Postnl Nv

Good morning, ladies and gentlemen. Welcome to the post NLQ1 2023 analyst call. At this moment, all participants are in a listen only mode and after the presentation, there will be an opportunity to ask questions. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Now I would like to hand over the conference call to Mr. Johan van der Laaschot, Director, Communications and Investor Relations, PostNL. Please go ahead, sir.

Thank you, operator. Good morning, everyone. I'm here in the room with Herna Verhager, our CEO, and Pim Berendsen, our CFO. We will first start with a presentation, the slides of which you can find on our website and also, of course, on the webcast. And we will follow up by Q&A after that. Pim, the floor is yours.

Thank you Jochem and good morning to all of you. Let's start with having a look at the key takeaways for the first quarter of this year. Q1 results came in slightly better than expected, so a good start of the year. This is driven primarily by parcel volumes that developed more favourable compared to our expectations. That is the case both domestically and internationally, and also especially visible in March. The positive trend in our international activities that we already saw in Q4 continued. Next to the volume component, the better performance is also driven by good operational performance and more efficiency in the operations, driven by the adaptive measures that we initiated last year to adjust the cost price per parcel levels to the lower volumes. So efficiency is up and volume slightly better than originally expected. Mail in the Netherlands performed more or less in line with expectations. And all in all, it is a satisfying start of the year for us. Nevertheless, these Q1 numbers are obviously below those of last year. Last year, we still had some weeks of lockdowns. And apart from this, January, February... We're relatively normal months with obviously the war in Ukraine starting on the 24th of February and as of that point in time having significant impact on our performance. Volume at parcels in Q1 was down 6.5%. If you look at domestic only and just for non-recurring COVID volumes, we see a decline of 5%. Male volumes developed in line with expectations being down 10.8% reported and roughly eight underlying adjusted for COVID. Also in the quarter, we're making progress as scheduled in our preparations for our additional plans to save 25 million as of 2024, up to a run rate of 30 million in 2025, by a reduction of 200 to 300 full-time equivalents in overhead and indirect support roles, predominantly at parcels. Looking at the full year, we are on track and we have confirmed our outlook. This is based on the Q1 results that came in above expectations, but still, let's say, in an economic environment that continues to be volatile and uncertain, even though some macroeconomic indicators seem to indicate first signs of improvement. If we then move over to the next slide, On Q1 performance, a bit more numbers there. You see the revenue of this quarter coming in at 783 million euro, a 3% decrease compared to last year. A normalized EBIT at 7, obviously a significant increase compared with the 33 million we reported Q1 last year, which is obviously largely explained by high organic cost increases. with also specifically in this quarter a one-time payment of 1.5 percent of annual salaries for the people in the PostNL collective labor agreement which accounts for 10 million and the total organic cost increases in the quarter amount to 54 million including the 10 million with a full year assumption of 185 million. Our free cash flow was negative The result was, amongst others, a tax payment related to the year 2022, but also the final settlement payment for the transitional pension plans of €16 million. All those payments have now been done and have been settled. Normalised comprehensive income was positive and came in at €4 million. On slide four, we repeat the key components of our strategy. We're continuing to execute on that strategy, which is obviously to be the leading logistics and postal service provider into and from the Benelux, with the three pillars that we talked about before on parcels, mail, and digital next. And if you look at the first quarter, we've made further progress on some of our non-financial KPIs. Today, we have 8 million PostNL consumer accounts, of which roughly 70% are actively used. We're implementing an algorithm that supports the planning of delivery routes fully based on data, which will further improve the efficiency of our network operations. We've now installed 710 automated parcel lockers, which is an increase of roughly 200 compared to the end of last year. We further improved the carbon efficiency of our own fleet by another 6% in the first three months of the year. So all in all, good progress also on the strategic side. The next slide talks about the performance of the parcel segment. There we achieved revenues of 561 million, slight decrease compared to the same quarter last year. As said, volumes were down 6.5% reported, 5% domestically when stripping out the non-recurring COVID elements. Volume decline was offset by price increases and favorable mix. Cross-border continued its positive trend. Logistics was a couple of million below last year, and the normalized EBIT of the segment came in at 5 million compared to 18 the year before, obviously reflecting the organic cost pressure, including the one-time allowance of 1.5% we just talked about. which is partly mitigated by very good operational leverage and good efficiency levels, also related to the adaptive measures that we've taken last year, including the optimalization of routes, staff and our fleet, but also strict cost control on directs. Slide six provides the bridge in the setup that you've seen many times before. So it's a reconciliation of the 18 million results of last year's quarter to the five. And there you see the key components. Revenue effect, 23 million. Positive price mix of 16. The biggest part related to higher prices that we've introduced towards the market. 24 million of organic costs going the other way. Volume-dependent cost obviously as a function of lower volumes, a positive. And also there are other costs to see the operational efficiency improvements on network optimization, et cetera. Other results slightly better and spring down in logistics and other businesses also driven by higher organic costs. Then we step over to the meal segment. Mail in the Netherlands revenue came in at 349 million, a decline compared to 387 last year, obviously driven by a volume decline of 10.8% reported, which is 8.1% if you take out the non-recurring COVID of last year. Revenue was obviously impacted by the moderate price policy with a 5.2% increase in stamp prices as of January 1st, 2023. and normalized EBIT came in at 8 million compared to 36 million last year. Also at mill, we see significant organic cost increases, which also are a reflection of the wage increases. We agreed on the collective labor agreements, obviously also including the one-off payment in this quarter of 1.5%. At the same time, sick leave rates continue to be high, negatively impacting cost and quality levels while we are currently making progress in filling meal vacancies. Cost savings are well on track and leading overall to result in meal in the Netherlands that is more or less in line with expectations. Slide 8 provides the bridge for meal in the Netherlands. 36 million compared to 8, down 25 if you correct for the non-recurring COVID. You see 9 million of cost savings realized offset by slightly lower bilaterals in other costs and in other results. There are some phasing elements in it, but also lower proceeds from real estate sales that account for that. All in all, in line with our expectations. The next slide provides a breakdown on the cash flow. Cash flow, a negative number, obviously driven by a slightly lower normalized EBIT number than last year, and then some changes. Taxes paid predominantly related to 2022 is higher. You see a slight increase in the phasing of the CAPEX. Full-year CAPEX is unchanged at $150 million. a little bit more was done in the first quarter. And you also see the 16 million settlement payment transitional plans at the bottom of the graph, which is the final payment that we've now made. That brings us to some forward-looking awards statements on slide 10. And clearly it is still early in the year, but the satisfying Q1 results combined with the still uncertain economic environment makes that we're comfortable and confident that we can conform our normalized EBIT guidance for 2023 full year within the ranges of 70 to 100 million for normalized EBIT and free cash flow is expected to come in between 10 and 40 million. Also important is that we are well positioned to deliver the step-up in improvement in performance as of 2024 that we talked about at Q4 numbers. And I repeat what I've said in February, the 200 basis points margin improvement prominently from parcels, assuming an upward trend in e-commerce and further based on economic conditions is still what we expect to realize. For the shorter term, we do expect for Q2 a result business-wise that is going to be more or less in line with the result last year. It assumes that parcels volumes will be more or less in line with volumes last year. We expect meal volume to continue to decline in the range of 8% to 10%. we know obviously the impact of collective labor and other organic cost increases we do expect the price mix effect being positive to continue and obviously also the benefits from the pension arrangement will will also continue to contribute quarter after quarter um i think it's important to understand that let's say the around 20 million one-off costs related to the plans to reduce 200 to 300 ftes and overheads will occur in quarters to come so it's not a one-off program but it's split in very different programs to be discussed within the business units and the works councils of those business units which means that there will not be one-off restructuring cash out to be recognized, but it will be phased gradually over Q2, Q3, Q4. And if we know a bit more of the phasing, we will certainly update you on it. But good progress is made. We're comfortable that we'll reach that number of FTE reductions and as well then the savings associated with it. So maybe to summarize, first quarter results came in above expectations, so that's a satisfying start of the year for us. Parcel volumes have developed a little bit better than expected, and we see the positive impact on efficiency measures, operational leverage of the measures that we've taken to improve the margins on the e-commerce side as well. Mill in the Netherlands more or less in line with expectations and some early signs of improvements in macroeconomic indicators, but obviously overall still in very volatile and uncertain market circumstances. Full year assumptions therefore remain the same and we're all on track to deliver our full year outlook. And on that note, Jochem, I'll hand it back to you.