Postnl Nv

Good morning, ladies and gentlemen. Welcome to the Poster Now Q1 2024 results call. At this moment, all participants are in a 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 Miss Inga Laude, Manager, Investor Relations. Please go ahead, madam.

Good morning, everyone, and thank you for joining us today in our Q124 analyst call. With me here in the room are Herna Verhagen, our CEO, and Tim Berense, our CFO, who will present the results today. As usual, we will start with our presentation, which you can find on the website and on your screen when you're logged in to the webcast. After that, we will open for Q&A. Tim, over to you.

Yeah, thank you, Inge, and welcome. Good morning, everyone. Let's look at the key takeaways for the first quarter, and then we go into a bit more detail as we go along. In the first quarter results came in below those of last year but in line with our expectations and because of that we're also of course able to confirm the outlook for the full year 2024. And volumes at parcels grew in line with expectations and are trending towards the full year growth levels. We're pleased to see that growth in domestic volume has resumed, and at the same time, strong growth in international customers continued. Overall, this resulted in an unfavorable shift in mix that had an impact on margins. We'll come back to that a little later. At the same time, we're gaining momentum on the strategic actions to balance volume and value, and took concrete steps in the rationalization of our product and service portfolio. Next to that, we're proud that we have opened a new state-of-the-art sorting facility in Alphen aan de Rijn, with very innovative solar energy storage, preparing for sustainable growth. We have confidence in the long-term growth potential of the e-commerce market. At Mill in the Netherlands, as expected, performance was lower than last year, a result of continued volume decline, but also increase in organic costs, of course mainly labour related. Reported volume decline was 12.5%, which is high, but needs to be adjusted for elections in 2023 first quarter, I corrected for that the underlying decline was 8.3%, just a little bit above the midpoint of the assumed four-year range. It's important to note that also here the shift in mix is unfavorable and materializes faster than anticipated. We have put large effort in fulfilling the vacancy in mail delivery with the number coming significantly down to 300 from a thousand vacancies. Obviously this contributes to the improvement of delivery quality. The performance of mail underlines the urgent need for the transformation as announced in February. A modification of postal regulation is needed for this and the Minister of Economic Affairs is in the lead of this process. I'll tell you a bit more on this topic on the next slide. And first and most of all, it's clear that we are really committed to keep the postal network in the Netherlands accessible, reliable and affordable. But we have to face the fact that the current situation is no longer sustainable. The needs of customers and consumer are changing. This has resulted in a 65% decline of 24-hour mail over the last 10 years. And to give you some idea of what this meant for households in the Netherlands, the average household did receive three letters a day in 2004, and currently receives not more than four letters a week, which is of course a huge difference. All be all, the market has been declining. Postenel's volume has declined with 35% over the last 10 years, and that already includes the consolidation of sand volumes. Without the consolidation, the volume drop would have been around 50%. During that period we've consistently tried to adjust our operations and cost base to accommodate and to mitigate this volume decline and we've taken out more than 500 million through cost savings. Reaching the end of the current model and the combination of continuous volume decline and very high organic cost increases require a change in USO requirements to maintain a sustainable level of mill delivery in the Netherlands. On slide five, it's a summary of our strategy. The three pillars you'll recognize will manage parcels for sustainable growth, mill for value, and we combine that to accelerate, combine this by accelerating our digitalization programs. The Q1 progress on digitalization and ESG has been very positive. The number of consumer accounts grew to 9.1 million. And we have celebrated the 1,000th automated parcel locker, which has been put to service last month. We've improved our CO2 emissions with 14%, and we've introduced 4 million liters of HVO-100 to our system. european road networks to also offset and be more energy efficient from a footprint point of view our people play an important role clearly and in the quarter we've reached an agreement on the new collective labor agreement for about 15 000 mail deliverers offering a new salary structure that reflects our valuation for experienced workers This collective labor agreement runs from January 1st of this year until the 31st of December 2025, and gradually over that period, wages will increase around 19%. All in all, all to achieve our ambition to be your favorite deliverer with 225 years of dedication, trust, and innovation to back that up. Now let's look at the numbers in a little bit more detail. On slide 6 you find the Q1 numbers. Normalized EBIT came in at minus 9, a decrease compared to the first quarter of 2023. Free cash flow was 7 million negative, which is an improvement compared to last year and follows a normal seasonal pattern. We have reported a negative normalized comprehensive income of minus eight and performance includes a continued high organic costs of 24 million within the quarter. And in meal we see a shift to non 24 hour meal that puts pressure on the results of meal in the Netherlands next to the organic cost increase obviously. Overall, a weaker result than in the first quarter of last year, but as said, in line with our own expectations. For a bit more detail, we go to parcels. It was very positive to see the signs of recovery there. 4.6% growth, improving throughout the quarter with exit rates for March of 7%. But also domestic volumes were up 0.3% with an increasing share from larger customers. Cross-border volumes grew by another 25%. And all in all, that is important telltales for the gradually increasing domestic growth rates that we project for the quarters to come. Composition of the volume, of which roughly 21% is now driven by international customers, have led to a negative mix effect of roughly... $0.08 per parcel reduction of average price, whilst that already included price increases on the back of indexation. So you'll see in the parcels bridge a 16 million negative mix effect offset by 9% price increases, but that still leaves 7 million negative $0.08 per parcel delta on the average price. As a percentage of overall average price, not that big, but in absolute terms, still significant. Costs reflect, of course, the cost increases on the one hand, mainly related to labor, but we also see the impact from efficiency improvements due to network optimization, more smaller parcels, rationalization of services, but of course also the impact of measures that we've taken last year to save costs. On slide 8, you'll find in the standard format the EBIT bridge. So we bridge from 5 million results normalized EBIT last year to 2 million this year. And you see the volume component of 4.6%, growth being 16 million, revenue mix effect of minus 16. Then, of course, in the standard format, the volume dependent costs, 11 million of organic costs, and then subsequently 9 million of yield management and tariff increases that offset a big part of the organic cost increases. Other costs are a function of operational efficiency improvements and have added 6 million. And other results is the combination of very many smaller items of different parts of the parcel segment that have contributed the government contributed nicely in this quarter to the results we've recently added our 28th depot to our infrastructure located in alfanderan which supports our sustainable growth strategy for e-commerce we are very proud of this new state-of-the-art facility it's the biggest the largest depot we currently have Of course, it has solar panels, close to 2,000 panels to be precise, and it also contains very innovative energy storage, which takes pressure off the local grid. The building was rated outstanding for new construction by BREEAM and is fully equipped with lead lightning and heat recovery systems and has on-site charging facility for our electrical vehicles. Let's move to the results of our segment mail in the Netherlands. Revenue came in at $324 million, a decline compared with the $349 million of last year, obviously driven by the volume decline of 12.5%. As said, excluding election-related mail, that would have been 8.3%. Also, within meal, there was a negative mix effect due to a faster than anticipated shift to non-24-hour meal. That was partly offset by the increase in stamp prices of around 8% as of the 1st of January. Normalized EBIT came in at minus 5 compared to 8 positive last year, first quarter. Labor costs increased following the completion of the collective labor agreements. and due to pre-agreed increases in the POPs-NL collective labor agreements. These costs were partly offset by cost savings of approximately 10 million from product portfolio optimization as well as efficiency gains in sorting and preparation. Sick leave rates remain high whilst we at the same time have made a huge step to bring down vacancies from 1,000 to 300. That, of course, also helps us to improve on the quality of service. On slide 11, you'll find the bridge for mail in the Netherlands, bridging the 8 million result last year with the minus 5 this quarter. Of course, the biggest step down is the volume effect because of the volume decline. Then a little bit of additional negative mix effect driven by the quicker substitution of 24 hour meal. And you see organic cost of 7 outpaced by 11 million price increases. In other costs you will find the cost savings and also other results. It's a combination of very many different things, including international meal that show a positive of 4 million. Then from EBIT to cash flow, we reported a minus 7 million free cash flow for the quarter compared to 31 million the same quarter last year. The biggest explanations there relate to the final settlement of transitional plans last year, $16 million that obviously we don't have anymore. And also in the first quarter last year, we had a big income tax payment of $38 million that we didn't have in this quarter. Next to that, of course, as we discussed before, we've adjusted the CAPEX levels to the lower growth. Full year assumption for CAPEX is around 110 million and for the quarter we've accounted 26 million of investments. That brings us to the balance sheet. Our adjusted net debt position all 477 million an increase of 15 million compared to a year end obviously predominantly explained by the negative free cash flow that we just discussed I think important to note that Standard & Poor's have reaffirmed their BBB rating albeit with negative outlook but still important for us to maintain that BBB rating And we continue to manage our cash flow balance sheet and net debt position carefully with the end to end up obviously below the two times EBITDA as net debt. Then on slide 14 a little bit more detail. If you look at the full year consensus that is really very much aligned within the quarter there were some deviations between our own expectations and analyst consensus. And this slide aims to give a bit more color on how we gradually expect the results to improve over the quarters. of the year. And as I said, to start with, we have confirmed the full year outlook. What we will see is throughout the quarters of the year, gradually more growth coming from domestic clients. That obviously also means that the negative mix effect will over the quarter become significantly lower. and at the same time the actions we've taken to find efficiency gains rationalize service and take costs out are also a bit back and loaded they are kicking in they are contributing but will only reach full run rate potential towards the end of of the year and the middle graph indicates how the volume development within mill will go throughout the quarters and please pay attention there of the numerous elections that we had in in 23 and as well one plan in 24 that of course impact the comparable yearly decline rates we're on track to achieve the 40 million of cost savings based on our existing business model And we have communicated also today that we'll increase the stamp prices as per the 1st of July to €1.14 as well. For the full year, we do expect organic cost increases of €155 million to be partially absorbed by €135 million. of tariff adjustments within the quarter, you can see that, let's say, we managed to match the organic cost increases with price increases. For the next quarters, there are some deviations between those numbers also because not all quarters attract the same level of organic cost increases, which to a large extent also a function of when the raises on wages that are agreed in collective labor agreements are kicking in. If we go to page 15, it's a recap of the output components, normalized EBIT 80 to 110, normalized comprehensive income 40 to 70 million, and free cash flow 0 to 40, where CAPEX is expected to be around 110 million. and even a bit more exposed than normally is the case to fourth quarter and the reasons why I just addressed. So gradually more domestic volume growth taking out some of the negative mix effects whilst at the same time the measures taken will reach run rate to maximum levels around the fourth quarter time as well. So to close the presentation, maybe just to summarize the main messages. We are executing on our strategy to be the leading e-commerce and postal service provider into and from the Benelux. At Parcel's volume growth is trending towards the full year levels as anticipated, coming with an unfavorable shift in product and customer mix. We are gaining momentum on all actions we take to balance volume and value, and remain confident in the long-term growth potential of the e-commerce market. For me and the Netherlands, we are committed to keep the postal network accessible, reliable and affordable, but the current performance underpins the urgent need for transformation. Modification of postal regulation is needed to adjust the service level, to fit with lower demand for 24-hour meal and to better align with volume decline and labor shortages. The current situation is simply not sustainable. And with that, we confirm our outlook for the full year. That's it for me for now. Inge, let's go back to you.