Bpost Sa Unsp/Adr

Hello and welcome to the BPOST fourth quarter 2020 analyst call. My name is Rhian and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen only. However you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point please press star 0 and you will be connected to an operator. For now, I'll hand you over to your host, Mr. Jean-Paul Van Avermaet, to begin today's conference. Thank you.

Good morning, ladies and gentlemen. I'm pleased to present you BPOS Group's fourth quarter and four years 2020 results. First of all, welcome to all of you, and thank you for joining us this morning. With me, I have Leen Geernaert, our CFO, as well as our new manager of investor relations, Antoine Lebec. We did post the materials on our website last night. We will walk you through the presentation and afterwards, as planned, we will then take your questions. So if you go to page three, you see that our full year 2020 group adjusted EBIT came in at 280.6 million euro. And this is fully in line with our commitment to realize at least 270 million euro. As we have last revised during our third quarter results release. COVID-19 drove outperformance versus our initial group adjusted EBIT guidance of 240 to 270 million euro and this through strong development in parcels and logistics on both sides of the Atlantic. In addition, this growth and results were supported by solid last mile operations in Belgium. Mail and retail contributed for 171.2 million euro to the group adjusted EBIT and this with a margin of 8.7%. Year over year, the segment was impacted by accelerating mail volume decline of minus 12% due to continued resubstitution, rationalization, and also COVID-19 impacts mainly on advertising mail during the two lockdowns of non-essential retail in Belgium, meaning in spring and in November 2020. The segment also witnesses lower revenues from proximity and convenience retail network, equally due to COVID-19, related partial closure of the network, and reduced food flow and lower banking and finance revenues linked to that. Parcels and logistics ratios top-line growth was driven by strong e-commerce development, both domestically and abroad. As to parcels Belgium Netherlands, year-over-year growth was driven by parcels B2X, volume growth of plus 56.2%, and by Dynalogic. Volumes were fueled by the boost to online sales from COVID-19, as we know, and also to the two lockdowns of non-essential retail in Belgium. In parallel, growth in e-commerce logistics at active ends and Radio Europe together with growing cross-border activities mainly driven by Asian parcel volumes shipped by train since June 2020 also supported the revenue development of this business. Adjusted EBIT grew by 54.2% and amounts to 101.4 million euro with a margin percentage of 9.3. This EBIT margin grew solid versus 2019, where the margin stood at 7.9%. When we go to parcels and logistics North America, radio significant growth of existing customers driven by COVID-19, as well as new clients launched in 2019, of which sales have more than tripled, combined with increased operating leverage led to an adjusted EBIT uplift of €32.8 million, and this with a margin of 2.5%. This excludes the impact of the ransomware attack of €9.2 million in the last quarter of 2020. If we exclude that, it would mean that the adjusted EBIT would have been €41.9 million with a margin of 3.1%. CAPEX ended up at €147.7 million, and this in line with the revised guided cap of €150 million to preserve cash in an uncertain year, as 2020 was. Moving to page four with the highlights of the fourth quarter, we see that group-adjusted operating income at 194.4 million euro increased by 7.2% versus last year, while the group adjusted EBIT at 60.5 million euro was fully in line with our expectations and guidance. Business makeshift is further evidenced through combined adjusted EBIT contributions of the parcels and logistics business of 36.4 million euro, and this exceeds for the third consecutive quarter the mail and retail adjusted EBIT that amounts 34.3 million euro. We did continue to benefit from driving e-commerce volumes in Belgium, in Europe, and in the US, as well as from positive operational leverage in parcels and e-commerce logistics. In Belgium, this was fueled by a growth of 67.4% in parcels B2X volumes year over year, positively impacted, of course, by the November 2020 lockdowns and the end-of-year peak. On its peak, BPOST managed up to 670,000 parcels a day, exceeding the previous record of 550,000 parcels, which we reached during the due to first lockdown. The underlying mail volume decline at minus 11.8% was driven by less advertising campaigns due to non-essential retail lockdown in November, which resulted in an advertising mail volume decline at minus 20.4%. Remember that this minus 11.8 compared to a tough comparison base with Q4 in 2019, where the underlying mail volume decline was only minus 5.5%. Before I hand over to Lane, let me first give you an update on a couple of developments within BPOST in the last quarter, and also for the months to come. We go to page 5, and on December 8, 2020, we announced our updated strategy, Connect 2026, which aims to accelerate BPOS groups' transformation into a customer-centric and sustainable omnicommerce group close to society, and this while remaining an efficient mail provider in Belgium. A non-exhaustive list of concrete initiatives on page 5 here. illustrates how Bebo's group implements and concretizes this strategy. As to Omnicommerce growth in Europe, Active ENCE will open two new highly automated fulfillment sites in 2021, one in Belgium and one in Germany. And Radial Europe is opening a third site in Germany in March. As we also want to be a reference sustainable and planet-friendly company, BPOS has initiated a new materiality assessment for the whole group. This new assessment is the next step in our evolution as a sustainable company. First phase consisted of reaching out to more than 2,500 of our stakeholders, inquiring which ESG topics are important to them. With over 50% of response rate, this exercise will help us to ensure our sustainable strategy is focused in the right areas and tackles every aspect of the evolving sustainability landscape important for our stakeholders. The methodology and the results of the new assessment will be published on our website in the course of 2021. In the same vein, we also entered a new phase test for our EcoZone in Mefren in Belgium. This way, the city center is evolving into a complete emission-free distribution network, and this by the end of this year, and into a complete emission-free distribution network shortly. And by the end of this year, 2021, we will have five to ten other Belgian city centers that also will be supplied emission-free. BPOST announced on December 23, 2020, that BPOST and BNP Paribas Fortis signed a non-binding agreement on the future long-term partnership of BPOST Bank. BPOST would sell its 50% stake to BNP Paribas Fortis, but will continue to provide banking services through its physical network of post offices, thus ensuring high-quality service. This bolsters the ambition of our strategy to be an important contributor to social cohesion in society, and this also fits with the active portfolio management approach of our capital allocation framework, which we announced together with the Connect 2026 strategy update. I would now like to hand over to Lane for more details on the financials of the last quarter and 2020. Lane?

Yeah, thank you, Jean-Paul. Hello, everybody. I hope I can make it a better morning when it started. So looking forward to your questions at the end of our presentation. I'm now on page six, showing the EBIT bridge for the fourth quarter. As you can see, EBIT showed a decline indeed of 8.7 million euros compared to the same period of last year. In mail and retail, we adjusted every decline by 17.2 million euros from COVID-19 impacts on advertising mail, like already explained by Jean-Paul, and also on proximity and convenience. This was visible through the domestic mail volume decline of minus 11.8%, which comprises a decline of 20.4% in advertising mail over the quarter, and a monthly volume decline of minus 24.3%, in advertising yield during the lockdown months of November in Belgium. Parcels and logistics Eurasia, they recorded an adjusted EBIT increase of 8.6 million euros, mainly driven by parcel B2X forums, up with 67.4% yearly yield, yield positively impacted by the November 2020 lockdown, and in addition to that, the other EURT. The general mix in our Belgian operations was, however, more innovative. That is driven by higher mail volumes in our integrated network compared to the second quarter 2020 reform. This does result in a higher use of SIP contractors for the parcel delivery. Fowler North America adjusted edits. It increased by 3.3 million euros last year, fully driven by the continued strong momentum in e-commerce logistics. Neuron peak volumes and also operating leverage. Excluding the EBIT impact of the ransomware attack and that amounted for 9.2 million euro in the first quarter, the adjusted EBIT would have more than doubled and increased by 12.4 million euro. The corporate EBIT was 3.4 million euro down versus last year, this coming from lower balances. So at group level, the reported figure was 69.1 million euros down versus last year, which includes also 62.1 million euros of impairment charges. On the one hand, on present retail within the business unit's main retail, with 49.1 million euros related to youth rate groups, and then on the international mill at Parler North America, with 13 million euros related to the birth rate. I will come back on that in a minute. Page 7 shows the key financials for the quarter. At group level, the total operating income was up to 7.2%, fully driven by continuous strong performance in parts of the United States, Europe and Asia, and North America. More details on revenue and AB developments follows in the breakdowns for this material. As always, the EBIT was adjusted for non-cash amortization charges on intangible assets that were recognized following purchase facilitation of the various acquired securities. Furthermore, as just mentioned, reported EBIT of this last quarter was also impacted by impairment charges on current retail and on international use. Driven by COVID-19 impacts of reduced food for intangible environments, and partial closure of fresh shops during the lockdowns, the impairments have led to impairment on goodwill and intangible assets of the UPV group. This represents 49.1 million euros of cost, not cash of course, in press and retail within MNR. The decline in business meal also results in an impairment of the goodwill of international meals, which is a part of Southern North America for an amount of 12 million euros. Looking at the line of the net financial results of minus 17.9 million euro, these improved by 8.9 million versus the fourth quarter last year. This is mainly due to lower financial charges related to IS employee benefits and last year's fair value adjustment of the purchase price of the remaining shares of ANSI. Income tax expense decreased by 20.7 million euro compared to the fourth quarter of 2019. mainly due to lower profit before tax, combined with lower statutory tax rate in Belgium at 25%, and the recognition of the different tax assets for U.S. tax losses carried forward. Below the EBIT, related to our participation in the B-Polibank, an impairment of 141.6 million euro has been negative. As Jean-Paul already reminded in his introduction, In December 2020, we announced the intention to sell our 50% stake in B4Bank to B&D Paribas. The purchase price will be calculated based on the IFRS net value at time of the closing, and it is expected to range between 100 and 170 million euros. Based on the lower range of 100 million euros, the carrying value was therefore reduced to the fair value less cost. These impairments, they totaled 203.7 million euros. They led to a group net loss of 155.1 million euros in the quarter, whereas the adjusted group net profit increased by 19.7 million euros to 52.1. Adjusted free cash flow, then. It is at 117.2 million euros, and it increased nicely. I will come back on that later. This decreased by €284.7 million compared to end 2019, supported by this free cash flow generation and the absence of dividend payments in the second quarter and in the fourth quarter of the past year. CapEx for this quarter amounted to €60.9 million, which is a decrease of €12.3 million compared to the same quarter last year. with the spend primarily related to capacity expansion in e-commerce logistics at the Radio North America Enec event, as well, of course, in parcels between in Belgium. Let's have a quick look at the contribution of the different operating segments in our results, which you see on page eight. You see the contribution per business unit in the fourth quarter. It is actually for the third consecutive quarter that the combined contribution of our power business units to the group adjusted EBIT is higher than the one of meal and retail. In these we see that meal and retail generated 57% group adjusted EBIT of 60.5 million euros. Power Eurasia was the second contributor at 37%. And Parsons and Logistics North America contributed 23% to the group adjusted EBIT. So these figures prove that our business transformation is on the right track towards sustainable epic growth. We can move to page nine, and there we have the external revenue bridge for mail and retail. Mail and retail external revenues, they divide by 30.2 million euros to 456.6 million. That's impacted by €15.5 million revenue loss from domestic mail, of which 12.7 is relating to advertising mail, and by €14.3 million decline in the proximity and convenience retail network. Domestic mail recorded an underlying mail volume decline of minus 11.8% for the quarter, partly compensated by a positive price-make effect. The mail volume declined for the full year at minus 12%, whereas the last quarter we thought that perhaps we could catch up to minus 11% with the additional lockdown that proved to be possible. Transactional mail noted an underlying volume decline of minus 10.8% for the quarter against a tough comparable base of minus 7.2% last year. Although the Christmas cards supported the volume trend and they contributed positively to the price mix The volume decline remains impacted by no structural trend. Advertising yield volume declines to that minus 20.4% in the fourth quarter. Also here, very tough comparable base of plus 0.5% in the fourth quarter last year. The decrease was driven by the non-essential retail closure during the full month of November, impacting volumes, like I said, minus 24.3% during that particular month. and a continuous COVID-19 context with limited feasibility ahead what fuels advertisers' hesitance to engage into advertising campaigns. The press volumes were down with minus 2.7% for the full corporate. That shows the continuation of the e-substitution and the rationalization trend. Proximity and convenience retail network revenue may decline by 40.3 million euros due to the impact of COVID-19 on the footfall in our UV-ray retail stores, especially in the travel location. Value-added services, they increased slightly. We see that especially in the Delta and the Burkina Faso. Then moving to the P&L of solar retail, the adjusted EBIT amounted to 34.3 million euro with a margin of 6.5. It is an immense decrease of 17.2 million euro compared last year. The decrease in filter revenues is up of €10.7 million and €6.5 million increase in operating costs, including PHS, PMU. Operating expenses, why did they increase? We see higher operational costs in the mail network during the non-essential retail lockdown in November 2020. end of year peak driven by elevated parcels funding and therefore also to a large extent compensated by higher cost charged by Eurasia. The operating expenses they related to significantly higher payroll and income costs through increased headcounts. We have the regular salary indexation and we also had a daily COVID-19 premium for the operational staffing duty from November 30th to December 24th. In addition to the paywall and income costs, we have higher transport costs from a high use of subcontractors and also higher rental costs for the fee. The operating expenses increased also driven by higher re-invoicing from corporate linked to IT projects and some costs such as holidays and training have phased from the first half of the year to the fourth quarter of 2020. like we said earlier. Lastly, lower material cost of UV ray retail and general cost containment on discretionary strength allow to partially compensate with higher peak effects. Reported EBITs. The reported EBITs is minus $15.5 million, and that was impacted, like I said, by the impairment charges of present retail for $49.1 million. Then part of Eurasia. We recorded an external revenue growth of 81.9 million euros. The positive revenue development across all the sub-segments was mainly driven by thriving domestic e-commerce during the November lockdown and the end of year two. Parcel daily recorded an increase of 60.3 million euros or plus 55.9%. It is fully driven by parcel need to expand and revenue growth of respectively 67.4% and 69.9%, which indicates a positive price mix effect of plus 2.5%. As mentioned earlier, the volume growth was fueled by non-consensual retail closure in November 2020 and also a strong year-end peak. The price mix was supported by peak surcharges and favorable products and customers. Parcel B2X falling growth was at 66.2% for the full year 2020. Besides the strong volume and the revenue development that's dynamic, the remainder of parcel's daily revenues, which are not captured in B2X, show the year-over-year revenue decline, resulting mainly, I should remember, from last year's closure of some non-profitable businesses. Moving into e-commerce logistics, the revenues increased by 5.5 million euro or even by 7 million euro when we exclude last year's positive effect of the continuing consideration reversal on the amounting. This increase was mainly driven by strong organic growth at active ends from existing customers and new customers acquired through the MCS fulfillment integration as of October 2019 and also regular growth mainly in the UK from existing and also new customers, and a bonus from the opening of a new fulfillment site in the third quarter of 2020. Close border revenues increased by 16.2 million euros. This revenue development was driven by a continued strong growth of alien parcels linked to rail transport as an alternative to air freight, but at a slower pace than we have seen in the second and third We also saw growth in UK business driven by new customers and surcharges. This revenue development was, however, partly offset by the declining cross-border postal business, where growth in inbound parcels would not compensate the decline in both inbound and outbound deals. On the next slide, we see that the adjusted EBIT for part of Eurasia increased by €8.6 million to 2020.4. That is an increase of 61.8%, and the margin is 7.8%. This was driven by top-line evolution I just talked about, partly upset by higher volume-linked variable costs and higher intersegment operating expenses charged by the operation network for minimum retail, as mentioned on the 3D slide, relating to sorting and distribution costs. The channel mix in the fourth quarter was more negative, driven by a higher meal value in the integrated network compared to the second quarter lockdown, and therefore resulting in a higher use of subcontractors. Excluding last year 1.5 million euro earn-out leaders, Suomi and Mencken, the adjusted EBIT would be up by 10.1 million operationally. On a full year base, for the full year 2020, the EBITDA value ratio was up by 54.2% to 101.4%, and the EBITDA percentage increased from 7.9% in 2019 to 9.3% in 2020. Then let's have a look at North America. In spite of the ransomware impact, the operating income of e-commerce logistics grew by 34.5 million euros, up 9.3%, or, even important, with 17.9% when excluding the negative foreign currency development. This growth was mainly driven by Radio North America, recording an 18.5% increase from existing customers, as well as significant growth from new clients launched in 2019. This was only to a small extent offset by change. Our cross-border activities via Landmark, Apple Express, and IBM also recorded strong volumes from existing clients and new customers, fueled by continued e-commerce developments. It will not surprise you that international mail saw a decline in external revenues year-over-year, driven by the infertile impact of COVID-19 on the mail business. External revenues were up by €13 million for the business unit. Looking at the profit and loss account, you see that Pala North America adjusted EBIT was up €3.3 million at €13.9 million. The margin is 3.3%. For the third consecutive quarter, we have reached a positive adjusted EBIT at Pala North America, and this quarter despite the ransomware backing back. In 2020, the net estimated impact amounted to 9.2 million euros. As the ratio has a cyber insurance coverage, the foregoing constitutes also a continued asset towards the insurance company. While we exclude the ransomware impact of 9.2, we adjusted that it would have more than doubled to amount to 23.1 million euros with a margin of 5.4% driven by operating leverage and cost containment in general. Reported EBIT is negative, minus 1.7 million. This is, of course, due to the impairment of the meal group, with an amount of 13 million euros. The corporate segment on page 15, external operating income decreased by 1.1 million euros, driven by lower building sales, The operating expenses, including the depreciation, increased by 9.8 million euros, mainly related by higher services to the operational business units, especially, like I said, for IT-related projects. So this lateral majesty of a decrease will incorporate up to 3.4 million euros. Then moving to the cash flow, it's the cash flow of the quarter. The report is free cash flows to that 145.4 million euros, an increase of €18.2 million versus the fourth quarter of 2019. Cash flow from operating activities stood at €201 million, which is €16.6 million lower than last year. If we split that, we have a couple of elements. €41.2 million decrease in the cash flow from what we call operating activities before changing working capital and provision. at 64.7 million euros. This is driven, of course, by a lower EBITDA generation, higher taxpayer payments in the fourth quarter because we made use of the postponement that we could make allowed by government due to COVID-19, and then the absence of receiving a dividend from people's banks. The second element is an improvement of 24.6 million euros in working capital to €136.3 million. This is mainly explained by €15.1 billion higher cash outflow relating to collected proceeds due to wages customers driven by the high level of merchandise sales during the COVID-19 period in the tourist business. Remember that the due to effect is excluded from the adjusted fee cash flow presented in the key financials on slide 7. This due dues outflow was more than compensated by working capital evolution excluding those, being $36.3 million better than last year at $109.5 million. This is primarily driven by increased terminal dues, extended payment terms due to setup of temporary initiatives during the pandemic. This is partially counterbalanced by some lower supplier balances due to timing of expenses in late 2019. and an increased ESO as a consequence of the mixed impact on our receivers. Note that in the full year 2020, the changing working capital was positive at €140.1 million versus €18.9 million in 2019, so an improvement of €121 million. As just mentioned, for the fourth quarter, this was explained by increased cross-border activities leading to higher thermal juice, and the positive impact of extended payment terms in tables due to some temporary initiatives that were set up in the context of the pandemic. As expected, these temporary initiatives start to unwind in the course of the fourth quarter of 2020, and it will also continue to unwind during this quarter in 2021. Cash flow from investing activities is increased by 34.8 million euros year-on-year, The resolution was explained by the Superordinated Loan Grant to People's Bank in the fourth quarter of 2019 and combined with the loan of CapEx. As a reminder, in the second quarter in 2020, we announced that we would be prudent that CapEx investments would be limited from $200 to $150 million for cash preservation. The cash flow from financing activities at minus €40.5 million in the quarter, it increased by €121.9 million versus the same period of 2019, mainly resulting from the absence of an income dividend payment in the short quarter this year. The actions taken to preserve cash may be posed at the start of 2021 with a stronger position for the future and thus for execution of its strategy, and that we also can see on the balance sheet. As a result, some main movements, perhaps, that I want to explain. As a result of the announcement made by BPOD to sell its stake in BPOD Bank, the investment in BPOD Bank, which was previously booked in investments in Associates and Joint Ventures, has been classified as assets held for sale. The decrease of the value of assets was mainly explained by the impairment charges of the and also saw foreign exchange impact on the portfolio. The increase of cash-in-cash equivalents we explained in the cash flow statement, the net debt consequently increased by 284.7 million in 2020 to 495 million euros. In 2020, we could preserve the strength of LiPo's balance sheet, the cash reserves, and capacity to invest on the long term to continue accelerating BPO's business transformation. I'm now also on slide 18, so complete with total available liquidity at the end of December, consisting of 948 million euros of cash and cash equivalents, of which 779 million euros is readily available on bank current accounts and at short-term deposits. BPO's group also has two ongoing revolving credit facilities for a total amount of €275 million. As to the external earnings, no big changes occurred in the quarter. The amount is €984.1 million, out of which €809.9 is loan-to-invest. Note that in December 2020, there was a big annual installment of €9.1 million on the European Investment Bank. The outstanding commercial paper in the amount is to €165.1 million, so stable, with a maturity between one and three months. The current portion of the EIP advertising loan of €9.1 million will be repaid next year in the full term. I will now hand over to Jean-Paul for the outlook and come back to you with the key

Thank you, Lynn. As mentioned during this presentation, we can summarize that in 2020, within the challenging context of the pandemic, we witnessed an unprecedented growth in our domestic parcels volumes, as well as in our international e-commerce activities, which progressively led to a shift in debit contribution by By delivering on our ambitions for CONNECT 2026 and building on the recent development of our parcels and logistics activities for the year 2021, we expect the following. Our group total operating income to increase by a low single-digit percentage and our group adjusted EBIT for 2021 to be in a range of €265 to €295 million. This is broadly in line with 2020, where, despite all challenges faced, COVID-19 had a net positive contribution to the result. For mail and retail, we expect a total operating income evolution to result from an expected mail volume decline of 9% to 11%. an approved mail pricing increase of plus 6% and an expected post-COVID-19 recovery in value-added services and proximity retail. Adjusted EBIT margin is expected to range between 6% and 8%. For parcels and logistics Europe and Asia, we anticipate a mid-single-digit percentage growth in total operating income. with parcels and e-commerce logistics volumes expected to normalize from elevated COVID-19 levels observed during 2020. The adjusted EBIT margin is expected to range between 8% and 10%. Operating expenses will include investments to grow omnicommerce logistics in Europe, as we told you before. Our parcels and logistics activities in North America are expected to grow at the operating income level by a mid to high single-digit percentage, and this is driven by radial existing customers growth and new client launches normalized for 2020 COVID-19 spikes. Adjusted EBIT margin is expected to be here between $4,000 and $5,000. We foresee a gross capex of 200 to 220 million euro for the whole group in 2021. This capex envelope will be geared towards the priorities set in the Connect 2026 strategy to grow Omnicommerce for business. The dividend relative to the results of the year 2021 will be in the range of 30 to 50% of IFRS net profit and will be payable in May 2022 after the general shareholders meeting and this fully in accordance with the new dividend policy. Of course, due to continued COVID-19 uncertainties, visibility going forward remains limited and may still impact also the 2021 outlook. We are now ready for Your questions, so operators, please open the lines.

Thank you. So if you would like to ask a question on this call today, please press star 1 on your telephone keypad. That's star 1 on your telephone keypad. So the first question comes from David Kirstens from Jefferies. You're now unmuted. Please go ahead.

Hi, good morning, everybody. Three questions, please. First of all, when you compare your performance with some of your peers in Europe, what would you say are the most important factors that explain a relatively more sluggish performance? Is that something specific to Belgium or to BPOST? I think most of your peers all had strong recoveries in the fourth quarter with strong growth in parcels compensating for pressure on mail. Then my second question, you highlight a net positive impact on EBIT from COVID-19 in 2020. Can you please quantify that? Is that in line with the guidance upgrade that you put through in the autumn, around 15 million, or maybe even 25 million when you considered the 280 million realized result? And can you be more specific on what the impact has been on mill and parcel volume in EBIT? Then my third question is, can you give some indication on volume developments in the first quarter so far, and particularly with regards to partial volume, and perhaps are you seeing already recovery in advertising mill? Thank you very much.

As to the performance of the years, yeah. I can only talk about that ourselves. Of course, we also look into that. I think one thing that is very important to understand and what we try to flag, if you look at people's results, it's always at the UMP between Black Friday and Christmas that that comes with higher operating expenses. And I'm talking parcels in Belgium. It's something that we have always seen that at that point in time, we have external expenses for transport, transport cost and interest. So that's an important element. Secondly, the EBIT margin was also driven by some COVID-19-related elements, such as the premium that we paid them to the operational staff and duty. That was a premium between November 30th and December 24th. This was to tackle absenteeism as much as possible. We had a cost failure from the first half of the year to the fourth quarter. We flagged that before. I think everybody thought that probably that would not be the case, but since in this particular business unit there are also important parcels, we want to invest in the growth of e-commerce and e-commerce. That obviously also keeps me. And then lastly, like I indicated in the presentation, compared to the second quarter 2020 lockdown, we witnessed higher mail volumes in the integrated network. So although we came down year on year, especially in advertising, I think the volumes were higher than they were in the second quarter. That resulted in a higher use of subcontractors. So that's very much in particular. And to your question, so that explains probably, so we were not at 11% of ABQ, like we were in the second and the third quarter because of those reasons. And it's a typical B post that's up to you to judge on that one. This flag also, that peers could compensate the growth in e-commerce and parcels, and that could compensate for the decline in mail. I think if you look at the revenue proportion of mail within DuPont, it's true that it's still different there. Our profile is different than it is with peers. So we still have, let's say, a bigger dependency on mail. And on the other hand, I think this year, we clearly showed the potential that we have in the two follows and that we took all of the chances to grow there further. But it's true that our profile is still different.

Jean-Paul? With respect to your third question, is there any view we can give on the volumes starting 2021? What we can say is that on the male decline, anyhow, The comparison between 2021 and 2020 will be very different because as you will know that the figures of 2020 have been very volatile, I would say, from month to month and linked to lockdown and not lockdown and recovery from lockdown and backup or backlog that was being done. But for the moment, the first two months where we have seen were of course normal months last year, I would say, And we see that in the mail that the decline is in line with expectations. So it means that for the coming months where there was a huge decline last year, it might also be less, of course. But, okay, the average that we gave in our outlook is what we expect over the whole year. taking into account I would say the volatility as it is but it's not a negative view what we have here to date on mail apart from and that's your question also apart from the advertising mail we have several actions in place to get that back on track I would say or to get it growing we feel that there's a lot of reluctancy um on advertising campaigns probably companies that are linked to savings and etc because of kobe so there is a reluctancy but we continue to work on that so there it is still lacking behind i would say as far as parcels is concerned we can see but also there again the first two months of last year were of course normal months, as far as we can say normal, they were before COVID. We are in year-to-date now at plus 50%. So we follow it very closely to see, okay, we all know that 2020 brought us in a higher curve and brought Belgium in a higher level, I would say, of e-commerce sales and e-commerce business. So what we can say is that we see that for the first two months that we are at around plus 50% in the Tarsus volumes.

Okay, thank you. Sorry, carry on.

Sorry, the COVID-19 related EBIT impact, if you can quantify that, please. Or did I miss that?

But you mentioned an amount.

Can you perhaps say that? I think if we look at it ourselves, did you refer to the initial guidance that we gave from 42 to 170? We withdraw that then afterwards. We're now at 280.6. If you would include the ransomware, in fact, we would even be at 289.8 million. So, yes, you could. And we think that the implied COVID-19 boost, it ranges between a positive impact like maybe 220 and even up to 49 million. It's difficult to say. That's why we also said we will not give the amounts anymore because the truth will be told this year. We will see indeed, like Jean-Paul was saying, we know that we jumped the curve in e-commerce. We know that some of the growth is there to stay. But it's difficult to say how much. So also saying now exactly what the economy is impacted is extremely difficult.

Understood. Thank you very much.

You're welcome. So our second question comes from the line of Frank Claassen from Big Roof Petercam. You're now unmuted. Please go ahead.

Yes. Good morning, all. Two questions, please. First of all, could you update us on your cost savings programs and mail? So the alternative distribution model. And last time you also talked about Project Delta. So what is the latest there? And then secondly, you talked about working capital and widening of the temporary measures. How big is this effect? And what can we expect going forward for working capital? Will it be a negative? So any thoughts on that, please? Thank you.

I'll first take the working capital perhaps. So indeed, if you look at 2021 overall, I think it will be negative, but it was done on purpose. And like we said, we want to be sure when we started this journey a year ago, I think everybody was sitting on his cash as much as possible. So the people tend to be prepared for worse. The negative impact will be deep unwinding of those temporary initiatives that we set at that point in time. We expect, for instance, for the first quarter of this year, that this will be something like 60 million euros. There's always the impact of the dues to customers, but that's also why we report, just as there's this report, it does not really have that impact because it's not really our cash. And then we also have the terminal dues of which we spoke. which is now on the liability side because we wait for those to come. But timing is not easy to predict. On the other hand, working capital management, what I've seen from my teams in the past year was excellent work. So I think we can continue to do so. And I think all in all, it will be more the unwinding of the temporary initiatives that we will see than anything else on particular. Perhaps also in the cash flow, we've already elaborated on that. So we explained about the post-banking, which we are now negotiating with the SBA and looking into the closing days. That's, of course, also money that will come in, which I cannot predict whether it will be 2020 or 2021. So I think that's also an important thing to add. And like Jean-Paul said, The CAPEX expenditure will amount between 200 and 220 million, so that's also an important . But starting with a strong balance sheet to start off, let me repeat that, so indeed we will see some unwinding, but there are also very much structural things which have been done in 2020. Jean-Paul, you take ADN?

Yeah, with respect to the alternative distribution model, as you know, we started the implementation at the same day as the first COVID lockdown. We had then an evaluation period, as we explained before, in my opinion, that started in mid-March and that took until end of June, together with the unions. For the reorganizations, we had a a small delay linked to COVID, but we are now fully into it. The total cycle, as we informed you before, is taking about 18 months. And the small delay we have taken in 2020, we have planned to catch it up during 2021. But, of course, it takes, as I said, a cycle of about 18 months. We believe that there will be savings in 2021, but they will be limited, and the full savings will definitely be in 2022. The full effect will be in 2022, so to say. The speed of the reorganizations, according to what we have planned, we are, for the moment, on track, and it demands, of course, also social dialogue. But for the moment, as we have started, we are in the plan that we have foreseen for 2021. The limited savings are also included in our outlook as we are ranging to 295, from 265 to 295. So it is included in that range.

And any new thoughts on this Project Delta, which you talked about last time?

Well, the Project Delta is ongoing. Project Delta is, in fact, we're still in the study phase for various possible operating models. We go step by step, and the last thing we have done is look to the possible commercial effect of the models. So we expect to be able to present it to our board in the second half of the year. And that's more or less what I can say about that. And then to start implementing also step by step as from next year. So it will be, I would say, on top of the ADM implementation, we will continue and we will take steps definitely as from next year to further work on the operating model, which is a need, as you will probably know.

Okay, thank you very much.

So our next question comes from Sumit Mehrotra at Societe Generale. You're now unmuted, please go ahead.

Yeah, thank you. Actually four, I'll try to concise, be on three. On mail and retail, first you did 8.7% margin this year. You're guiding for a decline, 6% to 8%. I'm more interested on the reasons on the bottom end of that range that why do you even look at the 6% bottom end of the range? What's your thinking there? Having considered that there are saving programs in the distribution model should give you some benefit. Secondly, on Palo, Eurasia, again, when I read closely what happened in Q4, I understand that there are some extraordinary pressures on costs. year-end peaks, COVID premiums, and a lot of special pressures I see in Q4. What is your confidence that you will be able to do this next year, your target? How do you think you can meet that? And lastly, your confidence level on dividend payments, considering you have got a higher KPEX outgo, EBIT, you're looking at flat. So what is your confidence level on the payout ratio for this year? And lastly, a B-Post bank account. You take this revaluation loss. Why does it come at this time and are there any reasons why it shouldn't have been adjusted in previous years? I see even a halving of the book value with this. So why shouldn't it have been captured in the last year's year-end appraisals? Thank you.

I'll start with the last one, eco-bank valuation. Probably you don't know, but you do know that this last year we came out with an updated strategy. We were working on that already in 2019 too, and especially for people's banks in the course of 2019. We were indeed looking together with BNP Paribas, what is the future of the banks, Especially for ourselves, we're not bankers. We did have 50% share, and we did, and we do, and we will service for the bank. But as you know, the compliance requests get extremely high. The capital requirements get extremely high. So if we look at our capital allocation, for people it makes sense to invest in e-commerce and our business transformation rather than investing in a bank where you have to put more money in. But on the other hand, as you know, the income is lower. Lastly, we were still in that access point. We were making, together with the bank, a long-term plan to see, will we do the long-term plan, which also has its value, of course, but requires more cash and more capital allocation. And we did not come to a conclusion yet in 2019. That's the reason why. We only decided that in the course of time. I see a question on the mail-in detail, the outlook. So your question was, if I remember well, we are at 8.7% margin. And we guide us for decreasing margin at 6.8%. We give the range because we don't know. The mail volume decline will be the main item that we have to flag. Every percent is represented. I think you're absolutely right. We are working on the operating costs, like Jean-Paul explained on the ADM. Due to COVID, we couldn't start up as it was foreseen in the course of 2019. So we do not have the full effect in 2021 yet. So that's also having an impact. But it's both sides. We do expect it will vary how much the volume decline will be.

there that is already a thing and one that we cannot catch up in soon and sorry in the post uh maybe to end on the on the on the mainland retail i think the main challenge um we gave a range if everything turns out positively you will understand that we will at the upper side of the range but it's i think the advertising uh Male is an important element. As I said, we do not see the recovery yet, but we do everything we can. But it's also economically, I think, an impact. The male decline in general is, of course, an important element and can quickly change the results. And as per the operational cost savings, I think we are in line and we will not really be able to go much faster than what we have planned. So that has been included in the range. So I think the main targets are keeping, of course, the costs under control and continue the reorganizations as we have planned with full effect in 2022. And secondly, we need to... bring up the advertising mail, and we hope that the other mail decline will not be as big as we expect and as we have calculated in this range. So these are the main elements in my opinion.

Then moving to PolyU Asia, I want to come back on the point that I made in the presentation. If you look at the results of the fourth quarter, you're right that the adjusted EBIT margin in the fourth quarter is 7.1%. So if you compare that to the outlook, I understand your question. If you look at the full year 2020, it is shown that in 2019, we had an EBIT margin of 7.9%, and we increased that to 9.3%. So that, for me, indeed does confirm that the range that we indicated between 8% and 10% or just an epic margin for Paolo, is really weak.

Yeah, your question was, are we confident about that? I think we are very confident about that rate.

And then on the confidence level on business, I think you mentioned CapEx and things like that. Yes, that's in our outlook. That's in business. We will be paying dividend based on our new capital allocation policy, and there's no reason to believe why we would not do that.

Thank you.

So our next question comes from Lottie Timmermans from ABN AMRO-ODDO-BHF. You're now unmuted. Please go ahead.

Good morning. First, a question on the underlying assumptions of the partial logistic Euro-Asia 2021 outlook. You assume mid to high single-digit growth. I think it's quite confusing if you say that you already have 50% volume growth in the first two months of this year. And I also think that Belgium e-commerce penetration is relatively low compared to other countries and therefore would apply stronger growth. I also mentioned that you would expect to continue at a higher growth curve. I would say that it's clearly not in your outlook. Could you give some more color on the underlying assumptions also, because there are, of course, non-voluminated revenues in there. Is that what drags down the 21 outlook growth guidance, or do you assume other outcomes? market participants stepping in, or what is your view on that? That's my first question. Then second question, I couldn't 100% understand the first answer on operating expenses around Black Friday. I get that operating costs increase when high volumes are there, but you also see that margins throughout the years in Q4 were stronger, and it was clearly not the case this year. What's your view on that? And were there any significant one-offs in Q2, Q3, supporting the margin in parcels, which dropped the margin to 11% at that point and which were not there in Q4 and are also not expected to continue going forward?

Okay, I think the last question is getting ahead of me. So I think one thing to point out is that you say normally Q4 we have a better margin on parsing. That's not the case. I think typically within B2, it's always the quarter in which we experience that we have to make use of more subcontractors. So the way we work in B2 is that we have an operational network that distributes in any case the rule and as much as possible also the parsing. So that's what you have seen. If you ask for specifics in the second quarter, that's exactly what happened. There was very little meal because of the lockdown. So as a consequence, more courses could be distributed. And that made the need that we could make use of that synergy with that network far more than we can when we are in a normal peak. That normal peak we've seen in the fourth quarter, meal volume was down, especially advertising, but not that low as it was in the second quarter. So our capacity was fully used, and we had to hire extra interviewers. We had to work with subcontractors to be able to deliver all the parcels. That's what happened. It typically happens in the fourth quarter, but now it was more outstanding, and especially when you compare it to the second quarter. If you say that you have specific costs that you will not have in the future, yeah, let's hope that COVID-19, that we can... in the world can manage COVID-19 and that indeed we do not have to pay COVID-19 premium anymore. Like I said, we did it. You have to imagine that our mailmen, they had to be out in the street where people were asked to work from home. They had to deliver my parcel, your parcel at home. So we had to stimulate them to go to work and to take that risk, which it was. So hopefully that risk cost is no longer there in the future. I also talked about cost saving. That's a need saving. And so I think that's something in particular that kind of depressed the margin of the fourth quarter. And normally that would have been also in the second and the third quarter. So we have been spread over the year. But it's included, like I said, in the full year margin of 9.3%. So that's all. the fourth quarter specifics compared to the other years?

Maybe to add something on the fourth quarter. As you probably know, we had a second lockdown in Belgium for the month of November, so quite some weeks ahead of Black Friday, which was, of course, obliging us to deliver and to put extra costs on things that were not I would say, planned in advance. I mean, the lockdown, we did plan in advance. We were able to fulfill and to keep our promise that everything would be delivered before Christmas at home. That's what we did. We were fully in the setup of the end-of-year peak operation model, but, of course, it was not ready on the 1st of November when the second lockdown came. So that has led to different OPEX costs than in the Q2, in the first lockdown. And as Leen said, the mail did not decline as it was declining in the first lockdown. The mail had a normal pattern as we had planned. Only the advertising mail had an extra decline again. But all the rest was in a normal, I would say, normal evolution and a normal planned type of mail, which led to much more parcels to be distributed outside of the existing mail distribution network and mail and parcel distribution network. So that means that at that site we are running at a higher OPEX cost than normally. When your question on single digit assumption for the parcel growth of 2021 and in view of what I said before, I would like to repeat what I said because January and February last year were were non-COVID and were, I would say, at the lower growth path or the lower growth curve than as from COVID, as from March, April, mainly in April. So, yeah, do we believe, is the assumption we took for 2021 for the parcels growth too low? Well, we will be able to say after the second quarter or during the second quarter. The first quarter mainly was still, I would say, last year was still a normal quarter with normal growth. According to 2019, it only jumped up as from end of March, beginning of April. And okay, the plus 50% is I would say the new normal level of the growth curve. But okay, we had percentages in the second quarter of, if I'm not wrong, 86%. So it means that, yeah, we will not have another 50% on the 86%, according to my opinion. So that's a little bit what we want to say about that.

In the press release and in the analyst presentation, we gave the overviews of the quarter. I think for the coming year, it's extremely important that we have the comparatives right. And so you find both in analyst presentation and press release, the growth numbers for parcels and for mail that we have seen in some previous months. Okay. Denise?

So our next question comes from the line of Mark Swartzenberg at ING. You're now unmuted. Please go ahead.

Yeah, thank you for taking my questions. A couple of parts were a little bit difficult to hear, and that is my line. So forgive me if I'm asking the same question again. But I first want to come back a bit on, indeed, some outlook statements, which I find difficult to understand. The first one is the mail volumes. Already a few questions asked about it. But you're basically guiding for minus nine, minus 11. But I would say 2020 has had some significant headwinds from COVID, particularly in the advertisements. And if you're running in gen and FED in line with your guidance, as you stated, and comps are getting a bit easier, then basically you're assuming that the trend will become underlying worse towards the end of the year. Is that correct? that was your question mark now that's my first question but it's better to take them one by one because otherwise we forget probably a few no because i prefer that everybody speaks the three questions that you know okay okay then we go ahead the other one is um your your outlook for the full year and you're basically seeing uh already 50 growth indeed in your parcel then you come to a mid single digit guidance for the full year um assuming a little bit of operational leverage. But if I add up all your guidance, what you give there in terms of margins, there seems to be, for Palo, North America, for instance, if you are just already for the one-off effect from the ransomware attack, there's basically very limited operational leverage in that segment. While I thought that Palo, North America, was still a turnaround story where margins would be where we would see an acceleration of our operational leverage over the years, and particularly then with some tailwinds from COVID, I would expect that to continue a bit faster in 2021. Same a bit for Palo, Europe and Asia. And your margin guidance there also shows a very limited addition to your EBIT. And that all then comes down to a sort of midpoint similar performance in 2021. Is there then underlying such an investment in OPEX, which I didn't see in the presentation being mentioned, but I'm just curious if that's the case, because how should we think about this guidance and then look into 22, what would drop out in terms of investment, whether we would see the inflection point of really growth and EBIT? That's my second question. Then the networking capital, Frank did ask about it, but I didn't get it in full. But looking at the networking capital, we had a big inflow in Q4, and the guidance was to be a significant negative for the full year. That didn't happen. It was a big inflow. Will that be first then all in 21, or at least a significant amount? So we would see a sort of strong trend. multi-million outflow for net working capital in 20 months. Can you give us a bit of guidance on the net working capital outflow for 20 months? And then lastly, on the impairment of the 62 million on the retail and mail business. I understand it's due to COVID, but COVID is just a blimp in the end. So in the end, the world will at some point go back to normal. You would see a reversal of that. And I assume that the impairments are based on DCFs, so a lot of value also in the future. I haven't seen interest rate going up yet, although the market is a bit afraid of that. But how should I understand that there will be such a significant impairment Basically, to me that suggests that the underlying basis will be structurally less performing. Is that correct? Those are my questions.

Yeah. Okay. As to the experiments, and specifically you asked on the UV region, what we've done in 2020 is, and you can find it in the annual report, two intersectional and danger-based experiments So we split actually the network in people's retail network on one hand and UVA retail network on the other hand because we want to monitor them separately because they have some of the same goals but also some separate goals.

Can you speak a little bit louder, Elaine? Because I can't hear you.

It's a technical explanation but based on organizational steering. So what we do in 2020, is that the proximity and convenience retail network part has been split in BPOS retail network on the one hand and UV-ray retail network on the other hand. And that's because we want to monitor them separately. It's extremely important for us that the BPOS network, that we can have a clear earnings model on that one, so that's why we decided to split it. It is in line with the updated strategy to deliver new neighborhood and proximity services, through the BPOS retail network, different products are offered and differentiating it as much as possible from the UBWay retail network. As a consequence, as you know, you have a technical thing that is split at CGU and that you cannot profit from one or the other. So UBWay retail was listening to its own long-term plan and that was used to calculate On top of that, it's absolutely true that COVID-19, it impacted this here result, so also the starting points going forward. So both are true, right? So it's technically because of the split, because we want to steer it separately. And as a consequence, indeed, you're not benefit from the whole as to speak. As you know, we bought UV rays, so we have good will on that one. We do not have good will on reposts. So I think that is helpful. And like I said, you can read it in the annual report because it's technical, which is a very nice question from an analyst's point of view. So thank you for that. And then for the networking capital, yeah, I'll repeat what I just said. So yes, we have seen some positive effects which we expected to unwind Already in the fourth quarter, they did a bit too, but we had some other positive things that came in. So going forward, what we expect is that about 60 million of unwinding will happen in the course of probably the first quarter.

60 million outflow in Q1, there's a reversal of that. But that unwinding Q4 was way bigger, so will there be another reversal later on then?

Well, we also have the impact of what I explained, the due to customers, but that's very difficult to predict how that goes. And we do not, it's in the report, it's not in the adjusted cash flow. And then the terminal dues, that timing is really uncertain. So we do have on the face of the balance sheet that we await for terminal dues settlements or invoices as the problem. And that's hard to predict when exactly that will happen.

How much was the terminal use element?

I'm not very sure. It was a net positive impact, but we had some liabilities and some assets. I cannot give the correct amount.

So for 2021, looking to networking capital, should we then assume, say, an outflow of something like 80, 100 million, including some financing of your business? So on top of the $60 million, an additional outflow for working capital as well? Or should we think about the net working capital for 2021?

Sorry, I didn't get the amount that you were sending, Mike.

Well, we have the $60 million that will reverse in Q1, but there obviously will be an underlying net working capital movement as well in 2021, apart from the reversal. So, yeah, can you give us a bit of guidance on the net working capital in total for the full year 2021, what you expect there? Is it bigger than the minus 60 or smaller?

I think the best we can tell is the unwinding of the temporary initiatives. And that's the 60.

Okay. Okay.

The outlook on raising more dimensions?

Yeah, the operational leverage, the lack of it predominantly. Yeah.

So you may be correct assumption, so you include ransomware and then I think we are at 3.1% of 80% and we indeed give an indication that we expect it to be 4 to 5%. So I think that's again a nice step. So I hear your question, but I do not fully agree.

If 9 million is a bit more than that, 0.2, I think. Yeah, so you say we go from 3.1 to 4.5. That's what you're doing? Yes. Okay. And then on the group level, adding it all up together, the margins, the growth, and then at midpoint, guiding for a flat performance over the year, how much is then related to investments in OPEX that we might not see in 2022? Because in the end, you're growing on your top line, particularly your e-commerce business. Is there some level of cost involved in the P&L in 2021?

I think in the development of Europe, we clearly say that we included investments in OPEX for the growth. Of course, that's why we give a range. So if they would be less, it would be at the upper range. I think that's what you are aiming at, and that's, of course, the case. So, yeah, we have foreseen to invest, so we would like to do it. But, of course, if there would be some delay, it would definitely... push the results in the upper side of the range and to the male volume, that was also a question. Minus 9, minus 11. We did end at minus 12 in 2020, which was according to what we expected. Also there we had between minus 9 and 11, I think, predicted. So it's not that much higher. So the The mail volume declined for 2021. We do not expect to be at minus 4 or minus 5 because of minus 12 in view of minus 9 to 11. And the advertising is the most vulnerable and liable. We do say that in the first two months we are in line of that guidance. and a bit, I would say, even a bit better if we would look at it month by month. So it's very difficult to predict, as you know, but I think in the first two months it looks not that bad. But again, the first two months were a comparison with the first two months of last year, which had no volatility linked to COVID.

No, indeed, that's why I ask. You're guiding basically still from 9 to 11, but you have easier comms ahead and you're already trending a bit better. So I would have expected if you have 2% negative COVID in 20, you could bring that range a bit down because it would suggest a bit that you're guiding underlying and let's say minus 11, minus 13. That was a bit of a feeling.

We also had months that If I'm not wrong, June was a very strong month, for example, where there was a recovery of what was lost in the months before. So it's very... Yeah, we, of course, exercise month by month and product by product, and we do come up in that range. If we see for certain months that you understand that we have only minus 2% or minus 3%, if you compare it. Okay, yeah, yeah.

We had a catch-up. So all in all, we believe that the minus 12 is quite representative to compare the 9 to 11. The exercise that you make to shift that from minus 11 to minus 13, I cannot really follow that.

Yeah, it's quite easy. If you have 2% tailwind of headwinds in 20 from COVID and that drops out, then actually if you go from minus 9 to minus 11, you should add that to the underlying set. That was a bit the math behind it. But now I understand. This is OK. Thank you very much. Thank you.

So our next question comes from the line of Maniba Kayani from BOFA. You are now unmuted. Please go ahead.

Good morning. A number of my questions have been answered, but just on the parcel Eurasia guidance of mid-single-digit growth, how are you thinking about volumes versus prices in this guidance, and would that positive price mix continue this year?

Thank you. We have two questions.

We have one on the volume growth and one on the pricing. Is that correct? It was not very clear.

Yes. So on your guidance for the parcels, how are you thinking about it on volumes and pricing?

I think on volume, we explained... already leading to high single digits, that we do believe that we jumped the curve, that we see still strong growth in the beginning of 2020, and that we expect to see what really is the new normal in the second quarter. But there will be a path. We took into account, of course, A rebate for COVID-19, how much exactly will be, we still have to see. That's also why we gave the range. As to price mix, I think they're also depending on the volume. I think on the entire year 2020, price mix has been negative, simply because the growth was still seen at the biggest customers, so in the mix. As you know, we were already working on pricing. So we already negotiated before COVID-19 started with our customers to increase the prices for the pricing project. We charged, and it was in the negotiation before COVID that we had some surcharges agreed upon, so those were executed. In addition to that, we also had in the second quarter some special surcharge for COVID-19. All in all, Let's say that probably in 2021, price mix will be rather stable because some things will disappear. Your mix will be different there, probably a bit less geared to growing only in the bigger ones, but only new customers, smaller customers who find their way to e-commerce will grow. So I think the name of the game will be mainly on the volumes rather than big shifts.

Thank you. You're welcome.

So our next question comes from the line of Henk Slotboom from The Idea. You're now unmuted. Please go ahead.

Good morning, Jean-Paul, Leen, and Antoine. Thanks for taking my questions. Mark touched upon a thing that I had on my list as well. That's the operational leverage. When I look at radial and I try to filter out all the one-offs, um on the back of the uh the hack you you'll have there um i see a margin and that would be a margin of well anywhere between seven seven and a half percent uh now i know that it was your predecessor who once promised us 10 margins at radial i haven't seen any such statements from your site but is Is this still achievable in your view? What is the upside potential of Radial? If I look at the 7.5% which was achieved in a record year. My second question relates to Radial as well. I appreciate the fact that you can't talk about damage for insurance reasons and for security reasons. But I was triggered by an amount I found on page 14, slide 14 of the deck you presented, an estimated 6 million gross margin shortfall in ransomware. Now, I don't know exactly what the gross margin is like at Radial exactly, but could you give any idea what kind of sales level we are talking about and I get the impression that we're quite easily talk about an amount of tens of millions of dollars of revenue impact you had on your operation in this one or two weeks that you fell victim in the aftermath of the ransomware attack. Has that led to any commercial damage? Have there been any clients that left or Have you seen potential clients becoming more hesitant to join Radial as a client? And my last question is an indirect one. Recently, we had a new company listed in Amsterdam, which is specialized in lockers. Could you give me any idea? You're a relatively large player in lockers in Belgium. What proportion of your consuls in Belgium is being delivered via QB? Those were my questions.

Thank you. Yeah. I'm a bit longer here than Jean-Paul. I feel like I have to take a question on the radio. And you said that it was promised the EBITDA would be at 7.5%, and you asked where we will be. Like we said in December, we're not, I'm sorry for that, but we made a choice not to communicate on where we plan to land. But I think for Rachel, if you look at peers, then you can see that there's still a nice spot ahead to grow in the EBITDA percentage. There's no reason why we do less than the peers as to percentages. And a lot will depend, of course, also on the mix. Actually, we have different kinds of products. We have the fulfillment, which is the largest part. But we also have, in addition to that, the order management system, technology. We have the payment tax and fraud business. We have the transportation on which we earn money. But also depending on how our product portfolio will evolve, will that have its impact on the percentage? So that's all that I can respond on that one. And then as to the ransomware.

The ransomware, a few elements. I think what we've seen is, of course, we have the $6 million and the $3.2 million. which is specific cost in the Q4. And that's apart from some partial insurance recovery. The $6 million is linked to sales during the ransomware attack period, I would call it. Sales that are definitely lost, like in the customer care business, and sales that are lost because some of the customers did find other solutions. And some of the sales have been recovered afterwards in a later stage. But it's a mix of a lot of things. But we estimate the $6 million as a shortfall in average because of these lost sales, which of course, which we understand immediately that the costs have not been lost in the same moment. That was something more difficult. We recovered quite quickly, that we must say. But in total, that is the effect. And the 3.2 million has more to do with the costs really on the ransomware with the specialists that we took in the house, with the expert IT and legal people. So that has been the thing. Do we have a long-term effect on, I would say, the churn of customers? I only know one customer who gave the ransomware attack as one of the elements of leaving. Of course, if you have another decision, if it is price, if it is something else, I can imagine that every customer would also put in his list the ransomware attack. On the contrary, we have positive, I would say positive elements and positive discussions with the existing bigger customers that are very understanding, but also the contracts have not been put into question because of the ransomware. And we do have new customers coming in. So there's a big new customer, which was already an existing customer for a part, but a big new customer that will be started up in April. And so that was also a customer that already worked with us during the ransomware. So I believe that we feel that there's no long-term negative effect on our image and on the possibility to gain new customers and that we will see in the coming months and you will also hear about that in the coming months as soon as they are active. So no real effect I would say on medium or long-term, on the contrary. I mean, in troubles and in problematic periods, you also get closer to your customers when you deal correctly with them, and that's what we have done.

Okay.

The parcel lockers, along the parcel lockers, I don't know by heart the percentage percentage we know but the percentage which is not delivered at home i would say which is in the pickup network and the total of that of our parcels in belgium is uh normally between 10 and 15 percent uh and uh gradually a bigger part is always coming into the parcel lockers um what we um we continue it has been lower during kobe because people were more at home so um and they were less interested in letting deliver their parcels into a post point or a parcel locker. What we do see in the test, what we have in the eco zone in Mechelen, where we have installed around 50 to 60 parcel lockers all over the city, small ones and bigger ones, is that it's an interesting success. And that people really, 85% of the people have picked up their parcel by foot or by bike. And 15% have picked it up by car, passing as the lockers. So not specifically having driven to the lockers. So we continue to invest in lockers. And we want to continue to do that. The biggest challenge there is to... to convince people to let it deliver in the lockers. The point there is that we want to continue to look with our customer centers, with the commerce players, that how can we promote and how can we make sure that people choose even more than they do today. How can we have much more people putting their order in the parcel of the rebate. Can we get the rebate transferred too? Yes or no, that's not always the case. But it's definitely something we want to put extra attention on in the coming years, because it also helps, of course, in the end-of-year peak preparation.

Okay. Thank you very much. It was most helpful. Thank you.

So our next question comes from the line of Marco Limit from Barclays. You're now unmuted. Please go ahead.

Hi, Maureen. Two questions left for me. So number one is that if you think that in 2020 you actually grew above the Belgian market or you think that was in line, I was just wondering if you actually tried to boost your volume just maybe with better pricing compared to the competition. And second, just going quickly back to your volume guidance for 2021, do you see a scenario where in a few particular months, for example, November or during the lockdowns in Q2, you have a very high base and as a consequence, you will sort of see negative growth year on year in 2021?

Thanks. Maybe I'll take this.

The second question. Well, we gave you, I think, the figures on the volume growth. And that's why we also say it's very difficult. On the first, last year, parcels B to X, we had 25% in the first quarter, about 80% in the second quarter, 50% in the third quarter. 67% in the fourth quarter. Really, during the lockdown themselves, the percentages were even higher. In the first lockdown, we were at 80%. It's the same as the second quarter. But in November, for example, it was at plus 90%. So maybe we could have a non-growth in one month or in a week or something like that, But in general, we believe that there will still be growth. And if you see that in the third quarter, which was, yeah, if we compare it for the whole year, we could say the third quarter was a bit normalized quarter, which would be the new normal. We have plus 50%. If we then see what we said before in the first two months of this year, we have plus 50%, I think we can more or less say that that is the new normal and that we will have growth on top of it. So I think the percentage we predict, we are definitely confident about it. We do not believe that we will have negative percentages, yeah, maybe in one week or something like that. that on the year we will definitely have an interesting growth still there, even with these high levels. End of year peak will be again an end of year peak. We are in the new normal, so I believe that. But having another growth of 56% as we had in 2020, of course you will understand this will not be the case. But we don't expect anything negative, not at all.

And then the first question was about... Yeah, I think you asked if we buy market share. Marco Ivane, the year 2020 was a year of, like the newspapers write it, parcels bonanza. So why would anyone then buy market share? I think if we increase the... But particularly in Belgium, we only have part of it in Belgium with the incumbent. We perform extremely well. We kept our promises. And I think that explains the big growth. Not that we were bargaining with the price. Absolutely not. We have a business to run on the longer term. So that would have been an unwise incident.

One thing we've done in 2020, and this we should say as well, is that we we did not accept any parcel. So we did accept every customer. We accepted all parcels. We accepted all parcels that came in. And it means also that, of course, that gives us the extra costs. I know that there are some players in the market that limit and do not go further. And then, of course, it's planned in advance. So We continue to ramp up and continue to accept and continue to do it, which leads maybe to some extra costs, but I think that's also important. Is that gaining market share? Maybe next year, but in the year itself, it's just delivering the service you promised and being there for your customers.

Okay, thank you.

Our next question comes from Andre Mulder from Kepler-Chevreux. You're now unmuted. Please go ahead.

Hi, just a number of questions still left. Again, on parcel, if you look at the quarterly performance, it seems that when growth is becoming too high, you have extreme difficulty handling it. So the problem in Q2, problem in Q4, better result in Q3. Looking at the current momentum of 50%, that more resembles the development in Q3. Would you say you are, let's say, better able to handle this kind of volume than in some of the other colleges I mentioned? Second question is on this convenient network. Are you still convinced that they have a benefit to the group, or is this impairment just an upfront action for possible disposal there? I never understood that acquisition, but maybe you can explain that. On parcels in North America, Did you include any amounts that you expect to get back from insurance in the target for 2021? Those will be my questions.

The last question, I guess?

On the first one, maybe... I think... The plus 50% is our network is fully fledged now for the plus 50%, that's for sure. But we were able to do the plus 90 and the plus 70 in the fourth quarter. And we did do it in the end of year peak. I will not hide that we are currently heavily evaluating and looking how we can further ramp up the capacity as well in sorting as in distribution. And that's what we do every year. And we definitely are going to make sure that we can handle even more volumes as we have done last year for the end of year peak of 21. We do expect also even higher volumes. So we do expect to grow. And we will prepare ourselves for that so that we can handle and keep the same philosophy of not refusing any parcels that are being brought to us.

And to your question, will it come with less cost than in Q4? I explained what happened in Q4. You can draw your own conclusions there, Rommel. Some particular year-end Black Friday sequences Of course, we will have less because volumes can more easily be absorbed. That's for sure. But we're not planning on giving quarterly outlooks that you will understand. On the convenience network, the question that you asked, you give me the opportunity perhaps that in general, we communicate in December during the strategy of date that we are indeed looking into a portfolio. That's a general comment I can make. Of course, I cannot make comments on the case.

Well, the 9.2 million, I think we did say somewhere also that it constitutes a contingent asset towards the insurance companies for Palo Alto Americans.

Did you include that in your outlook, a certain amount of that to be recouped and again? No. Okay, thanks.

So our final question comes from the line of Ivor Bilvark-Kelly from UBS. You're now unmuted. Please go ahead.

Good morning. I had a bit of trouble with my lines. Forgive me if I'm asking a question that's already been answered. But just related to your comments about accepting every single parcel, I think it's fair to say that you did struggle to meet the demand that you saw. But was every single parcel that you actually delivered positive for EBIT or was there some negative impact because of the extra cost that you had to take on? And could you have been better off refusing some of the parcels? Secondly, in terms of the capex, you talked about your gross capex being – between 200 and 220, which is a little bit higher than I think consensus is expecting. But is that a level that we should expect in future years as well? And within that, in terms of asset sales that you're applying, can you give us a level of how high they're expected to be? And finally, on the fulfillment centers that you're opening up, can you tell us a little bit about when you expect them to ramp up to full utilization and any startup costs that you're going to face in opening them? Thank you.

The line is extremely bad. I think we heard the first question. I heard the second one. I'll start it.

Maybe if you can answer the question you did here, I can repeat the other two questions.

Profitability for parcel, it's a business that we run. If you bake cookies, probably they will be cooked. which are more profitable than other ones. And like Jean-Paul said, it's definitely true that in the last quarter, we really plan to deliver all the parcels and work on our reputation and get things done. I think the numbers in Q4 tell everything, that indeed it has been growing as to profitability. And I talk about percentage compared to last year, so I think that answers your question. And yes, it's lower than it was in the second quarter and the third quarter, so I think that's the second answer to your question. That there have been loss-making parcels all in all. If we report on an EBIT margin that grew and it's more than 7% than last year, the answer is no. As to the CAPEX 200 to 20, we said in December we would every year come with a guidance. On CAPEX, we also indicated that probably every year it would be somewhere between 150 and 200, but we will guide on that year per year more in particular. And then the last question, Jean-Paul, around 20 and... Could you repeat your last question? Sorry for that.

No, sure, that's okay. So in terms of the fulfillment sentence that you're opening up this year, can you tell us a little bit about the start-up costs that you're going to face there and when you expect them to be fully up and running in the contribution that they might give towards EBIT in the year?

So we announced that we would open up two new centers of active hands, one in Belgium and one in Germany this year. And then also Radial is going to open up a new center in the region of Kassel. So in total then we will operate seven sites for Radial Europe, three in Germany, one in the UK, one in the Netherlands, one in Poland, and one in Italy. And for active events we will then have four sites, two sites in the Netherlands, and one site in Belgium and one site in Germany. So that's the footprint that will be developed this year for sure already.

Right. Men, do you have any comments on how much they're going to contribute and the cost that you're going to face starting them up? And effectively, is that what's leading to an element of the weaker margin that you're forecasting or guiding to?

Right. Those sites have been included in the outlook. So that's, for example, where we say, okay, we have operational OPEX investments. So they have been included.

Okay. So you won't quantify it further. That's okay. I'm sorry. I might have missed it. But in terms of asset disposals that you've had in the past, are you expecting them to run at the same rate in the future?

Yeah. We continue to look into our assets and see if they're strategic or not. And I think you're talking sales buildings, so I'm talking also about sales buildings. And I think for next year, there will be more or less in line with the current year.

Great. Thank you so much.

You're welcome.

We have no further questions in the queue, so I'll hand you back over to your hosts.

Okay, well, thank you, everybody, for joining us, and I hope we have been able to answer your questions, and I hope we gave you also a good flavor of how we look to the future, although it is very difficult in these times, but I think we, at least, we look from our side positively to the future, and that's also why we have this range which we gave you and i hope you will join us in the i would say in this in this ride in 2021 so uh talk to you later again uh after the first quarter will give us a bit more insight in 2021 and thank you for uh for being there and thanks for your questions yeah have a great rest of the day