Postnl Nv

Good morning, ladies and gentlemen. Welcome to the PostNL Q2 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 Inge Laude, Manager, Investor Relations. Please go ahead, madam.

Thank you, operator, and thank you all for joining today in our analyst call. We have published our Q2 and a half year results early this morning, and with me in the room are Herna Verhagen, our CEO, and Pim Berenser, our CFO, to present these results to you. Herna, would you please start?

Thank you, Inge. And of course, I'll start with slide number four, which is on the highlights of the second quarter. In our view, a good quarter as expected. Parcel volumes up with 6%, modestly domestic, but high growth when it comes to international customers. And, of course, on most of these topics, we'll come back in the further slides. Meal volumes were down 1.3%. That's because of the elections in Europe. It's 5.9%, almost 6% when you adjust for that. We saw a continued rise of our organic cost, 38 million in the second quarter, still expected to be around 155 for the full year. We had good cash flow, strong improvement compared to last year. Of course, a further improvement of our carbon efficiency, a successful issuance of a sustainability-linked node, And Pim, of course, will highlight that in his part of the presentation. And we're very happy with the outcome of the court case in Belgium, where we are played fully free from all the things they said we did do wrong. And most importantly, also the management in Belgium is totally free from that and there is no appeal. And of course, we'll pay a dividend, which is three euro cents. For meal in the Netherlands, we once again, of course, highlighted the urgent need for transformation. That's a transformation in the postal law where we want to change universal service obligation to get meal within two days and overtime within three days. And what we added today to that is that in the bridging measures, which were already by the Minister, of course, communicated to Parliament, that together with those bridging measures, we would like to have a financial substitution or a financial contribution as well that should be, in our view, included. In parcels, the growth we saw in the second quarter is trending to our full year anticipated level and happy with a slightly higher market share in the quarter. What we do see, of course, is that the product and customer mix is less favorable and that impacts margin. Still with full confidence for further growth of our e-commerce going forward. That translates into the results you find on slide number five. What you see over there is that the normalized EBIT for the second quarter is the same as last year, while revenue grows slowly with 3% and, of course, as said, a much better free cash flow. I think important to highlight here, and not yet said in the other highlights, is the fact that the mail volume development is strongly positively impacted by the election-related mail, and we did see a further shift to non-24-hour mail, which impacts margins. Organic cost increases... continued 38 million in the second quarter and largely mitigated by yield measures. And we'll come back to the measures we've taken and still also the measures we see going forward till the end of the year on a later slide when we talk about strategic drivers and development within parcels. I think this is the moment for me to go to that strategy, which is on slide seven, and of course earlier laid out and also explained to you. Our strategy, of course, is still the same. We have a strong strategic foundation in which we say parcels are managed for sustainable growth. In meal, we manage for value and we want to accelerate our digitization. That's next to the fact that we have a few important strategic objectives, which are around our customers and consumers. And for example, is on our net promoter score. which is on environment, where we want to improve our carbon efficiency, and which is on social value, where we want to be a good employer, able to pay the wages as expected in the market we operate in, and again, very happy with the outcome of the court case in Belgium. 225 years does this company exist, and hopefully it will be there for the next 225 years. Let's dive a little bit into the measures taken within parcels and mail in the Netherlands, which create that sustainable growth and which create that managed for value. First of all, start with parcels, and that's what you find on slide 8. This is a combination of what are the important strategic drivers and actions set into motion in the beginning of the year together with some of the results at the end of the second quarter. The first important element in managing for sustainable growth is, of course, balancing volume and value. We've taken quite some actions when it comes to our revenue management, meaning that we have tailored pricing policies to balance our portfolio and also attract the favorable parcels, together with the fact that we have very active capacity management, which is necessary, of course, talking about the volumes coming in. We have a targeted approach in the direction of the small and medium accounts. And especially in this segment, we're scaling our digital initiatives and they're working quite well and are highly appreciated by those customers. And we find new customers in that SME segment, which is important for us as well. Simplifying products and services is what we do in 2024, but especially also in the direction of 2025 needs to bring in further rationalization. When you talk about managing capacity versus volume, you also talk about network rationalization and cost control. These are important actions to underpin also the 35 million of cost savings we took into account and still is, of course, in our latest estimate and outlook. To reach that cost reduction, we're, for example, working on a more efficient first and middle mile while we integrated certain networks. We do smart route design by algorithms. And at this moment in time, more than 60% of the routes are automatically planned. But we also focus on our parcel lockers and more broader than that on our out-of-home strategy. We placed more than 1,000 parcel lockers by the midst of this year, and we want to grow to around 1,200 by the end of the year. And that is, of course, next to or together with all the retail stores we currently have. Focus on consumers and customer space out. When you look into our net promoter score, we have a very strong number one position in the market. We slightly gained market share in the second quarter, also important. And what we do see is that we have a growing amount of consumers making use of our parcel lockers. That then translates into second quarter numbers, which you find on slide number nine. here you see that revenue increased normalized ebit slightly declined and we saw a volume growth of six percent and that is on trend for our full year outlook which is on seven to ten percent the six percent consists out of a growth of almost 30 percent from our international customers and 0.3% for our domestic customers. And important to say with that is that that growth then also mainly comes from the larger customers. We did see that the weather conditions in the Netherlands impacted the e-commerce market and especially in fashion. When it comes to the customer mix, it impacts our tariffs and it impacts, of course, our average price per parcel, and Pim will come back to that in his presentation to show you a bit of the effect it has on our business. As said, significant cost increases also within parcels, not only mail, also parcels, and many efficiency improvements to balance that, and I already discussed most of these efficiency improvements on the slide I just presented. So that's a good moment to go to slide 10, where we talk about meal in the Netherlands. In meal in the Netherlands, we manage for value. And as we did say when we presented our Q4 numbers in February, there is an urgent need for transformation. And why is that? First of all, of course, the ongoing decline of meal. Also this year, expected to be between 7% to 9%. Together with the fact that we see a shift from 24-hour to non-24-hour mail. So already in our volumes, we do see that there is less need for urgent mail. Together with the organic cost increases, which continue to rise, they have a big impact, especially in an organization where, of course, which is mainly people-dominated, and that is where the meal business in the Netherlands is. The result over the first half year was 1 million, and I think that underpins the urgent need for transformation. In our view, when we talk about transformation, there are two important elements. The first one is, of course, what we said in February, and that is the postal law needs to change. And in our view, the best way forward to change the USO into what you posted today will deliver within two days and overtime within three days. That's, in our view, the best way forward, together with, as already said by the Minister, that bridging measures deemed necessary. And in our view, a financial contribution in those bridging measures is crucially important to maintain the mail services as they are today. That, of course, asks for political process. That's what you see on slide 11. So far, we had, of course, the letter from the minister, which went to parliament in May. There was a roundtable that took place in June. In that roundtable, many members of parliament were informed by all sort of market parties about their views on the mail market. We expect a first debate in parliament in October. Before that debate there will be a letter from the minister in which we expect that there will be an exploration around the bridging measures and in the meantime ACM needs to assess the requirements of postal service users. Also important is, of course, the real amendment of the Postal Act. Hopefully that will also be discussed in October. And also here ICM is asked to assess the feasibility of that and to give a view on post in the future or meal in the future. And that part needs to be ready somewhere in spring 2025. In 2025, in our view, it will be a year of discussions in Parliament. Hopefully, the first bridging measures will be in place in the year 2025 when it comes to the amendments to the Postal Act. We do not expect that these will be in place in 2025. We expect that there will be a discussion on these elements in Parliament starting in 2024 but also walking into 2025 to hopefully come to a finalization. If you then look to the numbers of mail in the Netherlands which are on slide 12, you see that the second quarter had a relatively good normalized EBIT, also a relatively good volume decline, but as said, caused by the fact that we had the European elections and therefore had lots of mail underlying, we see that substitution is ongoing. We increase the revenue price to mitigate, of course, the cost increases we see in our mail businesses as well. And that's what we did on January 2024, but again on July 1, 2024. And as already said, in revenue, you find also the unfavorable shift in mix. We see more customers moving from 24-hour mail to non-24-hour mail. The costs are continuing to be high, which is partly because of labour costs and organic cost increases, which is partly because of higher sick leave and in a tight labour market, which results also in higher related costs, including a higher provision. And to offset that as much as possible, as said, stamp prices are increased and we continue to save as much cost as possible. Cost savings over the first half year were 20 million and we expect to be around 40 million by the end of the year. The graph also shows an indication of the split in bulk mail. the non-24-hour and 24-hour meal, and you see here the slight decline from 24-hour to non-24-hour. If we look into the development of our businesses, we reconfirmed the outlook, and that's what you find on slide 13. Imparsers were well positioned for the anticipated pickup in volume growth towards the end of the year, and Q1 and Q2 gave us the trends we expected to see to be indeed around the 7% to 10% by the end of the year. with consistent focus on customer excellence and strict cost control and capacity management to make sure that we reach the margin level we want to reach within parcels. For Miele in the Netherlands, focused on, of course, further cost savings and decrease the sickness rates together with, of course, an important half year in politics with the first discussions we will have on the changes in postal law and hopefully the bridging measures, further underpinning the urgent need for transformation. I hand over to Pim to go through the numbers and also a little bit of the insights behind those numbers. And I hand over.

Thank you, Erna. And indeed, let's look at the financial performance in a bit more detail. First on slide 15. Well, we have the reconciliation of the anomalous EBIT bridge of parcels from 17 million last year to 15 million this quarter. Clearly, in the beginning of the bridge, you see the contribution of 6% of volume growth, clearly contributed to the results, but was almost fully offset by the impact of product and customer mix effects. On the next slide, I will talk in a bit more detail about the composition of those mixed effects. Organic cost increases amounted to 18 million in the quarter, mainly related to labor, and the tariff increase was 12 million. this quarter, which again leaves a gap between organic cost increases and prices that we could put forward. The other costs were 8 million better. That is clearly a result of all the operational measures and efficiency measures that Diana just talked about that supported the development within the quarter and will continue to do so in the quarters to come. Other result is positive, obviously driven by a very large extent by the performance of Spring and our cross-border business. If we then go to the next slide, there we spend a bit more words on the composition of the volume. We talked about that clearly already at the beginning of the year. On the left low end side of the slide, you can see that gradually the composition of our volume is changing. And we've got now roughly 22% of total volume coming from cross-border clients. And there's basically two main developments that define Mix. Within domestic, we see still that bigger clients are growing and outgrowing the SME customers and at the same time platforms are also growing faster than direct customers so that in and by itself already leads to a mix effect within domestic And next to that effect, obviously, the fact that international volume continues to outpace domestic in terms of growth, leading to the higher relative share of cross-border, is another negative mix effect that impacts the average price per parcel. And if we go to that, then you can quite clearly see that the shift in product mix basically is costing us 21 cents per parcel within the quarter, Obviously, percentage-wise, that is not even a very big difference, but term times 92 million pieces, of course, it is material material. And you also see that tariff and price increases offset a part of that. But, of course, then you're stuck with the organic cost increases as well. So all in all, $0.08 per parcel down on average price driven by the mixed effects we just talked about. And, of course, that has played a big impact in the margin profile. for the first half of the year, which we still expect also to partially continue to the next quarters. Then on slide 17, we go and talk about mill in the Netherlands from 2 million profit last year to 6 this year. The biggest driver, of course, is the 11 million cost savings during the quarter that we talked about. but also here you can see a negative mix effect and herne already talked about it that we see a shift from 24 hour to non-24 hour meal obviously bringing a lower average price per item also on the meal side organic costs are up with 11 million price increases within meal exceeds the organic cost increases within meal and compensate for that. In other costs, there is clearly the benefit of the 11 million cost savings there, but also high sick leave rates and additions to the provision for long-term illness have offset part of the cost savings we realized within the quarter. Other results positive with 3 million include smaller items, including the international meal services that did slightly better than last year. Next slide covers the cash flow. Cash flow negative for the quarter, but improved in comparison to last year. A bit of phasing in working capital, but all in all, we tightly manage the cash flow, the working capital and the CAPEX as strongly as we can. Full year expectation on CAPEX is around 110 million for the year. Then to the balance sheet. Quite quickly, as said, we manage the balance sheet quite tightly to ensure that we keep a leverage ratio that is going to be below the two times adjusted net debt. Interim dividend is set in accordance with the dividend policy at a third of the dividends over the full book year 2023. which leads to a $0.03 per share interim dividend for August to be paid on the 26th. Then a deep dive on the adjusted net debt levels. Currently at 514 million compared with the year end. 2024 obviously impacted by the negative free cash flow in the first half of the year. We're really happy and satisfied about the issuance of the new sustainability linked bond of 300 million. Very good debt investors in it, 300 million, 4.750 annual coupon with 100 basis points step up on the final coupon only if targets are not met. And those targets are tied to our ESG strategy with three drivers, 90% reduction scope one and two. 45% reduction in scope, three greenhouse gas emissions by 2030, and 36% women in senior management positions also in 2030. In the meantime, of course, we've done this to have enough liquidity to redeem our 2024 bond due in November. In the meantime, obviously, the excess cash will be prudently invested to limit the cost of carry. And all in all, very happy with that result. New in this setup of net debt is the addition of the WGA provision, and that is a provision for future costs future entitlements for long-term illness people in 2021 we moved away from a social security premium structure in which you actually pay monthly fees to your social security agency to go to a self-insured method, which means that we're gradually building up the provision. And within the quarter, the addition to the provision was 3 million within meal and 2 million within parcels. Why we've included here is basically that we want to be as close as possible to the standard and poor's global definitions of net debt, and that's why we add the provision to the composition of the elements that collectively form the adjusted net debt level for POSTA now. Then let's move to the outlook. Well, clearly a couple of points have been discussed, but based on the business performance in the second quarter and under the assumption of gradual improvements in market conditions, we have reconfirmed our outlook. The graphs on this slide show the indicative development of some of the important drivers over the year. If we go and look at parcels first, we're leveraging on the infrastructure that is in place as well positioned to anticipate the pickup of volume growth in the second half of the year. And we expect to realize further efficiency gains. And we expect measures that we already have taken to grow to full run rate contribution in the third, but predominantly in the fourth quarter of the year. As said, domestic parcel volume was up 0.3%. The growth rate is trending towards the anticipated 2% to 4% for full year. At the same time, volumes from international customers are expected to outpace the already strong growth realized so far. And that also means that the mix effects will continue to be there. So those mix effects will continue to put pressure on the margin, all in all expecting growth to come in between 7% and 10% for the year, depending on economic circumstances. Next to that, plans to re-rationalize services and network strict cost control will contribute to around 35 million of cost savings to normalize the EBIT in 2024 that will gradually mature in the quarters to come. But in meal in the Netherlands, the 1 million result of meal in the Netherlands as a segment, so that it also includes other than our meal businesses results. And so 1 million in the first half of the year underpins the urgent need for transformation. Volumes for the year are assumed to continue its decline by 7% to 9%. Year-to-date number is 7.2%, obviously due to ongoing substitution. Volume development is not evenly split over the quarters, mainly due to the timing and number of elections in the Netherlands. Obviously, in this year, in the second quarter, and last year, in the first and fourth quarter, there were elections. And the faster shift towards non-24-hour mill puts additional pressure on margin. Halfway through the year, we've saved 20 million of cost. We do anticipate to get to the full 40 million by the end of the year, based on further adjustments to the processes in the current business model. And as Anna said, the extent price will increase to €1.14 as per July 1st, which is clearly necessary to absorb rising costs and to maintain the existing service level. All in all, still significantly hit by organic cost increases, full year expected to be 135 million, sorry, 155 million. That will be mitigated by around 135 million from yield management activities, both at parcels and meal. And additionally, we should achieve 20 million cost savings from earlier measures to reduce indirect costs and to improve efficiency. Then to summarize the outlook based on the Q2 results and the environment that remains very volatile, even if we look at the news today, we can reconfirm our outlook for 2024. Normalized EBIT is expected to come in between 80 and 100 million, and free cash flow to be expected around 0 to 40 million, with normalized comprehensive income between 40 and 70 million, which is obviously the baseline for our dividend. KPEX expected to be around 110, continuing a clear focus on strategy whilst staying disciplined on cash flow management. And as you can see on the right-hand side, given the gradual step-up in domestic growth, given the step-up in maturity of the measures that we've taken throughout the year, the year is a bit more back-end loaded than normally is the case, with the biggest contribution to the result clearly in the fourth quarter of this year. And to the closing remarks, we aim to remain our leading e-commerce and postal service position into and from the Benelux area. Very glad that we've managed to successfully issue the 300 million sustainability linked notes. Clearly very positive about the developments in the Belgian court case where there's nothing sticked from all the complaints and all the things that were thrown at us. Very happy also for our staff involved. And at Parcels, we're well positioned for the anticipated pickup of volume growth. And for meal, we once again do emphasize the urgent need for transformation. And the service level for standard meal will transition towards delivery within two days and over time moving towards three days. Adjustments in regulation are necessary and bridging measures are needed because of the regulatory process that will obviously take time. In the meantime, we are and will stay to be committed to keep the postal network in the Netherlands accessible, reliable and affordable. So far, thank you for your attention. Inge, back to you.

Thank you, Hannah and Pim, for your explanations. Let's now open the floor for Q&A. Operator, can you please explain the procedure?

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue. Our first question comes from the line of Michiel de Klerk from KBC Securities. Please go ahead. Your line is open.

Yes, hi. Thanks for taking my questions, too. The first one you mentioned already is that the phasing of the EBITDAs will be a bit more skewed towards the fourth quarter, as can also be seen in the graph. I'm just wondering why would it be a bit lower in Q3 and why do you expect it to then exceed your original expectations in Q4? Is it a bit more top line and volume driven or more cost saving initiatives driven? Just trying to understand that a bit more clearly. And then the second question is just on the on the parcel volume developments where it looks like you're trending a bit below for domestic and the opposite for international. Can you give a bit more color on the evolution throughout Q2 and the exit rates that you have seen there? As I recall that your exit in the first quarter was around 7% and you mentioned that this continued also in April. So that would imply a bit of a step down in the summer months, I would assume mainly domestic related. So if you just can clarify that a bit, the evolution throughout the quarter. Thank you.

Tim Hill, thank you for your questions. First one on the phasing. Yes, indeed, a little bit in comparison to what we said in the first quarter, Q3 looks a bit slower. I don't think that's going to be a lot to do with volume development. maybe a bit with the volume mix, being in the third quarter still a bit more reliant on cross-border. But the most important driver there is, I think, the phasing of the maturity of the measures that we've taken. So it's a bit of phasing between the quarters. I'm quite frankly not concerned about the full year numbers on the cost-saving initiatives that are part of the outlook. So that is one. On the second question, yes, you're right. When discussing Q1, indeed the exit rates on domestic were around the 7% in March. That actually continued into April and May, maybe even at a higher level than the exit rate of March. But that also implies that June was significantly worse. And that is also why we make a reference in the press release to the difficulties that the fashion segment as a market has. I think they're quite volatile. weather in June didn't favor people spending money on fashion, whilst normally June is a very big month for fashion, for people running up to the summer and their summer holiday. So June was particularly compressed because of the low fashion volumes, whilst April and May did definitely trend somewhere in between 7% to 8% domestic growth that we're also looking for, yeah, for the step up towards the 2% to 4% of domestic growth full year.

Okay, is it correct to understand then that, yeah, 7% to 8% in April and May, it's quite a steep step down in June? Can you... say something about July? Has this been normalizing?

No, not that much. I cannot say a lot about July. The step down in June was, as I said, driven by fashion, and June is normally the biggest fashion month apart from really the year-end peak, and that drives that step down.

Okay. Very clear. Thanks for answering the questions.

Thank you. We'll now move on to our next question. Our next question comes from the line of Amy Lee from UBS. Please go ahead. Your line is open.

Hi, good morning. Thank you for taking my question. First question is just a follow-up on the four-year guidance. So with an achieved EBIT in the first half of 9 million and the indication of an EBIT loss of 10 million or more in Q3, Can you maybe give some color on the building blocks of how you might achieve more than 80 million profit in the fourth quarter? What are your assumptions around volume growth needed to get there? And also, what gives you the confidence that there would be an improvement in the economic conditions towards the fourth quarter? And maybe a second question on the USO changes. Can you maybe give some indications on what potential bridging measures are being explored? How should we think about the magnitude of cost savings from there and how soon might the cost savings be realized once the bridging measures are in place? Thank you.

Yeah, thank you, Amy. First one I'll probably take and the second one probably Erna will answer. Look, what does it take? Nothing wrong with your math. So indeed, to end up with the four-year guidance, there's a fair amount of profit to be made. That still requires a step up in growth. So we're very happy to see that the growth in first quarter, somewhere between 4.5% and 5%, has grown towards 6%. We do expect that to grow even further, and we do expect gradually, based on also the conversations with our clients, but also when the Chinese platforms really started to grow in last year, that gradually the domestic market growth rates will pick up again also set by the positive trends at least that we saw in march april may we do expect that room is really there um so that's one secondly uh there's to in to anticipate these pretty tough market conditions we're doing everything we can to de-risk the volume development, the mixed effects by taking additional measures. Those additional measures relate to improving the efficiency, making sure we utilize the network with the best possible yields up to and including our peak period, and also taking additional cost measures on the indirect side. And those will gradually mature. Some of those cost savings are also partially volume-related, so obviously then also the biggest contribution to those efficiencies measures will be there when you've got the highest volumes, which is clearly also in the fourth quarter. Maybe, Hannah, you can take the USO... bridging measures question from Amy.

Yeah, I think the real indication or a good guidance on what the Ministry is aiming for or thinking about when it comes to the bridging measures is probably the letter which will be sent by the Minister to Parliament just before their debate in October. So at this moment in time, no guidance from our side. We made our view very clear, meaning that we want to have changed the universal service obligation to a two-day delivery window and overtime to three days delivery window. We added today, which we already said, of course, when we had the analyst presentation in February, but we added today very explicitly the financial contribution to those bridging measures, but let's see what in the end is put on paper by the ministry. I think important to add over here is that we're preparing to bring our business mail to a service level of within two days, starting from January 1, 2025, and that's an important cost-saving measure for coming year.

Okay, thank you very much. Thank you. We'll now move on to our next question. Our next question comes from the line of Marco Limite from Barclays. Please go ahead. Your line is open.

Hi, good morning. Thanks for taking my question. The first question is a follow up on the bridge measures you're mentioning. So I understand you are not able to provide the financial guidance at the moment, but could you give a little bit more color on what these bridge measures consist of. I mean, you are mentioning clearly financial contribution, I suppose, from the state, but so are bridge measures more related to operational changes and improvements that you can introduce ahead of the time, ahead of the new postal law, or is there more about financial contributions? It's the first question. My second question is on your parcel breach. I see that year over year you have got six million of positive contribution from spring. As far as I remember, this was not the case in Q1. So yeah, just wondering whether what you're seeing in spring that is driving a nice improvement in profitability. And the third question is on the letter mix So you're saying that there's been a shift towards non-24-hours products. My question is to what extent do you think that's a consequence of your second price increase of the year from 1st of July? So was the trend also visible in June before the price increase or that has been triggered by the price increase? Thank you.

Thanks. I will give an answer to question one and three, and then I'll hand over to Pim for your question on the parcel bridge. So the bridging measures, what the ministry exactly will propose as bridging measures, we don't know. What you did see in the letter which was sent by the Minister to Parliament in May, she gave the example of bringing the universal service obligation to delivery within two days, but it was put into that letter as an example. What we did do today and also by the end of February is make very explicit what in our view is important in those bridging measures. And next to a change in service level of the USO, we also think that a financial contribution is crucially important in the meantime until we have a new postal law. So it's difficult to give real color to it, except of what we think is necessary. And that's also the reason why we put it in the press release today, but also did so end of February to make it very explicit and open so that we can discuss it with all stakeholders. So the latter mix towards non-24-hour mill, it's a trend we already see over the last 10 years. So it doesn't have much to do with the price increase of July 1 of this year. What we do see is that over the last 10 years, we saw a volume decline, an overall volume decline of around 35%. the volume decline from 24 to non-24 hour was 65%. So it's a trend which we already see for many years. And it's a very strong trend that does not bend into the right direction for us.

On spring, yeah, also in the first quarter, spring was doing well and doing better, slightly better as last year. And that continues into the second quarter. So we're actually very happy already the entire year with spring's performance. Obviously, leveraging partly on more cross-border volumes. but also the transition in Spring's European business, significantly more e-commerce related than in the past. So Spring is doing well, better quarter after quarter, which is also the case in the first quarter of the year.

Thank you. Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw the question, please press star 1 and 1 again. We'll now move on to our next question. Our next question comes from the line of Mark Swartzenberg from ING. Please go ahead. Your line is open.

Hi. Good morning. A couple of questions. Just checking the first one, is it correct that you've now taken additional cost savings measures on top of the ones that have already been announced, the $35 million in parcels, for example, and the $40 million in mail? Is that something I heard correctly or not?

No. So these were already announced beginning of the year. We set the target for cost saving within mail in the Netherlands of around 40. We already included already cost savings within our parcel unit. But what we do see is that the actions taken, of course, to underpin those cost savings, as already said by PIM, is leaning towards the end of the year. And then you will see the positive effect of that.

but there will not be additional concerns.

Well, as I said, we're consistently monitoring the development on the top line on volume and composition, and we always will look for additional opportunities just to further de-risk the year-end result if need be. The current state of affairs is that we take 40 million costs out of a meal, that we have taken out the indirect cost savings that we talked about from 23 to 24, and we do expect 35 million of efficiency gains and cost savings within parcels. But we're always trying to further de-risk our year-end performance, and that means that we'll consistently look for ways to further improve. Because at the end of the day, you will know that we strive to get to better margins in parcels than also the year-end number now currently implies. And that's why we will continue to look for more if we can get it.

And what you always will do, Marcus, of course, and that's also what we said, is you try to balance capacity to volume. And that's what you do on, of course, on the longer term, but also on the shorter term. And that's what you anyway will do also in the end or in the direction of the end of the year.

Yeah, sure. And will there also be extra costs in Q4, for example, to prepare for the transition period in 2025 to already start going to this two-day delivery model?

No, that change will in any event be gradual and there's no big one-off cost or other project related cost in preparation of that change within 2024.

And to add to that, and that's also the reason why we are advocating our change so much externally as well, because we do think that we can do this change without any or at least very little people being left over, and that's important as well, because in the end, that can make reorganizations costly within PostNL. To do that, that's the reason for us also advocating this way of change instead of many others.

And do you already expect, because I think you said at some point on the non-USO meal that you already expect a saving there, but in general for next year, even in the transition that's currently proposed, do you expect you will have already some additional EBIT or slash savings from the transition that you're foreseeing for next year, even without the financial compensation that you're also targeting?

I think it's good to split the several items, Mark. So, yes, we expect that our change, which we have now asked approval from the Workers' Council to change to a two-day delivery service level for our business mail, which will start beginning of 2025 and then gradually will be implemented, that needs to deliver a certain cost savings in 2025. That's one. When it comes to the bridging measures, either the maybe earlier possibility to implement also for the USO service level within two days delivery or financial contribution, that's too early to say. And that's too early to say if that will contribute to 2025 or not. Postal law is not expected to contribute in 2025. That is expected as of, hopefully, as of 2026.

And then you're referring to a financial compensation from the losses in the USO.

So what you do have is some things we can do ourselves, and that is changing the service level of business mail. That's what we are going to do in 2025, and all actions are taken to be able to start implementing that as of 2025. Then the ministry said we do need certain bridging measures which fill in the period between the discussion or between now and an approved postal law. In those bridging measures, we've said we need next to a change in USO also a financial contribution. And then the new postal law will come in and that will have more measures than only the USO. And that is then the third phase. So you need to see it in phases. Try to see it in phases, Mark.

Yeah, that's very clear. That's very helpful. And then maybe a final one, maybe for Pim. If I look to parcels and your bridge and your EBIT, and you see that the volumes are growing but are eaten away by the price mix, at the same time, you will have the cost inflation also in the second half. But let's say the volume increase will be eaten largely away by still price mix. You will have some extra savings, but will you actually then still be able to see an uplift in EBIT in the second half. Of course, the inflation will be there and might be completely eaten away the $35 million savings.

I think in the half year numbers, there are significantly less contribution from the cost saving measures that then we'll see in the second half of the year. So out of the $35 million, the vast majority will materialize in q3 and q4 next to that we do expect a further step up in growth from the six percent in this quarter to higher growth percentages in the quarters to come and we do expect gradually domestic to get back to within the 2% to 4% growth rate, which then will limit in comparison to the first two quarters the size of the negative mix effect. And those elements together will lead to the step up in profitability of the e-commerce business.

Okay, yeah. Very clear. Thanks, Ben. And those were the questions. Thank you very much. Thanks, Mark.

Thank you. We'll now move on to our next question. Our next question comes from the line of Hanks Lotboom from The Idea. Please go ahead. Your line is open.

Good morning, all. Thanks for taking my questions. I need some clarification on the remark that you gained market share in the Netherlands in parcels. If I look at the data, the retail sales data that was published by the Best Central Bureau of Statistics last week, I see that wet shops have done remarkably well. And there has clearly been a shift back from, call it the brick and mortar stores, back to e-commerce. And yeah, normally speaking, should benefit from this. I also had contact with your neighbors on the back of their earnings release last week and asked them how the volume trends developed in the Benelux. And they told me that they were recording low volume growth in the second quarter. If I compare that with the domestic growth for 0.3%, and also in the context of the CBS data, what am I missing here? Is the rest so bad that even with 0.3%, you've been gaining market share, or is it something else? What am I missing here?

Well, different people might apply different definitions of market, and as a consequence, market share. I think that is one. Clearly, we have been very consistent over the quarters of what our definition is. And within that definition, Henk, you can clearly see that the market has not been growing for what we call domestic clients, and that the overall growth within this quarter is de facto driven by cross-border volume. We do that consistently. We see a step up in market share in the months May and June. that give us a clear indication that, let's say, the overall volume development is significantly driven by market circumstances and not so much by loss of market share. That is the consistent way we always use the same data points, the same analytics, and the same definition of market. And clearly, within that number, we've actually also gained market share in Belgium. That is part of what we call domestic volumes, clearly, as well.

Sorry for being so persistent.

I don't know the definitions of others, but we apply.

I asked him specifically, what is the domestic volume trend in the Benelux? And that's I mean, you take the Netherlands and Belgium together as well, and they told me it was in the low teens volume growth year on year in the second quarter, and also in the first quarter of this year. Again, it's their words, which I'm citing here. So, if they are telling me something wrong, then you should forgive me.

Yeah, I don't know how they define it, what is domestic. You could also say if it's received by a Dutch customer, then for some it's already domestic. I can only say, Henk, that we apply the same definition that leads to a market share of By the end of June, that is significantly higher than the LTM June number of 57%, which gives us the clear indication that we're on an upward trend line if you talk about market share.

Okay. Then about... the volume growth you anticipate, the acceleration in volume growth you anticipate for the second half of the year. If I look at the domestic market, I see consumer confidence coming down again. Last week's retail sales, as I referred to earlier, also show a weakening of the trend. I respect the fact that fashion was one of the main reasons for June. Last year, we saw exactly the opposite. taking place. What makes you so optimistic about consumer spending? Or is it purely the market share growth you're referring to making you so positive that you expect 2 to 4% volume growth in the domestic market for this year?

Well, it's the combination of market growth and a market share that will be stable or slightly positive. If you look at the months that we just discussed, then there's been quite a lot of months where you actually did see a more than 2% to 4% domestic growth in the order of magnitude of 7%. to 8% growth, with the exception of June. So there's, I think, enough indication to assume that 2% to 4% growth. Yeah, surely, and that's also what we say, everything can be influenced by economic circumstances. I don't know what will happen over the next couple of days, but based on the information that we've had over the composition of the growth over the months of the year, Also, the visibility that our domestic clients tend to have for the latter part of the year and also the expectation that Dutch consumers for the holiday season will spend relatively more in domestic players than at the cross-border Chinese platforms. We think the best projection that we can currently give is still aimed to be the 2% to 4% domestic growth for the year.

Then a final question, if I may, and that's on the international volume growth. You highlight specifically that Asia plays an important role in the 29% volume growth in the first half year. Now, last Friday, your colleagues from the south had a conference call, and there was a word that attracted my attention, disintermediation. by the likes of , rather than using contents, sorry, volume aggregators like, in their case, Landmark, increasingly used their own planes, their own capacity to fly stuff to Europe. And what remains for the B posts of this world is that at the end of the day, they can deliver the product to the online buyers at home or in a box or in an out of home location. But that's it. Is this something we should fear for in the case of spring as well? And I respect that spring is more than just the China lane. but is this the new trend going forward that might affect the spring as well?

no this is not completely related to spring only this is also direct entry from those clients to our dutch networks and they they might organize the flight themselves either to liege or to schiphol but i don't see any further disintermediation and i just see them very satisfied with the quality performance that we deliver for them So I don't see them making any other strategic choices than using us for the delivery to Dutch consumers.

And what really contributes in the end, of course, Henk, is the fact that we are able to get those parcels through our network and do the delivery ourselves. That's where we can earn the contribution. It's not in flying those parcels from China to Amsterdam or wherever. So we perceive that risk difference.

And we don't have that landmark proposition, right? So it's a different business model. Correct. And we earn from the distribution to see, and we do not see them making any other choices.

Okay, clear.

Thank you. Thank you. Good to hear you, Hank. Good to have you.

Thank you.

Thank you.

Due to time constraints, we'll now move on to our final question. Our final question comes from the line of Othmane Breacher from Bank of America. Please go ahead. Your line is open.

Hello. Good morning. Thanks for taking my questions. So first, I just want to confirm that the 7%, 8% that you observed in April and May, was that domestic or aggregate? Because if that was just domestic and you had 0.3% for the whole quarter, that means that June was quite negative. And also on your fashion volumes. So I just want to understand how much does fashion represent as a percentage of your volumes? And do you think that you are more or less exposed than your competitors to fashion? And did you notice a catch-up effect for these fashion volumes in July? Or do you think that most of these volumes are definitely lost? Thank you very much.

All right. Yes, I can confirm that when I talked about 7% to 8%, April, May, I was talking about domestic volume. So your deduction that then June must have been negative is absolutely correct. And that's also addressed by Hank's point. Last year, June was quite high on fashion. And this year... very low on fashion and that causes that shift from a positive number in June last year to a negative one in June this year. In terms of exposure to fashion, I think we're slightly less exposed than competition, given the composition of the customers that we carry. And unfortunately for the entire fashion industry, if a fashion season is over, the fashion season is over. You tend not to buy new dresses in full, and then you buy other stuff. So we don't expect a catch-up. but we do anticipate kind of the normal pattern on the fashion segment as well.

Thank you. So can you give us a figure of what was the June number compared to that 7% and 8% piece?

Sorry, now I'm mixing up stuff. So all in all, the 728 is on the total, clearly with the higher growth coming in March, April, and in May, coming back down a bit, driven by the delta and domestic. Just to make sure that I don't mix up stuff. Sorry.

Okay, yeah, so the 7-8% is total aggregates. Okay, good. And if I can add one more question, please, is about sick leave rates. You've been highlighting sick leave for some time now. Do you see any signs of stabilization, or do you expect reversal of the negative effect anytime soon this year or next?

Yeah, we're working hard to turn it around in the sense that to get the percentages lower than they are today. What we do see is we do see positive impact on short-term illness. We do not yet see a positive impact on the people who are for a longer time or for a longer term ill. So there's still quite some work to do. It also has to do, of course, a bit with the aging population we have within PostNL, but we're working hard on it. If it truly will contribute in 2024, too early to say, to be honest, but we're working hard to turn it around and bring the numbers into a little bit more normal territory. Thank you very much.

Thank you. This concludes today's question and answer session, so I'll hand the call back to Inge for closing remarks.

Thank you all for listening. Enjoy your day and back to you in November. Thanks. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.