Postnl Nv

Good morning, ladies and gentlemen. Welcome to the PostNL Q4 Fall Year 2024 Results Call. At this moment, all participants are in a listen-only mode, and after the presentation, there'll 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.

Thank you and welcome to all of you. This morning we have published our Q4 and full year results and we will now explain these to all of you. With me in the room are Hannah Verhagen, our CEO, and Pim Berense, our CFO. Hanna will present the 24 results to you and after that Pim will take over and he will elaborate on a strategy and outlook for 25. Afterwards Pim and Hanna will answer your questions. Hanna over to you for your last full year results.

Thanks Inge and welcome to you all. Let's start with the key takeaways for 2024. A few elements on which we are very proud for the year 2024 and achieved with relentless efforts is the favorable NPS where we have a strong position versus competition. Of course, well executed cash and balance sheet management. And I think with all the changes we saw in trends, We improved our efficiency and our capacity, delivering 41 million of cost saving within our mail division and 35 within parcels. Of course, organic costs kept increasing, but with the smallest gap in recent year, it's mitigated by higher prices and we even further improve in the year 2025. Our leverage ratio is below 2, meaning we propose a dividend of 7 euro cents in the AGM. Of course, 53 million euros of normalized EBIT is unsatisfactory. The main driver within parcels of the shortfall result is the margin pressure due to the acceleration in client concentration. Our top 20 customers in Q4 2024 did 60% of our volume, where a year earlier it was lower than 50%. So that is increasing rapidly. Within that, of course, international customers grew much faster than the domestic customers. That's a trend we saw also in the other quarters. A second big change is consumer behavior. People are ordering much later than they did in the past, so they wait, of course, for the big discounts, and then they start ordering. In mail in the Netherlands, not that much news under the sun, meaning that volume declines Continued 8% over the year. And what we did see over there is we still have, of course, difficulty in filling in all the vacancies. Although we've put lots of extra people and extra money into that together with a still high sickness leave had impact on the results of mail in the Netherlands. If we look to the normalized EBIT of 2024 and compare that to our outlook, what are then the main drivers for difference? Already shortly mentioned when we discussed key takeaways, Within parcels we see 25 million which is mainly because of the negative mix effect due to concentration with customers and secondly a less favorable volume distribution in the short peak period. We're only able to deliver in such a short period the peak volumes if we do the ramp up earlier and that is of course less efficient and therefore costly. The impact with mail in the Netherlands is also there because of mix effect, meaning that 24-hour mail, we had less, and therefore we got in, of course, non-24-hour mail, which has a lower margin, and we saw higher cost because of the related absenteeism. Coming in at 53 million euros for the full year. If we then give you PostNL at a glance, and I think I will mainly look into the non-financial KPIs. We saw, of course, our first CSRD report published today. We're proud on it. Proud that we, of course, made all the guidelines and have, in our view, a readable report. We saw again, of course, carbon efficiency improvement and also an improvement in the share of our emission-free last mile delivery. We saw growth in the amount of personnel accounts, very important because that's our possibility to reach those consumers and get their information. For example, when it comes to delivery preferences and we expanded the amount of parcel lockers and what we did see is that the utilization of those lockers is growing and especially in the last quarters accelerated in growth. Also, but there is a separate slide on cash, I would like to, of course, focus on our free cash flow. We had a very strong fourth quarter and therefore also a positive year-end result of 12 million in cash. Looking into parcels and then, of course, our Q4, we saw a revenue growth together with normalized EBIT growth and we saw strong volume growth, 10.5%. That 10.5% did deliver, of course, margin extra normalized EBIT, but did not deliver the margin increase we expected. And that is mainly because of that client concentration. And to give you a feeling what the impact is, we did quite some price increases over the year 2024. €14.14. And on the other hand, we saw a shift in mix, meaning bigger customers becoming bigger, and that was a negative of 22 euro cents. And that, I think, is the translation or the explanation why we do see pressure on margins. Secondly, we achieved our targets when it comes to efficiency, efficiency improvements and therefore also of course cost reduction of 35 million euros in the year 2024. Overall, when you look into volume increase, a good quarter. When you look into where volume comes from, consumer behavior is changing, we saw pressures on margins in Q4 and therefore also over the full year. The bridge explains you where we, the bridge of course from Q4 2023 to Q4 2024, up from 23 million in 2023 to 31 in 2024. What are the main parts within? Of course volume growth, that delivered extra revenue. We lost because of the unfavorable product mix, bigger customers as explained. Then when you have more volume, of course you have more cost to deliver those parcels. We also see organic cost increases, mainly because of wage increases. And then we saw again the positive of our tariff increases and the positive in Q4 of the operational efficiency improvements. The LADA was 11 million in Q4 and for the full year it was 35 million. Let's do the same for mail in the Netherlands. In the Netherlands, we see a large step down in result from 54 quarter for 2023 to 38 in the fourth quarter of 2024. uh we see we see of course that volume decline was 10 and a half percent over the full year uh around eight percent but it also includes of course last year's election mail so real substitution is eight and that is still within the bandwidth we've given in the beginning of the year 2024 to keep revenue up we increased stem prices twice in the year 2024 Per January 1, 7.9%, and then again, 4.6% per July 1. Reason for, of course, the step down is, first of all, the shift from 24 to non-24-hour mail, and secondly, also a higher illness rate in a tight labor market, which makes that we have less efficiency and slightly more cost, because we have to hire external people to fill in as much as possible the empty people spaces. On cost saving side, Mill Netherlands did very well, 41 million over the full year of 2024. Also for Mill in the Netherlands, the bridge, the 54 million Q4 2023 to the 38 in 2024. Here of course you see a revenue decrease because of the volume decline. We have a slight revenue mix. Then of course volume dependent costs and organic costs which are wage increases and other inflationary pressures. Also here tariff increases that did have quite some positive impact and here 5 million for cost savings and as said a total year result on cost savings is 41 million and that brings us to 38 million in the fourth quarter of 2024. On cash flow, we had a very strong fourth quarter. As already said, we brought in 106 million euros in Q4. Obviously, normalized EBIT was down in Q4 compared to last year's number and lower than we expected. But thanks to the well-executed cash and balance sheet management, the free cash flow performance in the quarter was solid, resulting in 12 million for full 2024 and well above our outlook. Looking a bit deeper into the cash flow components in Q4, the capex, which is mainly related to parcels, was less than, of course, the year before, and we did a good job on working capital. This winds up the 2024 financials, but obviously these were realized in an environment where market dynamics keep on changing. And then the last slide before I hand over to Pim. Those market dynamics already mentioned, of course, when we discussed the numbers of 2024. Within the e-commerce markets, we see evolving consumer behavior, meaning that on the one hand, they order their parcels later. mainly based on discounts, and secondly we see that they order more and more with the big partners, and that creates of course client concentration. In postal services in the Netherlands, and we said a lot about it last Friday, we keep on seeing a structural decline due to substitution, Also, here consumers say there is no need for urgent mail. It's fine for us if we can get it within two days. So predictability is much more important than speed. We see further cost increases, mainly labor-related, and we did see in 2024 that the decision on postal regulation is postponed. That means that for parcels, we think that we're keeping, of course, our commitment to further investments and innovation. We also do think that it is important to start a dialogue with the whole value chain to come to a fairer distribution of value in the sector. And we start as a leading player. And of course, as a leading player in the market, we want to start that discussion. Some of the consequences of that discussion you will also find in our plans for 2025. For Mail in the Netherlands, we're committed to, of course, a future-proof and a financially viable postal service. The business model is unsustainable and requires urgent action. That's what we already said more than a year ago. That's why we presented our plan in February 2024, how to make mail services in the Netherlands reliable and financially viable. And that's also the reason because there is no view at this moment in time for changes in the postal law while we submitted our request for a financial contribution to government for the year 2025 an amount of 30 million and for the year 2026 an amount of 36 million. I think 38 million sorry pinpointing that action from Dutch government is needed and in our view urgent. And that, I think, concludes 2024, gives you, in our view, a good view on what happened in 2024. What we also did say in our trading update is that the outcome of 2024, together with some of the market trends we see, means that we're looking into certain elements, adjusting certain elements of our strategy. That, together with the outlook for 2024, will be the story of PIM, and I hand over to PIM.