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.

Thank you very much, Herna. And first and foremost, then look at our group strategy and subsequently I'll dive into the adjustments on strategic themes in both our segments. But slide 15 to start off with, we're focused on delivering distinctive customer and consumer experiences with the aim to be the leading e-commerce and postal service provider into and from the Benelux. and this overarching strategy fully embeds our environmental social and governance ambitions which will enable us to drive towards a sustainable future obviously the dynamic nature of the markets we're in will require us to every now and then respond to external developments and collaborate with customers to introduce new increasingly digital solutions if we then move over to our parcel segment On slide 17, let's first look at the addressable market and how we believe that will develop. We have strong confidence in the growth potential of the Dutch and Belgian e-commerce markets, which is driven by growth of Dutch retail market spending as well as the development of online penetration. For the Dutch retail market growth, the general view is that we will see growth for the years to come. The pace at which the market will grow is of course partially dependent on economic conditions and these are and will remain to be volatile. When it comes to online penetration, we see an upward trend both in the Netherlands as also in Belgium. The blue line on the graph, a small graph, shows the online penetration as a worldwide basis so in our countries there should still be room to catch up towards this level which is a very important driver behind the overall market growth based on these two fundamental drivers a mid single digit growth for the Dutch e-commerce market in the medium term is expected our assumption for 2025 is a growth rate of between 4 and 5% based on the increase in online penetration and the growth of the retail market. However, as the e-commerce market matures, factors beyond growth potential become increasingly important. That is the bridge towards slide 18. The e-commerce market is changing in very many dynamics. Obviously, also, this e-commerce market is impacted by increasing costs, more requirements on labor conditions, but a more unequal split of volumes over the days of the week and over the week. periods in the year so a even more spiky consumer pattern and putting pressure on networks in the market and that of course requires some adjustment we obviously remain committed to further investments and innovation to support sustainable growth in this market but given the market dynamics that have clearly impacted our financial performance We believe it's necessary to adopt some of the elements of our strategy. In this presentation, we'll discuss five elements of this strategy where we will respond to the changing market dynamics. I will present them in more detail one by one in the slides that follow. and so only the high-level strategic initiatives are discussed here. There is increasing awareness for decent working conditions in our labor market that is very tight. Consumers buy an increasing amount of parcels online. We also see an increased focus on reducing the company's carbon footprint, and in response we will further step up our investments in health and well-being of our people, as well as the investment base for sustainability. We've seen consumer behavior change as you and I tend to buy products more often at large market players and platforms instead of medium and smaller sized webshops. This change in behavior impacts PostNL and resulted in an acceleration of client concentration that has put pressure on our margins. With targeted yield measures specifically aimed at our largest customers, we will enhance the value of our customers. We've also experienced an increasing demand from web shops and consumers to be able to send and receive parcels from countries within Europe. To support our customers in this, we will expand our spring proposition in Europe and our presence in Belgium. Lastly, we will accelerate the rollout of our parcel lockers in response of the growing adoption of consumers and customers for our out-of-home options. We truly see that the flywheel has been accelerated in 2024, and as such, the time is right to step up those investments even more. So these are our five high-level strategic initiatives that I will subsequently discuss in a bit more detail. The first one is targeted yield measures to enhance customer value. We see an increasing level of client concentration since large market players and platform are outgrowing the other client categories. In just two years' time, the share of our top 20 customers increased from 49% to close to 60% in the fourth quarter of this year. That top 20 consists of both domestic, international, and platform players, and the internationally recognized are mainly asian-based customers. The accelerated client concentration put pressure on our margins. Also as you've seen in the bridges here and I explained the average price per parcel went down irrespective of the increase of 13 cents on price points that we've put through. So those negative mix impacts have been the most important factor explaining the gap with our outlook. All in all, only the mix factor accounted for roughly 30 million of the difference between outlook and the 53 million. Having said that, this is clearly an area where we need to seek a better balance between volume, volume growth and value. We will need a fairer contribution from large webshops and platforms to fixed costs to pay for sustainability, improving labor conditions and labor remuneration. And if we want to maintain in a position to keep on innovating this broader e-commerce market, to facilitate their future growth ambitions, we need to get to a better balance and fairer contribution of margin within the chain. We will further accelerate the utilization and number of customers that have locker delivery in their checkout processes, which will be an efficiency improvement in itself. And we will further build upon our SME propositions to support the growth of that client category as well. Next to that, we'll focus on more efficient flow of parcels to increase the utilization of our network. Examples are to increase the number of first-time ride deliveries and to encourage our customers to set delivery preferences right in order for us to increase the first-time ride delivery, utilize the existing infrastructure, and create slightly more equal flow in the network. We expect these measures to impact our volume growth and anticipate on slower growth relative to the e-commerce market and, as such, expect a slight loss in market share. Next to that, we see great organic growth opportunities that are now ready to be captured. We see possibilities both in the international growth domain as well as in Belgium. In the international growth domain, we think we can leverage our existing spring infrastructure that is an asset-light business model uh we reported within the parcel segment so we don't have own deliveries we don't have to own networks nor are we going to invest in those but spring's platform is very well equipped to align customer demands and supply to mix to combine various trade lanes and have customers grow those Europe trade lanes. As you know, the European market is a very big cross-border e-commerce market, and we have performed very strongly over the past years in this area, 16% growth. We already have a strong market position in Europe, and we believe that from that asset-light network, we are able to boost organic growth And let's mention some of the actions we will initiate to make this happen. We intend to expand and optimize our asset-light network, aiming to reach all top destinations within 48 hours. It differs per country of origin what the key trade lanes are for export out of the Netherlands. For instance, Germany, Belgium, France and the UK are most important, but out of Spain it's different. So it does make sense to build a EU network linking these lines together to create scale effect and further growth opportunities. We will intensify commercial efforts and improve the sales force targeted at European and Dutch market to grow the number of customers and invest in tools and commercial intelligence. Whilst introducing new services and offerings, for instance, fulfillment and additional customs capabilities. Then next, we see also great opportunities for further growth in Belgium, where we are clearly the number two in the market. Very good performance since 2022. And also here, a market with growth potential. Good to mention that the Belgium e-commerce has some characteristics that differ from the Dutch market. For example, as you can see on the graph, the part of import is relatively high due to historic factors. Our actions there, We want to expand our position on export Belgium into Europe through spring, targeted yield management to achieve a better volume mix there as well. And we have existing infrastructure and capacity in place in which we can accommodate additional volume without further investments. Next to that, we'll focus on improving our net promoter scores as well and roll out our out-of-home strategy to Belgium. That brings us to the third pillar of the changes to the e-commerce strategy, and which is the acceleration of the rollout of out-of-home strategy. Here you see the flywheel that is now clearly working, and that's why we believe we should accelerate it. In the last year we have seen growing adoption of out-of-home delivery from our customers as well as from our consumers. Large customers have now added delivery to APLs in their checkout and we've delivered 97% more parcels to APLs than in the year before. Receiving very very favorable, very high actually, NPS scores of 51 from our consumers using this delivery option. This has made it decided there's sufficient adoption now to accelerate the rollout of parcel lockers. This out-of-home delivery strategy has many advantages for our customers, but also for ourselves. Our customers receive higher NPS scores as consumers tend to return to web shops after experiencing a smooth checkout and delivery process, which in return generates more revenue for our customers. With delivery to lockers, we can reduce our costs. The costs for delivery to an APL are roughly 30% lower than for home delivery, as we have fewer stops in routes and can drop off more parcels in a stop. Also, the utilization of our network can be increased, and retail locations have less handling as consumers can pick up their parcels without interaction with personnel working at their retail locations. We've assigned a capex budget of around 10 million for 2025 for the rollout of lockers. That is a couple of million more than assumed before. So for lockers and also the expectation of utilization, currently at 36%, that will rapidly increase to 100% in the years to come. So we plan for the additional investments to roughly add 500 parcel lockers and to improve the utilization even more, capturing the scale effects and efficiency gains we just talked about. The fourth element relates to our role as large employer, both in the Netherlands as well as in Belgium. And as large employer, we are committed to decent labor conditions to enhance employer-employee engagement and the health and well-being of our people. Increasing online purchases have resulted not only in growth in volume, but also in different type of products. We see more parcels that weigh more, requiring tools to support the process for our people. The health and well-being of our people in the operations in both our parcels and meal division is of great importance to us. With long-term absenteeism remaining high, we take a lot of effort to reduce these rates and support reintegration. We have a dedicated team that supports employees in tailoring the best possible way to return back to work. And also, we do invest in prevention, with the accelerated rollout of tools like, for example, tilters that support in placing parcels on the sorting bins, but also a move-back that helps you to transport roll cages next to frequent rotation of tasks supports to minimize the physical strain for our people. With people coaches at our depot, we keep a close eye on work pressure and job satisfaction. And in this year, we also have introduced a centralized health and safety department that has expertise in one central place and will build on that on uniform guidelines and safe working practices. And the last part relates to our role in the environment, and we are determined to remain at the forefront of sustainability and have set an ambitious path towards net zero emissions. We are on track to reach our recently validated SBTI targets. We decided to further step up our investments in sustainability, of which I will name a few. We will expand our electric fleet and increase the utilization of our fleet through improved fast charging efficiency and will expand our zero emission network to increase the amount of city centers that we deliver with zero emissions. We currently do this already in 27 cities. We will also expand the use of renewable HVO 100 fuel for our large trucks and last mile vehicles. And besides our own fleet, we financially support our delivery partners in electrification of their fleet in the Netherlands and in Belgium. Next to making our fleet more sustainable, we also invest in building stronger algorithms to optimize routes and minimize air in parcels we collect and deliver. To summarize the effects of these five strategic initiatives, slide 24 is there. In 25, we will invest an additional 15 million related to the initiatives, and both revenue and normalized EBIT will see impact from this when we compare to the base case. So on normalized EBIT, we expect a hit of 5 to 10 million in this first year. with 15 million additional capex over time those five initiatives so this should not be confused of a by a midterm guidance only those initiatives will over time lead to roughly 300 to 400 million revenue increase and a positive ebit contribution of 25 to 35 million For us, it clearly makes sense to take those steps right now. They are clearly in the interest of the enterprise and are directly related to the market dynamics in e-commerce that we've seen in 2004. Obviously, next to those strategic initiatives, we will continue our efforts to reduce costs. We keep on doing what we can to improve efficiencies. To mention a couple of main projects that will contribute to margin improvement over time, direct and indirect cost savings in first and middle mile, collection and transport by integrating networks, reduce kilometers including in last mile by further developing our planning algorithms and digital supply chain solutions, improve the management structure in depots to further accelerate efficiency measures, improve capacity utilization during off-peak periods, reduce our customer care queue, implementing our conversational AI platform to capture part of contacts with consumers, And then, as always, there are some very many smaller initiatives to reduce costs. All in all, we anticipate on saving between 40 and 50 million in costs with the efficiency measures that we just discussed in 2025 within the parcels segment. On that, now let's move to mail in the Netherlands. And let me start by repeating our message that the current business model of postal service is unsustainable, which is again underpinned by the financial performance that Herne explained a little while ago. In 2024, despite 40 million in cost savings, we've experienced a large step down in result as a result of structural decline in mill volumes, shift in mix, rising costs in tight labor markets and continued high illness rates. We fully acknowledge that Dutch government needs to assess the future of postal services, but there is an urgent need for change in postal regulation. While we await further decision, we are continuing to make every effort to address this situation and have started to mitigate, migrate a large part of business mail to D plus 2 delivery. By the end of the year, all business mail will be at a service level of D plus 2. As of this month, we have amended the collection processes of our mailboxes and will collect mail privately during the day to save costs and increase our network efficiency. All measures are taken in the transformation towards a future-proof and financially viable postal service. On the next slide, we have laid down our roadmap towards the service level for standard mail to be delivered within two days, moving towards three days over time, in line with consumer needs and in line with customer expectations. And yes, for that, postal regulation needs to be adjusted urgently. Given the discussions that we had on the roadmap earlier on, we thought it wise to explain the different steps and how they do relate to cost savings. We show a roadmap that assumes that the USO meal can migrate to D plus 2 at the January 1st, 2026. On the next slide, we see the projections when taking into account that this is not the case. We continue with the measures that are within our control and anticipated cost savings between 40 and 45 million in 2025. Part of these savings relate to the migration of business mail and mailbox collection during the day. On top of this, we continue our efforts to optimize our network. In phase one of our roadmap, we assume that USO mail can also be migrated to a service level delivery within two days. Then we will be able to eliminate off-peak routes and have delivery concentrated on three days at every address. This allows us to make further optimizations in our network and in the mailbox collection process. It will still be possible to send items within 24 hours, so-called priority meal, at a different price levels. These items will then be delivered via the parcel infrastructure. That steps are expected to bring in roughly 40 to 50 million in cost savings. In phase two of our roadmap, we transform the service framework to delivery within three days. With that, we can further achieve cost savings and anticipated further decline in volume will justify to bring down the amount of delivery days within the meal network. and with one delivery day less, we have sufficient time to be able to sort all meal during the day and will need fewer locations to carry out all our processes. In other words, we won't need night work anymore. In total, we expect that this will result in cost savings in the range of 80 to 100 million as well. Please note that amending the service level for USO meal will be dependent on the outcome and timing of the political decisions on postal regulation. Slide 29 compares the development of normalized EBIT in the meal segment in different scenarios. It is also where EBIT should be to cover the cost of capital at the level of the WEC of the group. Without interventions, the loss will become larger by the year. Our roadmap, as explained on the previous slide, we expect to be able to limit the anticipated loss for the postal services in the next year and then turn back to positive results. These projections clearly show that the USO obligations need to be reformed urgently. We stress the importance of including a service level for standard mail to deliver within two days and overtime to within three days. also taking into sensitivities a financial safety net should be incorporated in regulation. These changes are in line with regulation in other European countries. While we are awaiting parliamentary decisions, last week we submitted an application to the Dutch government for a financial contribution of 30 million in 2025 and 38 million in 2026. This is to cover the costs of the universal service obligation that we have. So it's a cost coverage of loss-making activities that we have to do as part of the universal service obligation that we have. We've asked the Ministry of Economic Affairs to take a decision at short notice. Then let's move to our outlook. So after explaining you about the strategic initiatives and parcels, the roadmap for Mill, I would like to show you our main assumptions for 2025 and how they will translate in our outlook for the year. We expect organic cost increases of around 125 million, of which 75% is labor-related. We expect within this year those costs to be fully absorbed by price adjustments. Another improvement. At parcels, we expect volume growth between 1 and 3%. That total volume growth is lower than we expected the Dutch e-commerce market to grow, mainly related to the yield measures that we will take, which will result in a slight loss of market share, mainly on international. Positive price mix effects are expected roughly around 55 to 60 million almost fully explained by pricing and we will continue our efforts to take adaptive measures of which we expect a contribution of in between 40 and 50 million. At Mail in the Netherlands we expect between 8 to 10 percent volume decline and between 40 to 50 million in cost savings. All these factors taking into account, including the strategic initiatives we will focus on this year, we expect a normalized EBIT for 2025 in line with 2024. As showed early in the presentation, the EBIT impact, negative impact in this case, of the initiatives is between 5 and 10 million. Lastly, and maybe you're not fond of it, but for us it's important that there will be a change in segment reporting. As of January 1st, we will report our real estate activities in the parcel segment in order for us to be as close in the meal segment of the result of the meal business in itself and not making the distinction between meal and meal in the Netherlands anymore. I know that will result in a bit of extra work for you, but we kindly ask you to amend your models accordingly. To help you, you will find a full reconciliation of quarterly results in the appendix to this presentation. On 32, we present the development per segment to help you understand the expected deltas compared to last year. And what you clearly see is that, let's say, the results in parcel segment will grow, and the mill in the Netherlands result will diminish from a positive of three towards a negative result. For parcel, the main developments are additional revenue from volume growth, organic cost increases are expected to be mitigated by price adjustments, the impact of cost saving and efficiency programs partly offset by higher costs, and the strategic initiatives we discussed will result in a step down visible in other results. At Millen and Ellens, the impact on volume decline is clearly visible. Furthermore, we anticipate to be able to mitigate organic cost increases fully by price adjustments. Then over to the split of normalized EBIT over the quarters. Even more than in 2024, normalized EBIT will have to be earned in fourth quarter. The impact of pricing will be larger in Q4 than in any other quarter. Overall, working day distribution over the quarters is slightly different than in 2024, also impacting the quarterly split. For parcels, you should take into account that the announced yield measures will start to come into effect as of Q2. And for mail, Please remember that in 2024 we had elections in the second quarter and for this year no elections are scheduled. To wrap up the outlook on slide 34, normalized EBIT is expected to be in line with performance of 2024 due to those balanced strategic decisions CAPEX will be slightly above the level of 2025 and will include 15 million related to the strategic initiatives. We expect that economic conditions over time will improve, but for 2025 we assume that the external environment remains challenging. And we stress that pace of client concentration due to changing consumer behavior is difficult to predict. Having said this, I emphasize our intention to pay a dividend over 2025. We hold on to our aim to be properly financed, taking into consideration the anticipated improvement in performance going forward and the progress towards a future-proof postal service. Good to add that normalized comprehensive income, which is of course less, It is, of course, the base for dividend is expected to follow a pattern which is more or less in line in terms of step down compared to EBIT than of the 2023 year. And lastly, before we close and open up for questions, I would like to announce that in September of this year, we will host the Capital Markets Update. I will elaborate on how we see the e-commerce market going forward based on market dynamics that we've seen and will continue to see. We will provide you further details on the elements that we will adjust our strategies on. Also, the progress made towards a future-proof postal service will be discussed at that point in time. Based on all of that, we will provide a market and medium-term financial guidance for PostNL, Looking forward to have that discussion with you at that point in time. And for now, I would like to conclude the presentation and hand it back to Inge, and she will then subsequently open up for Q&A.

Yes. Thank you, Pim. So, operator, please open the lines for Q&A, please.

Thank you. To answer your 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. We will now go to your first question. One moment, please. And your first question comes from the line of Michelle DeClercq from KBC Securities. Please go ahead.

Yes, hi. Hannah, thanks for the presentation and the extra color on the strategic measures that we'll be taking. Maybe first question on that, I was just wondering of these five strategic measures, you will of course have some revenue impact and some EBIT impact into 2025. I was just wondering what is this revenue loss related to? Is it like that you assume maybe some customer losses on some more aggressive pricing pass-through? And then maybe following up on that as well, looking towards that target that you have by 2028. How should we see the benefits from that coming through in the P&L in terms of the phasing effect between 25 and 28? And then the second question would be, and you mentioned it a couple of times on the decision of the amendment of the change in the postal regulation. Can you maybe remind us now what the timeline is at this point in time and how you are looking at it? And yeah, because based on your presentation and what you show on slides, I would expect that you officially start a shift towards the D plus 2 also for the USO mill as from January 27 based on that graph that you showed. So just wondering if you can give a bit of an update on that front. Where do you or when do you expect this change to finally happen if it happens?

Thank you for your questions. Let me start in the sequence of how you've raised them. I think on the revenue loss element there, yes, we do expect that the yield measures aimed at our biggest clients will most likely also result in some loss of volume. It's definitely much more than just price increases. improvements and creating more equal flow but we do expect that in some cases that could lead to slight loss of share of wallet on those clients and that will lead to the negative on revenue that we indicated and that's also the reason why our volume growth is behind the expected market growth. So we do expect a slight loss of market share, but that's by choice, because at the end of the day, we believe that we need to get to a better balance between volume and value for PostNL. So that was one. Then the target to 2028, yes, clearly this is only aimed at the initiatives we talked about, so they will gradually mature towards that level. How exactly that phasing will go will be an element that will certainly guide you on more detail in September when we do have that capital markets day and we'll also make it as part of the overall revenue and EBIT contribution for a midterm period. So I'm not going to say too much about the phasing right now. We truly believe those initiatives are robust and we believe it's the right moment in time to accelerate those growth opportunities and we'll have the in-year effects that we also indicated so a 5 to 10 million loss in related to those initiatives I think on postal regulation maybe Erna you can share the latest there

Yeah, so I think two processes in the sense that, of course, the discussion in Parliament on changes of the postal law are still going on. They're waiting at this moment in time for a review of ACM that will be there somewhere in spring, not exactly known when. And that, of course, is the basis also for the minister to give his view on how he thinks postal regulation should be changed. Because a change in postal regulation will take at least one and a half year to two years, so it will be at the earliest January 27 that that postal regulation will be in place. That's the reason why we've asked for financial compensation, and that was the press release we issued last Friday. When are we able to bring USO to D plus 2, so delivery within two days? Is that from January 27? That depends on the changes in the postal law. So depending on what is the outcome of the political debate and of course the decision to be taken by the minister in the end, that is decisive for the moment we can start changing the universal service obligation into a D plus 2 service level.

Okay, that's clear. So if I understand it correctly, the discussion empowerment will be in the spring of this year. If all goes well, they will approve the change in regulation, and then it will take one to one and a half years. So that's the earliest would then be 1st of January, 2017.

Yeah, if they speed up, it could be mid-2026, but the expectation is that it will take at least the year 2025 and probably 2026, and that's also the reason why we asked financial contribution for 2025 and 2026.

And obviously that can change if there's a willingness to create transitional arrangements prior to the postal law to become in place. Like was the intent in October.

Okay, that's clear. Thank you. Looking forward to the capital market.

Thank you.

Thank you. Thank you. Your next question comes from the line of Mark Swartzenberg from ING. Please go ahead.

Good morning. And I'm Pim. I would like to go back to the slides 28 and 29, just to get a bit smaller there and also to see if I'm reading it correctly. If I read slide number 28 with the related cost savings, that's an annual number. So in 25, obviously the 40, 45 million is there. And then phase one, phase two, the 40, 45 and the 80 to 100, that's Is that conditional on, indeed, the changes coming through to the USO, and is that an annual number on top of each other? Should I read it like that?

What you need to do, Mark, is to basically add the amounts from phase one and phase two, and those will be divided over the years that we here discussed. So it will be dependent on the phasing. And also the phase two step will be a function of how volume will develop. So it's not all on a yearly basis. Obviously the 2025 number is. This is the absolute amount of cost that we can take out in this horizon.

Right, so these numbers then add up to the orange line on slide 29.

Yes, so if we, and that assumes the phasing that we just discussed, so if you then go to 29, then what we will say is if we're able to realize our plan, that in a transition period up to the point that we are at D plus 3, the mail business will be loss making. Only after the step towards D plus 3, we're able to get back to positive numbers again. That is what the orange line says and still we believe that is the best possible plan for a postal delivery in the Netherlands as we felt it was. That's also why we believe that also in the postal law a financial safety net needs to be there in case sensitivities push that orange line down or government policies like minimum wage increases put those numbers down need to be offset in order for us to at least create a meal business that can function and not at a loss-making level that we're currently looking at.

Yeah and if I look at the orange line and at 2027 it's still more negative than the 26 so You're only asking for compensation for 25, 26, but wouldn't it then also be logical to ask for compensation also for 27 when you have an even bigger loss still?

That depends. So we need to make the distinction between the two different elements here. We've got a period up to and including up to the new postal law being in place and the mechanisms of the postal law. So assuming that postal law is in place in the 1st of January 2027, then within the postal law we intend to have that financial contribution described in the law that makes a separate request for financial contribution not necessary of course if timelines move we at some point could consider if there's no post law yet to do for 27 what we're now doing for 25 and 26 but we've taken the years because we expect or at least we are prepared for the fact that it could take until At the end of 2026, beginning 2027, before there is a postal law, for now, that financial contribution is aimed at those two years. Preempting that.

Yeah, I understand. Yeah, exactly. So then it's laid out in the postal law, of course, yeah. And this scenario, does it, because this morning was also news about DHL going into the postal market and increasing capacity, et cetera. Did you take that into account in driving these scenarios, or did it come as a surprise this morning as well?

Well, we are never surprised that they communicate something on the day before our results announcement, Mark. But at the same time, we didn't take this into account. And let's be frank, Intrapost is a very, very small mail player. So no, I don't see any impact on that news on our numbers nor on our strategy as we've presented it this morning.

And I think the relevance of out of home is of course also underpinned with what they say and that's what you see back in our strategy. I think when you think about out of home for PostNL, we do have 3,600 retail stores, we do have 1,100. We do have 1100 parcel lockers. We will add quite a lot of parcel lockers in the year 2025. So the total will be of course around the 5000 numbers of retail slash parcel locker locations you can do your parcel business. So that's quite an impressive number and it shows I think the importance of out of home.

No, that's absolutely clear. Maybe a final one. I'm just curious about the scenarios you put into your model for the larger account where you try to increase your yield management. How much market share loss or lower volumes did you pencil in for those clients where you're really taking action to improve the yield with, for example, price increases?

Yeah, basically the gap between 4 to 5% and the growth of 1 to 2 that we forecast ourselves. And that is a market share loss. And as you know, we've managed to keep the market share stable also throughout 2024. But now when looking at those bigger accounts, we believe we need to get a better return out of those clients. And if the consequence is that they are not willing to move on our efficiency measures or on price points, at some point you are better off without certain volumes of certain clients, not all, but some. And then we're okay to surrender part of market share to whomever wants to do that. below full cost numbers. We're not going to go that way. And that's why there's a gap between market growth and our expected growth.

So if I take that gap and I assume that 60% of all it is with larger clients, then I should take that as an average over the 60% to explain the gap of, say, 3%. Is that, say, 5% or so?

Yeah, but we also said that it will mainly be in international, which is not included in the market share definition that we every time put on paper talking about the 58%. So it will only have a limited impact on the not cross-border volumes, at least as we see it in 2025, but will have an impact on our cross-border volume flow Also for that flow, we don't expect to grow, but a slight decline in volume, whilst our domestic volume growth will be there.

Okay, so I need to know then a bit of what the Asian flows are to get a bit of a feel for, and that explains a large part of that gap. So then we're talking about more than 10%. volume loss at those clients. Is that a correct assumption or am I wrong here?

Well, I don't want to be too specific, Mark, because as you also heard me say, those elements will kick in as of Q2. That is also related to contract end dates that are at the end of first quarter. So we're in the middle of those conversations right now. But I would say roughly you're right in the expected decline on those flows. But I'm not going to be more specific on which client and how much exactly, since that doesn't help our commercial position here.

Yeah, no, that's logical. But that means that it still needs to be implemented, so the first quarter is then trending above that year guidance, and then you expect the market share loss to be more skewed to the second half. Is that how I should read it?

Absolutely. Okay.

Clear. Thank you very much.

Thank you for your questions, Mark.

Thank you. As a reminder, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. Your next question comes from the line of Marco Lumetta from Barclays. Please go ahead.

Hi. Good morning. Thanks for taking my question. So the first one is on your request for compensation in 25 and 26. We saw on the press on Friday that the minister has somehow already said no to your request, but you still, look, let's say, hopeful that that comes true. So if you could really clarify how the conversations are going on, I thought that was already a no from the Minister. Second question is on the USO cost savings opportunity. So just to be very clear on the question from Mark. The 80 to 100 million is the absolute aggregate number. So we should not do 40 in phase one plus 80, 100. So let's say 150 million is 100 million, the absolute amount of cost savings aggregated. And also on this one, I mean, in the past we've been able to achieve about 40 million of cost savings in mail per annum. shall we expect a meaningful amount of additional cost savings on top of the USO change? Or let's say you, I mean, overall, you're still kind of thinking about 40 million of cost savings per annum, including the USO changes. And the third question, my final question, is on the 25 dividend to be paid in 26. So your leverage is already quite close to two times. You expect a free cash flow burn in 25 plus dividend payment from the 24 dividend. So shall we think about Postal Anil not paying a dividend in 25, dividend for 25 to be paid in 26?

Thank you. I think on your first point, I can imagine when you read the news and the newspapers that you think that the minister said no. But that is not the case. What he did say is that he thinks that commercial companies that need to deliver a task from government, which is of course laid down in regulation, should not be loss-making. That's a very important quote from the minister. and he will look into our request of course for a financial compensation very thoroughly. The way we build it up is of course via principles that are laid down in that same regulation. It's a document of many pages. They will go through it thoroughly, they will start up a discussion with us on it, and we expect, at a certain point in time, a decision from the minister and his ministry on the request we did.

On the second point, yes, you're right, those are cumulative, you need to add up those numbers, so if you add them all up you're roughly at 160 to 200 million of savings over that period. roughly divided by four or five a bit depending on the phasing as the slide already says that gives you roughly the yearly amount of cost savings and there can be some differences within year it's also a function on when changes can be made can changes be made at the beginning of the year or are changes only allowed at some point when the postal law is there mid-year but in total roughly speaking that 160 to 200 million relating to roughly 40 to 50 million compared to a 2024 cost base. Then on your third point What we say is that we still have the aim to pay dividends. We intend to pay dividends based on our dividend policy to be properly financed, whilst taking into account these strategic initiatives and the progress that we make on those, as well as the progress on a sustainable future mill position. There's a bit more moving parts than the ones that you also mentioned. EBITDA will be slightly higher, for instance, than in 2024. So we clearly have the intent to pay a dividend in line with dividend policy also over the book year 2025, partially by an interim dividend in August and hopefully a final dividend in 2026. Thank you. Thank you, Marco.

Thank you. We will now take our final question for today. And the final question comes from Henk Slotboom from The Idea. Please go ahead.

Good morning, all, and thanks for taking my questions. I have a few. First of all, on the guidance for the current year, does that in or exclude a possible financial contribution from the Dutch state. I assume it's excluding. Is that right?

Excluding.

Okay. So if it comes, it is It could create a tailwind for you in 2025 in terms of... Yeah, but I need to correct you here, Henk.

Let's say how this works is that this is a net cost request based on the net cost of the obligation of the Universal Service. Basically compares the factual cost and the counterfactual without the Universal Service. That is currently assessed based on our own view of 2025 of 30 million. But the factual, so our own assumptions, need to be changed by an actual ultimately. So a cash in, if at some point, will only be there after the 2025 book year. Because you need to have the actuals to determine the full and final number of those net costs. But we do expect to get an agreement or a decision in principle clearly before that point in time. But we don't expect in any circumstances an actual cash-in in 2025. That will then need to be in 2026.

Okay, perfect. That's clear. Second question is on the reallocation of real estate. I'm a bit puzzled. What exactly does that mean? Is it rental revenues, or is it book profits, or what is it?

It's both, and what we said is in order to create the least possible confusion about the results that we realized with mail, the mail distribution part, we wanted to clean up the segment in order for Mail in the Netherlands to truly be the results of our mail business. The real estate which was in this segment was a combination of the internal rent markup for economic at arm's length purposes, as well as some remaining real estate proceeds. I would say more than two-thirds, probably 75% of that is related to internal rent and not to real estate proceeds.

That's clear also. Then the next one on the cross-border initiative you announced, Pim. I'm a bit in the dark as to what it means exactly. Are you, you have an asset line model there? Is it basically bringing, assisting your Dutch clients to make sure that if somebody orders a, a parcel in France at bol.com, for example, that you make sure that it arrives at the proper place in France? Is it the mid-mile? Let me put it in those phrases. It's not an initiative that stretches below this. It's not a last mile or so initiative.

No, it's an asset-light model spring, and over the years we've managed to transition the spring euro business from a traditional cross-border mill to a 75% cross-border e-commerce market. I would say already quite mature, close to 200 million of revenues. And they assist clients to create trade lanes within Europe so that they can ship and deliver their products towards consumers in different recipient countries. and we do that by leveraging our partners we've got access to very many different delivery options and what we're going to do is create more dense line holes to also increase the speed in which you can get deliveries from let's say Spain to Germany towards within 48 hours so it is to a large extent intra-Europe It could be from the Netherlands to Spain, but of course it can also very well be from Italy to Germany. With our footprint in Europe and with additional services in relation to some fulfillment activities, we believe that there is great organic growth on the back of a very positive track record of spring. We're not going into, and you know, you follow us already for a very long time, we're not going to go back to POSCON and NEXIS-type business models and actually final mile networks with the infrastructure. That's not what this is. It's an asset-light business model, and also in that sense, there's no stranded assets. There's not an awful lot of fixed costs that you add. So, even if the plan doesn't work out as we expect it to be, there's no stop losses of any material kind anyway.

Okay. And then my final question, and perhaps I should ask this question to DHL and IntraPost or whatever. IntraPost has a collaboration with the others, like Zitone and Spulta, and there are a couple of others as well. It makes my first impression when I read this news this morning was that it creates more body for the initiative PHL already announced a year and a half or so ago and that they opened their network for the heavier mail items as well. I was surprised by the fact that they think about a 24-hour initiative. What makes you think they can do it better than you can? I mean... I don't think they can, Henk.

That's the answer. I don't think they can at all, let alone at scale. And as you said, you indicated that you go back to something that they announced a year and a half ago on mail. I have not seen any impact on mail because of that. So, yeah. i think you're better off asking them the questions you could also maybe ask them why they're putting this out there a few hours for our for our own notification and i think you will get the answer quite quickly then i see what you mean okay thank you very much have a nice day thank you thank you i will now hand the call back for closing remarks

Thank you. So that's all for today. Thank you for joining. And if there are any questions left, please reach out to us. Thank you for now.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.