Postnl Nv

Good morning, ladies and gentlemen. Welcome to the post-NL half-year 2023 analyst call. At this moment, all participants are in listen-only mode, and after the presentation, there will be an opportunity to ask questions. Now, I would like to hand over the conference call to Mr. Johan van der Lassoe, Director of Communications and Investor Relations, post-NL. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Thank you for joining us today. We know some of you are enjoying their well-deserved holidays, so we appreciate the effort to be with us this morning. With me here in the room, Herna Verhagen, our CEO, Pim Berendsen, our CFO, As usual, we will start with our slides, which you can find on the website and on your screen if you are logged into our webcast. And the presentation will be followed by Q&A as usual. Herna, over to you.

Thanks, Jochem. And let's start with the key takeaways. We had a satisfying second quarter and, of course, also second quarter results, especially because of the better than expected volume development at parcels, which came in at 3.3%. That is growth in our domestic business, but predominantly with our international customers. We took lots of measures to mitigate of course the inflation which are supported with good operational leverage and efficiency improvements that helped of course the normalized EBIT development in this quarter as well. The reported volumes within Milan, the Netherlands, were minus 9%, which is mainly substitution, not very different from what it was the last quarters and also the last years. We improved our carbon efficiency 10% if you compare to full year 2022, and we made good progress in our reduction plan of the 200 to 300 full-time equivalents. Good progress means... that more of the people who need to leave did find a job within PostNL elsewhere or left the organization. And that, of course, led to the fact that we need less restructuring costs. Previously, we mentioned 20 million. This year, we expect it to be around 10 million, of which 5 million is in the second quarter. And a small part of the cost savings is expected to be achieved as early as in 2023. The interim dividend is set at six cents per share. Because of a good first quarter and a good second quarter, we also raise our outlook. For normalized EBIT, it's between 100 to 130 million euros, and before it was 70 to 100. Free cash flow remained unchanged between 10 to 40 million. We're happy, of course, that we took measures at an early stage to deal with the changing macro environment. This, along with the dedicated efforts of lots of our employees, is reflected in this quarter's performance. If you look into a little bit more detail or the numbers of the second quarter, you find that our normalized EBIT came in at 18 million, which is better than expected, but also above the second quarter of 2022, which was 10 million. We saw a revenue growth and, of course, also growth in normalized EBIT. Free cash flow also a little bit better than expected. had in the second quarter of 2022. And the normalized comprehensive income a little bit less than we had in the second quarter of 2022. In my view, important, of course, and Pim will come to that as well, the normalized EBIT includes our organic cost increases in the second quarter so far. 38 billion in the second quarter, but for the full half year, 92 million. And our full year assumption is 185. And we had a positive impact from pensions in the second quarter, which is visible in PostNL other. A better than expected quarter above last year. And of course, underpinning the race in our outlook. We remain, of course, to focus on our strategy, which is being the leading logistics and postal service provider into and from the Benelux. For parcels, it remains to be managed our business for sustainable growth, which we do, for example, with many of our efficiency programs. For mail, it is manage for value. And I will dive into our mail business at this moment in time. Manage for value means, on the one hand, cost savings, on the other hand, price increases, and manage, of course, the volume decline. And keeping to be very supportive to our Digital Next program, in which we try to digitize our business end-to-end, and that supports business performance and increases customer satisfaction. Strategic objectives are of course helping our customers growing their business, securing a sustainable meal market, but also, for example, increasing our net promoter scores to maintain to be the best in the market. In social value, which is an important strategic objective, we made progress when it comes to attracting employees within parcels and parcel drivers. And of course, we have full attention for solving the amount of vacancies we still have within our mail business. An environment already discussed. We're taking lots of initiatives to improve year over year our environmental footprint and environmental impact. And part of our initiatives are of course in electrification and using HVO, which is biodiesel for our trucks, which has a 90% less CO2 emission. If you talk about delivering on our strategy, which is on slide number five, You find, of course, here a few of the items I already mentioned. A few others, I think, which are important to mention. If we think about parcels, we saw a strong potential. We see a strong potential for e-commerce growth, which is unchanged and which is based on the fundamental growth drivers, which are, of course, the digital platforms. The amount of consumers that use digital to order their things and the economic situation. What we do see is that the fundamental growth drivers are still in place. That's the reason why we do think that parcels will continue to grow and fortunately growth came in earlier than we expected. we secure our position in a very dynamic and competitive market and that's what we do by on the one hand making sure that we score high on our net promoter scores and are by far the best in the market when it comes to nps and on the other hand also make sure that at the back we do have a cost efficient operation and organization to be able to create efficiencies Within mail in the Netherlands, we have an unchanged drive to get our cost savings right and to fill in our moderate pricing policies. What we do see in the second quarter, we see an unfavorable shift in mix, so less 24 hours mail with a higher margin and more 48-hour mail. We see significant cost increases, which we're not able to fully appreciate. via cost decreases and price increases. And we see that achieving our cost savings becomes more challenging, which partly has to do with the fact that we're already shrinking our organization for the last 10 years and partly have to do with the fact that we have quite some cost-saving programs running at this moment in time, also affecting the delivery quality. In digital next, we keep having a good performance, like, for example, in the amount of accounts. 8.4 million consumer accounts at this moment in time, and it's constantly growing. We see it in the growth of the amount of parcel lockers, but also, for example, AI, which we use for recruiting our people. On ASI, I already mentioned that we had a 10% further carbon efficiency compared to the full year of 2022. And I already mentioned that the ways we do that is via electrification and also by driving our trucks on biodiesel, which is much more CO2 efficient. We talk a little bit through the business of parcels and mail and then I'll step into slide number six and I'll start with parcels. Here we see that a return of growth came earlier than expected together with of course the measures we took to mitigate inflation and they are successfully paying off in a good normalized EBIT also better of course compared with the second quarter of 2022 And as already said, the biggest part of this volume is international volume. The smaller part is domestic volume. But I think the good news in this is that also the domestic volume is growing again. Market share is slightly down in the market, which is still characterized by temporary overcapacity. The revenue reflects our volume growth. And overall, of course, price makes effect. Positive pricing, which of course put in place partly because of all the inflations we saw, partly we did see room, of course, to improve our prices. And partly it's a less favorable mix, which is mainly because the growth of international customers. Not only the international customers from spring, but the whole of CBS is showing good progress and shows a positive trend. And that's what we see already from Q4 2022. Within logistics, we saw that revenue came down slightly. Organic costs are higher than expected, which is mostly, of course, labor. And that is due to inflationary pressures. But we took lots of adaptive measures. And you could think in that sense of optimizing our routes, creating higher utilization rates, tight control of our indirect costs, also all resulting in improving our operational leverage and therefore also efficiency. A few more words on mail in the Netherlands. Mail in the Netherlands shows continued volume decline. We expect to enter the year within the bandwidth of 8 to 10%. Volume decline in the second quarter is 9%. And if you take out COVID, then it's 8.4%. Revenue came down because of that volume decline to 323 million in the second quarter. It came from 350 million. And also our normalized EBIT came down from 13 million last year second quarter to 2 million this year. There we see, of course, increased labor costs, which follows the CLA of PostNL, but also the CLAs which we have for postal deliveries and Saturday workers. We see a continued higher sick leave in this tight labor market, partly because of the fact that we have vacancies and people are asked to do more work. And we see additional cost savings are of course achieved through our programs, but we also did see, and that's what I already mentioned, that the amount of programs together makes it sometimes more difficult to reach the level of cost savings we expect. More challenging in the sense we have an unfavorable mix effect, which comes from a shift to lower service proposition and less single items versus bulk mill. But also the proportion of international mill plays a role over here, together with, of course, a cost increase because of inflation, but also because of the fact that we have higher sick leave. and have more difficulty to get to the level of cost saving we want to get to. As already said on my first slide, and then I'll move to slide number eight. All in all, we're very pleased to announce a second consecutive quarter with results above expectations. We've implemented adaptive measures to mitigate the inflationary pressure and are successfully paying off. These are successfully paying off. Volumes at parcels returned to growth earlier than expected, which is positive domestically as well as internationally. And at the end, and at the same time, developments in mail are becoming more challenging, which as we expected, which means that we have a performance below last year. We have made steady progress in our plans to reduce 200 to 300 full-time equivalents, which part of the expected annual savings will be achieved in 2023, but also leads to significantly lower restructuring and related costs because of the fact that people find external jobs and therefore leave the company themselves. And as a result of all these developments, taking into account, of course, the growth within parcels, the fact that they have a better normalized EBIT, the challenges we see within mail in the Netherlands, and we are positive about the normalized EBIT of PostNL and raised the outlook to 100 to 130 million euros. We continue to deliver on our strategy, which is crucial for us. And it's probably a sentence which we've used over the last 12 quarters, but we maintain to use it that the environment we operate in remains to be volatile and therefore uncertain. Much more to tell about the development of PostNL and the financial performance, and therefore I hand over to Pim.

Thank you very much, Erna. And let's look into a bit more detail per segment. And let's start at slide 10, where you'll find the parcels bridge. There you see quite clearly a better result from the parcel segment than the same quarter last year, 3 million better at 17 million. whilst the expectation was originally that the result for the quarter would be lower than last year. So all in all, good performance within Marshall's segment, driven by volume growth that came in earlier than expected, both in domestic and international volumes, with particularly strong growth in volumes from our international customers. You can also see that back in the price mix effect that ended up with 7 million positive, But at 7 million is split in 18 million price effects and 11 million mix effect down in relation to the composition of the volume that we carry. Already looking forward to Q3 and Q4, we expect roughly the same composition of the price mix effect that you can see in the second quarter of this year. 17 million of organic cost increases here, and I already talked about 92 million of organic cost increases halfway through the year. Full year expectation for the entire group is still around about 180 to 185 million for 2023. Other costs, you see 5 million here in the positive, which is driven by the operational efficiency improvements and measures that we've taken to adjust ourselves to the lower growth than originally anticipated. Clearly, that measures together with earlier growth results in a better performance in the parcel segment than originally expected. Other results. Spring is doing well. Better results than last year. Logistic Solutions is doing slightly less than last year. And some other internal departments suffer from higher organic cost increases, which all in all together causes the minus four in other results that you see here in the bottom end of the graph. Let's move over to Mil. There you see a deterioration of the results from 13 million of last year towards 2 million normalized EBIT in this quarter. A decrease of 9 million, obviously a result of roughly 9% volume decline, together with negative mix effects. Erna talked about the product mix development where we see more 48-hour meal rather than 24-hour meal that comes back with a decrease. different contribution, and obviously that is part of what you see back here in the bridge. Organic cost increases in the meal aside, 9 million volume-dependent cost for our cost six, which is 10 million driven by the cost-saving plans that were realized, partly upset by lower bilaterals and higher costs related to higher sick leave rates. If we then look at the cash flow on slide 12, cash flow better than last year, 9 million better, yet still negative, 34 million. And let's look at the key components of it. Obviously, it's better to a large extent driven by the higher normalized EBIT. Some of the other buckets are comparable to last year, so depreciation 44 million in comparison to 39, capex at 26, changing working capital minus 61. That does include quite an amount of phasing, and that's why I still expect us to end up in the second part of the year with a release of working capital, significantly improving the full year number in comparison to the 61 that is here halfway through the year. Full year CAPEX is still somewhere between, I would say, around about 140 million mark in comparison to the 150 million that we indicated before. Then, if we talked about the segment profits and the cash flow, it's logical to look at the balance sheet that gives the development of the adjusted net debt. Net debt increased to 5, 6, 9 million, an increase of roughly 100 million to a large extent, driven by the dividends that were paid in May. Clearly, we keep on managing our cash flow and balance sheet and net debt position carefully. In the beginning of the year, we were already comfortable that we were able to keep the adjusted net debt over EBITDA below 2. Clearly, with the increase in outlook, we'll certainly be able to do that. I would expect us to end up roughly in around about 1.7 times higher. EBITDA as net debt. Given that projection and given the current performance and in line with our dividend policy, we set the dividend at interim dividend at one third of the dividend over 2022, rounded to the whole cent to six cents per share to be paid by the end of August. Then let's look at the outlook for 2023. Clearly, the encouraging performance of the first half year made this outlook increased. We've raised our outlook for the normalized EBIT to 100 to 130 million, quite a step up compared to our earlier outlook of 70 to 100 million. This is driven by a better than expected first half of the year, with parcel volumes returning to growth earlier than expected, together with good operational leverage and efficiency. However, the meal results are doing less well and are expected to be slightly lower than originally estimated. Clearly, the measures that were taken to reduce 200 to 300 FTEs will be benefiting us into 2024, but part of the benefits will already come in in 2023, a small part that is, but we're able to do that reorganization with significantly less restructuring cash out than originally anticipated. Our current estimation is that restructuring-related costs will be 10 million at most, whilst the initial assessment was around 20 million. For 2023, we now expect better performance at parcels, a low single-digit parcel growth, rather than a small low single-digit decline that we originally anticipated. A growth that is visible in domestic and international volumes, but particularly strong with international customers, which will continue to result in a less favorable mix for Q3 and Q4, as already indicated at the parcel segment bridge. While not so clearly visible yet in the first half of the year, we do expect a more challenging second half of the year for meal. with results coming in below earlier assumption. And that is on the back of volume decline in the range of 8% to 10%, but with a less favorable product mix than previously assumed, which puts pressure on the margin. Next to that, we see continued high sickness rates and a still very tight labor market. We keep on focusing on realizing the benefit from a cost savings plan, but cost saving plans add mail, but achieving those in the second half of the year is becoming more challenging. As said, the implementation of our plans to reduce the 200 to 300 FTEs are doing better than originally planned. leading to lower restructuring costs and already partly savings visible in 2023. That clearly justifies the step up in our outlook of normalized EBIT to 100 and 130 million. Normalized comprehensive income will follow the step up in normalized EBIT, and we've changed the outlook there from 40 to 70 million to 65 to 95 million. The free cash flow outlook is unchanged. on the 10 to 14 million that was originally there. The reason why is that part of the step up in normalized EBIT is related to non-cash elements, including the lower additions to the restructuring provision. And there's a potential partly offset by tax phasing effects on the tax paid line in relation to tax assets from the sale on the international activities. Overall encouraging performance. We're cautiously optimistic, but still in an operating environment that remains volatile and uncertain in the short term. On slide 15, you see the quarterly split of normalized EBIT. It's a slide that we repeat every quarter, basically. There you clearly see that the fourth quarter of this year will be a big contribution to the normalized EBIT, but at the same time, which I think is also very important, Q2, Q3, and Q4 will show results that are better than last year. Then on slide 16, the summary better than expected above last year. Clearly the things that are in our control, we manage well, all the measures that we've taken both on the operational efficiency side, as well as in the restructuring side are paying off. That leads to better than expected results, and clearly that caused us to increase the outlook. Within mill, we see more challenging developments and a result that came in below last year, which was expected, but we do expect the end of the year to turn mill into a lower return than originally planned. That will be made up as such by better performance from parcels, That causes the increase in the outlook from 100 to 130 million. And as I said, today we will and have announced the interim dividend at 6 cents per share. Encouraging results for the first half year. Still some challenging circumstances and therefore our optimism remains cautious at this stage. Thank you very much, Shofar. Jochem, I'll hand it back to you.

Thank you, Pim. Operator, can you open the floor for Q&A, please?

Thank you. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We will now take the first question. from the line of Paul Kirijanov from Bank of America. Please go ahead.

Hi, good morning. Paul Kirijanov from Bank of America. Two questions from our side, please. On parcels, could you talk about volume trends through the quarter and what the exit rates were? And also related, can you talk about your expectations for parcel volumes in the third quarter? And then second question is on mail in Netherlands. You highlight that delivery quality is below required levels and has full management attention. Could you give a bit more color on that statement and what kind of actions can be expected related to that? Thank you.

Yeah, shall I take the first one, Erna? So on the volume trends within the quarter, I would say similar developments for the months in the quarter, slightly up more in May, also driven by the payout of holiday allowances in the Netherlands. But all in all, all months showed good performance. Expectation for the second part of the year is a continuation of the growth. An indicator that I can share is that, let's say, on absolute terms, we would expect kind of the same volume in the third quarter than in the second quarter of this year, whilst Q3 numbers at 2022 were down in comparison to Q2. So that should lead to an even higher growth rate to be reported in the third quarter of this year. And obviously also we anticipated higher growth in the fourth quarter of the year. So that's also why we've changed the indication of growth for the full year from a minus single digit to a low single digit growth number.

And on mail in the Netherlands, full attention, what does that mean? It means that we have dedicated teams working on filling the vacancies, because that's the main reason behind the quality we currently have. And then you could think of, for example, offering employees of PostNL as of day one... an untemporary labour contract so that they are working for us on fixed terms. Secondly, we offer people bonuses when they start working with PostNL. We offer our employee bonuses when they bring in new mail deliverers. We're starting up new pools in which we can find people to work for us, like, for example, people who are retired and still very healthy. but also migrants that came into the Netherlands, but also housewives in certain areas in the Netherlands. So there's lots of dedicated attention to it. still 1,000 vacancies with our mail deliverers. That's much less than last year, but nevertheless, still 1,000 to go. And in the current very scarce and therefore also small labor market we have in the Netherlands, it's difficult to fill all those vacancies. So it's not an overnight solution we can offer at this moment in time.

Understood. Thank you.

Thank you. We will now take the next question from the line of Marco Limiter from Barclays. Please go ahead.

Hi, good morning. Thanks for taking my question. First question is on the partial volume growth expectation for the second half. I appreciate the explanation you just gave, but I mean, if I've done the math right, The new guidance for the full year implies second half at 7-8% volume growth. So if you could just clarify a little bit more what are your assumptions behind this growth, other than comps being a bit easier. Second question is on elections in Netherlands. Just wondering if you have an estimate of what could be the tailwind to profitability from elections and if elections are included in your guidance. And third question, if I may, is about pricing for 2024 in mail. I mean, in 2022, you are now able to increase prices. In 2023, it was just a single digit price increase below inflation. Just wondering what could be the expectations for 24-mail pricing. Thank you.

Okay, another question on the growth assumptions. Clearly, let's say if we go back to the drivers that define the volume growth in our e-commerce part of the business, it's GDP growth, online penetration, and market share. On market share, we do not see a deviation from expectation. So it's the combination of GDP growth and online penetration that brings us back in growth territory earlier than expected. And from the growth perspective, we see a bit more coming from international clients than from domestic clients, whilst domestic clients also contribute to the growth. So you see slightly more positive client expectations still with a level of uncertainty that causes the bandwidth of growth expectations to be pretty broad. And we need to make sure that we're flexible enough to adjust along the way within that bandwidth. Your calculation is roughly right. For the second part of the year, we would assume around about a 7% growth. And for the third quarter, as I said, let's say roughly the same volume in Q3 as in Q2. That's 86 million that Erna explained. whilst Q3 2022 was 3 million less than Q2 2022. So that already indicates an increase of the growth from 3 to around about 7%. And that's also what we expect to continue with.

The elections, we did take that into account when we came up with the outlook. Elections are planned for November 22. I think important to keep in mind as well is that it is for us already peak season, which means that we have to organize the people around it to get all the work done, and that comes with some extra cost. When it comes to the pricing of Mill and the Netherlands for 2024, Without, of course, giving lots of guidance on what we will do, because that's a process we will run in the third quarter, which we have to get approval from the regulator in the Netherlands before we can publish it. Of course, you do know that there's regulation in place, which limits us to a certain extent in what we can do when it comes to increases in mail. And what we have to balance always is, of course, the increase we take into account and the level of substitution that is connected to it. because increasing more than we normally do does mean that you create some extra substitution, and we also try to find the careful balance between the two. That's what we will do in the next coming, in the quarter ahead of us, which will go then to our regulator, SCM, for approval, and then we'll publish it by the end of this year.

Thank you.

Thank you.

We will now take the next question from the line of Mark Twarzenburg from ING. Please go ahead.

Yeah, thank you for taking my questions. Good morning, everybody. Two questions for my side. First of all, on the mill and mill business, you mentioned some delivery quality issues due to the vacancies and the scarcity of labor. um i think we discussed this also in the periodics a bit uh put this still lead to potentially a fine from the from the acm is that still possible so that's my first question uh and the other one is also on mail um you you you see that um yeah the mill volume declines a bit higher also the mix is putting the pressure on on on the margins as well as the the uh the cost and maybe efficiencies from sickness. Does it also mean that you will take more dust-cutting measures to offset the margin pressure from these elements? Because we're running a bit behind already on the cost savings. Should we expect additional measures in the meal division? Those were my questions. Thank you.

I think when it comes to the fine and high mark, it is of course possible because the postal law says that we need to get to the 95% of the delivery quality. The normal process is of course that at a certain point in time we send in our quality figures And we sent in the reasons why we think we should be excused or why the quality numbers should be mitigated because certain things happen. Like, for example, scarcity in the labor market, which is not specific to personnel, or special weather conditions, etc., etc. Better than in the end is discussed. And finally, of course, ASEAN will come to their view on a quality delivery of a certain year. That's the process we are in. So could that lead to a fine? The simple answer is yes, it could lead to a fine. Know that we do have arguments in place why it is what it is. But we're not yet at a phase that there is a final verdict or a final outcome. of the ACM process or procedure. 10 million in the Netherlands, extra cost cutting measures. Of course, we've planned for around 40 million of cost cuttings in this year, so 2023. What we do see at this moment in time to come to the 40 million of cost savings, and we will not fully get that by the end of the year, we started quite some saving programs and the combination of all those saving programs sometimes lead in certain areas of the Netherlands that were not able to do the full cost saving as expected. So, adding more at this moment in time, in our view, will not help to get to the right levels. So, that unfortunately cannot be the answer at this moment in time. And that's, of course, what we're working on, but that's not the answer at this moment in time.

Maybe as a follow-up on that $40 million, can you share with us what currently the target is? What is achievable? Is it $30 million and will then be the remainder that's still out there left for next year?

It's a valid question and a question to be expected, but we didn't give guidance on what we then expect to do for this year, except of the fact that we of course did say that we expect a little bit less cost savings than we originally planned.

And that 10 million haircut from 40 is more than a little bit off. So we're not thinking that number of the 40. Halfway through the year mark, we've realized roughly 20 million of cost savings. And the second part will be more difficult. But only a couple million deviation is what we expect and not the level of the 10 million that you just talked about. Nevertheless, the combination of the combination. Go ahead.

Yeah, if I understand it correctly, is it also quite difficult to do actually more even maybe next year because of the restraints you have already with the sickness and the scarce labor market, I can imagine.

Now we're specifically talking about 2023, and specifically in this year we had quite a big amount of programs we had to start to do the cost savings for this year, which partly of course also have their work through effect to next year. So it's too early to give a view on next year. And of course, like every year, we're working hard at this moment in time to get our programs ready for the year 2024.

And if I may add, Mark, I think let's say from 22 to 23, you actually see a step up in cost savings. So the delta in expectations is not driven by worse cost saving contribution than last year. It's driven by Obviously, the fact that organic cost increases are significantly higher and price increases are not contributing to half of the volume decline. Now price increases offset the organic costs and only that. So that is obviously the reason why there is a step down in results from meal in comparison to 2022, whilst there is a step up in cost savings from 2022 to 2023.

Okay, I thought last year it was 47 or so, but maybe that's... No, no, no, it was around 20. Okay, around 20, okay. Claire, well, thank you for answering my questions and well, congrats on the strong water. Thank you.

Thank you.

We will now take the next question. from the line of Nicolas Mauder from Kepler Chevrolet. Please go ahead.

Hi, good morning. I would like to come back to two of the guidance bridges. First, the divisional one, which was not repeated in today's material, but compared to the original version that we saw with Q4 results, you indicated negative impacts in both parcels and mail for parcels and mail. Is it safe to assume with the 20 million underlying uplift, excluding the revision of the provision there, that parcels is now seen up year on year in EBIT contribution, whereas mail is seen more down? The first question. Secondly, I would like to get back to the quarterly EBIT bridge for the full year guidance. The indication of EBIT in the third quarter, even if it only an indication, has not materially changed despite the raised outlook. Why is that the case? And then finally, housekeeping. Can you indicate the distribution of the provisions you have booked in the second quarter? Where were they booked? And where will the remaining 5 million be booked? Thank you.

Okay. Thank you, Nicolas. The guiding principles. So, yes, if you go back in time and look at the outlook that we presented in the beginning of the year, you saw a business step down in parcels, an even bigger step down in mail. a 20 million assumed restructuring cash out and then offset by 75 million of benefits from the pension and deal that was reached. If we were to make the bridge again, the performance of parcels would from a negative turn into a positive, which is also, in our perspective, very positive news. So we won't see a deterioration of profit coming from parcels, but an increase in profit in comparison to last year. At the same time, the negative in mil will become slightly more negative. And the combination will obviously turn into the step up of the profits that we talked about that we indicated in the improved outlook. And the other element, obviously, that around 20 million will be at most 10. And those elements together are giving you the new kind of segment bridge, so to say. So if we talk the quarterly development, I think in the second quarter, the 5 million restructuring cash out was accounted for partially within the parcel segment and partially in PostNL Other. for the restructuring component that does relate to the head office staff of the various programs that we're uh doing well for the second part of the year the remainder of max five timing is a bit depending on on when final agreements are reached uh on with the works councils but i would say that the vast majority will probably be in q3 with a little bit in Q4 as well. I don't have a specific split right now for you.

Okay, thank you. And then just finally, why the indication for the third quarter EBIT didn't change despite the rates of outlook?

Yeah, a big part of the change was also related to the first half of the year. And given the size of the third quarter, where we are also in kind of in the summer season, where July and August will be slow months anyway, it will not be that material within the quarter and the big step up as a consequence of what is still to come, will come as of September, moving towards October, November, December. So the majority then clearly will be in the fourth quarter.

Okay, many thanks.

Thank you. As a reminder, if you wish to ask a question, please press star 1 and 1 on your telephone. That's star 1 1 if you wish to ask a question. And the next question comes from the line of Hank Slotboom from The Idea. Please go ahead.

Good morning, thanks for taking my question. I've got two. One is related to the mix of parcels. I'm a bit puzzled when I look at the presentation of the first quarter. I see that spring is growing by 10.5%. Domestic parcels are decreasing by 1.7%. and it results in a positive price mix effect. And in the third quarter, I see a delta in spring, which is in absolute terms, 28 million. I see a delta in domestic parcels, which is 21 million. And I see all of a sudden a negative mix effect. Could you explain to me, Why that is, what are the main drivers behind that? Is it new business at lower margins or how should I see it? The second question is on the development at parcels and especially on the labor front. On the one hand, I see that in parcels, the labor costs are roughly the same as in the first quarter. whereas the first quarter contained this one-off payment of, what was it, 1.5%. Is it purely because of the holiday allowance or so that the second quarter is roughly on par with the first quarter? I see also that the number of FTEs has risen quite significantly by 450, roughly, people. Why is it that you don't have the recruitment problem in parcels, whereas it is difficult to find mailmen? Those were my questions. Thank you.

Thank you, Henk. You were very quick in throwing a different type of numbers, let's say, on your first question. I think there we need to deviate or split SPRING's performance and cross-border volume that hits the e-commerce network. Those are not one and the same. So, Spring makes money at very many different trade lanes and only some of them get volume in the Netherlands. So, if we talk about volume development in the segment parcels, we talk about the combination of domestic volume being Dutch webshops that sell to Dutch customers through PostNL's mail of parcel network. And at the same time, cross-border clients that sell to Dutch customers and hit the domestic parcels network. The combination of those two has led to the 3% growth in the second quarter, whilst the combination of those two in the fourth quarter led to a 6.5% decline. So within the quarter, we see a very big contribution to the growth of international clients. And at the same time, we do also see domestic clients growing again. The composition of the cross-border volume is quite different than the composition of domestic volume. By and large, it is smaller packets, smaller DM3, so less sized products, and as a consequence, the average price per item is lower than the average price on domestic clients. That leads to the negative price mix effect that offsets the positive price effect of 18 million in this quarter. That's the way you should look at it.

Okay. Well, that's at least clear. Thank you.

When it comes to the labour parcels, you do see correctly that we hired more people at parcels. That means that we have more people now employed with PostNL than we had in the second quarter. So on the programme which we started summer last year, that we want to hire more people on our own payroll, that's running successfully. And that means that we indeed are able to get them on our payroll. That also explains a little bit of the cost we saw in Q1 and the cost we saw in Q2. Why do we have difficulties in finding enough mail deliverers and do not have the same difficulty at parcels? I think two answers to that, Henk. The first one is also within a meal. Last year we had around 2,000 vacancies. This year we have around 1,000 vacancies. So also there we do see that we're able to find lots of people to keep those people. But we're still not yet at a level which is, in our view, within the workforce of mail in the Netherlands. That takes time. It's a scarce labor market. We're fishing in the same labor markets as many others, so it will take time. When it comes to parcels, for many, it's an attractive proposition. It's a full-time job. It's driving in a van, it's a very independent job, so most hours of the day you're on your own and can decide, of course, between certain limits how you do your work. It's a job in which you have lots of contact with people, which many of our people do like, so in that sense it's an attractive job to have. What we see over there is that we are able to recruit lots of people and it's important to make sure that the people we recruit have a careful training, understand what the job is truly like. and that enables us to maintain them and keep them in the job so it's a little bit the difference between the two jobs that makes the difference why on the one hand in parcels we have no vacancies are easily able to fill the vacancies and within mail in the netherlands we still have vacancies but take into account as well the improvement we made compared to last year okay very clear thank you very much thank you

We will have time for one more question. From the line of Frank Klaassen from Dick Roof Peterkamp, please go ahead.

Yes, good morning all. Question on your outlook, your guidance, you more or less raised guidance by 30 million, the range. How much of this 30 million has been roughly been achieved in the first half and how much do you still think you can achieve of this step-up and the need to achieve in the second half? Could you roughly indicate? And then secondly, you started the year with a guidance for margins for 24 with 200 basis points, at least improvements. Of course, now some of these margin improvement is coming earlier than expected. So how should we read that guidance for 24?

All right, thank you for your questions. Frank, first one, let's say the step up in the deed, 10 million of that is obviously because of lower restructuring cash out. I've given the phasing on that element. We obviously have seen half-year results that are better. So a big part of the step-up is already accounted for in the first half of the year, with a part of the step-up to come predominantly in the parcel segment, whilst that will be offset by lower performance in mail. So that is kind of what I can give you. So parcels will continue to improve. Also, in the second part of the year, mail will go back a bit, that will contribute to the step-up of the outlook in the second part of the year, and a big part of it is already in half-year realization there. On the basis point step-up, I think there's a couple of components. So the 200 base points for PostNL at large, I think the lower restructuring cash-out and the Slight contribution to the cost savings that we realized earlier, partially in 2023. All other things being equal already shift 50 basis points towards 23. And then next to that we see better operational performance in parcels and growth earlier. So I would say that let's say half of that step up will roughly be realized already in 23. And then another step to come. from 23 to 24.

Okay, that's helpful. Thank you very much.

Thank you. I would like to hand back over to Jochem van der Laarstoot for final remarks.

Thank you, operator, and thank you all for your participation today in this call. As usual, you can find all Q2 materials on our website. And if you have any remaining questions, please contact the IR team at PostNL. Thanks very much and goodbye.

That does conclude our conference for today. Thank you for participating. You may now disconnect.