111	3 179
- other	7 301	11 867
Total revenues from sales	131 404	129 390

Under others, the sale of other logistics services is presented (serving money transfers, transport services, serving advertising postal items, distribution of leaflets, unregistered postal items, "Small Courier" service). Apart from other logistics services, under other sales revenues, revenues from the sales within own network of Customer Service Points, sales of goods from agents, revenues from rental are also included.

1.15.Revenues from sales by distribution channels

	3-month period ended 31-03-2016	3-month period ended 31-03-2015
	3-month period ended 31-03-2016	3-month period ended 31-03-2015
- public administration	36 327	61 904
- large enterprises	19 016	28 811
- bailiffs	4 258	3 452
- small and medium enterprises	17 102	23 842
- e-commerce	54 701	11 381
Total revenues from sales	131 404	129 390

1.16.Information about major customers

Customers representing revenues from sales that exceed 10% of the Group's total revenues within the reporting period are classified as major customers. In Q1 2015 major customer included InPost Paczkomaty Sp. z o.o., with sales of PLN 11 400 thousand, as well as courts and public prosecutor's offices served under the court contract, with sales of PLN 52 198 thousand.In the corresponding period of 2016 major customers included InPost Express Sp. z o.o. and InPost Paczkomaty Sp. z o.o., with sales of PLN 33 282 thousand and 21 584 thousand, respectively, as well as courts and public prosecutor's offices with sales of PLN 27 794 thousand.

1.17. Operating expenses

The largest item of operating costs in Q1 2016 constituted the costs of external services and payroll. In comparison to the comparable period the costs of external services increased by PLN 12 890 thousand. The main reason for the increase in these costs was mobilising, in Q2 2015, the provision of courier services by the Group. The costs of external services related to courier operations and the costs of courier branches operated by third parties in Q1 2016 amounted to PLN 14 046 thousand. The increase in costs of external services was also affected by higher value of the written asset in the valuation of long-term contract (see Note 14) - in Q1 2016 this amount was PLN 4 420 thousand, while in Q1 2015 it was PLN 1 123 thousand. The increase in the costs of courier services and a higher level of written down assets from the valuation of long-term contract was partly offset by lower costs for external services in the letter segment (commissions for agents for the delivery of parcels services, packaging items, the cost of advising). These costs decreased in Q1 2016 by approx. 13% (i.e. by PLN 8 950 thousand) as compared to Q1 2015, which was caused by lower letter volume handled in 2016. The costs of payroll, social insurance and other employee benefits increased in Q1 2016 by PLN 6 427 thousand, mainly due to the development of courier activities.

1.18.Operating revenue and expenses

Other operating revenues of the Capital Group include revenues and earnings not related directly to basic activities. Other operating revenues include primarily settled grants, as well as obtained contractual penalties and reversed revaluation write-offs for receivables.

Other operating expenses include primarily costs of created write-downs, damages costs and contractual penalties.

The increase in other operating expenses in Q1 2016, as compared to the same period in 2015, was caused primarily by an increase in the cost of damages and contractual penalties, whose value in Q1 2016 amounted to PLN 557 thousand.

1.19.Financial revenues and expenses

The amount of financial revenues and expenses is composed mainly of the commissions on the bank credit guarantees granted mutually within Integer.pl SA Group (described in detail in note 17) and interest and other costs related to loans and credits granted and received.

In the period from 1 January to 31 March 2016, the Group received commission for sureties in the amount of PLN 408 thousand and incurred costs in the amount of PLN 556 thousand. In the corresponding period of 2015, the Group earned revenues for sureties in the amount of PLN 408 thousand and incurred the costs in the amount of PLN 508 thousand.

1.20. Information about business segments

In connection with the development of the Group, the growing importance of revenues from the logistics services for courier and Paczkomaty parcels, as well as infrastructure division into the courier and letter sectors, completed in 2015, two primary business segments were established. This division reflects the existence of two main business lines, each of which is analysed separately by the Management Board of InPost SA (chief operating decision maker) as well as by other customers. In accordance with IFRS 8, business segments were determined based on management information used in making strategic decisions by the Group's Management Board. Data drawn up for persons that determine the resource allocation within the Group and assess segment results within the Group focus on groups of services provided to customers.

The Group operates in two segments:

a) Courier segment

b) Letter segment

Courier segment comprises logistics services that involve the delivery of courier parcels and Paczkomaty parcels. These services are provided primarily for the benefit of the two companies in the Integer.pl Group - Inpost Express Sp. z o.o. and Inpost Paczkomaty Sp. z o.o.

Letter segment comprises the remaining services that involve the provision of regular letters, registered letters and remittances.

The operating segments meet the quantitative criteria set out in IFRS 8.

The scope of services rendered and goods supplied is described in detail in Note 1.3.1.

The allocation of the Group companies to the respective segments, based on their scope of activity and type of services, is presented in Note 1.3.

The Management Board evaluates the performance of operating segments based on EBITDA. The level of EBITDA shows the Group's ability to generate cash in similar conditions. The Group defines EBITDA as operating profit plus depreciation, impairment and disposal of tangible assets. EBITDA is not defined by the EU IFRS and can be calculated differently by other entities. The Group's financing and income taxes are managed at the Group's level and are not allocated to operating segments.

Revenues from operations with external parties, presented to the Management Board by business segments, are measured in a manner consistent with the method used in the statement of comprehensive income. The amounts presented to the Management Board in terms of total assets by operating segments are measured in a manner consistent with the method used in the financial statements. These assets are allocated based on the segment in which they are used or in which they were generated. In the case of joint use of assets by letter and courier segments, distribution of assets is estimated in the following way:

- joint use of tangible fixed assets and intangible assets - 50/50 split

- cash - in proportion to the revenue generated by each segment

Basic economic information on the business segments of InPost Group.

31 March 2016	Letter segment	Courier segment	Total
31 March 2016	Letter segment	Courier segment	Total
Profit and loss account
Sale	82 393	49 296	131 688
- to external customers	82 393	49 296	131 688
- within the Group's segments	-	-	-
Operating profit / loss (EBIT)	(13 939)	4 195	(9 744)
Amortisation and depreciation	1 989	213	2 202
EBITDA	(11 950)	4 408	(7 542)

Balance sheet
Total assets	189 729	70 412	260 141

In Q1 2016, InPost Group's revenues amounted to PLN 131 688 thousand and they were 1% higher than in Q1 2015. The revenues structure underwent significant changes. In Q1 2016, revenues from the courier segment accounted for 37% of total revenues, compared to approx. 8% in Q1 2015. The significant increase in revenues in the courier segment resulted from launching, in June 2015, courier operations and an increase in the volume of handled Paczkomaty parcels (the volumes of Paczkomaty parcels in Q1 2016 increased, as compared to Q1 2015, by 76%). A significant increase in revenues in the courier segment was the main cause of achieving a positive EBITDA in Q1 2016, in the amount of PLN 4 408 thousand.

In case of the letter segment lower sales revenues, as compared to the previous quarters of 2015, was mainly influenced by:

- a decrease in revenues from handling registered letters - mainly in connection with the termination on 29 February 2016 of the contract for the provision of postal services to courts

- a decrease in revenues from handling regular letters - the effect of lower average selling price of ordinary letters and lower level of handled volumes in Q1 2016.

In addition, the letter segment results at the level of EBITDA in Q1 2016 were affected by one-off costs in the amount of PLN 5 345 thousand. These costs were associated with the need to maintain an adequate letter infrastructure (branches, deliverers) until the end of February to handle the court contract. After termination of the contract on 29 February 2016, the letter infrastructure was restructured (reduction of branches by 45% and human resources by 40%). The effects of optimization, due to agreements concluded, were reached in the second half of March. In the event of achieving the restructuring effects for the letter network on 29 February 2016, the level of EBITDA for the letter segment would have been better about PLN 5 345 thousand.

The remainder of the negative result of EBITDA in Q1 2016 was affected by a significant reduction in the handled volumes of regular letters, as well as the average price for these products. The significant decline in revenues from handling regular letters was the result of strong price pressure in the market. It resulted in the inability to maintain unit costs in the short term at the level of the year 2015, which greatly contributed to the negative EBITDA.

The Management Board decided to submit for approval of the Supervisory Board a new strategy for the letter segment to reverse the negative results in the coming quarters.

1.21. Dividends paid and proposed for payment

In Q1 2016 and in the previous years, the Company did not pay any dividends.

Future dividends will be paid in accordance with the relevant resolution of the Annual General Meeting of Shareholders.

1.22.Goodwill

Compared to the end of the year, company's goodwill did not change, and the presented value was generated by the acquisition of PGP SA and an asset recognized as the difference between the purchase price and the net asset value.

Goodwill arising from acquisitions

	PGP SA
Payment transferred	47 534
Additional costs incurred for the acquisition of company	60
Less: fair value of identifiable net assets	9 150
Goodwill arising from acquisitions	38 444

At the date of these Condensed Consolidated Financial Statements, the Management Board did not conduct an impairment test of goodwill arising from the acquisition of PGP SA. Such a test was conducted at the end of 2015.

1.23. Intangible assets and tangible fixed assets

The most important item of the Group's tangible assets include letters and parcels sorters as well as other machinery used in the Group's operations whose value at the end of the year amounted to PLN 13 787 thousand.

The biggest items of intangible assets include licenses and software used for current operations of a total amount of PLN 32 774 thousand.

In Q1 2016, the Group did not record any significant changes in the positions of fixed assets and intangible assets.

1.24. Investments in subsidiaries

In Q1 2016, the Group did not make any acquisitions.

In the corresponding period of 2015 there was a change in shares in subsidiaries. On 24 March 2015, a part of shares of the subsidiary, InPost Finanse Sp. z o.o., was purchased. Under the signed contract, InPost SA purchased from Integer.pl SA 2 140 shares with a nominal value of PLN 500 each (constituting 49.98% of shares in share capital), for the amount of PLN 10 800 000. In result, the share of the Parent Company in InPost Finanse Sp. z o.o. increased to 100%.

1.25.Long-term and short-term financial assets

Other financial assets, both short- and long-term, are primarily loans granted by the Group's companies to external entities and related entities from Integer.pl Group. As at 31 March 2016, the value of receivables from long-term loans amounted to PLN 2 837 thousand and from short-term loans of PLN 393 thousand. In Q1 2016, the Group did not grant any new loans, whereas there were recorded repayments of the total amount of PLN 262 thousand.

1.26. Deferred tax assets

A significant increase in the deferred tax asset by PLN 4 379 thousand was mainly due to increased provisions for future liabilities that are at the expense of accounting and are not yet tax expense.

1.27. Trade and other receivables

On the receivables of the Group consist primarily of trade receivables, which at the end of March 2016 amounted to PLN 113 255 thousand, among which the biggest value were receivables to companies related to Integer.pl Capital Group for a total amount of PLN 43 117 thousand.

1.28.Ageing of receivables

The table below presents overdue receivables, in net values.

Period ended 31 March 2016	Period ended 31 December 2015
- overdue receivables, including:
- up to 30 days	9 663	7 804
- 30 - 90 days	9 485	5 398
- 90 - 180 days	1 586	1 269
- 180 - 360 days	835	1 878
- more than 360 days	401	275
Total value of overdue receivables	21 970	16 624

1.29.Assets arising from long-term contract

From 2014, the Group executed a long-term contract for the provision of postal services to courts and public prosecutors' offices. On 29 February 2016, the contract to operate the courts was terminated. The Group, however, continued to perform the contract for the provision of services to public prosecutor's offices.

The executed contract to handle courts and public prosecutors' offices for 2014-2016 is considered as one contract and it was valued accordingly based on the principles described below.

In previous periods as well as in Q1 2016, this contract resulted in the recognition of assets, whose valuation is shown below.

The purpose of the valuation of the long-term contract is to determine the costs to be recognized in connection with the execution of the work and the costs to be capitalized to be settled in subsequent periods of the contract's execution. Profit on contracts is determined by the stage of their completion, if it is possible to reliably determine the progress. In the event it is not possible to reliably estimate the outcome of the contract, a margin of zero is recognized for the period. The progress is measured based on the ratio expressed as a percentage of revenues invoiced until the balance sheet date to the total revenue from the contract. If it is probable that the total contract costs exceed total revenue, the expected loss is recognized immediately.

In the assets column, the Group presents item "Other current assets" in the event that there is a surplus of costs incurred and recognized profits due to long-term contracts above the value of invoiced sales to customers, but only up to the values of profits on the contract expected in the next year. Otherwise, i.e. in the event that there is a surplus of invoiced sales to partners over the value of costs incurred and recognised profits due to long-term contracts, the Group presents item "Other liabilities" in the liabilities column.

Detailed calculation of assets due to long-term contract is presented in the table below

in PLN '000

Contracts in progress at the end of the reporting period	Period ended 31 March 2016	Period ended 31 December 2015	Period ended 31 March 2015
Invoiced value of sales revenue accrued since the start of the contract	401 946	375 557	235 535
Costs incurred for the execution of the contract	426 461	396 749	267 432
Current assets resulting from the valuation of the contract	24 515	21 192	31 897

Provision for the forecasted loss on the contract for its entire term	(22 511)	(14 768)	(13 562)

Assets arising from long-term contracts	2 004	6 424	18 335
Liabilities arising from long-term contracts	-	-	-

1.30.Long-and short-term financial liabilities

Both long-term and short-term financial liabilities relate primarily to financial leasing. As at 31 March 2016, the Group had four open leasing items where the leasing subjects were means of transport and sorting machines. As at 31 March 2016, the value of long-term liabilities amounted to PLN 5 326 thousand and short-term liabilities amounted to PLN 2 088 thousand. A slight decrease, as compared to the end of the year, was related to the repayment of part of the lease.

1.31.Long- and short-term liabilities under loans and bank credits

On 31 March 2016, the Group recognized liabilities for loans and borrowings in the amount of PLN 13 032 thousand, which included limits used to open lines of credit current accounts and assets.

The increase in the value of these liabilities to the end of 2015 was due to overdraft taken in Q1 2016 by InPost SA (PLN 9 104 thousand) and by InPost Finanse Sp. z o.o. (PLN 1 529 thousand).

1.32. Sureties and guarantees

The principal amount of sureties is made up of bank credit guarantees granted and received by the companies of Integer.pl Capital Group and one unrelated entity. As at 31 March 2016, the total value of sureties received amounted to PLN 83 422 thousand and sureties granted to PLN 34 000 thousand, respectively.

On 31 March 2016, the Group had two open guarantees:

- on 23 March 2015, Bank BNP, acting to the order of InPost S.A., granted a guarantee up to the amount of PLN 554,114.41 to AI Sp. z o.o. This guarantee is valid until 10 April 2017.

- on 1 June 2015, a similar guarantee was granted to Prologis Poland LXXIX Sp. z o.o. up to the amount of EUR 96 578, valid until 31 July 2018.

In addition, in the course of Q1 2016, the Group had three guarantees which ended at the balance sheet date:

- for Polskie Linie Kolejowe SA, a guarantee granted by RAIFFEISSEN POLBANK at the request of InPost SA for PLN 240 thousand with expiration date on 31 March 2016,

- for PGE OBRÓT SA, a guarantee granted by BNP Paribas at the request of InPost SA for EUR 96 thousand and expiration date of 31 March 2016,

- for the Court of Appeal in Kraków, a guarantee granted at the request of InPost for PLN 2 000 thousand and expiration date of 31 January 2016.

1.33. Lawsuits

a) Audits of UKE carried out or in progress in InPost SA and PGP SA

a. Administrative proceedings instituted ex officio with respect to the violation of the regulations related to postal activities (InPost SA)

Between 4 July 2014 and 28 August 2014 the Office of Electronic Communications (UKE) conducted in InPost Sp. z o.o. (currently InPost SA) an inspection regarding the provision of postal services and for compliance with the requirements for the exercise of postal activity. The inspection covered the period of activity of InPost SA between 7 April 2014 and 28 August 2014. The inspector requested access to documents relating to the postal activity of InPost SA, in particular, details of post offices and cooperation agreements with other postal operators and agency agreements, which documents were submitted by InPost SA. On 20 March 2015, InPost SA received a decision of the President of UKE of 19 March 2015 stating that InPost SA violated postal law provisions and calling upon InPost SA to remedy the violations identified within 30 days. In the decision the President of UKE also pointed out that the identified violations relate to the following three issues: mail secrecy, postal traffic safety and respect for the provisions governing the delivery of shipments on general terms and in criminal and civil proceedings. According to the President of UKE, the remedying of the identified violations does not require any special implementation process, nor does it require any special organizational effort or expenses, which would justify a period longer than 30 days to remedy them to be set by the President of UKE. The President of UKE is of the opinion that the time limit specified in the operative part of the decision will allow for the efficient introduction of appropriate changes in the conduct of postal activity by InPost SA. On 3 April 2015, InPost SA filed a request to review the case. On 12 May 2015, the President of UKE issued a decision upholding the decision of 19 March 2015. On 15 June 2015, InPost SA filed an appeal against the UKE's decision with the Provincial Administrative Court. On 27 November 2015, a judgement of the Provincial Administrative Court in Warsaw was pronounced. It set aside the decisions of the President of UKE thereby upholding the administrative appeal filed by InPost SA. On 15 March 2016, the Company received a copy of the cassation appeal filed by the President of UKE dated 11 March 2016 against the decision of the Provincial Administrative Court of 27 November 2015 setting aside a post-inspection decision of InPost. InPost SA filed a reply to the said cassation appeal on 24 March 2016.

According to the Management Board of InPost SA, the decision of the President of UKE specifying the scope of violations and the time limit for remedying the irregularities was enforced, and also set aside by the Provincial Administrative Court, with respect to which the President of UKE filed a cassation appeal. The Management Board of InPost SA believes that the current position of the Company is justified.

The Management Board believes that the outflow of substantial funds in connection with legal proceedings is unlikely.

b. Audit conducted by the Office of Electronic Communications in InPost SA

On 21 September 2015, InPost SA received a letter from the Office of Electronic Communications (UKE) which notified of its intention to initiate audit of InPost SA as regards compliance with the rules and decisions in the field of postal activity and the provision of postal services and for compliance with the conditions required to conduct postal activity. The proceedings formally began in October 2015. They were completed with preparation of control report on 29 January 2016. InPost SA submitted to the President of UKE a letter presenting its comments and objections to the minutes of the post-inspection, however, the President of UKE by letter dated 25 March 2016 did not take into account the comments and objections of the Company. On 15 April 2016, InPost SA received notice of the President of UKE of 11 April 2016 on the initiation of administrative proceedings pursuant to Article 125(1) of the Postal Law of the infringement procedure concerning the postal activity by InPost SA. The Management Board of InPost SA will take further appropriate steps dictated by possible measures of the President of UKE.

c. Administrative proceedings initiated ex officio for infringement of regulations on postal activity (PGP SA)

Between 3 February 2014 and 8 May 2014 the Office of Electronic Communications conducted in Polska Grupa Pocztowa SA an inspection regarding the provision of postal services and for compliance with the requirements for the exercise of postal activity. The audit covered the period of activity of Polska Grupa Pocztowa SA between 1 January 2013 and 28 May 2014. During the inspection the inspected party was requested to provide documents and information related to the postal activity, which documents and information were provided by Polska Grupa Pocztowa SA On 20 March 2015, Polska Grupa Pocztowa SA received a decision of the President of UKE of 19 March 2015 stating that Polska Grupa Pocztowa SA violated postal law provisions and calling upon Polska Grupa Pocztowa SA to remedy the violations identified within 30 days. In the decision the President of UKE pointed out that the identified violations relate to two issues: respect for separate provisions establishing special rules for service of documents in criminal and civil proceedings, and postal law provisions with respect to obligatory elements of the rules of provision of postal services. According to the President of UKE, the remedying of the identified violations does not require any special implementation process, nor does it require any special organizational effort or expenses, which would justify a period longer than 30 days to remedy them to be set by the President of UKE. The President of UKE is of the opinion that the time limit specified in the operative part of the decision will allow for the efficient introduction of appropriate changes in the conduct of postal activity by Polska Grupa Pocztowa SA. On 3 April 2015, Polska Grupa Pocztowa SA filed a request to review the case. On 12 May 2015, the President of UKE issued a decision upholding the decision of 19 March 2015. On 15 June 2015, Polska Grupa Pocztowa SA brought an appeal against the UKE's decision to the Provincial Administrative Court. On 27 November 2015, a judgement of the Provincial Administrative Court in Warsaw was pronounced. It set aside the decisions of the President of UKE thereby upholding the administrative appeal filed by Polska Grupa Pocztowa SA. On 8 March 2016, the Company received a copy of the cassation appeal of the President of UKE dated 4 March 2016, against the judgement of the Provincial Administrative Court dated 27 November 2015 setting aside a post-inspection decision of PGP. PGP filed a reply to the said cassation appeal on 22 March 2016.

According to the Issuer's Management Board, the decision of the President of UKE specifying the scope of violations and the time limit for remedying the irregularities was enforced, and also set aside by the Provincial Administrative Court, with respect to which the President of UKE filed a cassation appeal. The Management Board of InPost SA believes that the position of the Company is justified.

The Management Board believes that the probable outflow of substantial funds in connection with legal proceedings is unlikely.

d. Audit conducted by the Office of Electronic Communications in PGP SA.

On 18 August 2015, Polska Grupa Pocztowa SA received a letter from the Office of Electronic Communications which notified of its intention to initiate control of Polska Grupa Pocztowa SA as regards compliance with the rules and decisions in the field of postal activity and the provision of postal services and for compliance with the conditions required to conduct postal activity. The proceedings were formally commenced in October 2015. The audit was completed and on 24 March 2016, PGP received notice of the President of UKE of 18 Match 2016 on the initiation of administrative proceedings pursuant to Article 125(1) of the Postal Law of the infringement procedure concerning the postal activity by PGP.

The Management Board of InPost SA will take further appropriate steps dictated by possible measures of the President of UKE.

b) Proceedings on awarding public procurement carried out by Appellate Public Prosecutor's Office in Szczecin for the provision of postal services in domestic and foreign markets with respect to reception, transportation and delivery of postal items and return of undelivered postal items for common business units of prosecutor's offices

On 11 March 2016, InPost submitted appeal at the National Board of Appeal in a case on awarding public procurement for the provision of postal services in domestic and foreign trade in terms of reception, transport and delivery of postal items as well as return of items undelivered to the common public prosecutor units. InPost accused the contracting authority of describing the subject of the contract and the conditions of participation in the proceedings in relation to the post offices in a way that violated the principle of fair competition. In addition, it challenged the requirements for the performance of services relating to the so-called timely shipments, as well as a description of the condition of withdrawal. By letter of 18 March 2016, the Regional Prosecutor's Office in Szczecin upheld the appeal of InPost. The tendering procedure is pending.

c) Proceedings are conducted in an open tender No. 2014/9 for the provision of postal services in domestic and foreign trade for units of state administration (CUW)

In case on the appeal lodged by Poczta Polska SA with its registered office in Warsaw, on 27 November 2014, in the procedure conducted by Shared Services Centre with the participation of InPost S.A. (formerly InPost Sp. z o.o.), in the decision of 11 December 2014, the National Board of Appeal partly allowed the appeal of Poczta Polska, i.e. only within the scope of declaring the price form of InPost secret and ordering the Ordering Party to annul the selection of the most favourable tender and to repeat examination and assessment of tenders. The Ordering Party was ordered to verify one more time the correctness of the examination of company-classified information in the tender of InPost in the part regarding the price form - Appendix No. 1a to ToR and to recognise that the contractor had no grounds to make such provision within the meaning of Article 8(3) of the Public Procurement Law Act. In the decision of 11 December 2014, the Appeal Board confirmed that InPost met the requirements with respect to having relevant technical potential. The consequence of the decision of 11 December 2014 was only declassification by the Ordering Party of the price form submitted together with the tender by InPost and repeated selection of InPost tender as the most advantageous one in the tender procedure. The Appeal Board did not allow other allegations of Poczta Polska. On 11 December 2014, after the disclosure of the price form of InPost, Shared Services Centre one more time selected InPost tender as the most advantageous. On 22 December 2014, Poczta Polska SA filed an appeal against the selection of InPost tender as the most advantageous. On 16 January 2015, the National Board of Appeal dismissed the appeal of Poczta Polska, regarding the allegations raised by Poczta Polska to be delayed. On 21 January 2015, Poczta Polska applied for establishing security by prohibiting the conclusion of agreement between Shared Services Centre and InPost until the final and binding resolution of the case. On 29 January 2015 the Court dismissed the application of Poczta Polska for establishing security. On 2 February 2015, Poczta Polska appealed against the decision of the National Board of Appeal of 16 January 2015. The complaint against the decision of the National Board of Appeal was also submitted by the President of the Public Procurement Office on 6 February 2015. The District Court in Warsaw conducted the case under file number XXIII Ga 285/15. On 20 April 2015, the District Court in Warsaw issued a verdict, under which it decided to change sec. I of the decision of the National Board of Appeal of 16 January 2015 and dismiss the appeal of Poczta Polska. The judgement of the Regional Court in Warsaw is final and binding. Only the President of the Public Procurement Office has the right to file a cassation complaint against the decision. With its letter of 15 May 2015, Shared Services Centre informed the Company about cancelling the selection of the most advantageous tender of 11 December 2014 and cancelling the procedure for the award of public contract. On 25 May 2015, InPost appealed against the Ordering Party's action. On 8 June 2015, a hearing was held before the National Board of Appeal. The meeting was interrupted due to the request of InPost SA and Shared Services Centre to hold camera sessions. A hearing behind closed doors was scheduled for 18 June 2015. On 22 June 2015, the National Board of Appeal upheld the appeal of InPost SA. On 6 July 2015, Shared Services Centre lodged a complaint against the decision of the National Board of Appeal No. KIO 1089/15 of 22 June 2015 in proceedings conducted following the appeal of InPost SA. On 22 July 2015, response to the complaint was brought directly by InPost SA to the Regional Court in Warsaw. On 29 October 2015, Warsaw Regional Court dismissed the appeal brought by Shared Services Centre on the decision of the National Board of Appeal dated 22 June 2015 in which the Appeal Board ruled favourably for the appeal of InPost SA on Shared Services Centre's invalidation of the selection of the best tender on 11 December 2014 in the proceedings conducted in an open tender No. 2014/9 on the provision of postal services in domestic and foreign markets for state administration units and cancellation of the public procurement procedure in which the offer made by InPost Sp. z o.o. (currently: InPost SA) was considered the most advantageous. The judgement of the Regional Court in Warsaw is final and binding.

On 5 February 2016, the Company received a request of the State Treasury - Shared Services Centre (budget economy institution) acting on behalf of Public Administration Units with its registered office in Warsaw ("Applicant") to revise the decision of the District Court in Warsaw of 29 October 2015 due to the invalidity of proceedings, together with a request to suspend execution of the decision.

The decision of the District Court in Warsaw of 29 October 2015, dismissing the action brought by Shared Services Centre ("SSC") on open tender No. 2014/9 for the provision of postal services in domestic and foreign units of state administration is presented in Current Report 11/2015. In support of the complaint concerning the resumption of proceedings the Applicant claimed:

a) lack of notice on the hearing date set for 15 October 2015,

b) lack of representation and operation of the Applicant at the hearing on 15 October 2015 (which culminated in the decision on 29 October 2015), in particular that, at the hearing on 15 October 2015 the Issuer filed pleading adopted by the Court,

c) inability to read the contents of the submitted pleading and to comment on its content.

The Applicant is of the opinion that due to the mistakes of the Court, both the Applicant and its lawyer had not been properly notified about the date of the hearing, which prevented the Applicant from effective protection of its rights.

The Regional Court in Warsaw, at the hearing on 23 March 2016, dismissed the request of Shared Services Centre for revision in full because its invalidity.

The value of the offer amounted to PLN 33 354 539.54 thousand.

The Management Board of InPost SA believes that the Applicant's position is unfounded.

d) Competition organized by the President of UKE for the designated operator.

On 30 December 2014 competition documentation was published for the designated operator for the provision of postal services in the years 2016-2025. On 14 April 2015, PGP submitted a bid. On 20 May 2015, UKE announced the results of the competition. The designated postal operator became Poczta Polska S.A. On 10 June 2015, pursuant to Article 75(1) of the Act - the Postal Law, PGP filed its request for invalidation of the competition, which has not yet been settled.

Despite submission of the request, on 30 June 2015, the President of UKE issued a decision regarding the selection of Poczta Polska as the designated operator. The President of UKE did not treat PGP as a party to the proceedings. Ogólnopolski Związek Pracodawców - Niepublicznych Operatorów Pocztowych was admitted to the proceedings as a social organization, in the capacity of a witness.

In the course of competition proceedings PGP SA was not admitted to review the proceedings file. The refusal was treated as a decision to refuse access to the files, so PGP filed an application for a retrial. By order of 18 September 2015, the President of UKE declared the appeal inadmissible, arguing that administrative proceedings had not been conducted at that stage. On 20 October 2015, PGP appealed to the Provincial Administrative Court in Warsaw. UKE responded to the appeal regarding the refusal of access to the file (UKE letter was delivered on 11.02.2016). On 30 March 2016, the Regional Administrative Court in Warsaw dismissed the complaint of PGP on the refusal to disclose records of the competition, being of the opinion that the competition is a separate proceeding from the administrative procedure for the selection of the designated operator and is not subject to the provisions of the Administrative Procedure Code. The decision is not final. PGP is entitled to lodge a cassation appeal against the decision of the Administrative Court in Warsaw.

In addition, on 23 March 2016, PGP received the order of the President of UKE on the appointment of deadline, as of 18 May 2016, for resolving the case submitted by PGP for a retrial of the cancellation of the competition.

It is not possible to determine the value of the competition, but its outcome could have a material impact on future financial results of InPost Capital Group.

The Management Board of InPost SA expects the competition to be cancelled and believes that the position of InPost SA in the present case is justified.

1.34.Future contractual and contingent obligations

Termination of agreement with Ruch SA

On 6 July 2015, the Parent Company and InPost Paczkomaty Sp. z o.o. submitted to Ruch SA ("RUCH") their statement on the termination of cooperation agreement of 31 October 2013. The Management Board of the Company believes that termination of 6 July 2015 of the agreement with RUCH on conducting agency activities on behalf of the Company, consisting of handing over to the customers their notified items of correspondence, was due to objective reasons, related to the counterparty's failure to meet contractual obligations. The counterparty believes that it fulfilled all the conditions of the agreement and the scale of non-compliance should not lead to termination of the agreement in the manner in which this had been done by the Company. In such a situation RUCH may submit claims for compensation against the Company. Claims may relate to lost benefits due to termination of the agreement before expiry of the period in which RUCH had a guaranteed lump-sum remuneration, independent of the volumes handled. RUCH may also demand reimbursement of expenses incurred in connection with the development of networks for the Company, as well as in connection with the work of implementing the EPO system. The second condition is more likely as there are differences between RUCH and the Company in the interpretation of the agreement regarding the party which had to finance implementation of the EPO system in the RUCH branch network. The Company's Management Board the may not exclude that RUCH will also present other claims for potential damages.

As at 31 March 2016 and as at the date of these Condensed Financial Statements, the Management Board of the Company, in line with discussions with RUCH, estimated that the probable outflow of funds from the Company in connection with the termination of the agreement, at a higher amount than already recognized on 31 December 2015 as a liability to RUCH in the statement of financial position (net amount of PLN 1 820 thousand), is small.

Covering the net cost of universal service by the designated operator

The Postal Law Act is a mechanism that imposes on postal operators the obligation to finance any losses generated by the designated operator for the provision of universal service. Article 106 of the Act introduces the concept of net cost, which determines the cost increase for the operator serving as the designated operator, less any indirect benefits, and in respect of special rights under this function. In the event of incurring losses on the provision of universal service, net cost is, to the amount of the loss suffered, funded by postal operators covered by the obligation to share in the subsidy and by the state budget (when the sum of the shares in the subsidy of the postal operators is insufficient). Under Article 108(2) of the Postal Law Act operators providing basic postal services (i.e. universal services or services within the scope of universal services) whose revenue in the financial year for which the subsidy is due, exceeds one million PLN, are obliged to contribute to the subsidy. The share of postal operator in the subsidy is determined based on its percentage share in the revenue generated in the segment of basic postal services in the financial year for which the subsidy is fixed. The designated operator also participates in covering the losses suffered, thus the share of the remaining operators depends on the proportion of income earned by the designated operator and other operators. The Postal Law Act provides for the maximum level of participation of operators in the subsidy of 2% of the revenues generated from the basic postal services. In the event of a loss incurred by the designated operator on the provision of universal service, both InPost SA and Polska Grupa Pocztowa SA may be forced to transfer up to 2% of the revenues generated from the provision of basic postal services to cover the loss (the income from services provided by both entities - e.g. under subcontracting - will be eliminated accordingly).

In connection with the reporting submitted by the designated operator to UKE, the risk of covering the net cost may relate to 2013, i.e. the year in which Poczta Polska SA reported a loss on the provision of universal service. In 2014, Poczta Polska SA reported profit on providing universal service, whereas the data for 2015 is not available. As at the date of preparation of these Consolidated Financial Statements the President of UKE did not take decision to cover the net cost of the postal operators. The absence of decision of the President of UKE in this regard as well as a number, in the opinion of the Management Board, of substantiated concerns about the accuracy of both the mechanism of subsidy to the net cost, including its compatibility with European law, which has not been subject to binding decisions and, in case of confirmation, mean no need for subsidy, as well as objections to the accuracy of calculation of the net cost by Poczta Polska SA, meant that no provision for the above risks was recognized in these Consolidated Financial Statements. The maximum level of subsidy that may be imposed on Companies of InPost S.A. Capital Group and Inpost Paczkomaty Sp. z o.o. Company (in this company, in 2013, postal activities were conducted, contributed in 2014 to Inpost S.A.) amounts to PLN 3 691 thousand.

1.35.Information on related parties1.36.Entities related by capital

The main shareholder of the Parent Company is Integer.pl Inwestycje Sp. z o.o. controlled by Integer.pl SA. Transactions with related entities of Integer.pl SA capital group are presented below.

31 March 2016		Trade and other receivables	Loans granted (principal + interest)			Trade and other payables		Loans received (principal + interest)	Sale	Financial revenues (interest and other)	Expenses	Financial expenses (interest and other)
InPost Express sp. z o.o.		34 245	-			15 078		-	33 282	-	411	-
InPost Paczkomaty sp. z o.o.		8 216	-			601		-	21 584	102	184	153
EasyPack sp. z o.o.		146	-			18		-	112	-	6	-
InItTec sp. z o.o.		89	-			2 526		-	37	-	1 769	-
Integer.pl SA		138	-			1 241		-	32	102	755	199
Verbis Alfa sp. z o.o. (PL)		119	-			554		-	92	-	72	-
InSupport Center sp. z o.o.		156	-			295		-	36	102	440	102
Integer Group Services sp. z o.o.		9	-			453		-	8	-	484	-
Total		43 117	-			20 766		-	55 183	306	4 122	454
31 March 2015	Trade and other receivables			Loans granted	Trade and other payables		Loans incurred		Sale	Financial revenues	Expenses	Financial expenses
InPost Paczkomaty sp. z o.o. (PL)	8 552			151	2 008		-		11 400	103	528	144
InPost Express sp. z o.o. (PL)	807			-	-		-		656	-	-	-
Integer Inwestycje sp. z o.o. (PL)	594			-	-		-		483	-	-	-
EasyPack sp. z o.o. (PL)	229			-	0		-		125	-	0	-
Integer.pl SA (PL)	127			-	2 342		12 470		47	102	1 598	538
InSupport Center sp. z o.o. (PL)	102			1 837	304		-		20	111	484	102
Verbis Alfa sp. z o.o. (PL)	46			-	267		-		51	-	299	-
InPost Finance S.a r.l. (LUX)	39			212	-		-		31	1	-	-
Integer Group Services sp. z o.o. (PL)	35			645	493		-		15	4	401	-
InItTec sp. z o.o. (PL)	26			-	7 586		1 524		36	-	1 970	9
Total	10 557			2 845	13 001		13 993		12 864	321	5 280	792

1.37.Other related parties

Entities related personally with the Company include, inter alia, Łatała i Wspólnicy Sp. k., with whom the Parent Company is related through the person of the Supervisory Board Member - Wiesław Łatała. As at 31 March 2016, the Group demonstrated a liability to the above entity in the amount of PLN 43 thousand, and in Q1 2016, the costs incurred amounted to PLN 30 thousand. There were no transactions with other entities related personally with the Group and Members of the Management Board or the Supervisory Board.

1.38. Remuneration of senior management of InPost SA Capital Group

	Period ended 31 March 2016	Period ended 31 March 2015
Management Board	276	160
Supervisory Board of InPost SA	79	15
Total remuneration:	355	175

1.39.Earnings per share

As at 31 March 2016 and in comparative data, earnings per share was calculated as the quotient of the net result and the weighted average number of shares in a given period. This value on 31 March 2016 was negative and it amounted to PLN -0.74 per share, whereas on 31 March 2015 it amounted to PLN 0.51 per share.

On 18 June 2015, the incentive programme for key executives was adopted. The diluted earnings per share presented in the statements of comprehensive income do not include this event due to the fact that the execution of the programme depended on contingent future events, which as at 31 March 2016 were not met.

1.40. Events after the balance sheet date

On 16 May 2016, the Group's Management Board passed a resolution which concerns the decision to restructure the activities of InPost Capital Group for handling letter mail. The verification process of this activity model was initiated on the basis of the results achieved by the letter mail segment in January-April this year, which were influenced by the strong decline in letter mail volumes and price pressure, with limited opportunities to adapt operating costs of handling these shipments in the short term. Optimization of the letter mail distribution model made in March 2016, following the end of the service contract for the courts (referred to in item 12.14.2 of the prospectus), which resulted in reduced number of branch offices by approx. 45%, and human resources by approx. 40%, did not bring savings sufficient to maintain the profitability of the letter segment.

Therefore, the Management Board decided to undertake the following restructuring measures:

1. Terminate unprofitable contracts for handling letter items with the lowest unit rates.

2. Further reduce central costs.

3. Limit the area of operation to the main cities in Poland, which will reduce the estimated volumes of handled letters by approx. 30%, and whose service generates approx. 50% of the direct costs of distribution.

4. Renegotiate existing contracts from the perspective of the handled mail volumes and prices.

5. Transfer of registered mail for the e-commerce sector, served in areas outside the agglomeration, which represents approx. 30% of their volume, to courier infrastructure.

6. Build a "demand book" for letter services provided by InPost SA in 2017. After completing this process, further decisions will be taken as to the letter operations and the size of the service area.

Expected effects of the above actions include achieving, in Q2, positive EBITDA (i.e. the operating profit plus depreciation) for the letter segment per month, as compared with an estimated monthly loss in EBITDA
in the amount of approx. PLN 2.5 million in case of failure to restructure.

The said decision requires the approval of the Supervisory Board as it is part of the strategic plans of the Company, and therefore will be soon presented to the Supervisory Board the Company for its approval.

1.41.QUARTERLY FINANCIAL INFORMATION OF INPOST SA FOR A 3-MONTH PERIOD ENDED 31 MARCH 2016SEPARATE STATEMENT OF COMPREHENSIVE INCOME

	3-month period ended 31-03-2016	3-month period ended 31-03-2015
	3-month period ended 31-03-2016	3-month period ended 31-03-2015
Revenues from sales	127 391	124 502
Other operating revenues	231	1 004

Amortisation and depreciation	1 941	688
Materials and energy consumption	1 990	1 361
External services	125 828	92 032
Taxes and charges	119	218
Payroll	5 100	18 495
Social security contributions and other benefits	1 315	3 386
Other expenses by type	330	411
Cost of merchandise and raw materials	284	555
Other operating expenses	352	120
Total operating expenses	137 259	117 266

Operating profit (loss)	(9 637)	8 240

Financial revenues	626	741
Financial expenses	915	1 011

Profit (loss) before tax	(9 926)	7 970
Income tax	(1 873)	1 434
Net profit (loss) from continuing operations	(8 053)	6 536

Net profit (loss)	(8 053)	6 536

Other comprehensive net income
Total comprehensive income	(8 053)	6 536

Earnings per share
Basic	(0,70)	0.57
Diluted	(0,70)	0.57

SEPARATE STATEMENT OF FINANCIAL POSITION

	31 March 2016	31 December 2015	31 March 2015
Fixed assets	126 798	127 298	132 446
Intangible assets	28 797	28 640	13 323
Tangible fixed assets	16 416	16 712	8 243
Investments in subsidiaries	69 359	51 265	98 354
Other long-term financial assets	2 875	24 768	3 707
Deferred tax asset	4 053	-	2 966
Other fixed assets	5 298	5 913	5 853
Current assets	141 872	151 997	121 407
Inventory	1 205	1 758	1 089
Other financial assets	295	548	342
Trade and other receivables	118 914	118 772	87 636
Other current assets	3 105	7 652	19 481
Cash and cash equivalents	18 353	23 267	12 859
Total assets	268 670	279 295	253 853

	31 March 2016	31 December 2015	31 March 2015
Equity capital
Share capital	11 558	11 558	11 558
Supplementary capital	96 107	96 107	96 107
Retained earnings	23 159	31 212	28 870
Total equity	130 824	138 877	136 535

Non-current liabilities
Long-term bank credits and loans	-	-	2 085
Other long-term provisions	393	420	369
Government grants	769	852	1 107
Deferred tax provision	-	3 260	-
Long-term financial liabilities	5 318	5 841	1 423
Total long-term liabilities	6 480	10 373	4 984

Current liabilities
Trade and other payables	107 706	119 700	90 995
Short-term bank credits and loans	11 504	2 400	11 175
Government grants	338	346	364
Current tax liability	9 241	4 256	7 274
Short-term provisions	522	1 084	1 879
Short-term financial liabilities	2 055	2 259	647
Total short-term liabilities	131 366	130 045	112 334
Total liabilities	137 846	140 418	117 318
Total equity and liabilities	268 670	279 295	253 853

SEPARATE STATEMENT OF CASH FLOWS

(in PLN '000)	3-month period ended 31-03-2016	3-month period ended 31-03-2015


Cash flows from operating activities
Profit (loss) for the year	(8 053)	6 536
Adjustments for:
Tax expense recognised in profit or loss	(1 873)	1 434
Finance costs recognised in profit or loss	329	50
Depreciation and amortisation of fixed assets	1 941	688

Changes in working capital:
(Increase)/decrease in trade and other receivables	(140)	28 889
(Increase)/decrease in inventory	553	(642)
(Increase)/decrease in other assets	5 833	(1 566)
(Decrease)/increase in liabilities (excluding loans and borrowings)	(4 826)	3 422
Increase/(decrease) in provisions, deferred income and grants	(3 941)	333
Cash generated from operating activities	(10 177)	39 144

Interest paid	174	147
Income tax paid	671	125
Net cash from operating activities	(11 022)	38 872

Cash flows from investing activities
Interest received	8	-
Cash flows from loans granted	(112)	(92)
Payments for tangible fixed assets	(328)	612
Payments for intangible assets	(1 837)	(285)
Net cash (spent)/generated in connection with investing activities	(2 269)	235

Cash flows from financing activities
Cash flows from loans from related entities	-	(32 677)
Cash flows from bank loans	9 104	(147)
Cash flows from finance lease contracts	(727)	(254)
Net cash used in financing activities	8 377	(33 078)

Net increase in cash and cash equivalents	(4 914)	6 029
Cash and cash equivalents at the beginning of the period	23 267	6 830
Cash and cash equivalents at the end of the period	18 353	12 859

SEPARATE STATEMENT OF CHANGES IN EQUITY

	Note	Share capital	Supplementary capital	Profit/loss from previous years and the current year	Total equity
As at 01.01.2015		11 270	85 596	22 334	119 200
Total income		-	-	6 536	6 536
Issue of shares in connection with acquisition of shares in InPost Finanse Sp. z o.o.		288	10 511	-	10 799
As at 31.03.2015		11 558	96 107	28 870	136 535

As at 01.01.2015		11 270	85 596	22 334	119 200
Total income		-	-	8 878	8 878
Issue of shares in connection with acquisition of shares in InPost Finanse Sp. z o.o.		288	10 511	-	10 799
As at 31.12.2015		11 558	96 107	31 212	138 877

As at 1.01.2016		11 558	96 107	31 212	138 877
Total income				(8 053)	(8 053)
As at 31.03.2015		11 558	96 107	23 159	130 824

Kraków, 16 May 2016

Małgorzata Szcześniak

Chief Accountant

Sebastian Anioł

President of the Management Board

Marcin Pulchny

Vice-President of the Management Board

Krystian Szostak

Management Board Member

InPost SA published this content on 16 May 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 09 June 2016 12:39:02 UTC.

Original documenthttps://inpost.pl/report-show/1535

Public permalinkhttp://www.publicnow.com/view/38F5B28DBD256D4A79CAE344709B9E8BAD529367

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